|
|
| |
|
| EconomyOfPakistan »Banking Sector in Pakistan » Central Bank |
|
Central Bank |
|
|
The country of Pakistan is one of the key emerging markets of South Asia with a total population of over 150 million people. A rapidly developing nation, the country has slowly emerged out of the shackles of poverty after its independence in 1947. While Pakistan’s economic growth rate has fluctuated considerably in the last few years owing to imprudent policies and challenges on the political and economic fronts, the future seems a bit bright owing to the introduction of expansive economic reforms. This has resulted in accelerated growth in several sectors, including the banking sector. The Central Bank of Pakistan thus plays a significant role in acquiring a stronger economic outlook in the highly regulated banking sector.
|
|
The State Bank of Pakistan (SBP) is the Central Bank of Pakistan. Its constitution was originally laid down in the State Bank of Pakistan Order 1948. The bank was nationalized on January 1, 1974, which also saw its functions being considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today. The headquarters of the Central Bank are located in Karachi, the financial capital of Pakistan, while its second headquarters are in the capital city of Islamabad.
The Central Bank carries out several duties, primarily regulating the banking sector with complete autonomy. It is also responsible for licensing, directing, supervising, controlling and inspecting banks, as well as exercises various monetary control policy measures. The Securities and Exchange Commission of Pakistan also monitors the operations of the listed banks related to public shareholding matters. Without affecting the macroeconomic policy objectives, the State Bank of Pakistan is entrusted with carrying out monetary and credit policies in accordance with Government targets for growth and inflation, based on recommendations of the Monetary and Fiscal Policies Co-ordination Board. The central bank follows a supervisory framework dubbed as CAMEL, which reflect the financial health of financial institutions. These are namely Capital Adequacy, Asset Quality, Management Soundness, Earnings and Profitability, Liquidity and Sensitivity to Market Risk.
The Central Bank of Pakistan has also introduced several reform measures in the banking sector. Some of these key features can be listed below as:
- Introduction of a free-floating market driven by exchange rate system.
- Strengthening of Prudential Regulations.
- Policy for opening and closing of branches has been significantly liberalized.
- Enforcement of Good corporate governance culture.
- Introduction of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997
- Formation of Corporate and Industrial Restructuring Corporation (CIRC) to take over the non-performing loan portfolios of nationalized banks.
- Appointment of independent persons to the Board of Directors of the Nationalized Commercial Banks
- The minimum capital requirement for banks has been enhanced to Rs 1 billion.
- Improvement in quality and reliability of reporting, the format of statutory accounts has been revised on the basis of International Accounting Standards.
- Issue of Government bonds against long outstanding tax refund claims of banks.
- Mandatory Credit rating for all commercial banks.
- Tax rates for commercial banks have been reduced
- Tax laws have been changed to facilitate merger and acquisition of banks and financial institutions
For further information on other categories relating to Pakistan’s Economy keep browsing through the links at www.economyofpakistan.com
|
|
|
|
|
| |
|
|
|
