State Bank Of Pakistan

History of state bank of Pakistan

At the time of Partition, the new state was without a central bank and a proper banking system was almost non-existent. Most of the banks had their head offices in India. Out of 3,496 branches of the right banks, only 631 were situated in Pakistan. To complete the picture of despair, the entire banking structure was dominated by Hindus. With the announcement of the Partition Plan of June 3, 1947, the Hindus started to withdraw their deposits from the banks located in Pakistan. As a result, many banks had to close down their operations.

State-Bank-Pakistan Building Front Photo

Since Pakistan had no central bank of its own, it was decided to assign the monetary operations of the new state to the Reserve Bank of India for a period of one year till September 30, 1948. However, it was soon realized that if this situation continued for too long, the country’s interests would be hurt. Therefore, the State Bank of Pakistan Order was issued on May 12, 1948, and Pakistan Order, 1947 was amended according to which the Reserve Bank of India was to stop functioning in Pakistan on June 30, 1948, with the new central bank taking over on the next day.

At the time of its formation, the State Bank of Pakistan neither had any building for housing its offices nor was there sufficient time for purchase and construction of new premises. Therefore, Victoria Museum Building at the chimney Road was rented from the Karachi Municipal Corporation and swiftly update. Banking Pk was started on July 1, 1948, by Quaid-e-Azam Muhammad Ali Jinnah, who thus observed the teaching principles of the newly created central bank.

“I need hardly develop on the important role that the State Bank will have to play in regulating the economic life of our country. The monetary policy of Banking Pk will have a direct bearing on our trade and commerce, both inside Pakistan as well as with the outside world and it is only to be desired that your policy should.

See also  Allied Bank Limited Of Pakistan(ABL)

About us of State Bank

State Bank of Pakistan is the Central Bank of the country. While its constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained basically unchanged until 1st January 1974 when Banking Pk was nationalized, the scope of its functions was far expanded. The State Bank of Pakistan Act 1956, with the following change, forms the basis of its operations today.

Under the State Bank of Pakistan Order 1948, Banking Pk was charged with the duty to “regulate the issue of Banknotes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage”. The scope of the Bank’s operations was far widened in the State Bank of Pakistan Act 1956, which required Banking Pk to “regulate the monetary and credit system of Pakistan and to foster its growth in the best national interest with a view to securing monetary stability and fuller usage of the country’s productive resources”.

Under financial sector reforms, the State Bank of Pakistan was granted autonomy in February 1994. On 21st January 1997, this freedom was further strengthened by issuing three change Ordinances namely, State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962, and Banks Nationalization Act, 1974. The changes in the State Bank Act gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy, and set limits on government borrowings from the State Bank of Pakistan.

The change in Banks Nationalization Act abolished the Pakistan Banking Council and regulated the process of appointment of the Chief Executives and Boards of the nationalized commercial banks (NCBs) and development finance institutions (DFIs), with the State Bank having a role in their appointment and removal. The change also increased the autonomy and accountability of the Chief Executives and the Boards of Directors of banks and DFIs.

Like a Central Bank in any developing country, the State Bank of Pakistan performs both the traditional and developmental functions to achieve macro-economic goals. The traditional functions, which are generally performed by central banks almost all over the world, may be classified into two groups:

(a) the primary functions including the issue of notes, regulation and supervision of the financial system, bankers’ bank, the lender of the last resort, banker to Government, and conduct of monetary policy, and

(b) the secondary functions including the agency function like management of public debt, management of foreign exchange, etc., and other functions like advising the government on policy matters and maintaining close relationships with international financial institutions. The non-traditional or promotional functions, performed by the State Bank include the development of the financial framework, of regulator savings and investment, provision of training facilities to bankers, and provision of credit to priority sectors. The State Bank also has been playing an active part in the process of Islamization of the banking system. The main functions and responsibilities of the State Bank can be broadly categorized as under.


The responsibility of a Central Bank in a developing country goes well beyond the regulatory duties of managing the monetary policy in order to achieve the macro-economic goals. This role covers not only the development of important components of monetary and capital markets but also assists the process of economic growth and promotes the fuller utilization of a country’s resources.

See also  MCB Lite Free Charge through Mobile Wallet or VISA card

Ever since its establishment, the State Bank of Pakistan, besides discharging its traditional functions of regulating money and credit, has played an active developmental role to promote the realization of macro-economic goals. The explicit recognition of the promotional role of the Central Bank evidently stems from a desire to re-orientate all policies towards the goal of rapid economic growth. Accordingly, the approved central banking functions have been combined by the State Bank with a well-recognized developmental role.

The scope of the Bank’s operations has been increasing rather by including the economic growth objective in its statute under the State Bank of Pakistan Act 1956. The Bank’s participation in the development process has been in the form of repair of the banking system in Pakistan, development of new financial institutions and debt instruments in order to promote financial intermediation, the establishment of Development Financial Institutions (DFIs), directing the use of credit according to selected development priorities, providing subsidized credit, and development of the capital market.

Deputy Governors of State Bank

deputy governors