Name :
Hasan Ahmad Shaikh
Seat No : B19547043
Class : BBA-VIII
Specialization
Section : A
Assignment 1
Functions of SBP
Functions
The state bank of Pakistan performs the same functions as any central bank of a developing country. It
has traditional and developmental functions, and its aim is to achieve macro-economic goals.
The Traditional Functions
The traditional functions performed by the state bank of Pakistan can be classified in two groups, which
are
I. The Primary Functions
The primary functions of the state bank include regulation and supervision of the financial system,
issuing of notes, and conduct of monetary policy. They also include the functions of state bank as the
banker’s bank, the lender of the last resort, and the banker to government.
Sole Authority to Issue Notes
One of the primary functions of the state bank of Pakistan is the regulation…show more content…
II. The Secondary Functions
The secondary functions of the state bank include the agency functions. The agency functions include
functions like management of public debt, management of foreign exchange, and other functions like
the maintaining close relationships with international financial institutions, and advising the government
on policy matters.
Public Debt Management
The actions involved in the public debt management are: subscribing securities to Federal and
Provincial government, sale or purchase of securities in the money market, payment of interest to
holders of public debt instruments.
Management of Foreign Exchange
The State Bank is responsible for maintain the external value of Pakistan’s currency. As the State Bank is
an agent to the government, it is authorized to purchase and sell gold, solver or foreign exchange. The
bank is also responsible to keep the exchange rate of Pakistani rupee at a desirable level and prevent
too much fluctuations in…show more content…
The acts of the State Bank which lead to the development of the banking system are: the promotion of
commercial banking, promotion of micro finance, and promotion of Islamic Banking.
Training Facilities to Bankers
The State Bank introduced “Bank Officers Training Scheme” within one month of its
establishment, due to the acute shortage of trained bankers at the time of independence.
Development of Specialized Financial Institutions
The Bank have actively participated in setting up numerous specialized credit institutions, which
were designed to meet the medium and long term financing needs of the various sectors of the
economy. These institutions include Pakistan Industrial Credit and Investment Corporation of
Pakistan (PICIC), Industrial Development Bank of Pakistan (IDBP), National Development Finance
Corporation (NDFC), Agricultural Development Bank of Pakistan (ADBP), Federal Bank for
Corporatives (FBC) and House Building Finance Corporation (HBFC). All these institutions were
formed for the provision of credit to different sectors.
Assignment 2
Types of Commercial Bank
Types of Commercial Bank
Commercial banks are classified into two categories i.e. scheduled
commercial banks and non-scheduled commercial banks. Further,
scheduled commercial banks are further classified into three types:
Private Bank: When the private individuals own more than 51% of the share
capital, then that banking company is a private one. However, these banks
are publicly listed companies in a recognized exchange.
Public Bank: When the Government holds more than 51% of the share
capital of a publicly listed banking company, then that bank is called as Public
sector bank.
Foreign Bank: Banks set up in foreign countries, and operate their branches
in the home country are called as foreign banks.
Non-scheduled commercial banks refer to the banks which are not covered in
the Reserve Bank of India’s second schedule. The paid-up capital of such
banks is not more than Rs. 5 lakhs.
Functions of Commercial Bank
1. Primary functions
o Accepting Deposits: The primary function for which the commercial banks
were established is to accept deposits from the general public, who
possess surplus funds and are willing to deposit them so as to earn interest
on it.
There are various products offered by the
bank to the customers for the deposit of their money, which includes savings
account, current account, fixed deposit and recurring deposit.
o Advancing Loans: Next important function performed by the commercial
bank is lending money to the individuals and companies. The banks make
loans to the customers in the form of term loans, cash credit, overdraft and
discounting of bills of exchange.
2. Secondary functions
o Agency Services: There are some facilities provided by the commercial
banks in which they act as an agent of the customers. Such services are:
o Collection and payment of rent, interest and dividend.
o Collection and payment of cheques and bills.
o Buying and selling securities.
o Payment of insurance premium and subscriptions.
o General Utility Services: Commercial banks provide general utility services
to the customers and charges a fee for the same. It covers services like:
o Safekeeping of valuables, documents etc, in locker or vault.
o ATM card, credit card and debit card facility.
o Issue of demand draft, pay order and traveller’s cheque.
o Internet and mobile banking
o Sale of application forms of competitive exams.
o Transfer of funds: Banks assist in the transfer of funds from one person to
another or from one place to another through its credit instruments.
o Credit Creation: The commercial banks are authorized to create credit, by
granting more loans than the amounts deposited by the customers.
A commercial bank offers an array of facilities such as internet banking,
mobile banking, ATM facility, credit card facility, NEFT, RTGS and so forth for
which it charges a definite sum as a fee for providing these facilities.
Reorganization Of National Bank
Reorganization of a state bank as a national bank. A bank organized under this chapter may
reorganize under the laws of the United States as a national bank. When the bank has obtained
a certificate from the U.S. comptroller of the currency authorizing it to commence business
under the federal banking law, the bank is reorganized as a national bank. The reorganized
bank takes and holds all of the assets, real and personal, of the bank organized under this
chapter, subject to all liabilities existing against the bank at the time of the reorganization. The
reorganized bank shall immediately notify the division of the reorganization.
Letter Of Credit
A Letter of Credit is a contractual commitment by the foreign buyer’s bank to
pay once the exporter ships the goods and presents the required
documentation to the exporter’s bank as proof.
As a trade finance tool, Letters of Credit are designed to protect both
exporters and importers. They can help you win business with new clients in
foreign markets. This means the exporter gets a guarantee of payment while
offering the importer reasonable payment terms
Before Applying for a Letter of Credit
Letters of Credit are one of the most secure payment instruments available
but can be labor-intensive and relatively expensive due to bank fees. They are
recommended for use in higher-risk situations, when the importer’s credit is
unacceptable or not available, when dealing with a new or less-established
trade relationship or when extended payment terms are requested.
The required documents are detailed and prone to errors and discrepancies.
To avoid payment delays and extra fees, documents required by the Letter of
Credit should be prepared by trained professionals.
Additionally, the exporter should consult with their bank before the importer
applies for the Letter of Credit. Ask about:
What type and size of export transactions are suitable for a Letter of
Credit?
How much does a Letter of Credit cost? Who pays the fees?
How are disputes resolved between importer and exporter?