NA passes SBP (Amend­ment) Bill, 2015

The Pak Banker - - FRONT PAGE - Staff Re­porter

Na­tional Assem­bly on Thurs­day passed the State Bank of Pak­istan (Amend­ment) Bill, 2015 grant­ing au­ton­omy and free hand to the State Bank in its func­tion­ing.

The pur­pose of amend­ments in the SBP Act 1956 was to bring the ex­ist­ing leg­is­la­tion in con­form­ity with the in­ter­na­tional best prac­tices of a mod­ern cen­tral bank. The Bill to fur­ther amend the State Bank of Pak­istan Act, 1956, was moved by Par­lia­men­tary Sec­re­tary to Fi­nance, Rev­enue, Eco­nomic Af­fairs, Sta­tis­tics and Pri­vati­sa­tion Rana Muham­mad Afzal Khan on be­half of Fi­nance Min­is­ter Ishaq Dar.

Ac­cord­ing to state­ment of Ob­jects and Rea­sons the SBP Act was be­ing amended as the ex­ist­ing clauses per­tain­ing to share­hold­ers, ex­ec­u­tive com­mit­tee and lo­cal boards have been omit­ted in the SBP Act by in­tro­duc­ing var­i­ous amend­ments in the Act since these are no longer rel­e­vant af­ter the pro­mul­ga­tion of the Bank (Na­tion­al­i­sa­tion) Act, 1974.

A statu­tory Mon­e­tary Pol­icy Com­mit­tee with ex­ter­nal ex­perts to be ap­pointed by the Fed­eral Gov­ern­ment has been es­tab­lished, which will be re­spon­si­ble to for­mu­late, sup­port and rec­om­mend the Mon­e­tary Pol­icy and take ap­pro­pri­ate de­ci­sions re­lat­ing to key in­ter­est rates, sup­ply of re­serves, ex­change rate pol­icy and limit and na­ture of ad­vances and loans to the gov­ern­ment. The main ob­ject for in­tro­duc­ing this statu­tory com­mit­tee is to en­able the State Bank to per­form its es­sen­tial func­tions in a pro­fes­sional way in a chang­ing and emerg­ing fi­nan­cial en­vi­ron­ment.

Con­se­quently var­i­ous sec­tions in the Act have also been amended to se­cure the in­de­pen­dent statu­tory role of the Mon­e­tary Pol­icy Com­mit­tee. An en­abling clause to al­low SBP for es­tab­lish­ment of de­pos­i­tor's pro­tec­tion fund has been in­tro­duced. Draft law on the de­posit pro­tec­tion fund is al­ready un­der con­sid­er­a­tion of the fed­eral gov­ern­ment whereby the fund will be a sub­sidiary of SBP.

A new sec­tion of Len­der of last re­sort has been in­tro­duced in the Act to pro­vide le­gal cer­tainty to the sup­port that is al­ready be­ing pro­vided by SBP to the trou­bled banks. Another sec­tion on reg­u­la­tory pow­ers has been in­tro­duced in the Act to pro­vide ex­plicit pow­ers to SBP for is­su­ing di­rec­tives, im­pos­ing and re­cov­er­ing penal­ties, which is al­ready be­ing ex­er­cised by SBP un­der Bank­ing Com­pa­nies Or­di­nance 1962.

To fur­ther the role of Is­lamic Bank­ing in Pak­istan it is es­sen­tial for the Bank to en­gage in Shariah Com­plaint In­stru­ments an amend­ment has been in­tro­duced whereby Bank is al­lowed to hold prop­erty for the pur­poses of use of Sharia Com­plaint In­stru­ments. The role of SBP has been strength­ened fur­ther by sub­sti­tut­ing the Fed­eral Govern­ment’s ap­proval wher­ever re­quired with the Board’s ap­proval. It re­flects var­i­ous amend­ments in­clud­ing but not lim­ited to es­tab­lish­ing of­fi­cers, agen­cies or branches out­side Pak­istan, ap­prove amount of as­sets and the value of such as­sets forms of weekly re­turns sub­mit­ted to Fed­eral Gov­ern­ment. As per amend­ment in Clause 7, it is now in­cum­bent upon the Cen­tral Bank to sub­mit a quar­terly re­port to the Ma­jlis-e-Shoora (Par­lia­ment) on the state of econ­omy with spe­cial ref­er­ence to eco­nomic growth, money sup­ply, credit, bal­ance of pay­ment and price de­vel­op­ment.

By amend­ing the Act XXXII of 1956, a Mon­e­tary Pol­icy Com­mit­tee, headed by Gover­nor (SBP) or deputy gover­nor nom­i­nated by Gover­nor has been con­sti­tuted. While the mem­bers of the Com­mit­tee in­cluded, se­nior ex­ec­u­tives of the Bank, nom­i­nated by the Gover­nor; four mem­bers of the Board, nom­i­nated by the Board; two ex­ter­nal mem­bers, who shall be econ­o­mists, to be ap­pointed by the Fed­eral Gov­ern­ment on rec­om­men­da­tion of the Board. The ex­ter­nal mem­bers of the Mon­e­tary Pol­icy Com­mit­tee shall be ap­pointed for a pe­riod of three years and shall be el­i­gi­ble for reap­point­ment for another term of three years.

The pro­vi­sion of sec­tions 13 and 15 shall, mu­tatis mu­tan­dis, ap­ply to ex­ter­nal mem­bers of the Mon­e­tary Pol­icy Com­mit­tee. The ser­vice of the mem­ber of the Mon­e­tary Com­mit­tee shall be ter­mi­nated or a mem­ber shall be re­moved from the Com­mit­tee in ac­cor­dance with the pro­ce­dure laid down in sec­tion 15 (a) when the mem­ber be­comes in­el­i­gi­ble to serve the Mon­e­tary Pol­icy Com­mit­tee pur­suant to ap­pli­ca­tion of sub-sec­tion; or (b) to whom grounds for re­moval of the mem­bers of the Board or ter­mi­na­tion of their ap­point­ments ap­ply; when the mem­ber con­tra­venes the reg­u­la­tions of pro­ce­dure pf the Mon­e­tary Pol­icy Com­mit­tee.

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