SBP updated Act issued
State Bank of Pakistan (SBP) has issued its updated SBP Act 1956 in which it was given muscles by the National Assembly and Senate of Pakistan related to its autonomy and authority to exercise independent as per its domain. The amendments in the Act was made through Bills which were proposed by lawmakers and demanded by International Monetary Fund (IMF) to link reforms to its program of Extend Fund Facility to Pakistan.
According to the Act, central bank has been given authority to set up an independent Monetary Policy Committee (MPC) which recently formed and made an announcement as per given mandate. It involves measures for central bank to control borrowing of the government from the banking system. SBP was given authority to protect depositors of the banks and help them maintaining their liquidity. The capital of the Bank shall be one hundred million Rupees (Rs 100 million) , which shall be fully subscribed , paidup and held exclusively by the Federal Government and shall not be transferable or subject to encumbrance.
The capital may be increased by a res- olution of the Board subject to the approval of the Federal Government and no reduction of the capital shall be permitted at any time. Notwithstanding anything to this Act or in any other law for the time being in force, the Bank may establish and maintain a subsidiary or a trust for the following purposes, namely for catering to all training needs of the Bank employees, financial sector and other agencies, organizations or institution pertaining to banking and finance.
The institution shall be set up for handling the function of receipt, supply and exchange of Bank notes and coins which are legal tender; and for issue , supply, sale and purchase of prize bonds, holding draws thereof and other National Savings instruments. The Act stated that the Federal Government borrowing from the Bank shall be such that at the end of each quarter they shall be brought to zero barring the ways and means limit that shall be determined by the SBP Board from time to time. The debt of the Federal Government owed to the Bank as on the 30th April, 2011, shall be retired not later than twelve years from that date.
SBP is the lender of last resort where the circumstances so warrant and a scheduled bank approaches the Central Bank for financial facility to improve its liquidity and where the bank in the opinion of the SBP, is solvent and can provide adequate collateral to support the financial facility. SBP may provide the financial facility, in accordance with the regulations made by the Bank in relation thereto.
SBP Bank shall have power to issue such directives, instructions and regulations in whatsoever form as may be necessary for carrying out the functions of the Bank under this Act or any other law and shall be binding and enforceable. SBP may take any enforcement action including imposition and collection of pecuniary penalties upon legal and natural persons for contravention of this Act, any law being administered by the SBP
According to Act, SBP shall not, except as authorised to engage in trade or otherwise have a direct interest in any commercial, industrial or other undertaking except such interest as it may in any way acquire in the course of the satisfaction of any of its claims, but all such interest shall be disposed of at the earliest possible moment. SBP shall not purchase its own shares or the share of any other bank or of any company, or grant advances or loans upon the security of any such shares. SBP shall not advance money on the mortgage, or otherwise on the security, of immovable property or documents of title relating thereto, except where such advance is made to any of its officers or servants for building a house for his personal use against the security of the said house.