TABLE OF CONTENTS

Sr# TOPICS PAGE #

01 Executive Summary 02
02 Introduction 03
03 Primary Functions 04
04 Secondary Functions 06
05 SBP- Banking Service Corporation 09
06 Vision and Mission of SBP-BSC 10
07 Issue Division 11
• Accounts Unit 11
• Currency Management Unit 14
• Claim Unit 15

08 Administration Division 20
• Staff Matter Unit 20
• Payment & Advances 23
• Procurement& Engineering 24
• Internal Monitoring Unit 26
• Central Receipt & Dispatch 28
29
• System Support Unit

09 Developing Finance & Support Unit 32

10 Foreign Exchange Operation Department 35
11 Banking Division 38
• Public Account Unit 38
• Deposit Account Unit 41

12 Prize Bonds Section 43

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Our internship final project pertains the coordination of State Bank of Pakistan with rest of the
banks of Pakistan and the impact, which uphold the rules and regulations carried out by the State
Bank of Pakistan. State Bank of Pakistan is one of reputative bank of Pakistan which practices
monitory and fiscal policy to insure better results and outcomes of banking sector in Pakistan
normally the functions are as, commercial banking, rules and regulation, monitoring and predict
economic growth in banking sector. State Bank of Pakistan holds very crucial and significance
role for an escalating environment of the banking industry in Pakistan obtained through excellent
banking policies and procedures carried out by this bank in Pakistan. We have been able to
collect relevant data of the National savings and prize bonds, HR department, banking sector,
audit Section, medical facilities of the State Bank of Pakistan. Moreover the brief data of Globus.
This is the technological advancement of State Bank of Pakistan that practices for the
achievement of goals and objectives of this banking industry. The work environment proves to be
the authentically of State Bank of Pakistan

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A central bank is most important institute of a country. It is a symbol of financial sovereignty and
stability of a country. A central bank is an institute, which is responsible for safeguarding the
financial stability of a country. It holds ultimate reserve of the country. Controls the flow of
purchasing power, whether currency or credit and Act as a bankers to the state (Govt).
Now every country has central bank. Pakistan’s central bank is sate bank of Pakistan. It was
setup on 1st July 1948. Like other central banks its aim is to maintain economic stability in
country. It is the main monitory authority in the country. Before state bank India’s reserve bank
was acting as central bank of Pakistan. Reserve bank of India was sole issuing authority in
Pakistan till Sep 1948 from 1st Oct 1948 government of Pakistan issued its own currency.
Basic functions of state bank are

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Sole authority to issue notes:

One of the primary responsibilities of the state bank is the regulation of currency in accordance
with the requirement of business and the general public. For this purpose the bank has been
granted the sole right of issuing notes in the country under section 24 of State Bank of Pakistan
act, 1956.the overall affairs with respect to the issuing of notes are conducted through two
nationally separate departments of SBP, viz. issue department which deals with issue of notes
and banking department which undertakes general banking business.
The notes issued by the bank constitute by far the largest portion of currency in circulation in
country. The other components being 1 Re coin, 2 Rs coin and subsidiary coins.
The issue of 1 Re and subsidiary coins is the prerogative of federal Government. The bank nearly
looks after the management of their issue on behalf of the Government. The State Bank of
Pakistan also issues “commerative notes and coins” of different denominations at occasion of
national importance.

2. Conduct of monetary and credit policies:

The State Bank of Pakistan is responsible to regulate the monetary and credit system of the
country in such a manner that insures monitory stability in economy. The State Bank of Pakistan
has a number of instruments at its disposal to regulate the volume of credit and to insure its flow
to the priority sector.

Instruments

State Bank of Pakistan 3-day Repo Rate;

State Bank of Pakistan provides the lending facility to the schedule banks for up to 3 days
through Reserve Repo transactions. The interest rate charged on this facility serves as the main
tool to give interest rate signals to money market. Increase in this rate gives signal of monetary
tightening.

T-bill Auction

SBP 3 day Repo Rate influences the yield of T-bill sol through the auctions. The auction
committee, keeping in view monetary targets, current economic and financial conditions and
expected market response, determines the cut off yield. The six months T-bills are considered the
most important benchmark by the money market.
Open market operation;
State Bank of Pakistan is conducting regular open market operations since January 1995. Up till
October 1997. However, in October 1997, it started bi-directional intervention;
Now Repo transactions are used to mop up liquidity and Reserve Repo to inject it.

Statutory liquidity ratio:

Commercial banks are required to keep some fraction of their assets in the form of cash, Treasury
Bills or other approved securities. This fraction is called statutory liquidity Ratio. Its main
objective is to ensure that banks have sufficient funds in the form of liquid that banks have
sufficient funds in the form of liquid assets.

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Statutory Cash Reserve Requirement (CRR):

Under this requirement, banks are required to keep a weekly average balance of 5% of their total
time and demand liabilities with SBP, subject to daily minimum balance of 4%. Recently State
Bank of Pakistan has also issued a Master circular of regulations on CRR.

Regulation and Supervision of the Financial System:

Another principal task of the bank is to safeguard the soundness of the financial system. To
perform the crucial role effectively and efficiently, State Bank of Pakistan has been given vast
powers under the State Bank of Pakistan Act, 1956, 1974 and Microfinance Institutions
Ordinance 2001 to regulate and supervise the activities of banks, Development Finance
Institutitions and Microfinance Banks. These laws have been subject to amendments over time to
meet changing circumstances. During the year 1997 some major amendments were made in the
banking laws, which gave autonomy to the State Bank of Pakistan in the area of banking
supervision. As on December 31, 2003 there are 40 scheduled banks, 2 MFBs, and 6 DFIs
operating in Pakistan whose activities are regulated and supervised by SBP.

OFF-SITE & ON SITE MONITORING

The bank monitors the banking activities through a combination of off-site monitoring and on-
site inspection. The State Bank of Pakistan through various periodical returns received from
banks and DFIs conducts off- site surveillance. On the other hand, on-site inspections undertaken
on the premises of the concerned banks.

Prudential regulation:

In order to safeguard the interest of depositor s and to ensure the safety and soundness of the
banks/DFIs, the State Bank of Pakistan has issued prudential Regulations.
These Prudential Regulations present a prudent operating framework for the banks/DFIs.

Banker’s Bank:

The bank also functions as the banker’s bank. Banks are classified as scheduled and non-
scheduled.
 It keeps the deposits of commercial banks, which primarily constitute the statutory
reserves of scheduled banks.
 The State Bank of Pakistan also provides extensive remittances facilities to banks at a
concessional rate under the remittance facilities scheme introduced since 1948.
 Mail Transfers (MT), Demand Draft (D.D) and Government Draft (G.D) are the principal
instruments used for remittances.
 In order to streamline payments through the financial system, the bank also manages the
operations of clearing houses. In the five major cities, the functions of State Bank of
Pakistan clearing house has been handed over to a private agency namely National
Institutional Facilitation Technologies Private Limited (NIFT) to the extent of sorting of
payments instruments and preparing clearing schedules.

Lender of Last Resort:

One of the important characteristics of a central bank is its being the lender of the last resort. The
State Bank of Pakistan provides loan and re-discount facilities to scheduled bank in times of dire

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need when they find no other source of funds. These facilities are ordinarily provided by the bank
against government securities, trade bills, agriculture bill, etc.

Banker to Government:

The State Bank of Pakistan conducts the banking business of Federal and provincial Government
and some government agencies.
 It accepts the deposits of cash, cheques and drafts by the government and undertakes the
collection of cheques and drafts drawn on other banks.
 The Federal and Provincial governments can obtain advances from the bank subject to
mutual agreements in respect of the terms and conditions for such advances.

Public Debt Management:

The bank is responsible for the management of government debt.

 Subscribing Federal and provincial governments’ securities at the time of their issue.
 Sale/purchase of such securities in the Money Market.
 Payments of interest to holders of public debt instruments.

Management of Foreign Exchange:

Being responsible for maintaining the external value of the currency, the State Bank of Pakistan
assumed the charge of management and administration of the exchange system of the country in
line with the Foreign Exchange Regulation Act, 1947 which was originally enacted by the British
Government and subsequently adopted by Pakistan. An agent to the Government, the bank has
been authorized to purchase and sell gold, silver or foreign exchange and transactions of special
drawing rights with the International Monetary Fund.

Advisor to the Government:

The State Bank of Pakistan also acts as an advisor to the government on financial and economic
matters particularly with reference to their monetary aspects. The bank counsels the Government
on loan operations and advises it with regard to the timings, terms and conditions and rte of
return on these loans. The advice is also tendered on matters like agricultural credit, cooperative
credit, industrial finance, exchange regulation, banking and credit control, mobilization of
savings, financial aspects of planning and development and similar other economic issues.

Relationships with international Financial Institutions:

Pakistan is the member of International Monetary Fund. The State Bank of Pakistan deals with
the IMF on behalf of the government of Pakistan. As a member of the Fund, the Government
accepted the obligations of Article-VIII, sections 2,3 and 4 of the IMF Articles of Agreement
w.e.f, July 1. 1994.
Non-traditional Functions:
Responsibilities of the State Bank of Pakistan go well beyond the conventional functions.
The scope of bank’s operations has been widened considerably by including the economic
growth objective.

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Development of the banking system;

The most significant contribution made by the State Bank of Pakistan towards facilitating and
fostering economic development in Pakistan was the rehabilitation of the banking system in
Pakistan.
State Bank of Pakistan performs role of development for,
 Commercial banks
 Micro finance
 Promotion of Islamic banking.

Training Facilities to bankers;

Keeping in view an acute shortage of trained bankers at the time of the independence, the State
Bank of Pakistan introduced” Bank Officers Training Scheme” within one month of its
establishment.
The State Bank of Pakistan has strengthened the following institutes for the development and
training of bankers of SBP, Schedule banks and other financial institutions.
 Institute of Bankers Pakistan.
 Training Division of SBP.
 National Institute of Banking and Finance (NIBAF)
 Training on Islamic banking.
 SEANZA courses.
 Training for rural finance.
 Library services.

Development of Specialized Financial Institutions:

The State Bank of Pakistan has actively participated in setting up a number of specialized credit
institutions designed to meet the long and medium term financing needs of various sectors of the
economy. These institutions include
 IDBP
 PICIC
 NDFC
 ADBP
 FBC
 HBFC

Credit to priority sectors:

The bank has also introduced various schemes to channel resources towards priority sectors like
export finance scheme, mandatory credit for agriculture, small business and small industries etc.

Islamisation of banking sector:

The State Bank of Pakistan has also been involved in the process of Islamisation f the economy
in general and the baking system in particular. The State Bank of Pakistan had been making
efforts since its inception to evolve and introduce a financial system based on the norms of the
Shariah. Islamic banking department has been established in the bank in September 2003 through
the merger of Islamic economic division and Islamic banking division.

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SUBSIDIRIES:

Two subsidiaries of the bank have been established in recent years

 NIBAF (National Institute for Banking and Finance)
 SBP-BSC (Banking Services Corporation)
Each headed by managing director. All the 16 local offices of State Bank of Pakistan have been
made part of SBP-BSC. These are now branches of State Bank of Pakistan (BSC) located two at
Karachi and one each at Hyderabad, Sukkur, Quetta, Peshawar, D.I. Khan, Muzaffarabad,
Bahawalpur, Multan, Faislabad, Lahore, Gujranwala, Sialkot, Rawalpindi and Islamabad.

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State Bank of Pakistan Banking Services Corporation, as a subsidiary of the State Bank of
Pakistan (SBP), was set up through an ordinance on December 29,2001.
The corporation is responsible to carry out retail business i.e. certain statutory and administrative
functions and activities on behalf of state bank of Pakistan, transferred or delegated by SBP
under the provisions of the ordinance mainly including;
 Currency management
 Disbursing of loans and advances to the government, banks, financial institutions and
local authorities.
 Facilitating in inter-bank settlement system.
 Dealing in prize bonds and other savings instruments of the government
 Collecting revenue and making payment for and on the behalf of government, local
bodies, authorities, companies, banks and other financial institutions, and maintaining
their accounts
 Operational works relating to management of debt and foreign exchange.
However, the subsidiary cannot be given any function related to
• Formulation and monitoring of monetary and credit policies
• Regulation and supervision of the financial sector
• Foreign exchange regime and exchange rate policy
• Payment and settlement system.

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To develop State Bank of Pakistan Banking Services Corporation into a strong and dynamic
institution equipped with efficient and professional human resource based having necessary
technology fully capable of providing quality services to stock holders and complimenting State
Bank of Pakistan in achieving its objectives.

To maintain an efficient currency management system, which provide effective banking services
responsive to changing environment so as to command trust and respect of State Bank of
Pakistan’s stockholders.

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The first important unit of SBP is issue division. It maintains the accounts of currency and coins
received and issued to exchange branch and currency chests within the circle as also to the other
circles. For the proper and efficient management of the business relating to the issue of notes and
other currency, there are altogether four offices of issue department of the bank. The location of
these offices and their geographical limits are as under;
1. Karachi; -
Its geographical limit is Sindh and Balochistan provinces.
2. Lahore; -
Its geographical limit is Punjab province.
3. Peshawar; -
Its geographical limit is Peshawar and Dera Ismail Khan.
4. Quetta; -
Its geographical limit is Balochistan province.

UNITS:
The three main functions performed by the issue deptt are,
• Account management.
• Currency management.
• Claim.

1. Accounts management;
The accounts of receipt and issue of the currency notes and coins in its circles (chests) are
maintained by the SBP (Quetta) issue division.

Chests;
“An agent as it performs its functions on the behalf of SBP.”
Being the issue office of the circle State Bank of Pakistan Quetta has to account for not only
the transactions affected at Quetta, but also the transactions made on its behalf by its agents
in the whole circle. SBP (Quetta) has appointed its agents for the entire circle. These agents
are called its chests,
SBP (Quetta) has 34 chests, 32 are National Bank of Pakistan (NBP), and the other two are
Treasury offices.

NBP Chests;
All the NBP chests report their daily net currency transfer transactions telegraphically in its
main branch i.e. NBP main branch Quetta. These chests are
• Zhob
• Muslim Bagh
• Gandawa
• Panjgur

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 • Kalat
• Chaman
• Mausa Khail
• Pashin
• Daira Murad Jamali
• Quetta
• Loralai
• Mastung
• Surab
• Khuzdar
• Uthal
• Turbat
• Pasni
• Gawadar
• Kharan
• Kohlu
• Daira Allah Yar
• Harnai
• Bhag
• Dhadar
• Barkhan
• Dalbandin
• Daira Bugti
• Sibi
• Lehri
• Kila saif-ullah
• Dukki
• Noshki

Treasury offices:
 Ledgusht
 Mushky

Types of chest accounts:

Issue department maintains the two types of chest accounts,
1) Home Note Account.
2) Value Account.

1) Home Note Account: -

It is maintained to record the currency issued to the chests, it consist of home note ledger,
journal and trial balance. It is prepared through the Currency Chest Slip.

Currency Chest Slip: -

Daily transactions of chests are recorded on CC slip, and this slip is then forwarded to SBP
(Quetta) on the next day to issue department to maintain accounts and the same CC copy is
send to main branch NBP.

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A-17 book/ subsidiary register of chests;
Transactions reported by each chest through currency chest slip are recorded in the subsidiary
register of chest called A-17 book. It contains the details about currency denomination wise.
It has a separate record of each type of note issued by SBP and aggregate balances are
extracted. These balances are further utilized to prepare the home note ledger account.

F-157 statement;
This statement is sent by the NBP main branch (Quetta). SBP (Quetta) daily receives this
statement. it contains the aggregate amount of receipts and withdrawals of each chest and
their net balances. This statement is then used to make A-10.

A-10;-
It is the chest balance book. It is prepared on the monthly basis. Each chest ending balances
are recorded on it.

A-12;-
It is the balance reconciliation book; it is prepared to verify the balances.

A-8; -
It is home note ledger account. It consist of main accounts, currency account is head of
accounts, it must have credit balance, and the other 6 main ledger accounts are
I. Transfer account.
II. Cancelled note account.
III. Exchange note account.
IV. Chest account.
V. Circulation account.
VI. Invoiced account.
They must have debit balances

A-14; -
It is prepared to report Karachi SBP about the transactions of chests.

2) Value accounts:
Value accounts hit the circulation. These accounts are maintained to record coin transactions
like
• Coins transferred from reserve to exchange.
• Coins transferred from exchange to reserve.
• Remittances of coins sent to chest.
• Remittances of coins received from chest.
• Remittances received from Mint Lahore.
• Remittances sent by SBP Karachi to SBP Quetta chests.
• Net T.T effect.
• Remittances sent by SBP (Quetta) chests to SBP Karachi.
• Chest to chest remittances.

Foreign Circle (FC) Account;

Transactions between issue offices of SBP are handled through FC account.

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Amount of currency issued;
The assets of issue department lock currency issued in the circle. The main items which
constitute the assets of issue dep’t are;-
• Reserve gold
• Foreign bill of exchange
• Foreign currencies securities
• Govt of Pakistan securities
• As the reserve gold and foreign reserve increase/decrease, the central directorate
advises the office to expand/contract the currency accordingly and the entries are
made the issue office in respective heads of accounts.

2. Currency management
It is the main function of issue department as it controls the flow of currency in its circle. This
flow of currency is between chest of SBP (Quetta) and to the treasury offices.

Basic Functions;
Main functions and controlling measures adapted by this section are as under;-

Holding Capacity;
Holding capacity of the Govt treasures and chests is fixed in accordance with the requirement of
the area. Every chest holding capacity is fixed. It is fixed by SBP. It is according to their
requirements, and the chest is not allowed to keep the amount more than its holding capacity. In
case it exceeds it is transferred to SBP or on intimation of SBP to its main branch.

Remittances;
• How remittance is sent.
• How remittance is received

How remittance is sent;

Indent;
Chest requiring remittances send indent to SBP Quetta. When its capacity is less than 40% of its
holding capacity.

Replenishment of currency chest;

After receiving request for remittance, SBP check the requirement of chest and their holding
capacity. If amount in the chest is less than their holding capacity, then remittance is sent to
them. And replenishment of currency chest is checked. It contains details of currency notes by
denomination wise that are sent to the chest.

Remittance order;
As the requirement of the chest are reconciled with their holding capacity. Remittance order is
prepared by the issue dep’t (concerned officer) on the behalf of CO (currency officer). This order
is made to send remittance.
And another remittance order is written by vault officer to intimate currency officer that the
remittance is ready than CO nominates the person i.e. called Potdar. So that he could be sent with
remittance.

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Potdar form;
This form contains details about,
1. Name of Potdar.
2. Their value.
3. No of boxes.
4. Destination of remittance.
5. Date and hour of departure.
6. Signature.

Requisition for security;

CO asks the police demanding security for sending remittance. Then escort officer is nominated
for this purpose.

Escort Officer;
“Police officer nominated to be sent with remittance for their safe delivery.”
As the escort officer checks the remittance, he issues the certificate. When certificate from Escort
officer is received, that boxes are in good condition than issue deptt write the letter that letter is
sent along with remittance.

On receiving remittance;
When remittance is received by chest. Confirmation letter is sent to SBP Quetta.

E-54;
After receiving confirmation letter from chest. Accounts are maintained about remittance sent.
This book is called E-54.

How remittance is received;

When SBP required currency. Director of accounts SBP (Quetta) acknowledges Karachi office
(director of accounts) about requirement. Than Karachi office intimate to PSPC (Pakistan
Security Printing Corporation) and request them to deliver the remittance. After receiving
request, PSPC takes requisition from the railway in order to take booking for sending remittance.
On the request of booking, PSPC send coded letter to SBP. It contains the details of no of boxes,
their delivery date, and letter no etc. SBP decode the letter through cyphercode book. As the
remittance is sent by PSPC they sent Fax. It is always coded telegram. Than SBP receives the
remittance and makes the necessary book entries.

3. Claim unit
if notes becomes defective, and loses their worth and face value then SBP provides this facility to
the general public that they can claim that notes with SBP, and may exchange them with fresh
ones.
SBP has framed rules with certain limitation and conditions to change such notes of grace, which
is known as “State Bank of Pakistan (note refund) regulation”

Claim notes;

 Notes that are washed

 Has become oily
 It is burnt

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  Part of note is missing
 Portion of note is less than half
 Notes that are torn into more than 2 pieces.
Such notes required special examination under a specified procedure.

Rs.10 claim note;

Rs. 500 claim note;

Rs. 10 mutilated note;

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Rs. 1000 soiled note;

Procedure;
Person, who has the claim for the note, will have to submit the form with his CNIC card copy,
and submit it on the claim counter, examiner check the note, and if does not found to be
defective, or forged than note is exchanged.

Forged notes;
Sometimes, on the examination of note, it reveals to be forged. A note has some security features
that differentiate it from the forged notes, and the examiner detect it, security features of the
currency notes are given as below,

1. Enlarged Water mark;

Portrait of Quaid-e-Azam in Sherwani dress appears on the obverse left of the note.

2. Electrotype Water mark;

Below the Quaid-e-Azam portrait, denomination of the note appears as watermark.

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3. Window Security Thread;
Partially embedded window security thread into the paper runs from top to bottom at the front
left side of the note. Denomination numeral ‘500’ can be seen in the thread. The thread appears
as silver dashes at the front of the note. When the note is held against the transmitted light, the
metallic thread appears as a dark line. The security thread appears as yellow and pinkish red
fluorescent bands when viewed under ultra-violet light.

4. Intaglio process;
Intaglio Process has printed the front of the note in multi-colors.

5. See through;
Value figure of the note appears partly at the obverse left top and partly at reverse right top
giving a perfect look when viewed through light.

6. Intaglio lines;
Raised lines appear at extreme right and left sides of the note.

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7. Anti Scan & Anti Copy;
Anti-scan and anti-copy line patterns appearing at the note prevent scanning and photo copying
of the exact note.

These are all the features of SBP currency notes printed by PSPC (Pakistan Security Printing
Corporation), notes have some more features other than these, if any of these feature is not found
in the note it is called forged note.
On presentation of note to bank, if it is found to be forged, than presenter is handed over to the
police, for the further inquiry, unless he is found to be gentle man, he remains in the custody of
police. After inquiry forged notes are supplied to the bank and after one year from the date of
receipt of forged notes they are destroyed in the immediate presence of the currency officer.

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It consists of five basic units,
1. Staff matter unit (SMU)
2. Medical unit
3. Salary and advances unit.
4. Procurement and engineering unit.
5. Audit unit
6. Central receipt and dispatch unit.
7. System and support unit

Staff matter unit (SMU):

Staff matter unit is mainly responsible for all the activities related to staff of SBP (Quetta) posted
at various ranks of OG1, OG2, OG3, OG4 and OG5.
In SBP (Quetta), Chief Manager (CM) is at the rank of OG5. Where as the other divisional heads
are posted under OG4 like…
 Deputy Chief Manager (DCM) administration.
 Deputy Chief Manager (Banking)
 Currency officer.
Employees under OG3 are mainly responsible for supervision of all the units.
OG2 and OG1 are the working strengths.
In SBP, there is no clerical concept.
SMU is responsible for dealing with their matters and maintaining their accounts.

Act (2005):
In SMU all the matters are handled through the staff regulation (2005) act.

Responsibilities:
Main responsibilities of SMU are,
• All the matters from appointment to retirement of
employees are handled in this unit.
• New employees who are posted under OG2 or OG1 are
posted in this unit.

Staff order:
• If any employee is posted at another unit/desk/division, than SMU issue “staff
Order” for that employee.
• If matter is about OG2 or above rank employees than staff order is issued with
G.No.
Like staff order G.No……
• If matter is handled below OG1 or OG1 employees, than G.No is not given.

Check on transfer of employees:

• In one division, one employee is posted for 4 years.
• In one unit, one employee is posted for 3 years.
• Within one unit, at one desk an employee is posted for 2 years.
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SMU is responsible to post employees at different units/desks/divisions after given time period
and keep check on them.

Early Retirement Schemes:

If an employee wants to retire, he may apply for retirement through
18(A) 1; - It specifies what facilities will be given to employees.
18(A) 2; - If employee has service of 10 years, than he/she may apply under this
scheme/package.
18(A) 3; - If employee has service of 20 years. Than what facilities an employee may avail is
written in it.

Superannuation scheme:
If employee has reached at the age of 60 years. Than his job is accomplished and he will be
retired. In this case employee is given leave encashment for 2 years.

Death case;
If employee is dead, than “monetize salary” is given to widow and “Group term insurance
premium” is also given.

Disciplinary Action;
SMU is also responsible for taking action if any employee violates the rules/code of conduct of
SBP,
E.g. employee comes late.
Go on leave without notice/application.
Creating problems within environment of SBP.
Teasing /interrupting in the working of other employees.
Than SMU gives warning to that employee. If any matter required explanation. Than
explanation is called. In the end showcause notice is issued and its reply should be received
within 7 days. If reply is received and it is according to the regulation, than case is being closed.
But if inquiry office is not answered, than matter is transferred to “General Council Dept” than
GCD might terminate the employee or salary is stopped for some period.

Performance Evaluation Report (PER):

Every employee performance is accessed and they are given marks according to their integrity,
initiative, sense of responsibility etc. These marks are given by unit incharge and DCM or CM
approves it. Based on these marks the employee is given annual salary increment. These records
are also kept with SMU.

Cancelled Note Verification (CNV):

SMU authorizes the person who is going to cancel the notes. Task of that person is given by
SMU.

Leave management:
An employee may have 60 days leave in whole year. This record is maintained in oracle in leave
module. It maintains two types of leave accounts.
1. Special leave account (SLA)
2. Regular leave account (RLA)

1. Special Leave Account (SLA)

This account maintains the whole service leave balance. It is yearly credited.
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Regular Leave Account (RLA):
It maintains same year leave balance. If employee is consuming leaves less than requirement (60
days). Than his account will be credited and annually these leaves will be transferred to SLA
account.
And if employee consumes the leaves more than required (60 days) in whole year. Than his
account will be debited, incase he has no previous SLA balance.

Duty Resume application:

As employee rejoins his job after leave than he has to submit duties resume application with
SMU. SMU informs to employees about whether to join the same unit/division/desk where he
was posted earlier, or assign him at another desk.
Then he has to submit duty resume application with SMU. SMU informs to employees about
whether to join the same unit/division/desk where he was posted earlier. Or assign him at
another desk.

Leave Management Certificate;

Annually each employee is provided his ‘’Leave Management Certificate ‘’

Service certificate:
If employee needs SBP service certificate e.g for the passport preparation /confirmation .in
NADRA or any other institution .SMU provides it to needy employee.

Education:
SBP provides various educational facilities to children of its employees and clerical staff as
well. Their records are also maintained in SMU.

MEDICAL UNIT

MISSION: “Healthy body and mind ----Prosperous bank.”

Near about all the employees of the SBP-BSC Quetta are fully satisfied with medical
facilities of the bank. Even some of employees said that they have left other jobs and joined
the bank only because of its attractive and healthy medical packages. Annually RS 6500,000
is approved by HOK for medical expenses of bank staff. SBP-BSC Quetta has hired one male
and one female doctor after noon on contract bases. Important medicines are available in the
dispensary of the bank, however which are not available can be purchase by the panel
medical stores of the bank and bill is reimbursed in the medical unit for payment to
employee. Payment orders are prepared in the favor of employee after approved from HOK.
Doctors of panel hospitals use the pin numbers to credit the amount in the employee amount.
Employees are also referred to Karachi thorough proper channel for treatment. Parents and
Childers under 28 years can completely take advantage of medical facilities of bank.
Medical unit not only reimburse the bills of allopathic treatment but also of homeopathic
treatment for all the dependents of the employees.

• Panel Medical Stores: Itafaque Medical Store, Sadaf Medical Store and Shalimar
Medical Store.

22
 • Panel Hospitals: CMH, Children Hospital, Saleem Medical Complex and Civil
Hospital. Doctor Rehman for homeopathic treatment.

Bills are reimbursed with the ratio of 70: 30 in case if treatment from hospitals other than
panel hospitals.

Salary and Advances unit:

It consists of two units
1. Salary
2. Advances

1. Salary;
Employee salary accounts are maintained in this unit. It is mainly concerned with the payment of
salaries and deduction of various allowances that are paid after retirement and some are paid
during service.

Monetize salary;
It is the gross amount owe to employee before deductions.

Winter allowance;
SBP employees are given “8 months winter allowance”. Time period for winter allowance is
from Sep to April.

Overtime;
Non- officers; for non-officers, if they work after office working hours. They are given
overtime. It is given only if they work 3 or more than 3 hours. Overtime is given according to
their pay/salary as per hour rate.
OG1 and above; for the employees of OG1 and above grade. Rs. 15 Is paid as a flat overtime.
Medical allowance;
Employees are given medical allowance on reimbursement basis. This facility is not only for the
employees but it is also for their family.

Retirement packages;
Package 1; from employee salary, fixed amount is deducted monthly as GPF {gross provident
fund} and if the employee want to avail loan service, than he may obtain on GPF. And at the time
of retirement, some amount of interest will be paid to him.
Package 2; in this package, the employee may avail double salary every month. At time of
retirement, pension is not paid and a lump sum amount is paid to him. And instead of GPF fund
PF (provident fund) is given. It is not deducted from his salary. This is paid by bank itself.

2. Advances;
SBP employees may avail the interest free loan services. This loan is deducted from salary of
employee.

Loan types;
Loans are sanctioned to employees for
1. Movable property

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 2. House-building advance
3. Personal loans

1. Movable property;
SBP provides the loans to employees for the purchase of
1. Cycle
2. Motor cycle
3. Car
OG1 and above employees may obtain loan equal to amount of car. It is sanctioned for the
purchase of car.
Non –officer avail loan for purchase of cycle and motor cycle.
Application is submitted for availing /obtaining loan. Employee salary is monitored in
accordance with the amount of loan to be sanctioned. And that vehicle will be purchased on the
name of bank. It will be possession of employee. And the ownership will remain with the bank,
until loan is returned.

2. House-building advance;
Employee may also obtain loan for the construction of house or purchase of plot or building.
In this type of loan, 60 monetize salary is limited for obtaining loans with restrictions of net
deduction should not exceed 50%of take home salary.
• House building advance is not further financed. until salary of that
employee does not increase by 15%
• If employee avail loan for purchase of plot. Than SBP realizes value of plot
and the amount of loan sanctioned is always less then amount of plot.
• The same case is for purchase building.

3. Personal loans;
Loans are also realized for any personal need of employee. In this case,3 monetize salaries
payable on 24 installments with restriction of net deduction should not exceed 50%of take home
salary.

Procurement and Engineering:

Procurement;
It is concerned with purchase of stationary and other items required, the sale of items not
required, and repair and maintenance of vehicles. All purchase and sale matters are handled in
this unit.
In the beginning, the head office Karachi handle all the matters of purchase but now this work is
being done in SBP by itself. Budget is allocated. According to requirement items are purchased.
And it is compared with the annual budget. In case any items is no more in use, than their sale is
made. This matter is also handled in this unit.
Procurement unit purchase such items,
I. Stationary (paper, pencil, pens and most used items)
II. General (other than stationary)
• Like bakery items for refreshment of guests
• Meeting items
• Office use vehicles.
In repair and maintenance section, oiling, greasing, fueling of vehicles and machinery is
done.

24
Asset and Expense:
• Asset accounts are maintained here, in case cost of item is below Rs.25000, than
it is treated as expense and if it exceeds Rs.25000. than it will be treated as an
asset. Whom depreciation will be made at the year-end. In SBP (Quetta)
depreciation is recorded at 10% of its cost.
• If any item cost is more than Rs.5000 than committee is made, that decides
about the purchase of that item.
• If cost is more than 100000 than matter is handed over to Pakistan Procurement
Regulation Authority (PPRA).

Utility bills payment:

Payment of all utility bills is also done through this unit. As in SBP different meters are used in
order to overcome load and reduce charges. This unit is responsible for payment of each utility
bill. But after taking approval from CM bill is paid. This is called monetary sanction.

Engineering:

In every office/building working environment is very important. It is very necessary that

atmosphere should be breathing, cool or warm according to weather. Its electrical system should
be accurate. This all work is done by engineering unit of SBP.
This unit is concerned with mechanical, electrical, civil and information technology etc and is
also related with new technology and innovations.

Budgeting;
All the budget of SBP is allocated. Especially for engineering related items.

Types of budget:
1. Revenue budget
2. Capital budget.

Revenue budget;
Revenue budget is unspecified.
It is for the repair and maintenance purpose.

Capital budget:
This budget is specified. For the purchase of building, set up of plant this budget is allocated.
After plan, estimation, genuine requirement this budget is analyzed.

Procedure;
If for example, SBP has to install generator,
It will make market search, check market price and other taxes, technology, specification.
And after thoughtful consideration paper work is done, and estimated cost is allocated.
After analyzing that whether it is revenue or capital expenditure it is forwarded to CM for
approval.

Measurement book:
It is permanent book. After completion of project the details are recorded in this register. It
contains the cost of engineering items involved in project.

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Outsourcing;
Core business of organization is never hired. But some areas need outsourcing as it involves less
cost and more benefits for the SBP. SBP has outsourced the following,
• Lift maintenance and repair
• Security
• Cleaning
• Electrician
• Gardening.etc.

AUDIT UNIT:
Audit unit of the SBP-BSC Quetta has further divided into other two divisions these are;
• Internal monitoring Unit/ Pre Audit Unit
• Internal Audit Unit/ Post Audit Unit

INTERNAL MONITORING UNIT (IMU) / PRE AUDIT UNIT

Internal Monitoring Unit of SBP BSC Quetta works on behalf of Chief Manager on daily
bases. As name of unit imply that it controls all the internal functions and activities from
messengers to the officers of all units. It is pre auditing in terms of monitoring all the ongoing
activities whether for schedule banks in banking and currency issue unit or activities related
to bank’s own employees in administration unit. IMU with conjunction of IAU (Internal
Audit Unit) monitor the functions of whole bank in a way that there is 0% level of corruption
in SBP-BSC Quetta. Following are the some functions and duties of IMU related to different
units of bank;
• Monitoring and inspection of schedule/commercial banks for the reception of utility bills
and issuance of fresh notes.
• Checking of the uniforms of liveried staff i.e. messengers and security guards. IMU also
conduct the surprise checks at night to monitor guards at duty.
• IMU monitor all expenses related with all units. These expenses may be of stationary,
furniture & fixture, equipments & machinery electricity consumption and other assets
• Each year HOK approves and fix the limit of budget for expenses, IMU have to check
that all expenses must be allocated within that limit. This limit of budget can be increased
on demand.
• In procurement & engineering, IMU monitors the auctions, bidding and call for tenders.
• Checking of remittances of currency and coins to and from schedule banks, issue offices
or HOK. IMU also monitors the 3% of destruction process of forged an non issuable
notes,
• Auditing of educational stipend, scholarships for employee’s children, retirement
expenses, pension payments, loans granted and employee’s eligibility, TADA, and leave
accounts in Staff Matter Unit.
• In Medical unit, IMU monitors the bills of supplies for medicines and reimbursement of
hospital or doctor’s bill.
• IMU monitors all working of cheques of federal and provincial government and schedule
banks in PAD and DAD. IMU observes crossing entry, validity date, DDO’s signatures,
ATO’s signatures, signatures of drawer and drawee, schedule of banks, serial numbers of
cheques and many more.
• In Prize Bonds, SSC & DSC section IMU checks PB-35 register, conformation of
signatures of ACM and PDO (public debt officer) calculations of zakat, taxes etc.

26
 At the end we can conclude that IMU have a complete check on all the activities related to
bank and some of schedule banks to minimize the risk of fraud and miss interruption.
Internal audit unit (IAU):
It is concerned with checking of accounts and monitoring the work of all the units of SBP. This
unit keeps check on all the records after they have been prepared. They conduct post audit i.e.
audit after accounts have been maintained. IAU checks the format, content, serial no, figures,
initials etc. as specified in International Auditing Standards.

Monthly audit;
• Audit is conducted according to the monthly audit program.
• Audit program;
“In a month, one auditor is appointed to check the specific units/areas. Units are
divided among different auditor for monthly checking of accounts and their working.”
• Irregularities are pointed out and written in AU-1 register.
• AU-1 register is than sent to unit concerned for their remarks.
• In case remarks received does not satisfy the auditor and it involves some kind of risk,
than it is sent to head office Karachi.
• Monthly audit is conducted on %age basis.

Risks:
Auditors monitor the work of units in light of four kind of risk involved.
1. Financial risk.
2. Reputational risk.
3. Legal risk.
4. Operational risk.(daily routine risk)

Weekly Audit;
IAU keeps surprise checks on weekly basis. This check is kept on cash monetary, cancelled note
verification etc.

CNV(Cancelled Note Verification)

As in CNV, high denomination notes are destroyed. Auditors monitor that,
• Notes have triangular cuts.
• 3 holes are imposed on note that cuts governor’s initials.
• In CNV 80 note are counted by one person and than clip is attached on it and
initials are done and other person counts the other 20.

Cash monetary:
• Monitoring that employee has deposited their personal amounts with unit
incharge.
• Amount deposited is entered in the books.
• Initials checking.
• Amount of cash on the counter and their comparison with the amount entered in
the books.

Security;
• Monitoring duty list
• Checking physical appearance.

27
 • Uniforms maintenance.
• Keep check on water buckets, vehicle detectors.
Security checking is the part of surprise checks.

Annual Audit:
IAU also conducts yearly inspection. It involves 100% checking of accounts maintained. It
emphasizes on the control system and policy matters. Auditors try not to take reputational risk, so
they try to avoid such risk that may affect goodwill of SBP and keep close check on small
amounts that may effect the reputation of bank.

Central Receipt and Dispatch Department (CRD)

It consist of two units,
1. Receipt unit.
2. Dispatch unit.

Receipt unit;
All private posts, official posts and any complaints received. Employee application for leave,
related to SBP and their employees are received by receipt unit. After receiving posts, the
documents related to different units of SBP are separated, and recorded in the four different types
of registers maintained. i.e.
 Banking (DAD, PAD, Prize Bonds)
 Administration (Medical, DFSU, SMU, IMU, Payment and Advances Unit, Engineering
and Procurement, Security)
 Currency (Accounts, Management, Claim)
 Foreign Exchange.

Register of Inward letters;

Documents related to each of these units are separated and after opening the letter, diary stamp is
attached on it and then record is entered in concerned register called register of inward letters.

Dispatch unit;
All the official letters and documents that are to be sent outside are sent through this unit. Every
official/unofficial document is carried here and some number is allotted to it. After registration, it
is forwarded to the concerned institution/office/bank etc through postal service.

Memorandum;
In case letter/document is sent to the following
 SBP Head Office Karachi.
 Human Resource Department (SBP HOK)
 Chief Manager (SBP HOK)
3 copies of memorandum are prepared. It contains details of serial no allotted to each parcel.
One copy of memo is kept with SBP itself and the other 2 copies are sent to SBP (HOK), out of
which 1 is forwarded back to SBP (Quetta) after posting the stamp on it.

Acknowledgement card;
If parcel/letter is sent to any other office/institution/organization/bank other than SBP (HOK),
HRD (HOK) and CM (HOK) and it is important and confidential, than acknowledgement card is
attached with letter/document.

28
 When it is delivered by postman to concerned office and to the concerned person. His initials are
taken on acknowledgment card. This card acknowledges that document/letter is safely received
by that person to whom it was sent.

Register of letters (etc) issued;

When letter is dispatched. Central receipt department maintains the record about these
transactions in the register called register of letters (etc) issued.
It contains details about
 Serial no
 File no
 To whom dispatched
 Subject of letter
 No of copies

TCS;
SBP uses TCS service for its urgent documents and these charges are paid according to weight of
envelops.

Postal stamp Account register;

This register is maintained to record charges. After sending letter/document. Record is
maintained in postal stamp account register. This register contains details about,
 To whom dispatched
 Date
 Place
 Receipt no (this receipt is sent by post office that letter is received)
 Postage Rs. (acknowledgement card amount)
 Balance
 Initials

Non-important documents;
If letter and attested documents are not very much important, than acknowledgment card is not
sent with it and tickets are posted on envelopes.
Records of such letters are maintained in separate register other than postal stamp account
register of important document.

SYSTEM SUPPORT UNIT

There is full fledge support system in SBP BSC Quetta which is fully equipped with all modern
banking supporting technological facilities. All banking dealings are recorded in following two
banking soft wares:

• ORACLE

Oracle is banking system software that is installed in all computers of SBP. It is a database
program. It can store a large amount of data. To record different entries, different titles of
accounts are used in oracle, which are called ‘modules’.
E.g. HRMS is a module used to record and store data about the SMU (Staff matter unit) of SBP
(EIM, salary, work structure). Two very important modules for Payroll and Prize Bounds
29
modules that are self-created by ISTD (Information System Technology department) Karachi.
For Foreign Exchange Unit (FEU) Export overdue Reporting system is used which is also oracle
based. All the users of oracle in bank have their own unique passwords and ids for security
purposes. Main server of oracle is in SBP Karachi.
• GLOBUS(G-11)

SBP has purchased it from South Africa. It is totally developed for all banking related
transactions. Globus Bank Environment records all transactions related to Currency e.g.: DAU
(Deposit Account unit), PAU (Payment Account Unit) and Prize bounds. Globus has also
different Chart of Accounts to make payments. IDs and passwords are provided to all employees
who are using it.

Net Working in SBP BSC Quetta

All computer users of SBP Quetta office are connected with each other as well as with Karachi
office with a network. To communicate with users of Quetta, one can connect with LAN (Local
Area Network) and to maintain connections and interactions with Karachi office and other
offices, users are log in through WAN (Wide Area Network). Three types of servers are used for
all networking services.
 Domain Server
All Quetta servers can login through domain server. Server will first verify the user’s ID then
will allow to use the system.
 Mail Server
Mail server is for connection with SBP Karachi and other offices.

 CBR/ FBR Server

It is for the storage of data related to taxation e.g. income tax, wealth tax, property tax,
withholding tax, and custom duty and excise duty. FOXPRO software is used in CBR, a
server that is originally prepared by NBP.

 SBP has three DXX (Digital Cross Connector) as ISPs with total bandwidth of
128 KB of each. Among these three DXXs, one is of PTCL and two are of NTCL.
 SBP has also one radio link, satellite link and solar system link to make their
networking efficient for 24 hours.
 SBP pays a large amount to Micro Soft annually for the use and purchase of
licensed soft wares. SBP has installed licensed Windows XP Professional 2003 in HP
systems of model D330. Vista has also installed in some systems that are in special use.
 To prevent from viruses anti virus program namely semantic has installed which is
activated each hour by central server in Karachi.

System Backup

SBP Quetta office has its full fledge backup system of BCP in NBP Cant branch. All
recordings and balances are transferred it on daily basis. So that in case of any disaster face
by the bank, bank will be in position to run its functions smoothly.

UPS (Un-interrupted Power Supply)

A little bit breakup of electricity from WAPDA can result in lost of important data,
corruption of file, failing of hard ware and motherboard. To prevent from these problems,

30
SBP has installed UPS. All computer systems are connected directly with UPS, so system is
not disturbed while failing of electricity. UPS can provide 80 to 100 minutes backup in case
of failing of electricity from WAPDA. There are two UPSs namely UPS A and UPS B for
first and ground floor respectively of 10 KVA capacities. A UPS of 5 KVA is also present
for supply of uninterrupted power to three servers.
To control the low and high voltage level of electricity from WAPDA, there is a step-up and
step down transformer.
For continuous supply of electricity there are two generators in SBP Quetta, one is for
building purposes and other is for computer systems.
For hard copy of all reports and transactions, best HP printers/ Print ox are available in bank.

31
It is part of developing Finance Support Department (DFSD) situated in Karachi. In Quetta it was
established in 2007.

Strategy;
• The basic strategy of DFSU is financial inclusion. It is established to promote
development finance especially in rural areas. Its purpose is to promote financing
on the small scale.
• Another strategy is to control money and credit supply in the country according to
the development needs of the country.

Objectives of DFSU:

1. Formulation and implementation of monetary policy;

Monetary policy is the deliberate exercise of monetary authority’s power to
induce expansion or contraction in the money supply.

2. Supervision and insuring;

Monitor the working of schedule banks in order to insure that the policy is
implemented and finance is used for the same purpose in an accurate manner.

3. Financial inclusion;
It includes providing financial services such as opening bank accounts for people. Making
payments on the behalf of public. Helping public for designing and introducing new product.

4. Coordination with banks;

DFSU try to create capacity building with commercial banks,
It provides various training programs to them and also create various awareness opportunities in
order to inform about new schemes introduced by SBP and make better coordination of public
with the banks.

5. Awareness and information dissemination:

• DFSU basic function to disperse the development and finance information to
its stake holders that includes,
• Govt organization
• Commercial banks
• Small and medium enterprise development authority (SMEDA)
• Central Board of Revenue (CBR)
• Industries
• Agricultural Development Bank of Pakistan
• Zarai Taraqyati Bank Limited
• Saudi Pak
• DFSU conducts formal and informal meetings with the stakeholders.
32
 • It conducts seminars/workshops/milas in order to create awareness.
• DFSU also participate in seminars as speakers. The stakeholders conduct these
seminars.
• DFSU also encourages banks to conduct various campaigns for public
awareness.
• It also conducts Local Credit Advisory (LCA) meetings for dissemination of
policies and getting feedback from stakeholders.
• It develops linkages with educational institutions to sensitize about development
and finance.
• Agriculture Finance Officer (AFO)’s training is also conducted by DFSU.
• Broshers (circulars) are published in various languages for convenience and
understanding of rural people and farms. These broshers are printed in balochi,
brahwi and pahto as well.

Sectors of Development Finance Group (DFG):

Three sectors to which Development Finance provide support are
1. Agriculture Credit Development (ACD)
2. SME Finance and Micro Finance.
3. Housing Finance and Infrastructure.

1. Agriculture Credit Development (ACD):

The ACD was established as a full-fledged department in 1953. The department is mainly
responsible for facilitating banks to meet credit needs of Agricultural sector.

Functions:
Basic functions of ACD are as under.

• To operate as a focal point in SBP for all agricultural and rural finance policies, programs
and projects.
• To formulate agricultural and rural finance policies in consultation with stakeholders to
ensure adequate flow of institutional credit in rural areas.
• To liaise with Federal and Provincial Agricultural departments and research institutes on
all agri /rural finance issues, policies and projects.
• To estimate credit needs of agri/rural sectors and take measures to help develop necessary
institutional infrastructure to meet the credit needs of the sector.
• To collect periodical agriculture/rural finance data for analysis, policy formulation and
dissemination to general public.
• To initiate and undertake information dissemination and awareness building programs for
farmers and rural community about the financial services. They can access from banks.
• To arrange special training programs, workshops, seminars etc. for the capacity building
of commercial banks in agri/rural finance related activities.

2. SME Finance and Micro Finance.

“SME is a company employing up to 250 employees, nearly all (over 99%) employ less
than 50 people. In fact, three quarters of them don’t have any employees – they are sole
operators. So, the emphasis really is on small rather than medium in the SME label.”
SME means an entity, ideally not a public limited company, which does not employ more than
250 person (if it is manufacturing/service concern) and 50 persons (if it is trading concern) and
also fulfills following criteria either “a” and “c” or “b” and “c”.

33
a = A trading /service concern with total assets at the cost excluding land and building up to
Rs.50 million.
b = A manufacturing concern with total assets at cost excluding land and building up to Rs.100
million.
c = any concern (trading, service or manufacturing) with net sales not exceeding Rs.300 million
as per latest financial statements

Employment Total assets Net sales

Manufacturing 250 100 300 million rupees
concern
Trading concern 50 50 300 million rupees
Service 50 50 300 million rupees

Micro Finance (micro enterprise):

It focuses on the development of those people who are under poverty line.
Micro finance sector develops policy of Islamic republic of Pakistan. Aims to increase the access
of poor to financial services for enhancing their income earning capacity as a key input in fight
against poverty. Khushali bank is a major initiative to bridge the demand and supply gap for
micro finance services.

34
Monitoring of the foreign exchange operation is considered as the backbone of SBP BSC
Foreign exchange operations are implemented under the FER act, 1947.
The aim of this act is:
 Working for the economic stability of Pakistan.
 Dealing all the matters in FE.
 Securities in the form of documents
 Trading of currency and bullion

AUTHORIZED DEALERS:
Under FER act, the state bank may on application authorize any person to deal in FE. Any
authorization may authorize dealing in all foreign currencies or may be restricted to authorizing
dealings in specified currencies only and may authorize transactions of all descriptions in foreign
currencies or may be restricted to authorizing specified transactions only.

OUTWARD REMITTANCES:
Authorized dealers have a power to release FE to allow remittances for various approval
transactions without the prior approval of the state banks in accordance with the procedures laid
down in exchange control manual.
Private remittances:
Release of FE of the officials of the Government and autonomous bodies proceeding abroad on
official duty at the rate prescribed by Ministry of finance for daily allowance/ leave salary. The
foreign exchange so released is debited to the FE so allocation of ministry/department concerned.
Release of foreign exchange for medical treatment abroad to the patient and his/her attendant on
the recommendation of director general health both in private and public sector subject to the
maximum limits has laid down. The FE released to the Govt employees is allowed by debit to the
FE allocation of the concerned department.
Release of FE for participation in the international conference.
Issuance of guideline/ disposal instructions to authorized dealers for cases referred to by them in
release of FE for studies abroad.
Remittance for score report etc.
Checking of forms-M, T1, T2 etc for remittance made by the authorized dealers under the
general of specific approval.

INWARD REMITTANCES:
It contains the acknowledgements of all the inward remittances for family maintenance
and other receipts up to US dollars 10000 for purpose other than exports.

FOREIGN EXCHANGE MARKET:

It is a place where the economic stability of a country relies on.

35
FOREIGN EXCHANGE RATE:
The Bank is responsible to keep the exchange rate of the rupee at an appropriate level and
prevent it from wide fluctuations in order to maintain competitiveness of our exports and
maintain stability in the foreign exchange market. Various exchange policies have been adopted
at different times for this purpose keeping in view the circumstances.

IMPORT AND EXPORT REGULATIONS:

Import and export are regulated by ministry of commerce and Government of Pakistan,
under the import and export act 1950.

IMPORT:
No import is permissible from Israel or from any country, which may be notified by the
ministry of the commerce, imports of goods originating from any of these countries are also
prohibited. Imports from India are regulated a notified by the ministry of commerce.

I-Form:
It contains the amount of goods, which is imported, quality of goods, means of
transportation; the currency in which bank is dealing and also the invoice is attached to it, which
is given by issuing bank to state bank. It also includes terms and conditions and information
regarding trade to import and exporter.

EXPORT:
Under FER act Govt prohibits the export of any goods specified in the notification
directly or indirectly to any place so specified unless a declaration supported by such evidence as
may be prescribed, as furnished by the exporter to the prescribed authority that the amount
representing the full export value of the goods has been, or will with in the prescribed be, paid in
the prescribed manner.

TYPES OF FORMS:

R-FORM:
It contains declaration in respect of receipts for purpose other than exports and family
maintenance usually information regarding the commission and charges made by the issuing
bank.

E-FORM:
It contains all the acknowledgements of export matters. It also includes the terms and
conditions for export. This form is filled for the sake of providing information to SBP on
monthly bases.

I-FORM:
It contains the amount of goods, which is imported, quality of goods, means of
transportation, the currency in which bank is dealing and also the invoice is attached to it. It
includes the terms and conditions and information regarding trade to import and exporter.

M-FORM:
It is an application for permission to purchase FE for the purpose specified.

36
E-FORM NOT ATTACHED VOUCHER:
It is the form used for partial advanced payment of the exports.

LETTER OF CREDIT:
It is an agreement in which the banks of the importer and the exporter take the
responsibility of the export and the import.

WAYS OF EXPORTING GOODS

There are three ways of export goods.

1. ADVANCED PAYMENT:
In case of the remittance received in advance for goods to be exported from Pakistan,
authorized dealer should obtain a certificate duplicate form. The beneficiary on the advanced
payment voucher declaring the particulars of the intended export, before disbursing amount to
him. In case of any default, the exporter and the importer themselves are responsible for it not the
banks.

2. PARTIAL ADVANCED PAYMENT:

It is the customary in any particular trade for exporters to draw bills for only a percentage
of the invoice value and to receive the balance after arrival of the goods at destination, authority
dealers may negotiate/collect bills in the part amount provided they obtain an undertaking from
the exporters that they will realize the balance with in the prescribed period. Authority dealer
should report such part receipts on form e not attached voucher. It is the responsibility of the
authorized dealers to follow up each such case and to ensure that the balanced amount is also
realized with in the prescribed period.

3. LETTER OF CREDIT (L/C):

For import and export first of all the importer and exporter have to open the L/C account with
the commercial bank. State bank is the controlling authority of the foreign exchange so every
commercial bank is bound to submit their selling and purchasing report every month to SBP. In
case of any default the banks of exporter and the importer are responsible for it.

37
Banking is the key department of State bank. All type of general banking is done here.
It has two main units.

• Deposit account unit (DAU)

• Public account unit (PAU)

Deposit account unit

DAU is important unit of banking. All the account related banking operations are
exercised here, i.e. balanced before opening of the account to closing of account.
It consists of 04 major units

• Current account / Schedule bank

• Remittance
• Re-financing
• Clean cash

Current account / Schedule bank

.
DAU maintain all the current account of schedule banks. All the banks are issued chequebooks,
which they use to withdraw cash when required. Their transactions in the system one made
regularly throughout the day, which affect their account as well as books of unit. Finally, print
is taken out for record of bank.
State bank has bounded schedule bank to maintain a fixed amount, which is holding capacity of
balance in bank. State bank has given a limit to bank. Bank deposit their excess balance with
State bank and withdraw cash when they need. However sufficient credit balance be maintain at
the end of day.

Remittance
Remittance means transfer of funds with in Pakistan through banks. Transfers of fund with
province-to-province, province to central, with in province, through bank, instruments, which are
used to sending funds, are

• Govt draft
• Bank draft
• Telegraphic transfer
• Mail transfer

Govt draft
All the Govt transaction of funds is transit on through Govt draft. It is issued on
request of authorized dep’t on proper application form available with the unit to any particular
place with in the country.

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 When a dept issue Govt drafts on it the signature of issuing authority is necessary, which is
DDO (Drawing Dispersing officer)
Govt draft may be issued form State bank to State bank, if in case of there is no State bank then
State bank to National bank, if no branch of National bank then to treasure office or sub treasure
office.

Charges
State bank take its exchange charges on draft to Govt.

• Federal govt draft is free of charges.

• Provincial govt has to pay 0.07% exchange commission in case of sending
remittance out side of province.
• With in province there are no charges.
The govt draft can be issued through either cash or transfer.

Bank Draft
It is used for general public, but in State bank it is used for banks transaction to
other banks. If a bank wants to send remittance out of station they use this facility. As we all
banks, accounts maintain in state bank so if any bank want to send remittance then they use
draft. State bank charge 0.07% of exchange commission on each draft. State bank debit or credit
banks account through draft.

Telegraphic transaction (TT)

This is source of transfer of funds from bank to bank or
office to office and Head office. It is used to cover shortage of balance and transfer of excess of
balance to head office. For transfer of balance the banks pay the charges, which are 0.07% of
total amount. TT, after request it take 24 hrs times and mostly it is used b/w state bank’s issue
offices.

Mail transfer (MT)

This facility is only for the bank employees of State bank. Bank
employee uses it for transfer of money b/w state bank to state bank. It is a kind of online system
for bank employee. One cannot send money more then his salary. In case of amount is more
then salary, Deputy Chief Manager (DCM) is authorized to allow or not. It is a free service for
employees but DCM also has authority to charge some commission or not.
It is faster then TT, because after request with in a hour other one can withdraw the amount. That
is why we can say it is like online service.

Re-financing
For the promotion of export state bank each year fix a huge amount, which is grinded to Export
at a very low mark up rates. State bank promote this scheme through schedule bank. Schedule
bank financed only those exporters who are licensed holder, Taxpayer, member of chamber of
commerce, then bank forward for refinance to state bank. State bank only check the documents
after checking allow refinance from receipt of application. State bank take only 48 hrs for
checking the document .all the responsibility is on schedule bank that how much to finance,
whom to finance, and how to recover. State bank gives 180 days time after which the account of
the financed bank is debited by state bank whether party has paid or not. This financing is for
export encouraging so state bank only charge 6.5 % markup and 1 % schedule bank so exporter
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has to pay only 7.5% markup which is very low. Schedule bank cannot charge more then 1%
markup but low is on bank either charges or not.
Methods
State bank provide two type of refinancing.
• Refinancing under part 1
• Refinancing under part 2
Refinancing under part 1
There are two categories of part 1 refinancing.
• Pre shipment
• post shipment

Pre shipment
It is provided to exporter in his manufacturing period or before export the
commodity
Post shipment
It is provided to exporter to maintain his gap period. When exporter, export his
commodity he has to wait for amount. For it state bank provide loan to exporter that he
continuously manufacture commodities.
Refinancing under part 2
Party 2 loans grinded to exporter on his previous year performance. If a
exporter had 10mil export last year then it will be grained 50% of 10mil. Part 2 type of loan is
also for 18 days after the time state bank debit the account of financed bank.
In Quetta state bank, only part 2 type of financing is exercised. Quetta office has allowed
following banks for refinancing.
• Habib bank limited
• Bank Alfalah limited
• Soneri bank limited
Loan is financed to exporters with the prescribed limit by state bank. The schedule banks
distribute that limit to their various offices in different cities after that some is allowed to their
exporter and after financing them they applied to the state bank for refinancing and the loan is
only for listed commodities.
Penalties
In case of any irregularity state bank charges penalty to banks and exporters.
Following penalties can be charged.
 If the bank does not return the loan before maturity on same date to state bank.
 If loan is misused
 If the exporter could not show the required performance.
 If the bank allowed finance after refinance.

Clean cash
Clean cash shows the debit and credit total of various head of accounts of the bank in a particular
day. Its debit and credit sides should agree with each other.

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Public account unit

In banking, the second unit is public account unit. In this unit payment, accept and make
on behalf of govt dept as we knows state bank also have the account of govt dept. in PAU
there are two main division.
 Payment
 Receipts

Payment and Receipts:

There are three procedures of payment and receipt.
• Cash
• Clearing
• Transfer

State bank has lots of accounts but mostly used are

• Central 1(Taxes and Revenue)
• Central 3(Railway)
• Central 8(Zakat)

• Provincial 1(taxes and revenue)

• Provincial 2(Food)
• Provincial 3(Zakat)
• Provincial 4(District Government)

Through Cash
For cash payment and receipt, SBP issue chequebooks/challan to
Govt dept. These chequebooks are issued by serial no to all govt dept (Challans are
provided to govt departments for receiving tax and other revenue). Dept issue that cheque
on behalf of their dept for cash. The person who has issuing authority is called DDO
(drawing disbursing officer). He is authorized to withdraw cash without any limit. SBP
have the specimen of DDO in there record. There is some important checking which are
checked by Assistant Account Officer, which is
• Check no
• Date
• Serial no
• Institute
• Amount
• Signature of DDO.
For 20000 and below, AAO has authority to pay but above 20000 amount, it is paid by
Accounts Officer.
Cheque colors;
Provincial (four)_________ purple color cheque is used.
Central ___________ Green color cheque is used.
Army____________ white color cheque is used.
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 Provincial_____________ Pink cheque is used.
Challan colors:
Provincial ___________ Green color challan is used.
Central ____________white color challan is used.
After verification AAO makes the entry in “Transit Book”

Transit Book:
“It is a small intimation book containing token no of cheques”.
Than transit book is forwarded to cash department. ATO (Assistant Treasury Officer) and
TO (Treasury Officer) will check the Accounts Officers signatures and token no. Then
payment will be made. In the last, entry is made in the system.

Clearing:
Govt cheques are presented to PAU through clearing. (Now NIFT). For clearance in order
to offer the cheques to the respective banks account.
Before NIFT State Bank of Pakistan performed this function through its own
clearinghouse, but now NIFT is performing this function on behalf of State Bank of
Pakistan.

NIFT (National Institutional Facilitation Technology):

It is responsible for the establishment and management of automated clearinghouse.
Presently it is working for most of the banks.

Types of Clearing:
 Normal Clearing
“In this type of clearing, Cheques received are paid within 24 hours.”
 Normal Return
“ If the check is not cleared due to some reason, it is returned to the bank within
24 hours”
 Same Day Clearing
“ If bank need urgent payment, than same day clearing method is used. In this
case bank have to report to NIFT before 11:00 AM.”
 Same Day Return
“In case reporting bank is not able to pay urgent to NIFT for clearance, NIFT
returns the cheque to the issuing bank, this cheque is returned on the same day.”

Transfer:
Cheques of the Government received through the challan form are called
Transfer. In this process one dep’t; account is debited and other account is credited.
Government department purchase some assets or other thing from other department as all
the government accounts are in State Bank of Pakistan so they sent cheques with challan
and State Bank of Pakistan credit and debit the accounts.
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Validity of cheques:
 Central government cheques after issuing are valid till 3 months.
 Provincial government cheques after issuing are valid till 2 months.
 Pension and civil court cheques after issuing are valid till 30 days.

Prize bonds and other types of securities is a sort of a public debt. SBP- BSC deals in the sale and
purchase of prize bonds and other securities on the behalf of National Saving Scheme under
ministry of Finance/ Government of Pakistan because a person deals with these securities only
due to the trust on SBP not on the NSC. In SBP- BSC Quetta following three types are issued to
the public for public debt purposes:

Prize Bonds Section

DSCs-Defense SSCs-Special
Prize Bonds
saving Certificates Saving Certificates

Each of above is described below:

PRIZE BONDS:

One of the most common instruments of public debt is issuance of prize bonds by SBP. It is
common because it has large as well as small denominations, further it has no maturity period,
customer can encash it at any time. So these are called Domestic Small Savings.
 Bonds are printed by PSPS- Pakistan Security Printing Corporation. Then these are
distributed among issue and field offices according to the demand of each province and
sufficient balance. SBP- BSC can issue these bonds and securities to all schedule banks
for sale.
 After every three months draws are held in different cities of different denominations e.g.
on 16th Feb 2009 draw of bond value of RS 7500 was held in SBP-BSC Quetta.
 Small Denominations: RS 200, RS750 and RS 1500
 Large Denominations: RS 7500, RS15, 000 and RS 40,000
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  Shut Period: A period of two months, when sale of a specific denomination bond is
stopped before its draw.
 A prize bond one purchased is included in six draws means one bond has six chances
to win prize.
 Prize money of the bond can be claim within 6 months. Bank gives a form for the
claim of prize money to the customer. For prize less than RS 10,000 bank makes
payment at the time claim but prize money greater than RS 10,000 bank will make
payment within 10 to 15 days. Bank verify the signature through CNIC send it to
PBO-Public Debt Officer and PSPC for verification/ is it genuine or not. It lengthy
process but it ensures validity after checking means the prize money should be given
to deserved and truly bond holder. Pay orders signed by TO and CM are issued to the
customer.
 Government is paying 9.763% of interest to public on one draw of RS 1500 bond
according to current rates. All records of bonds and claim is maintained in Prize bond
based software Oracle but some registers are manually prepared, two of them are
described below
 PB-18: A register, which contains the records, related to prize-winning numbers with
series, series and numbers of bonds sold and unsold.
 PB- 35: A register in which data and information related to re-issuable prize bonds,
shut period, encashment, defective bonds, and rate of interest is recorded.
 Defective and encashed bonds and other types of securities (DSCs/SSCs) are
destroyed after 6 months in destruction kiln of SBP-BSC Quetta

DSCs-DEFENCE SAVING CERTIFICATES:

DSC is an instrument of public debt issued by SBP, which matures after 10 years.
Government pay interest on principle /face value of certificate on compound bases means
profit or interest is added each year in the principle value of the certificates. Customer can
receive profit after one year. SBP can issue these types of certificates to individual, joint
parties. In case of issuance to more than one person, at the time of encashment signatures of
both parties will be required.
o There denominations of RS 500 to RS 100,000 issue by the bank. A certificate of face
value RS 100,000 will become of RS 315000 according to current rates of interest
31.746% as on February 2009.
o At the time of sale of DSC to customer amount is credited to customer’s account after
filling of form with a credit voucher.
o At the time encashment by the customer, net profit after the deduction of taxes and
zakat is debited to customer’s account and debit voucher is prepared.
o At the time of maturity of DSC (after 10 years) customer can re-invest DSC (Principle
+ Profit) for further 10 years.

SSCs- SPECIAL SAVING CERTIFICATES:

Special Saving Certificates are another instrument of public debt issue by SBP. These were
introduced in 1964 simultaneously in Pakistan and India, however it has finished there.
It matures after three years; however it can be re-invest by the customer after completion of
three years same as DSC.
Interest is compounded annually on these certificates.
Profit on these certificates can be debited to customer account after each 6 months.
According to current rates a sum of RS 72000 are paid to the customer after first 6 months
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and after 3 years or 6th 6 month it becomes RS 76000 on face value of RS 1000,000 of
special saving certificates.
o Its denominations are from RS 500 to RS 1000,000 (one million).
o If face value of the DSC and SSC is greater than RS 150, 00,000 then withholding tax of
10% is charged on these certificates. Further 2.5 % of zakat deduction is also made unless
customer has not submitted the declaration form with bank. Amount of zakat and tax is
credited to central government or provincial government.
o All sort of bonds and security certificates are printed by PSPC- Pakistan Security Printing
Corporation.
o All records and data about Defense Saving Scheme and Special Saving Scheme is
maintained in Oracle which is connected with HOK.

VAULT VISIT

We have also visited the vault Of SBP- BSC Quetta. Although it is very confidential place
but we are very thankful to Mr. Churches Anwar, ACM of Prize bond section, who have
visited us the vault. The vault has divided into following three main units:
 PRIZE BONDS
Contains cupboards, which have unsold, defective and encashed bonds dually locked by 1
cash officer and one general officer.
 EXCHANGE NOTES
 Home Notes: Stores fresh, issuable, re-issuable, non issuable, defective,
forged notes/ currency from four schedule banks and one chest – National
Bank of Pakistan in large and dually locked cupboards and boxes.
o E- 8: A register that records total deposits and withdrawals and opening or closing
balances of currency of each denomination on daily bases.
 Value: In this unit of the vault coins are kept with security of all
denominations and memorable coins are also kept. These coins may be
remitted by Pakistan Mint Lahore or through circulation.
 BONDED NOTES: Facility of bonded notes is given to four large banks i.e. ABL,
UBL, HBL and MCB. In vault, there are four very large cupboards for these banks in
which they can keep their deposits. Three keys one by the agent of concerned
schedule bank lock these.
 Facility of Lockers have also provide to four large banks, in which they can keep
their keys of banks etc. SBP charges very nominally for the use of these lockers.

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