Glossary

ACM: Assistant Chief Manager

BDS: Banknote Destruction Machine
BOE: Banking on Equality
BPAS: Banknote Processing and Authentication System
BSC: Banking Services Corporation
CDNS: Central Directorate of National Savings
CM: Chief Manager
CMU: Cash Monitoring Unit
DCM: Deputy Chief Manager
DLTL: Draw-Back Local Taxes and Levies Section
EDP: Electronic Data Processing
FEOD: Foreign Exchange Operations Department
FID: Financial Inclusion Department
GSU: General Services Unit
IMU: Internal Monetary Unit
ITRS: International Transaction Reporting System
MSME: Micro Small and Medium Enterprises
NBP: National Bank of Pakistan
NFLP: National Financial Literacy Program
NIBAF: National Institute of Banking and Finance
OG: Officer Grade
PPRA: Public Procurement Regulatory Authority
PSPC: Pakistan Security Printing Corporation
SBP: State Bank of Pakistan
SME: Small and Medium Enterprises
SMU: Staff Matters Unit
Chapter 1: Background of the Host Organization
1.1 Background of State Bank of Pakistan
The bank first came into being on July 1, 1948, by Muhammad Ali Jinnah who thus observed
the guiding principles of the newly created central bank: “I need hardly dilate on the
important role that the State Bank will have to play in regulating the economic life of our
country.”

The bank carries out its functions under the powers derived from the SBP Act of 1956. While
its constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained
unchanged until 1st January 1974 when the Bank was nationalized, the scope of its functions
was considerably enlarged.

There are several main functions which are performed by the SBP:
 Circulating fresh notes in the economy
 Taking initiatives in implementing Islamic Banking
 Provision of training opportunities and facilities to the employees
 Maintaining reserves and acting as a banker to the banks
 Monetary and fiscal policy-making
 Acts as a lender of last resort
 Providing financial inclusion to the public and dealing with foreign exchange operations
 Supervising the financial system of the commercial banks

Banking Services Corporation (BSC) was established as a wholly-owned subsidiary of SBP

in 2002 as an operational arm for the Central Bank of Pakistan under the SBP Banking
Services Corporation Ordinance 2001. The tasks of BSC are currency management, financial
inclusion, financing for exports and others, dealing with prize bonds (an instrument of
National Savings) among the public, and management of commercial banks. The BSC has
faced many challenges, including streamlining its banking process and shifting towards a
systematic approach in administrative work.

The challenges posed by these changes required shifting its goals and objectives accordingly;
BSC has successfully aligned its operations with the new demands.

BSC has automated its processes, shifted from traditional approaches, introduced new
training programs, withdrew old functions that are no longer required, consolidated the
organization, and introduced a new culture with better policies and performance
management.

One of the main focuses of Banking Services Corporation is better internal control and
developing superior managerial skills which is critical in providing effective services and
achieving the transformation required by the changing landscape of the economy. BSC
fosters a culture of continuous improvement to take advantage of every opportunity and drive
the institution towards innovation and success. BSC's main role is to implement the policies
to commercial banks in their region and supervise them.

1.2 Vision:
Our vision is to develop the SBP BSC (Bank) into a strong and dynamic institution equipped
with an efficient and professional human resource base, the requisite technology, and the full
capability of providing quality service to stakeholders while complementing the State Bank
of Pakistan in achieving its objectives.

1.3 Mission:
To provide reliable banking services to the Government, financial institutions, and the public
and to act as the operational arm of the State Bank of Pakistan.

1.4 Core Functions of Banking Services Corporation:

 Monitoring internal affairs and audit each department
 Procuring necessary equipment and services to continue operations
 Maintaining the upkeep of the building
 Currency Management and imposing penalties
 Banking services and open market operations
 Financial inclusion among the public
 Dealing with foreign exchange and finance policies
 Implementation of SBP’s policies and SBP development

The State Bank of Pakistan is a dedicated member of the Alliance for Financial Inclusion and
through its extensive network of field offices such as BSC Multan has actively promoted
financial literacy to the public. It is one of the main objectives of Banking Services
Corporation which is to provide financial inclusion of the banking industry and also spread
awareness of Islamic Banking to promote halal banking and products to the people of
Pakistan. The State Bank of Pakistan has been working on Islamisation of the banking system
and BSC has made its strong focus on making it happen.

In addition to its efforts to provide financial inclusion to the people of Pakistan, SBP is
committed to fostering the economic system by introducing various financing schemes so that
Micro, Small, and Medium Enterprises can grow and contribute to the advancement of the
economy. The schemes are tailored to meet the needs of every business and its unique
processes.

The State Bank of Pakistan not only offers financial services to businesses and individuals
but also helps in the overall economic development of the country through the vast network
of its operational arms which are known as Banking Services Corporation.

1.5 Departments of SBP-BSC, Multan

Internal Monetary Unit

General Services/Engineering Unit

Cash Monitoring Unit

Foreign Exchange Operations Department

Financial Inclusion Department

Banking/Prize Bonds Unit

Staff Matters Unit

The various departments of Banking Services Corporation include roles like:
 Ensuring sufficient stock of currency, retrieving unfit notes, and destruction of notes
through a systematic process
 Focus on financial literacy and promotion of targeted credit schemes
 Providing cost-effective and quality support services to the other units of BSC
 Facilitating foreign exchange activities in various commercial banks across the country
 Ensuring that the organization’s management control system is operating effectively
 Talent resourcing, employee development, compensation and benefits management,
performance management, and industrial relations
 Responsibility for handling public debt via saving instruments of the federal government

1.6 Hierarchy of SBP-BSC

Chief Manager

Deputy Chief Manager

Assistant Chief Manager

OG-II

OG-I
The Chief Manager who has the highest role in the hierarchy overlooks the entire Banking
Services Corporation, making strategic decisions and ensuring smooth flow of operations. In
this case, the department of the Internal Monetary Unit (IMU) directly reports to the Chief
Manager acting as the eyes and ears for him.

The Deputy Chief Manager is the second in command and assists the Chief Manager in
managing the Banking Services Corporation. They act for specific activities in the
organization and take in charge whenever the Chief Manager is not available. They play a
key role in overlooking the functions of each unit and overlooking/handling any issue
regarding to any unit.

The Assistant Chief Manager is a supporting role and acts as the head of the department/unit.
Each unit has one ACM under which other employees manage the day-to-day activities of
that unit. The ACM also defines and governs the job description of the employees working in
their unit. An ACM can be allocated to another unit by the Staff Matters Unit.

An OG-II is a mid-level officer who is responsible for executing specific tasks assigned to
him/her by the ACM. They are involved in specialized tasks within their department and
report to the ACM. Similarly, an OG-I is an entry-level officer whose responsibility is almost
the same as OG-II. They also work within a department under the supervision of ACM and
perform the daily routine tasks of that unit.
Chapter 2: Business Operation

2.1 Organizational Structure

2.2 Business Process Analysis (Departments and their Functioning)

2.2.1 Internal Monetary Unit (IMU)

Introduction:
The Internal Monetary Unit serves as an audit department within the Banking Services
Corporation. It reviews and monitors all the checks, cases, bills and verifies authorized
signatures. It acts as a safeguard against any potential mistake or error that can affect the
integrity and credibility of the organization. This unit checks around more than 3000 cases
collectively each year. This unit ensures that each financial transaction is legitimate and is
according to the relevant internal policy.

The role of reviewing the clarity of various documents is of vital importance for any
organization. The IMU plays this crucial role for operations to run smoothly and effectively.
Ensuring that there are no discrepancies or differences, the IMU scrutinizes every document
meticulously preventing any kind of fraud and minimizing risk to the lowest level.

Reporting Lines of the Unit:

Normally the organization follows the hierarchal structure which is reporting to the Assistant
Chief Manager who reports to the Deputy Chief Manager. Then the information is reported to
the Chief Manager. However, in the case of this unit, it acts as an independent body
reviewing every transaction and dealings then reporting it directly to the Chief Manager. This
unit acts as the eyes and ears of the Chief Manager.

Internal Chief Manager

Monetary Unit of BSC

[Link] Staff Members of the Internal Monetary Unit:

Mr. Saad Bhatti (OG-II)
 He handles the cases which are associated with the Banking Department of the field
office, public dealings of the prize bond, and staff cases such as salaries and
remuneration.
 He monitors the dealings of simple and premium bonds which are dealt with by the prize
bond unit.
 Monetary policies which are to be practically implemented in commercial and Islamic
banks by the State Bank are to be properly handled by this unit.
 He also reviews the three Banking Services Corporation stores: Stationary, Medical, and
Engineering. Preventing any misuse of equipment or supplies is one of the duties of Sir
Saad.
 In addition to this, he monitors the two types of reserves that are to be maintained by the
commercial banks. These two types of reserves are SLR and CRR which are maintained
to avoid cascading effects on the economy.

Mr. Zeeshan (OG-II)

 Overlooking and reviewing the Foreign Exchange and General Services Unit of the BSC
is the main activity of this officer.
 The officer is responsible for monitoring the exchange rate, planning of the expense
budget, and procurement of goods and services by the GSU. The officer makes sure that
currency exchange is done correctly, and that goods and services are procured according
to the needs and regulations.
 Some seminars and programs are for export refinancing and activities, and supervision of
such activities falls under this officer.
 Adherence to the Public Procurement Regulatory Authority (PPRA) is very crucial to the
Banking Services Corporation. The unit governs that public money is used according to
the rules and there is no misuse of funds. The IMU assures that PPRA rules are being
followed.
 Reporting to regulatory bodies like the National Accountability Bureau (NAB) and PPRA
if expenses exceed the specified amounts mentioned in the budget, this is known as
expenditure regulations. This is done by the unit to maintain financial discipline.
 A centralized approach is used for the procurement of goods and services to streamline
business processes and any kind of discrepancy is directly reported to the Chief Manager.

Miss Amna (OG-II)

 Every unit is required to maintain sub-ledgers and General Ledgers to record every
transaction. These ledgers are then reconciled by the officer with the trail balance and any
discrepancy is resolved immediately.
 Provisions for future expenses are booked and surrendered to the head office. Before the
provisions are booked, they are interrogated properly by the unit first.
 The officer has super rights to check each and every transaction that occur through the
system and reconcile the transactions to the comparative trial balance.
 Breakups of receivables and payables are demanded so that the officer can verify their
relevance and ensure that proper collection and payment have occurred.
 Values are adjusted on trial balance according to the reacquisitions on old price. The
amounts in the trial balance are carefully adjusted and ensured at the end of the day that it
is correct.
 There are also suspense accounts that are opened in the trial balance and the officer
overlooking the trial balance is responsible for monitoring the account and make it zero at
the end of the day.

Mr. Mateen (OG-II)

 The currency life cycle management which means the process of issuance of cash till its
destruction is overlooked by this unit.
 Notes are printed by the Pakistan Security Printing Corporation (PPSC) and are delivered
to each field office for further distribution to the chest branches. All this process done by
CMU is monitored by this unit.
 The supervision of CMU relating to inward and outward remittances of the banks is
supervised by the officer.
 The fresh notes are to be circulated in the economy and soiled or reissued notes are
destroyed in the central bank through the Banknote Destruction System (BDS) which is
ensured by the officer.
 All the bonds which are dealt with through the central bank are products of National
Savings. Premium bonds were introduced to reduce Money Laundering and Terrorist
Financing. These products handled by BSC are monitored by the IMU.

[Link] Duties assigned in this unit:

On our second day, we were assigned to study the process of Ijarah. The State Bank of
Pakistan is trying to convert to an Islamic-based banking system and that is why we were
tasked to review how Ijarah works to gain Islamic Banking knowledge. For instance, a car
ijarah works through a rental agreement, under which the Bank purchases the car on behalf of
the owner and then rents it out to the client for a certain period which is decided between
them. When the Ijarah period is over, that is paying rent every month, the Bank gifts the car
or sells it for a token amount to the client thus transferring ownership.

One of the important functions of IMU is to manage risk and avoid fraudulent activities. So,
on our fourth day, we were charged to study the BARINGS bank case. It refers to the case
where a rogue trader dealing with derivative securities made speculative trading. He incurred
losses that he concealed in a different account and those losses accumulated to over 800
million pounds. This resulted in the bankruptcy of the BARINGS Bank because the amount
of loss was more than the overall worth of the bank. The trader was imprisoned and the bank
was sold at one pound only.

On our last day of the week at IMU, we were assigned to study the Federal Budget 2024-25
of the country and interpret revenue and tax amounts. We analyzed the revenue receipts and
non-tax revenue receipts, in which we learned the amount of direct and indirect tax revenue
that the government generates through individuals and businesses. We studied the salient
features and developed percentages from the figures of each segment to learn to explain the
budget in layman's terms.

[Link] Importance and Contribution of IMU

The Internal Monetary Unit diligently reviews and monitors financial transactions, economic
development, and financing initiatives. It ensures that during procurement procedures, the
rules and regulations of PPRA are being followed. The IMU acts as an independent body, and
not only plays a vital role in the operational efficiency of all units but also safeguards the
field office against the financial disturbance and misuse of the funds. It maintains the
credibility of the Banking Services Corporation through intensive audits and checking of
cases, bills, vouchers, prize bonds, procured goods, and various other activities. Thus, the
Internal Monetary Unit contributes significantly to the Banking Services Corporation’s
stability and reputation.

2.2.2 General Services Unit (GSU)/Engineering Unit

Introduction:

The General Services Unit acts as a support unit for all other units in the Banking Services
Corporation. The following are the two main functions that this unit performs:
1. Managing the utility bills and ensuring the payments of all the bills for example
Electricity, Water, and Gas.
2. Procurement of goods and services that this unit or any other unit would require for
operating efficiently. The goods or services are procured following the PPRA rules and
regulations.

[Link] Public Procurement Regulatory Authority (PPRA)

The Public Procurement Regulatory Authority is an autonomous body endowed with the
responsibility of prescribing regulations and procedures for public procurements by Federal
Government public sector organizations intending to improve governance, management,
transparency, accountability, and quality of public procurement of goods, works, and
services. It is also endowed with the responsibility of monitoring procurement by public
sector agencies/organizations and has been delegated necessary powers under the Public
Procurement Regulatory Authority Ordinance 2002.

Other functions that the GSU performs are:

1. Overseeing the janitorial and outsourced personnel for diverse duties ranging from drivers
to elevator maintenance workers.
2. Preparation of procurement plan and overseeing the budget approval process for the Unit
and compliance with the Procurement rules to maintain integrity and efficiency of the
Banking Services Corporation,

As discussed before there are three main stores in the BSC which are the Stationary, Medical
and Engineering store. The GSU has the responsibility for the upkeep of all these stores and
proper inventory management of these stores. The GSU also handles fleet and vehicle
operations, monitoring the fuel and maintenance expenses of the vehicles. The unit also has
the responsibility of administering petty cash usage by any employee and providing approval
of those petty cash usage. GSU is interlinked with every unit of the BSC to provide support
needed to resume day-to-day operations.

[Link] Procurement Process:

Planning/ Approval for Preparation of

publication of Bidding
Budgeting Tender Notice Documents

Publication in PPRA,
Approval from Bid Opening &
The first step is to plan and budget the required goods and services that are needed and ensure
that it covered within the approved budget. Then approval for publication is obtained from
competent authorities. The officers then prepare the bidding documents which are published
on three different sources: the PPRA website, the SBP website, and also the English and
Urdu newspapers.

When the bid is opened for evaluation, those bids are rejected that do not fulfill the
requirements of technical aspects. Those bids that fulfill the technical aspects are further
evaluated for financial aspects of the requirements. The final vendors are approved by the
competent authority for the award of work. The final vendors are announced after the
evaluation results and they are given the work contract.

For tenders below PKR 100,000 single quotation is opened, for tenders up to PKR 500,000 a
notice is uploaded on the SBP website, for tenders ranging from PKR 500,000 to 3 million
are advertised on the PPRA website, and for tenders exceeding PKR 3 million amount are
also published on national English and Urdu newspapers.

The unit categorizes assets into four types: office equipment, fixtures and furniture, motor
vehicles, and electronic data processing (EDP). Assets exceeding PKR 30,000 are classified
as fixed assets. The EDP assets are always acquired through the head office.

[Link] Staff Members of GSU:

1. Mr. Shahbaz (Assistant Chief Manager)
Roles: The GSU Supervisor manages the record room, sets the job description for
assistants, and supervises daily operations.
2. Mr. Haroon (OG-II)
Roles: Overseeing the janitorial and outsourced personnel, handling utility payments, and
preparing detailed procurement reports for diverse products, vehicles, and equipment.
3. Mr. Sharikh (OG-II)
 Roles: Handling account reconciliations, assessing bid costs, assessing bid costs, and
security deposits, and overseeing the financial analysis and budget allocations for GSU.
4. Mr. Ateeq (OG-II)
Roles: Responsible for handling all aspects of mail and correspondence;
managing monthly payments to TCS courier; overseeing vehicle and
fleet operations; administering daily petty cash; and coordinating
procurement and upkeep for three primary stores.

[Link] Introduction to Engineering Department:

The Engineering department is comprised of a small team of two members and they are
allocated within the General Services Unit. They play a vital role in maintaining the physical
aspects of the Banking Services Unit and the maintenance of office infrastructure. These
engineers are tasked with the upkeep of the office building and all the physical assets of that
are in the building. Maintenance of machines and systems like air conditioning, and elevators,
management of the power stations and generators, security systems, and guest house
maintenance are the roles of this unit.

[Link] Staff Members of the Engineering Department:

1. Mr. M. Umer (OG-2, Civil Engineer)
Roles: Planning the project initiation, drafting tender documentation,
managing the procurement process, and handling billing and project
closure.

2. Mr. Talal (OG-2, Electrical Engineer)

Roles: Management of generators, electrical power infrastructure, and
security systems.

The agency for procurement is SBP and the authority body for procurement is PPRA. A few
of the rules that both GSU and the Engineering department follow are 42-A: single
quotation/petty purchases. 42- B: request for quotations. 36-A, B: single
stage one envelope procedure and single stage two envelope procedures.
These rules may be called the Public Procurement Rules, 2004.
[Link] Annual Business Plan/Approval Mechanism:

Engineering Presentation to Review Meeting

Department Projects Review with Managing
Review Meeting Comittee Director

Presentation to Presentaion to
Submissions of
Management
the Budget Budget Proposals to
Comittee on
Comittee of Finance and Accounts
Properties &
Management Department
Equipment

Presentation to
Presentation to
SBP and SBP BSC
the Governor
Board
The Engineers working in the BSC have the following systems to manage:
1) Utility Systems 2) Building Exterior
a. Water Supply a. Roadways, Parking Lot &
b. Sewerage Sidewalks
c. Roof Drain b. Landscaping
d. Sanitary Fixtures c. Storm Drain
e. Underground and Overhead
Water
3) Building Interior 4) Thermal & Moisture Protection
a. Interior Walls & Flooring a. Water Proofing
b. False Ceiling b. Heat Insulation
c. Doors and Windows
d. Stairs & Railings
e. Slab soffits
5) Finishes 6) Housekeeping
a. Exterior and Interior Finishes a. Pest Control

2.2.3 Cash Monitoring Unit (CMU)

Introduction:
The primary focus of the Cash Monitoring Unit is to issue fresh notes in the economy, ensure
effective cash supply to commercial banks, and implement currency management strategies
which will be discussed in detail.

Purpose of Visit:
 Gain knowledge of Currency Management Strategy and Banknote Processing Strategy
 Learn about PSPC (Pakistan Security Printing Corporation) and Chest Branches
 Study BPAS (Banknote Processing and Authentication System) and BDS (Banknote
Destruction System)
 Familiarize ourselves with stapled, soiled, and counterfeit notes
 Understand inward and outward remittances
 Explore Currency Sorting and Identification with penalties implementation
 Discover the Banknote Security Features

Duties Assigned in the Unit:

 Discussion about Banknote Security Features
 Learn to identify how counterfeit notes are detected
 Record Management of old case files present in the unit
 Excel Data Entry of bundle files
 Investigate how Artificial Intelligence can be implemented in the unit activities
 Prepare a list of cases in the discrepancy reports
 Delve into the process of the Banknote Life Cycle

Unit Coordinate with Institutes:

 Pakistan Security Printing Corporation (PSPC)
 Pakistan Mint
 Central Directorate of National Savings (CDNS)
 National Bank of Pakistan (NBP)

With the supervision of the Currency Management Department in SBP, this unit continuously
strives to upgrade the currency operations in Pakistan through the introduction of
comprehensive and state-of-the-art automated solutions, comparable to domestic market
conditions, future challenges, and international best practices. It also provides feedback on
the indent of the bank notes to CMD.
[Link] BANKNOTES LIFE CYCLE

B
B
P
S

C
Destruction

Development/
Designing of Bank
Notes Government
of
Pakistan/PSPC/SBP
Sorting/Processing
of Banknotes:
Fit/Un-fit

Banks and BSC

Indent of
CURRENCY LIFE CYCLE
Banknotes
Fit Banknotes

Bank Notes:

Distribution Production
through different of Banknote
stakeholders

Storage &
Distribution

PSPC
[Link] Staff Members of the Unit:
1) Mr. Ahsan Bajwa (OG-III)
The roles and responsibilities of the Assistant Chief Manager of the CMU is to supervise
the activities performed in the unit and monitor that it complies with the vision and
mission of currency management strategies. He also oversees the inward and outward
remittances that occur in the unit.
2) Mr. Ateeb (OG-II)
The officer performs the unit's daily operations, including sorting the discrepancy reports,
examining the currency notes, and handling the representatives of different commercial
banks with their work.

2.3.3 Key Activities and Insights of the Unit:

1) Currency Supply Management
The supply of currency starts from the PSPC and ends when the fresh currency notes are
received at commercial banks. The inward remittance comes from PSPC through the head
office with a representative and with police protocol. The field offices of SBP are then
tasked with distributing the currency notes to the chest branches. The chest branches are
NBP branches which are responsible for distributing the currency notes to the commercial
banks. This distribution process maintains the quality and integrity of the currency
management strategies and the chest branches play a crucial role in it.
2) Currency Examination: BPAS and BDS Machines
To maintain the effective supply management of the currency, this unit utilizes Banknote
Processing and Authentication System (BPAS) and Banknote Destruction System (BDS).
Officers from other units who have proper training are also assigned to operate these
machines. BPAS machine verifies the authentication and fitness of the notes, and sorts
and manages the currency notes. The BDS machine is used to destroy the soiled,
reissuable, and stapled notes. The counterfeit notes are investigated and a 100 times
penalty is incurred on that note. The stapled notes result in a penalty of PKR 20,000 on
the first occurrence and then PKR 1000 is charged on every packet containing stapled
notes. These penalty implications are detected by the discrepancy report that is generated
by the BPAS Hall.
3) Counterfeit Detection and Denomination
Out of one million notes, only 6 notes are detected as counterfeit which proves the robust
security features and a strong examination process by the SBP to safeguard against

19
 fraudulent activities. There are eight denominations of Pakistani currency and each
denomination is distributed among the chest and commercial branches in a balanced
approach.
4) Currency Management Strategies
As discussed earlier, the CMU is responsible for the circulation of fresh notes in the
economy. Unfit notes are withdrawn from the banking system and fresh notes are fed
according to the demand of banks and strategy planned by the head office.
5) Currency Sorting and Identification
 Yellow Bundle Card: Used to denote soiled notes in the report.
 White Bundle Card: Used to denote reissuable notes in the report.
 Red Bundle Card: Used to denote rejected notes in the report.
 Note Packaging: Each packet contains 100 notes and each bundle contains 10
packets.
6) Bank Note Processing Strategy (BPI) Legal Aspects of Counterfeiting

Violations Punishments
Counterfeiting ofbanknotes Imprisonment for life or
[Section 489A]. imprisonment for 10 years and
a fine.
Using a counterfeit banknote Imprisonment for life or
[Section 489B]. imprisonment for 10 years and
a fine.
Possession of a counterfeit Imprisonment for 7 years or fine,
banknote [Section 489C]. or both.
Making or possessing machinery, Imprisonment for life or
instruments or material for imprisonment for 10 years, and
forging or counterfeiting bank fine.
notes. [Section 489D].
Making or using any document Imprisonment for 1 year or a fine
resembling a forged banknote or both.
[Section 489E].

7) Remittance Management
The CMU manages the remittances as written before. To maintain the secrecy about the
information regarding the remittance, the message is conveyed in a coded form. The
coded message is decrypted through set standards. A remittance officer with police
protocol accompanies the remittance that is set out to the field offices. The responsibility
of the officer ends once the remittance is securely inside the vault.
8) Exercise Plan for Fresh Note Distribution

20
 The Currency Management Unit is provided with an exercise plan which details how the
distribution of the currency is going to eventuate. The field offices are briefed on how and
how many fresh notes are to be issued to the chest branches and further to the commercial
banks. This plan ensures that a balanced approach to the currency supply is rendered
according to the market demand and is conducted systematically.

2.2.4 Foreign Exchange Operations Department (FEOD)

Introduction:

The Department of Foreign Exchange Operations manages and regulates the nation’s foreign
exchange reserves from the activities of different banks and businesses. This department
deals with the cases which are related to the foreign exchange. Primarily every foreign
dealing is done through the commercial bank branch which provides a trade facility. This
department has the responsibility to monitor the activities of those commercial banks and
support them with the necessary operations.

This division works under the Exchange Policy Department (EPD). All reporting is done
manually and electronically. Electronic posting is done through the International Transaction
Reporting System (ITRS) by commercial banks also known as Authorized Dealers.
Authorized Dealers report the manual data to the FEOD.

The department works under the following rules and regulations:

 Foreign Exchange Regulation Act 1947

 FE Manual 2002
 Booklet of Instructions, 1989
 FE Circulars

Being an operational arm of the Exchange Policy Department (EPD), FEOD is mainly
responsible for monitoring the repatriation of export proceeds, granting approvals for
commercial, private and Government foreign exchange remittances, processing of
applications under various Subsidy Schemes introduced by the Government for exporters,
etc. and collection & analysis of various returns/data on foreign exchange-related transactions
in the country.

The unit comprises of small team of:

 Mr. Ibitsam Khalid

21
 Grade/Scale: OG-II
 Mrs. Maimoona
Grade/Scale: OG-I
 Mrs. Rida
Grade/Scale: OG-III
[Link] Sections of the Foreign Exchange Operations Department

FEOD

Exports DLTL Miscellaneous

Returns
Overdue Section Imports/Exports

1) Returns
In this section, all foreign transactions with different forms are separated. Documents with E
form are sent to Exports and Form-I to Import section. The inward remittance from the
exports is recorded in the JO-3 schedule. If the amount of trade exceeds USD 10,000 then it
is recorded in Form-R otherwise it is recorded in Inward Remittance Voucher (IRV).

22
The imports can be done either through documentary credit or advance payment. In case of
advance payment, the importers must submit a Performa and an Undertaking form signed by
the exporter within 120 days of accomplishment of consignment. Reporting of Import is done
on the E2/P2 Schedule. If Foreign Exchange is to go out of the country for travelling then that
would be recorded on E3/P3 Schedule. If the Foreign Exchange is to go out for a purpose
other than trade then that would be recorded on E4/P4 Schedule.

2) Exports Overdue
Under the Foreign Exchange Regulation Act 1947, the exporter is expected to bring in the
foreign exchange earned through the exports within 180 days after the granting date of
shipment. If the exporter fails to bring in the exchange, then he is given the show cause
notice. The reporting is done through an electronic system of Export Overdue Reporting
System (EORS). Through electronic media, the exporter will report the following documents
to the Banking Services Corporations on the V-16 statement:

Statement for realized + Outstanding

V- Export Bills
15

V- Statement for Unrealized Export Bills

16

V- Statement for Realized Cases

17

3. Draw-Back Local Taxes and Levies Section

DLTL was established to encourage exporters. When an exporter exports some eligible goods
to the country, the exporter gets subsidies from the government to encourage more exports.
The goods on which a partial discount is given are mentioned below:

23

1% on Processed
Fabric
When FEOD verifies all the necessary documents to obtain the discount, it credits the DLTL
amount to the bank’s account which is then transferred to the exporter’s account according to
the Schedule of the Government of Pakistan.

4. Miscellaneous Imports/Exports
This section of the FEOD is for processes such as advanced payments recording in the FE
statements and recording of all shipping documents to facilitate these payments. In case there
is any excess payments, documents like payment/receipt vouchers, bank’s guarantee and
letter of credit acts as supporting evidence to ensure secure and efficient transactions
according to the international trade protocols.

[Link] Presentation on Two Kind of Forms in Exports:

We were familiarized with two kind of forms/schedules that are frequently used in FEOD and
their presentation is as follows:

SCHEDULE A-2/O-2 SCHEDULE A-4/O-4

Export (Part Payment/Advance Utilizations (Shipments)
Receipt/Cash)

24
Schedule A-2/O-2 records part or advanced payments received from exports and helps
monitor the foreign inflows. It contains details such as currency, country, and commodity
information. This form is signed and stamped by an Authorized Dealer for audit and
compliance. This form helps the FEOD to track trade patterns for foreign currency
management.

Schedule A-4/O-4 is used by the FEOD to manage the foreign exchange of utilities such as
shipments. This form records the timeframe of the data with the kind and unit of the
commodity details with it. This form is also signed and stamped by an Authorized Dealer.
This form is crucial for maintaining the trade balances and for providing transparency in
international trade.

2.2.5 Financial Inclusion Department (FID)

Introduction
The Financial Inclusion Department (FID) of the State Bank of Pakistan’s Banking Services
Corporation (SPB-BSC) plays a vital role in the banking sector in enhancing the overall
financial literacy rate of the population of Pakistan. This department of the BSC targets the
unbanked and unprivileged population by taking various initiatives like seminars for financial
inclusion. They provide knowledge about several topics like Islamic Banking, Digital
Payments, and Scheme Initiatives for Small and Medium Enterprises (SMEs) across various
institutions like universities and companies across Pakistan.

[Link] Key Personnel and Their Contributions

1. Mrs. Kiran (ACM)
Roles: SME financing, supervises activities of FID, focal person for various
initiatives, Banking on Equality program, and media relations.

25
 Contributions: Enhances SME support, promotes Islamic banking awareness, and
leads equality initiatives.

2. Mrs. Maryam (OG-II)

Roles: Manages the NFLP, oversees customer complaints via the SUNWAI app, and
runs digital literacy programs.

Contributions: Increased financial literacy and access through innovative educational

methods and digital platforms.

3. Mr. Basit (OG-II)

Roles: Focuses on agriculture banking and Islamic banking.

Contributions: Improved agricultural loan disbursements and led initiatives for

transitioning to Islamic banking infrastructure.

Some of the schemes that FID spreads awareness about are as follows:

• Long Term Financing Facility.

• Islamic Export Refinance Scheme.

• Refinancing Facility for Modernization of SMEs.

• Financing Facility for Storage of Agricultural Produce.

• Export Finance Scheme Part-I & Part-II

The continuous support and development of financial products and

services tailored to the needs of underserved populations underscore
FID’s commitment to an inclusive financial landscape in Pakistan.

[Link] Key Learnings from the Financial Inclusion Department:

1. Banking on Equality (BOE):
Banking on Policy is a landmark policy started by the State Bank of Pakistan to encourage
and induce women in the workforce as the majority of the population of the country is
women and they have the capability to contribute significantly towards banking sector

26
When it comes to financial inclusion there is a major gender gap in the financial system of
the country and women of Pakistan remain under-served. This increasing gap of financial
literacy between the two genders has made the State Bank of Pakistan to implement a
mainstream policy of Banking on Equality to address the inequality issues. Women are
encouraged to enhance their financial literacy and become a strong arm of banking sector and
FID is playing a vital part in implementing this policy and educating the modern women.

2. Pillars of Banking on Equality for Women’s Financial Inclusion

Gender FIs to apply Women Robust

Diversity in gender lens champions gender- Policy
disaggregated
Financial to develop at FIs
data Forum
Institutions women- customer
(FIs) and centric touchpoints
collection and
target-setting
on
their products & Gender
Access services
Points

Targets:
 Increase women’s ratio in the financial sector to 20%
 Place Women Champions at 75% of all bank touchpoints
 Increase the ratio of women branchless banking agents to 10%
 Impart gender sensitivity training to all staff members
 Reach 20 million unique active digital accounts for women by 2023

27
[Link] Islamic Banking
Islamic banking is defined as banking system which follows the principles of Islamic Shariah
which is free from ribah or any form of interest, and believe to follow the rules and
regulations provided in the Quran and Hadith. Several interest free instruments are developed
which follows the Shariah rules, such instruments being sukuk (Islamic Bonds). Islamic
banking, the more general term, is based not only to avoid interest-based transactions
prohibited in Islamic Shariah but also to avoid unethical and un-social practices. In practical
sense, Islamic Banking convert the conventional banking to a halal form of banking through
different modes of finances and practices. The model of Islamic banking system leads
towards the achievement of a system which helps achieve economic Prosperity.

a) Philosophy of Islamic Banking

The philosophy of Islamic banking takes the lead from Islamic Shariah. According to Islamic
Shariah, Islamic banking cannot deal in transactions involving interest/riba (additional
amount over the loan which is predetermined and has to be paid upon repayment). Further,
they cannot deal in the transactions having the element of Gharar or Maiser. Moreover, they
cannot deal in any transaction in which the subject matter/product is deemed invalid for
sale/purchase. Islamic banks focus on generating returns through investment tools which are
Shariah compliant as well. Operating within the boundaries of Shariah, the operations of
Islamic banking are based on sharing the risk which may arise through trading and
investment activities using contracts of various Islamic modes of finance.

b) Essentials of Islamic Banking

The Commission for Transformation of Financial System set up in the State Bank of Pakistan
in pursuant to the Supreme Court Judgment on Riba dated December 23, 1999 approved
essentials of Islamic modes of financing including Musharaka, Mudaraba, Murabaha,
Musawama, Leasing, Salam and Istisna. The State Bank of Pakistan’s Shariah Board has
reviewed and approved these essentials of Islamic modes of financing and recommended that
the same may be circulated to the banks conducting Islamic banking business in Pakistan as
guidelines.

FID has played a crucial role in spreading the awareness of distinction between conventional
and Islamic banking to the public so that the economic system of Pakistan may convert to
Islamic economy as soon as possible.

28
[Link] National Financial Literacy Program (NFLP)
State Bank of Pakistan launched Pakistan’s first-ever Nationwide Financial Literacy Program
(NFLP) on 20th January 2012 to promote financial inclusion through spreading financial
education for inclusive economic growth and stability across the country. The Program
intends to target middle-income households and youth by building partnerships with
education institutions in a phased manner. The program envisions educating around 0.5
million low-income families in the first phase.

The key objectives of the program are:

 Imparting knowledge and understanding of, financial concepts, banking/financial

products and services.
 Develop skills and attitudes towards budgeting, savings, investment, debt
management, financial negotiation, rights and obligations, etc.
 Facilitate behavioral changes and practices to improve financial outcomes; including
financial well-being through increased savings, improved debt management,
perceived financial stress or satisfaction

The National Institute of Banking & Finance in collaboration with the State Bank of Pakistan
is implementing the “National Financial Literacy Program for Youth” (NFLP-Y) to impart
essential financial education to Pakistani youth and school-going children to strengthen their
money management skills and enhance their understanding of economic matters. The
program is targeting three age groups (School going Children: aged 9-12 years; Adolescents:
aged 13-17 years; Youth: aged 18-29 years) across 45 selected districts of Pakistan including
GB & AJK. NIBAF (NFLP-Y) aims at reaching out to 1.6 million children, adolescents and
youth through classroom pieces of training including 0.6 million on digital learning platforms
during five years i.e., 2018 - 2023.

Key objectives of the program are:

 Strengthen and improve money management knowledge, skills and behaviors among
youth.
 Inspire the youth to set financial goals through saving, budgeting and planning for
their future.

29
  Educate the youth about their rights and responsibilities as consumers of financial
services and products.

2.2.6 Staff Matters Unit (SMU)

Executive Summary

The Staff Matters Unit of the State Bank of Pakistan handles the employee-related aspects
and manages the human resources. This unit has been playing a pivotal role in establishing
the organization’s manpower efficiency and effectiveness so that it can face the challenges.
The unit is responsible for various aspects such as employee compensation, benefits,
trainings, legal coordination, and staff-related management to better facilitate the human
resources of the bank.

Purpose of Visit:

 How do they plan, implement, and monitor different HR policies and procedures?
 How does the HR unit of this field office implement the performance appraisal system?
 How does the unit maintain the disciplinary actions of the employees?
 How do they manage the court cases and admin matters of the whole office?
 How the records of employees are maintained and the aspects through which they
facilitate employees of BSC?

Core Functions of SMU:

 Dealing with the cases of transfer/posting/Disciplinary matters

 Cases of retirement, dismissal, resignation and death of the employees
 Payment of salaries and advances to the employees and outsourced staff
 Making various recoveries like General Provident Fund and other Advances, Taxes etc.
 Payment of Pension/Benevolent Fund to the retired employees
 Release of Staff Loans/Personal Loans and all Advances to the employees of the office
 Education allowance and other payments

The Staff Matters Unit (SMU) is a vital part of the Banking Services
Corporation (BSC) in managing staff-related activities which includes
professional development through trainings, healthcare support to in-
office employees, approvals of loans, management of employee records,

30
and legal compliance. This helps the field office maintain organizational
efficiency, employee satisfaction and commitment and contributes to
overall productivity and stability which as a result provides effective
operations.

[Link] Key Personnel and their Contributions

1. Mr. Ahmad Saleem (OG-II)

He is mainly responsible for managing and getting approval for the

payroll, salaries, and advances of the employees.

 Duties:

To ensure that there are seamless financial operations related to the

employees of the office, he oversees the Human Resources
Information System for payroll, pension, and fund advances.

2. Assistant Chief Manager of SMU

Her main responsibility as an assistant chief manager is to define the roles

of employees within her unit and also oversee the onboarding of new
employees via hiring or transfer

 Duties:

She continuously updates and recommends to the employees of

the office training programs for the betterment of the future of BSC.

3. Mrs. Amaara (OG-II)

The key role of her work is to maintain and process the documentation of
staff, verify and reconcile the employee data, and process the promotion
related information.

 Duties:

She manages the educational scholarship documents/programs,

supervises the interns and their activities, monitors the performance

31
 management system, and advocates disciplinary actions to uphold
organizational integrity.

4. Mr. Ahsan (OG-II)

His main focus is to coordinate the medical benefits employees can avail of and manage the
related documents. He also ensures health insurance policies for the employees and
outsourced staff.

 Duties

He ensures efficient coordination of medical benefits and insurance-related processes are

effectively managed, guaranteeing timely and accurate support for employee healthcare
needs by coordinating and streamlining the medical facilities.

[Link] Key Learnings and Insights from this Unit:

1. Training Programs

a) Domestic Training Programs

National Institute of Banking and Finance (NIBAF) offers various training programs to the
employees of the State Bank of Pakistan, its subsidiaries, and various financial industries.
The Institute conducts various in-house training programs as well as outsourced training
programs aside from the usual seminars and conferences on different issues of Central
Banking. This Institute provides training of domestic level in training rooms for topic related
to Commercial Banking, Islamic Banking, and other areas of development Finance for
example Artificial Intelligence in Banking. Trainers are engaged from financial industry,
academia, Government and international agencies etc. with the objective of benefiting from
the capabilities of the best possible resource persons. NIBAF with collaboration of SMU
provides the trainers with evolving knowledge of banking sector using different modern
techniques and tools.

b) International Training Programs

32
NIBAF regularly features training courses for developing countries on central and
commercial banking functions. The objective of this cooperation is to transfer knowledge and
promote staff potential at the partner central and commercial banks. Topics are generally
discussed in classroom lectures and there are also group work, case studies, and exercises to
better enhance the learning experience. Employees of BSC can apply for technical and more
advanced training programs for example operating the BPAS and BDS machines. SMU is
present to offer these types of courses to employees according to their promotion requirement
and also keeping in mind that this will benefit the office in the long run by having more
knowledgeable and expert employees.

c) NIBAF Collaborations

Over the years NIBAF has worked in collaboration with different international institutions
including International Monetary Fund, World Bank, Asian Development Bank, Islamic
Development Bank, USAID, European Union, SAARC Finance, INCEIF Malaysia, DA
Afghanistan Bank, Central Bank of Sri Lanka, London Institute of Banking & Finance,
Bahrain Institute of Banking & finance and many others for design, development, execution
of the training programs and sharing of knowledge on various topics.

2. Staff Retirement Benefits

An un-funded contributory provident fund (old scheme) for transferred employees who
joined SBP prior to 1975 and opted to remain under the old scheme. The Corporation
provided an option to employees covered under old scheme to join the funded Employer
Contributory Provident Fund Scheme (new scheme) effective from July 1, 2010. Under this
scheme
contribution is made by both the employer and employee at the rate of 6% of the monetized
salary. Moreover, employees joining the Corporation service after July 1, 2010 are covered
under the new scheme.

An un-funded general contributory provident fund (new scheme) for transferred employees
who joined SBP after 1975 or who had joined SBP prior to 1975 but have opted for this new
scheme. Under this scheme contribution is made by the employee at the rate of 5% of the
monetized salary.

33
[Link] Features of obtaining advances:
 An amount of 3 times the monetized salary of advances can be obtained by the
employees of the office which is interest free.
 After every 6 months another advance can be taken by the employee.
 Any advance amount is divided by 24 to make an installment plan of 2 years for the
recovery of the amount.
 Staff loan can be taken once in all of the service which is up to the amount of PKR
70,000.
 The limit of approving a car loan is 70 times the monetized salary upon which
recovery is made until the service period remaining and this type of advance is also
interest free.
 Employees who come under the new scheme of provident fund can take a temporary
advance on their fund of about 75 percent of the fund and 4 year of recovery is made
on it.

[Link] Other Functions of SMU:

 Job Rotations/ Transfer/  Annual performance review
Posting/Retirements of office.
 Increase on Promotion &  Prepare promotion panel of
announcement by the Higher non-clerical staff
Management
 Maintenance of personal  Managing Rest & Recreation
confidential files leave

2.2.7 Prize Bond/Banking Unit

Introduction:

Prize bond unit is responsible for the management of the public debt. It is an instrument to
raise public debt. The prize bond unit deals with the issuance, encashment and handling of
prize bonds. They are issued in specific denominations and can be purchased from authorized
banks and other financial institutions. They are eligible for regular draws conducted by the
National Savings organizations where bondholders can win varying amounts of money
depending on the denomination.

[Link] Supervised by:

1. Mr. Rana Bilal Ahmad

34
Job Designation: OG-2

Job Description: Supervising prize money related transactions, miscellaneous assignments

(like correspondence, PB-draws, reporting)

[Link]. Shehroz Ashraf

Job Designation: OG-2

Job Description: Handling of prize bonds

Types of prize bonds:

1. National prize bond (Bearer instrument)

2. Premium prize bond (Registered instrument)

Types of certificates:

1. Special saving certificate (SSC)

2. Defense saving certificate (DSC)

[Link] Key Learnings from Prize Bond Unit:

1. Difference between Premium and National Prize Bond Scheme

Contrary to the National Prize Bonds (bearer), the Premium Prize Bond is a registered prize
bond which is issued in the name of registered investor. The investor gets a six-monthly
profit
on investment at a rate notified by the Government of Pakistan upon completion of six month
period either from the date of issue or date of last profit paid in addition to eligibility for prize
money in quarterly draws, subject to compliance to shut period requirements.

2. Denominations of Premium Prize Bond and their Composition

Presently, there are two denominations i.e., Rs. 40,000/- and Rs. 25,000/-. Each bond has a
unique alpha-numeric number where the alpha denotes the series and the number reflects
bond serial number e.g. A123456. The series of prize bonds shall be issued in sequential
order except I & O which will not be used as series. Each series of bonds consists of one less
than a million pieces of bonds i.e., from 000001 to 999,999.

3. Prize Money Schedule, Zakat, and Taxation on Premium Prize Bonds

35
 Prize Money
Denomination Prize Tier No. of Prizes
Amount
1st 2 30,000,000
Rs. 25,000/- 2nd 5 10,000,000
3rd 700 300,000
1st 1 80,000,000
Rs. 40,000/- 2nd 3 30,000,000
3rd 660 500,000

Any investment made under Premium Prize Bond Scheme and profit earned thereon is
exempted from compulsory deduction of Zakat. However, withholding tax on both the profit
(Section 151 of Income Tax Ordinance, 2001) and prize money (Section 156 of Income Tax
Ordinance, 2001) shall be applicable as per the prevailing rate notified by the Federal
Government.

4. Documents Required

The duly filled application form must be accompanied by the following documents:

a. Legible copy of valid CNIC / SNIC / Pakistan Origin Card (POC) (Original Seen)

b. Account Maintenance Certificate (not older than one month from the date of application)
of the IBAN Number provided in the application form mentioning Bank and Branch Name,
Title of Account, Account Number and IBAN (Required at the time of registration or change
of Account Number).

5. Procedure of Premium Prize Bond Drawing

Prize bond draw is held by a committee constituted by CDNS and open to general public.
Winning prize bonds are drawn through Hand operated draw machine, which is operated by
special children in front of Committee members and general public attending the draw
ceremony. Draw machine is also checked by general public before the start of draw. Video
recordings of all draws are also kept in record.

6. Claim of Prize Money, Draw Schedule, and Eligibility for Profit

The investor is not required to submit any claim as the prize money against winning Premium
Prize Bonds is directly credited to registered investor’s Bank account provided at the time of

36
purchase of respective bond. Draw for each denomination Premium Prize Bonds are held as
per schedule below:

10th of March, June, September and December every year.

The eligibility for profit on investment in Premium Prize Bonds is to hold the bonds for
minimum of six months, either from the date of issue or last profit paid.

7. Procedures for Handling Lost Bonds

In case of loss of Premium Prize Bonds, the investor is required to personally visit the Office
of Issue and report the loss of instruments by submitting an application form, copy of FIR /
NC. After necessary verification, the Office of Issue will issue new Premium Prize Bonds of
same Face Value with different numbers in the name of same investor.

8. Transfer of Prize Bond

The Premium Prize Bonds can be transferred to anyone from the Office of Issue. However,
personal presence of both the Transferor and Transferee is mandatory. Upon transfer of
Premium Prize Bonds, the transferor relinquishes all rights on the face value, profit and prize
money (if any) to the Transferee. Premium Prize Bonds can be transferred by the registered
investor as and when required from the office of issue and there are no charges for the
transfer of Prize Bond. Legible copy of valid CNIC/SNIC/Pakistan Origin Card (POC) of
transferee (Original Seen) is required other than the documents required for the transfer of the
Bond.

[Link] Denominations of National Prize Bonds Bearer Instrument:

37
2.3 SWOT Analysis
2.3.1 Strength
1. Effective Check and Balance: The SBP-BSC has an efficient network to validate,
authenticate, verify and cross-verify transactions. It is this very powerful system that
drastically reduces the instance of fraudulence and lost payment, making it trustworthy for all
transactions to be conducted through a Bank.

2. Back up Plans in Emergency: The SBP-BSC has maintained several backup plans in case
of any kind of emergency. There is another branch present in Hussain Agahi which is ready

38
and equipped with all necessary procurements so that the operations of the central bank will
still remain in progress.

3. Reputation and Trust: By virtue of its role as a central banking institution within
Pakistan, SBP-BSC has gained popularity and recognition as a reliable and stable unit within
the financial sector. This trust such as that of the customers, commercial banks and
government agencies increases the standing of the bank in this position.

2.3.2 Weaknesses
1. Over-Strictness: Discipline in the workplace is expected, but employees can suffer if too
much discipline is enforced. Over this period, job satisfaction and eventually productivity
may be linked to the fact of mental strain.

2. Bureaucratic Procedures: Enforcement of contracts are slow, time consuming and

cumbersome encouraging lobbying and rent-seeking opportunities. Public service delivery of
essential services is poor and inefficient and under investment has led to congestion,
shortages and access limited to the privileged far.

3. Overburdened Staff with No Backup: In some units, the limited personnel availability
causes chronic problems to employees in terms of high tasks. There are situations where a
key employee has to carry out certain critical tasks but because there are no backup people
trained to fill in, the normal flow of operations is interrupted and this may cause undue
delays.

2.3.3 Opportunities
1. Investment in Artificial Intelligence: There is also the possibility of improving
operations through investment in the modern technology by the SBP-BSC. For example,
implementation of an image-based ORC scanners for prize bonds should actually shorten
many operational procedures for the commercial banks and new products and services will be
introduced which will increase the income for SBP.

39
2. Achievement of the Financial Market Objectives: With technological upgrades also in
skill and services, SBP seeks to meet its specific aim of providing a facilitating financial
market which may in turn result in better open market operations and economy growth.

3. Enhancement of The Digital Banking Services: Since most customers nowadays are
opting for internet banking, here is a chance that SBP-BSC should seize to further the growth
of its digital services such as online banking and growth in the sector of branchless banking.
This growth would be able to draw in a younger population and also improved existing
customers’ convenience.

2.3.4 Threats
1. Instability of Political Reasons can harm operations: If we read about frequent changes
in government and changing policies, then in such conditions the functionality and
coordination of all SBP-BSC operations are likely to be affected and there will be no long-
term planning and the stability will be affected.

2. Overly Increased Government Borrowings: Over borrows of the government also makes
it difficult for the SBP to maintain the foreign reserves with them. This type of conditions can
lead to a conflict between the objectives of the monetary policy versus the necessities of the
government.

3. Spread of Artificial Make Currency: The overall availability of fake currencies or

trespassing the original ones promotes inflation. With the sophistication of the counterfeiters’
products and high quality of the fake currency notes that are produced, the risk of the
community failing to distinguish the real rupee from the fake one poses a danger to the
Pakistani monetary system.

2.4 Marketing Strategy:

1. Financial Literacy Program: The field offices on the order of the State Bank of Pakistan
educate general public through seminars and workshops. These includes universities, and
microfinance institutions.
2. Digital Banking Promotion: As part of Pakistan’s Economy Vision, the Banking
Services Corporation promotes digital payments and fintech innovations through mobile

40
 applications.
3. Engagement with Financial Institutions: SBP maintain strengthen relationship with
commercial banks, insurance companies, and other financial institutions through events
and seminars.

2.5 Competitive Strategy:

1. Regulatory Leadership: Benchmarking the practices implemented in the central banks
of other countries to ensure stability and best policies.
2. Technology Growth: SBP encourage and take various initiatives to implement an
advanced banking eco system. This is to make sure that central bank and its commercial
banks stay ahead in terms of fintech innovations.
3. Global Collaboration: Collaborate with different international institutions like the World
Bank and IMF to stay competitive on a global platform by staying integrated in the
modern financial system.

In essence, while SBP main goal is not to remain competitive in terms of profit like other
commercial banks, its regulatory leadership, technological growth, and global collaboration
maintains dominance in Pakistan’s financial system.

41
2.6 Financial and Non-Financial Highlights
2.6.1 Financial Statements

42
43
44
2.6.2 Financial Analysis of Consolidated Financial Statements:
1. Balance Sheet Highlights:
The balance sheet provides an overview of the State Bank of Pakistan’s (SBP) financial
position as of June 30, 2023, compared to the previous year (2022).

1.1 Assets

Total Assets SBP's total assets rose to PKR 19.69 trillion in FY23 from PKR 16.23 trillion a
year ago, depicting an increase of 21.3%.

Cash and Bank Balances reduced marginally from PKR 197.52 million in FY22 to PKR
182.09 million in FY23.

Gold Reserves were Valued at PKR 1.14 trillion in 2023 ~ up from PKR 773.64 billion in
2022 due to the appreciation in the gold price.

Foreign Currency Accounts and Investments (A/Cs, I): PKR 1.59 trillion against PKR 2.18
trillion in the preceding week (-) USD disinvestment and currency translation adjustments.

Securities Purchased under Agreement to Resell: Shot up massively towards 8.39trln from
previously reported at PKR 4.52trln indicating a well-directed play by the bank in investment
in reverse repos.

Domestic Investments: Shrank to PKR 6.03 trillion from PKR 6.36 trillion (likely reflecting
either maturities or revaluation losses)

1.2 Liabilities

Total Liabilities: SBP's liabilities increased from PKR 14.60 trillion during 2022 to PKR
16.94 Pecos in next year (2023).

Currency in Circulation: PKR 9.66 trillion (Dec-19) vs. PKR 7.99 trillion (FY18); Increase
underscores elevated demand for currency notes

Liabilities against bilateral currency swap arrangement surged to Rs1.21 trillion fromRs927
billion, which might be result of increased utilization of swaps facilities to stem reserves
erosion.

45
Banks and DFIs' deposits -- rose to PKR 1.68 trillion from previous week's figure of PKR
1.26 trillion, suggesting higher deposits or reserves kept with other banks

1.3 Equity

Total Equity: Bank's equity surged from PKR 1.63tn to PKR 2.74tn much of this growth is
due to:

Unrealized Appreciation on Gold Reserves: This valuation increased from PKR 769 billion
to PKR 1.13 trillion owing to the increase in global prices of gold.

Unappropriated Profits: A double to reach PKR 924 billion depictive of more robust
equity.

2. Income Statement Highlights:

2.1 Profitability

Net Profit After Taxation: The net profit improved significantly compared to the previous
year, from PKR 749.42 billion to PKR 1.14 trillion (52.5% YoY).

Interest/Mark-up Earned: Income generated in the form of interest showed considerable

growth and income earned at amortized cost moved up from PKR 980.55 billion to PKR 2.19
trillion.

Interest/Mark-up Expense: PKR 147.67 billion vs PKR 60.60, c50% increased either due to
higher rates or likely borrowing.

2.2 Non-Interest Income and Expenses

Exchange Loss: A net exchange loss of PKR 875.02 billion was recorded in the case of the
SBP against a net exchange gain of PKR 62.02 billion in decided. Unfavorable currency
movements impacting foreign currency positions are a likely cause of this.

Commission income: Up 37%; between PKR6.69b to PkR9.19bn.

Other Operating Expenses: Up from PKR 64.44 billion to PKR 72.71 billion due to higher
banknote production costs and administrative expenses.

46
2.6.3. Financial Ratios for Comprehensive Overview
Financial Ratio 2023 2022 Change Explanation
Net Profit Profit decreased due to increased
55.88% 80.14% -24.26%
Margin interest expenses and operating cost.
Return on Asset growth profitability shows
5.81% 4.62% +1.19%
Assets (ROA) improvement in ROA
Return on Due to lower profitability, there is
41.63% 45.91% -4.28%
Equity (ROE) less return on equity
Remaining lower than 1 shows that
Current Ratio 1.16 1.11 4.50% Bank is unable to fulfill short term
liabilities
Debt-to-Equity This shows a reduction in financial
6.17 8.95 -31.08%
Ratio risk due to increase in equity
Equity-to- This increase shows better capital
13.94% 10.06% +3.88%
Assets Ratio with growth in assets
Cost to Income Slight Improvement shows efficient
6.37% 6.89% -0.58%
Ratio operations
Interest Lower ratio shows reduced ability to
14.85 16.18 -3.68
Coverage Ratio covert interest
This reflects shows strong
EPS 11.43 7.49 +52.6%
improvement in profitability

Net Profit After Tax: PKR 1,142,945,383,000 (2023) and PKR 749,424,548,000 (2022)

Total Assets: PKR 19,687,153,566,000 (2023) and PKR 16,228,002,994,000 (2022)

Total Equity: PKR 2,744,682,373,000 (2023) and PKR 1,631,833,037,000 (2022)

Total Liabilities: PKR 16,942,471,193,000 (2023) and PKR 14,596,169,957,000 (2022)

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Total Revenue: PKR 2,044,859,726,000 (2023) and PKR 935,721,542,000 (2022)

Chapter 3: Learning as a Student Intern

3.1 Initial Phase of the Internship
The day of joining my internship at the State Bank of Pakistan, Banking Services
Corporation, Multan. We went to auditorium, where HR supervisors took our introduction
and we met Chief Manager, Javaid Iqbal Marath. He gave us brief introduction about the
State Bank and told us that State bank Pakistan has its subsidiaries in 16 cities of Pakistan,
and the State Bank of Pakistan Banking Services Corporation Multan is one of its
subsidiaries. It is basically the operational arm of the State Bank. Multan branch implements
the orders of the Head Branch of State Bank which is located in Karachi. State Bank is bound
by the law and it is the only Institute that is out of political influence. State Bank is not even
answerable to Parliament and its reports are globally accepted and globally launched because
these are out of bias. State Bank provide ground and general realities of all the factors like
inflation, money supply etc. and its internal setup is saved from external influence. Moreover,
he motivated us to apply for jobs in State Bank of Pakistan. Later we had brunch and all the
students were divided into group of 6 and departments were allotted to each department.

3.2 Duties
At my time in the Banking Services Corporation there were multiple tasks and duties that I
performed. These are as following:

3.2.1 Case Study

My first week during the internship, our group was assigned in the Internal Monetary Unit
where we were assigned to study about the BARINGS bank case study when the topic about
audit and risk management were ongoing. Sir Saad who is also a teacher assigned us to study
this case as this will teach us a lesson on what happens when the audit team of a bank does
not perform its duty up to the mark. The duty of our group was to study the case and present
our perspectives on how the collapse of the infamous UK bank could have been avoided.

3.2.2 MSME Event Presentation

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During our first week in the internship, the Financial Inclusion Department had organized a
seminar on spreading awareness about the various funding initiatives to Micro Small and
Medium Enterprises. Different representatives from various prestigious institutes came on
stage to present the benefits and characteristics of MSME loans.

We were informed that we had to attend the seminar and take notes so that later we can
present the key takeaways of the seminar. With my full attention, I listened carefully to each
representative and learned about the financial initiatives for the MSMEs. Then I presented the
highlights of the event to our internship coordinator Ma’am Amaara who appreciated our
effort of self-learning.

3.2.3 Asset Assessment

When our group was assigned in the General Services Unit, our group was tasked to make a
list in which we were recording the number of fixed assets such as almirah and tables. We
made two-member team out of our six member groups. Each team of two were assigned
different units within the office. My member and I made list of assets present in the General
Services Unit and Cash Monitoring Unit.

With a given format, we checked asset tags on each almirah and tables and recorded the
necessary details on the list. It took us almost 30 minutes to record and verify the assets of
two units. The next day we were assigned the same task for the Internal Monetary Unit and
Staff Matters Unit. These units were to be covered by another team of our group but was
unable to do so as they were assigned to manage audit files.

3.2.4 Discrepancy Reports Management

Our second day in the Currency Management Unit, there were multiple discrepancy reports
present in the unit which were generated from the BPAS Hall. Our task was to make a table
in which each discrepancy would be recorded with its contents. The contents would include
Bank name, case number, number of stapled or forged notes, and penalty assigned.
Approximately 2 bundles were given to each member within which there were at least 50
discrepancy reports for which we had to make formatted tables.

3.2.5 Record Management

One of the key duties that were assigned to each group of interns was record management.
Our group also performed record management in the Cash Monitoring Unit. Week 3 and
Week 4 were the most working weeks of our internship period where we manage to submit

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our weekly reports to internship coordinator and supervisor and also handled the records of
CMU.

First step was to sort each case reports by it subject, date, and then nature of the report. Then
we had to make bundle of 10 reports according to which the next step would be performed.
Second step was to write any missing information on the face of the report so that it may
reflect that the records are complete.

The next step was to make a manual list of bundles and there were 2 members who were
allocated with this duty. I myself made manual list for almost 4 days in which we collectively
had to assign case and bundle numbers. We had to follow the case numbers which was
difficult to follow as there were huge number of reports in the unit.

The last step was to make an excel sheet of every list in one spreadsheet following the format
and codes presented to us. One member and I was allocated for data entry task. We made
exact listing as the manual ones but also added few other columns in which we had to enter
data as well which was preservation period and report codes.

Our last duty was to color code the entire spreadsheet and organize the bundles so that the
excel sheet would be presentable to relevant authorities and the bundles would finally be
stored in the facilities.

3.2.6 Assignment Execution

Throughout our internship period, we were tasked to study and make comprehensive notes
like an assignment in different units. In the Foreign Exchange Department, all our group
members were assigned to make bullet points about the export manual and present our
findings to the officer.

In the Financial Inclusion Department, we discussed various topics on which various

seminars across the country had been conducted. On our first day we were given the duty to
make assignment on Banking on Equality (BOE) and give a brief presentation as to how
women could contribute to the banking sector. The next day in the same department, we were
tasked to prepare an assignment which would not be written but rather revised in our minds.
The topic was Islamic Banking and the modes of Islamic Banking.

Aside from these assignments, we also made weekly reports which were sent to our
internship coordinator via email. As member of the group, I fully participated in the

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preparation of the weekly reports and collaborated with officers to learn as much as I can
which contributed significantly in the preparation of the weekly reports.

3.3 New Skills Acquired

3.3.1. Leadership
I started initiatives and projects to test my abilities associated with leadership as well as
managing specific tasks. Examples: Managed the flow of discrepancy reports and during
record management both in interfacing with team members to collaborate it accurately and in
coaching the process. During that I had the opportunity to be in charge of making calls and
promoted team work.

3.3.2. Task Management

Now as a part of my intern I managed to multitask. I had to check off my responsibilities by
updating reports here, managing presentations there, and preparing lists elsewhere. I was able
to gain a taste of what employment in my field would be, with tasks and schedules that let me
organize my workload while juggling many responsibilities within a legal space.

3.3.3. Interpersonal Skills

I have learned strong colleague facing and interpersonal skills working with a different team
and my group, in a fast-paced environment. In the same way, regular conversations with co-
workers and supervisors aid communication, conflict resolution, and teamwork nourished my
interpersonal skills. It helped me in strengthening my professional network within the bank.

3.3.4. Problem Solving

I improved my problem-solving skills when we were making our final presentation, we had
to face number of problems. I would then provide solutions by breaking down the root cause
and then recommended a corrective measure. It forced me to think on my feet and come up
with actionable solutions under pressure.

3.3.5. Critical Thinking

I had to basically use my higher cognitive functions for deconstructing learning manuals and
regulatory activities so that it made sense when presented to the officers of the BSC. I
evaluated data extensively and then provided information accordingly. The internship

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experience made me think more deeply on profound cases and then come up with solutions
and alternatives.

3.3.6. Effective Communication

I honed my writing abilities through frequent reporting, email communication, and attending
meetings. As many of us pass through multiple departments, I was taught to articulately
express and convey ideas cross-departmentally. It was an experience that played a huge role
in my communicative talents, of both the written and vocal kind.

3.4 Final Presentation: Execution and Problems Encountered

During our week 5 of the internship, we were communicated that each group has to pick a
research topic on which an assignment would be crafted and each group has to give
presentation on that topic. We were assigned a supervisor from Financial Inclusion
Department but she was later replaced by the ACM of the Cash Monitoring Unit because of
her unavailability. We brainstormed some ideas on which we can present and we came to
finalize on Digital Payments. Upon realizing that this topic was already chosen by another
group, we had to adjust and communicate our problem to supervisor and coordinator. The
topic was at last changed to Artificial Intelligence in Banking for our group.

We segregated segments that we had to write and present and my segments were operations
& efficiency and customer relationship management through Artificial Intelligence in
Banking. The title for topic was selected as AI and the Future of Financial Services: A
Banking Perspective. During the preparation of the first draft, I had to face many challenges
that included resolving conflicts, filling in the gaps of communication, and taking over the
leadership so that the work would be completed upon deadline. Managing multiple tasks,
overcoming hurdles, and compromising on numerous events was hectic but I managed to
successfully handle each task and showed courage that I am an able student who can solve
problems no matter the circumstances.

Each segment was collected, analyzed, and then refined to meet the quality that would gain
approval of appreciation from the panel to whom we will present. Throughout the making of
report, I was responsible to effectively communicate everything to the supervisor and make
decisions that would suit each member of the group. I delegated tasks and contributed
significantly to the project. At last, it was time to make the presentation slides. My one
member and I were responsible in making the PowerPoint slides and it went through various
phases of improvements. Upon completion, we presented the topic to panel of other groups,

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their supervisors, and the Deputy Chief Manager of the BSC-Multan. We presented at the last
number with confidence and got second position among 48 interns. We were appreciated by
our internship coordinator and Deputy Chief Manager, and we were titled as the wild card
entry in the presentation orders because of our unique idea and the way of confidently
presenting it with clarity.

Chapter 4: Conclusion
Working at the State Bank of Pakistan (SBP) during my internship has been a valuable
opportunity for self-learning. The exposure to the departments, its working and the broader
role of central bank was an enlightening experience and it gets ingrained in me how
indispensable SBP-BSC is for country working well as a financial entity. This ranged from
managing the monetary system to regulatory oversight, and I got to see the complexity that is
involved in managing an economy on a macro-level – keeping monetary stability, the bank
reserves and maintaining financial covenants with banks.

This experience has allowed me to develop and train various important skills that will support
a successful career in finance and banking. During my time in the Currency Management
Unit (CMU), for example, I came to fully appreciate how critical strict compliance is for the
currency management and implementing penalties according to the rules.

From the week spent alongside SBP professionals, I learned what it means to be a leader,
how to delegate responsibilities, and how to think critically. At that time, I learnt the
significance of detail orientation and compliance and how communication effectively worked
between departments ensures the smooth operations of a bank. The critical thinking necessary
to solve for mismatches, address operational problems and deliver legal obligations on the
back of such disparate systems was also a key learning. These experiences in practice only
reinforced my theoretical knowledge, providing perspective between academia and what is to
be done.

Similarly, agility to embrace new technology and forward-looking policies allow SBP to stay
in the cutting edge of the adoption of change in banking sector. And this preemptive work
absolutely shaped the way I think about global finance and development. Watching the
continued digital transformation and regulatory developments from cybersecurity measures to
financial inclusion initiatives left me with an even greater sense of admiration for what SBP
had in mind.

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The internship not only sharpened my technical knowledge but also developed a
consciousness to work for the larger macroeconomic and sociopolitical goals of the country.
It helped me realize the importance of financial stability to trigger sustainable growth in
economies. In conclusion the journey with the State Bank of Pakistan Banking Services of
Corporation, has increased my knowledge of banking and finance. I finished my internship
by gaining invaluable knowledge and nourishing my existing and developing new skills. I am
confident that the insights I have gained through this internship will be a strong foundation
for my future career. I am deeply grateful to every officer and employee working in BSC
Multan, the supervisor of my university, and colleagues that I have worked with during my
internship.

Chapter 5: Suggestions and Recommendations

5.1 Leverage the Use of Artificial Intelligence
There are many training programs offered by NIBAF to the employees of SBP-BSC. The
central bank should explore the use of AI in operations, CRM, fraud detection, risk
management, and currency management. Machine learning algorithms can automate and
greatly enhance efficiency in banking activities. It can also drastically decrease the chances of
human error.

5.2 Enhance the Use of Digital Transformation

It would a great initiative to completely transform the economy into cashless economy.
Utilization of digital payments is a common practice in other countries and the State Bank of
Pakistan has the ability to introduce blockchain technology for better transactions. And also
implementing Robotic Process Automation in operations can automate routine tasks.

5.3 Expand the Financial Inclusion Operations

Collaboration with microfinance institutions and banks and developing tailored products and
services to better meet the needs for growing economy. Central banks should target regions
with low literacy who does not have access to modern technology and implement campaigns
for awareness of various banking knowledge especially Islamic Banking.

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5.4 Develop Learning Programs for Future Prospects
A centralized e-learning platforms should be established where future prospects could be
trained. We as a nation can develop professionally when there is mentorship and knowledge
sharing by prestigious organizations such as the State Bank of Pakistan. For example, setting
platforms to teach better interpretation of financial data could help numerous individuals
across country.

5.5 Lessen the Burden on Staff

The overburden on existing staff seems to be an obstacle for the employees. Implementing a
system where trainee or contract-based accountants and managers can come forward and help
with their day-to-day operations can enhance efficiency and lessen the burden. They can also
introduce part time temporary jobs to final year students who can benefit from this initiative
and central bank can perform more work with backup staff.

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 References
Departments of SBP retrieved from [Link]
Denominations and Prizes retrieved from [Link]
Frequently Asked Questions retrieved from [Link]
Training Programs-NIBAF retrieved from [Link]
Banking on Equality Initiatives retrieved from [Link]
Philosophy of Islamic Banking retrieved from [Link]
Financial Statements retrieved from [Link]

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