KARACHI, Jan 1: The State Bank of Pakistan Services Corporation starts functioning from Tuesday (Jan 2, 2002) as a subsidiary of the State Bank of Pakistan. With an authorized capital of Rs1 billion, it will be fully owned by the SBP and will perform public dealing functions that among others include the issue, supply, sale, encashment and handling of prize bonds and holding draws.

The government has amended the SBP act and promulgated an SBP Services Corporation Ordinance on December 29 to provide a legal cover to the bifurcation of the central bank into two organizations. The SBP will continue to perform the core functions.

The four core functions of the central bank, SBP Governor Dr Ishrat Hussain announced at a press conference on Tuesday, are (1) framing and operation of monetary policy, (2) regulation and supervision of banks and financial institutions, (3) foreign exchange management and (4) settlement of payments and accounts.

He announced Akram Shah as the first Managing Director of the Corporation which will have a total staff strength of 6,100 employees. Akram Shah has been the manager of SBP at Lahore before this responsibility.

“No dictates from the World Bank or International Monetary Fund,” the SBP Governor retorted when a journalist inquired whether this bifurcation was a recipe of the international monetary organization. “I prepared the concept paper for this restructuring in consultation with my colleagues, got it approved from the finance ministry, vetted it by the law ministry and even discussed it with the staff union leaders,” Dr Ishrat said.

Responding to another loaded question, the SBP governor declared in a firm tone that no downsizing or rightsizing was on the agenda. He made it clear that restructuring of SBP does not involve any downsizing of the staff.

With about 1,000 staff the SBP, he said, would now be able to work more effectively and diligently particularly in maintaining a vigilance over the banks and the financial sector, he said.

“We were blamed for acting rather late in case of Prudential Bank or Indus Bank,” he recalled while emphasizing that from now on there would be more emphasis on developing a human resource base in the central bank.

He announced that by the end of this year, the central bank would start receiving periodical statements from the banks and financial institutions electronically. “We now receive monthly reports from the banks” he said pointing out that all these reports make a big heap of paper on the desk that take considerable time to read and study.

“With electronic transfer of these reports, the central bank would instantly detect any wrong if there is any such thing, and take prompt action,” he said.

Answering another question he said the National Bank of pakistan would continue to function as treasury where SBP was not present. The SBP has offices at 16 cities but NBP is present in far flung areas.

But then NBP will have to be privatized in two years and some arrangement would have to be considered. “But it is too early to consider this position,” he said.

“Private sector credit has picked up after November,” he replied while pointing out that a mid-term review of credit policy will be made this month.