SBP Consolidated-Report

Annual
Performance Review
2019-20
Our Vision
To be an independent and credible central bank that achieves
monetary and financial stability and inclusive financial sector
development for the long-term benefit of the people of Pakistan
Our Mission
To promote monetary and financial stability and foster a sound
and dynamic financial system, so as to achieve sustained and
equitable economic growth and prosperity in Pakistan
STATE BANK OF PAKISTAN

The Team
Mr. Muhammad Akmal akmal.bhatti@sbp.org.pk
Mr. Shehzad Ali Sharif shehzad.sharif@sbp.org.pk
Mr. Ibaad Ahmed Khan ibaad.ahmed@sbp.org.pk

Contents
Governor’s Review 1
Executive Summary 5
Governance Structure 13
1 Enhancing Effectiveness of Monetary Policy 27
1.1 Monetary Policy Stance in FY20 27
1.2 Money and Debt Market 32
1.3 Foreign Exchange Reserve Management 33
1.4 Remittances and other Initiatives 34
1.5 Research 38
1.6 Economic Analyses / Publications Data 39
1.7 Management System 40
2 Payment System 43
2.1 Trends in Payment and Settlement Systems 43
2.2 Performance of Payment Systems During FY20 45
2.3 Regulatory Measures Taken by SBP during FY20 45
2.4 Developments in Government Payments 48
2.5 Ensuring Quality of Banknotes and Efficiency of Currency Management 49
2.6 System The Way Forward 50
3 Strengthening Financial System Stability and Effectiveness 51
3.1 Institutionalization of Financial Stability Framework 51
3.2 Progress towards Risk Based Supervision 54
3.3 Strengthening Regulatory Framework 54
3.4 Supervisory Initiatives 57
3.5 Enhancements in SBP's Conduct Regulation and Supervisory Regime 61
3.6 Other Initiatives 64
4 Broadening Access to Financial Services 65
4.1 National Financial Inclusion Strategy (NFIS) 65
4.2 Agricultural Finance 67
4.3 Microfinance 68
4.4 Branchless Banking (BB) 70
4.5 Small and Medium Enterprise Finance 71
4.6 SBP Refinance Schemes 73
4.7 Infrastructure Project Finance 74
4.8 Housing Finance Division 75
5 Islamic Banking 77
5.1 Overview 77
5.2 Initiatives for Promotion of Islamic Banking during FY20 77
6 Institutional Strengthening 81
6.1 Strategic Planning at SBP 81
6.2 HR Developments 81
6.3 Strengthening IT Systems 86
6.4 Business Continuity Management 90
6.5 SBP Tech Club 91
6.6 Enterprise Risk Management (ERM) 91
6.7 Risk Based Audit Function 92
6.8 Legal Services Department 93
6.9 Effective External Relations 93
6.10 SBP Library 94
6.11 Museum, Art Gallery & Archives 96
7 SBP Subsidiaries 99
7.1 SBP Banking Services Corporation (SBP BSC) 99
7.2 National Institute of Banking & Finance (NIBAF) 103
7.3 Deposit Protection Corporation (DPC) 105
7.4 Pakistan Security Printing Corporation (PSPC) 105
8 Financial Performance 109
8.1 Overview 109
8.2 Income 110
8.3 Operating Expenditure 111
8.4 Balance Sheet Summary 112
9 Consolidated Financial Statements of SBP and its Subsidiaries 115
10 Unconsolidated Financial Statements of SBP 191
Annexure
A Chronology of Important Policy Announcements
A-1 Banking Policy & Supervision Group 1
A-2 Development Finance Group 2
B Organizational Chart 3
C Management Directory 5
Governor’s Review
I am pleased to present the SBP Performance Review for FY20, during which the economy and
financial sector faced challenges due to the need to address unsustainable past macroeconomic
imbalances and, later, the COVID-19 pandemic. Despite numerous challenges during FY20, the
Pakistan’s economy performed relatively better, particularly on the external and fiscal fronts. During
the first half of the year, the policy focus remained at stabilizing the economy and building adequate
buffers. The country also witnessed a smooth transition to a market-determined flexible exchange rate
regime and a prohibition of government borrowing from SBP. The second half witnessed proactive
and timely policy measures to counter the emerging risks due to COVID-19 pandemic.
The successful implementation of deep-rooted fiscal and monetary structural reforms in the first half
of the fiscal year facilitated rolling out of unprecedented policy support measures to combat the
COVID-19 shock. SBP adopted a proactive approach in assessing the evolving COVID-19 related
situation around the globe and within the country, enabling it to identify the issues in a timely manner
and implement policy prescription necessary for ensuring continuous provision of financial services
while limiting the impact of the pandemic. Besides lowering the borrowing cost through aggressive
monetary easing, SBP introduced targeted schemes to support employment, health sector and
investments in new/existing projects to stimulate the economy. These included, introduction of new
refinance schemes to prevent businesses from laying off workers (the Rozgar Scheme),
encouragement of investment activities through Temporary Economic Refinance Facility (TERF) and
providing support to eligible hospitals (Refinance Facility for Combating COVID-19), in addition to
enhancing the scope and coverage of the existing concessional refinance schemes.
SBP complemented these initiatives with a broad range of macroprudential measures to facilitate the
financial sector in supporting the real sector of the economy, preserve the solvency of the borrowers
and enhance the loss absorption capacity of banks. The host measures include reduction in Capital
Conservation Buffer, launching of a comprehensive package to facilitate the borrowers in
restructuring or deferment of principal amount of their loans, decrease in the debt burden ratio for
consumer finance and relaxation of margin requirement for exposure against shares of listed
companies. The policy initiatives and support measures are estimated to have provided a stimulus of
around Rs.1.6 trillion or 3.9 percent of GDP.
Ensuring availability and continuity of financial services remained the other key focus of SBP for
alleviating the stress driven by the pandemic and keeping confidence of the customers in the banking
system. SBP issued various guidelines to promote use of digital payments channels by banks’
customers so as to limit branch visits and ensure social distancing. SBP advised banks to waive
charges on online fund transfer services to limit the physical contact of customers at branches,
promote the use of Alternate Delivery Channels (ADCs) e.g. ATMs, online banking, phone banking
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State Bank of Pakistan Annual Report FY20
etc., ensure availability of 24/7 ADC-related customer support, enable digital collection of all
challans/ invoice-based payments such as education fee, offer loan repayments facility through digital
channels, among other measures. SBP also ensured that sufficient fresh or disinfected cash is supplied
to the banks to prevent the spread of the disease.
More specifically and despite the pandemic, in FY20, the country’s external accounts improved
markedly due to effective monetary and exchange rate policies along with fiscal consolidation. Of key
note is a successful transition of the exchange rate system to a flexible market-based system which
helped tame the current account deficit while the average annual inflation in FY20 on the basis of the
new-base was 10.7 percent, slightly below SBP’s projection of 11-12 percent at the start of the year.
SBP’s FX reserves also registered strong growth during FY20 with an annual increase of USD 4.8
billion whereas remittances increased to a record high at USD 23.12 billion, despite the
unprecedented global dislocation caused by the COVID-19 pandemic. The increase in SBP’s gross
reserves was attained not due to higher net external borrowing of the government but instead due to
the reserve building operations of the SBP during the first nine months of the fiscal year before the
impact of COVID-19 struck.
Similarly, financial stability remained a key priority area for SBP in the backdrop of COVID-19.
Significant measures taken during FY20 included enhancement in the macro stress-testing regime
surveys, assessment of risks emanating from COVID-19 and revision of stress testing guidelines. In
order to strengthen the regulatory framework, SBP augmented its supervisory scope by including new
areas including assessment of corporate governance, cyber security and compliance with the
AML/CFT regime.
To comply with international standards and requirements under FATF, SBP further strengthened the
AML/CFT regime in Pakistan. SBP has also taken a number of initiatives to promote digital payments
and encourage stakeholders to adopt new technological advancements, which are especially important
in light of the COVID-19 pandemic. In addition, a comprehensive National Payment Systems Strategy
(NPSS) was launched in coordination with the World Bank’s Financial Inclusion Support Framework
(FISF) program. SBP in consultation with stakeholders waived all charges on fund transfer
transactions conducted through online channels during the lockdown period due to COVID-19.
To enhance financial inclusion in these unprecedented times, SBP took several steps. First, 800 new
branch licenses were issued to commercial banks/ microfinance banks during FY20. Twenty-three
percent of the licenses were issued for branches in rural, underserved and unbanked areas. Similarly,
special focus remained on the priority areas of Balochistan, Khyber Pakhtunkhwa, AJK and Gilgit
Baltistan for which 164 new branches were approved during FY20. Growth in the key indicators of
Branchless Banking was also encouraging, which will help pave the way for adoption of digital
channels and use of banking services in the country. The Islamic Banking Industry also witnessed
significant growth during FY20. The assets and deposits of Islamic Banking Industry grew by 21.4
percent and 22 percent respectively, which is an encouraging sign for financial inclusion. Similarly,
Microfinance Banks’ assets base crossed Rs.400 billion from Rs.350 billion recorded in the previous
corresponding period.
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Governor’s Review
Second, SBP took various regulatory measures to promote digital payments during the COVID-19
pandemic including strengthening the legal and oversight framework of payment systems, digital
onboarding of merchants, facilitation regarding paper-based clearing operations, standardization of
QR Codes, improving payments card acceptance in Pakistan, enhancing cyber resilience and
improving the Large Value Payment and Settlement System.
Third, during FY20, Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES)
was launched to enable youth to avail affordable financing for starting up new business or
strengthening their existing business. The scheme will also promote entrepreneurship and reduce
unemployment in the country.
Fourth, with a view to promote long-term finance, SBP also issued instructions for targets of
financing for banks to extend mortgage loans and financing for developers and builders to promote
housing and construction activities in the country, as envisioned by the Government of Pakistan
(GoP). Banks would be required to increase their housing and construction of building loan portfolios
to at least 5 percent of their private sector credit by the end of December 2021.
Looking inward to its strategic plan, SBP continued to focus on the efficacy of its activities and
operations. To strengthen its organizational efficiency, SBP has taken several initiatives for business
process re-engineering, cyber risk management, rationalization of workforce, capacity building, talent
resourcing and information technology. SBP is also making strides in terms of gender diversity, with
its workforce consisting of 11 percent of female employees in diverse roles at each level of hierarchy
against the national requirement of 10 percent.
Lastly, I would like to express my gratitude to the SBP Board for their unwavering support which has
enabled us to meet significant strategic milestones. I also extend my appreciation to SBP staff for their
continuous efforts and dedication in helping the institution achieve its strategic goals.
Dr. Reza Baqir

Governor
October 27, 2020
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Executive Summary
For the last five years, SBP has been pursuing its operational and developmental activities in line with
its strategic goals. During FY20, progress was made in a number of areas, as summarized below and
expounded upon further in subsequent chapters.
Enhancing Effectiveness of Monetary Policy: SBP adopted a market-based flexible exchange rate
system in May 2019 to serve as the first line of defense against external shocks, to improve FX market
functioning on a sustainable basis, and to eliminate the anti-export bias that had existed in previous
FX policy regimes. The market-based exchange rate works as a shock absorber and helps in avoiding
the build-up of external imbalances. This change not only helped Pakistan in correcting the previously
accumulated external imbalance by compressing imports and encouraging exports, but as international
flows dried up during the pandemic, it mitigated the pressures on foreign exchange buffers. Indeed,
this new regime was subject to a real-time testing as the country witnessed a sharp reversal of
portfolio investment flow in the wake of COVID-19 without excessive movement in PKR-USD
parity, especially when compared with other emerging economies.
FY20 has been very challenging due to slower growth and the economic challenges amidst the
COVID-19 pandemic. In line with its mandate, SBP remained proactive throughout the year and
addressed emerging issues efficiently. A number of policy measures and interventions were made to
support economy and stabilize the financial industry. The first phase of the year witnessed monetary
tightening that continued until March 2020, wherein the Monetary Policy Committee (MPC)
increased the policy rate by 100 basis points to 13.25 percent in July 2019 and maintained it at this
level until March. In order to manage market expectations, the MPC for the first time provided
forward-looking guidance in its policy statement.
During the pre COVID-19 period, the monetary and exchange rate policies along with fiscal
consolidation improved the country’s fiscal and external accounts. The current account deficit
declined by 73.1 percent to USD 2.8 billion and the fiscal deficit was contained to 3.8 percent of GDP
during first nine months of the year. National CPI inflation averaged 11.5 percent during July-March
FY20, which was in line with the inflation forecast range for the year.
However, the outbreak of COVID-19 and ensuing lockdown led to a dramatic change in the economic
landscape with the estimated FY20 growth falling to -0.4 percent. Lockdowns of varying degrees
around the globe affected both demand and supply, leading to unemployment and furloughs. Being
cognizant of the unfolding impact of COVID-19 on Pakistan's economy, SBP proactively
implemented unprecedented policy measures to support businesses and households.
First, SBP policy rate was swiftly eased by 625 basis points to 7.0 percent in a short span of time, one
of the largest policy rate cuts amongst the emerging markets in a short span of 4 months. In addition,
SBP announced several measures to ease liquidity constraints for the businesses and households while
ensuring financial stability. These included the loan principal deferment, restructuring/ rescheduling
and various refinance schemes like SBP’s Rozgar Scheme to prevent workers’ layoff, Temporary
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Economic Refinance Facility (TERF) for new projects or BMR, and Refinance Scheme for Hospitals
to Combat COVID-19. Besides this, macro prudential measures, such as reduction in Capital
Conservation Buffer by 100 basis points, have also been taken with the objective of facilitating the
relevant stakeholders during this crisis time. These measures have received a sizeable response. These
policy support measures are estimated to have provided a stimulus of around Rs1.6 trillion or 3.9
percent of GDP.
One of the key steps towards setting price stability as a key objective of monetary policy was the
announcement of medium term inflation target range of 5-7 percent by the government in the Federal
Budget FY20. Besides, the Monetary and Fiscal Policies Coordination Board, among other forums,
helped to align, discuss and debate the policy initiatives among the key internal stakeholders.
SBP further improved its communication by restructuring its monetary policy statement, frequent
discussions with the business community, as well as regular interaction with researchers, academia
and the media. With regard to economic modeling, SBP further extended Dynamic Stochastic General
Equilibrium (DSGE) and Forecasting and Policy Analysis System (FPAS) models during FY20 by
adding new features relevant to Pakistan’s economy. Other econometric models were also updated to
better capture key economic linkages and incorporate forecasting suites. Similarly, a new survey of
professional forecasters was also added to the suite of SBP’s perception surveys during FY20.
SBP also revised its Interest Rate Corridor (IRC) framework by adopting a symmetric IRC framework
with the policy rate set symmetrically between the Ceiling and the Floor rate i.e. Ceiling/Floor +/- 100
basis points. As a result of stabilization measures taken by SBP during last couple of years and
adoption of flexible exchange rate regime, SBP’s FX reserves have maintained strong growth during
FY20. Accordingly, SBP’s FX Reserves increased from USD 7.3 billion to USD 12.1 billion as of
end June 2020, showing an increase of USD 4.8 billion over the corresponding year.
Remittances increased to a record high of USD 23.12 billion in FY20 compared with USD 21.74
billion during FY19 (an increase of 6.4 percent), despite the unprecedented COVID-19 pandemic. The
increase in remittances is mainly attributed to supportive Government policies, pro-active strategy of
SBP and Pakistan Remittance Initiative (PRI) and positive response of Banks and Exchange
Companies (ECs) to implement the SBP/PRI strategy. Further, a regulatory framework has been
prepared to facilitate cross border B2C e-commerce exports. This will help both established
businesses and new start-ups to reach out to global customers through e-commerce platforms.
SBP further strengthened the AML/CFT regime in Pakistan in line with GoP’s full commitment to
comply with international AML/CFT standards and requirements. Other significant measures taken
during COVID-19 pandemic broadly include aggressive awareness campaigns for home remittances
and donations, extension of time period for realization of export proceeds, import of goods and
submission of shipping documents against advance payment and allowing consignment based export
of permissible foreign currencies.
Payment System: Being the regulator of payments and financial industry, SBP played a significant
role in promoting and developing payment and digital financial services in the country. SBP took
numerous initiatives which primarily aimed at development of digital payment platforms, provision of
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Executive Summary
a conducive regulatory environment for the industry and promotion of innovative and convenient
digital payment instruments. Resultantly, the payment systems showed healthy growth both in terms
of volume and value of transactions conducted during FY20. During the last five years, significant
progress has been recorded in the usage of Internet Banking and Mobile Banking channels with an
annual transactions growth of 31 percent and 88 percent respectively. Moreover, SBP in consultation
with the stakeholders waived all charges on fund transfer transactions conducted through online
channels during lockdown period due to COVID-19. In line with SBP’s instructions for issuing
Europay Master Visa (EMV) Chip and PIN Compliant cards, number of debit cards have increased to
26.7 million in FY20, showing a YoY growth of 7.5 percent.
SBP through World Bank’s Financial Inclusion Support Framework (FISF) program, launched a
comprehensive National Payment Systems Strategy (NPSS) on November 01, 2019 after consultation
with all relevant stakeholders. The strategy outlines various recommendations in six major areas of
national payment systems i.e. legal and regulatory framework, payment infrastructure, retail market,
government payments, oversight of payment systems and remittance market. SBP is at the final stage
of implementation of Micro Payment Gateway (MPG) by going live with first use case i.e. bulk
transfers including government to person (G2P) transfers.
To promote digital payments during COVID-19 Pandemic and encourage adoption of new
technologies in payment systems, a number of regulatory measures have been taken in FY20 which
include improving payments card acceptance in Pakistan, standardization of QR Codes, digital
onboarding of merchants, facilitation regarding paper-based clearing operations, measures to enhance
cyber resilience, facilitation to Electronic Money Institutions, Payment System Operators and
Payment Service Providers, improving Large Value Payment and Settlement System and
strengthening the legal and oversight framework in line with the NPSS.
Further, SBP is also working with banks to provide Digital Accounts to Overseas Pakistanis to
facilitate Non Resident Pakistanis (NRPs) for opening accounts digitally/remotely in any Pakistani
bank through online banking.
As part of G2P digital payments and to facilitate the business community, SBP and Pakistan Customs
are working on digitization of Duty Drawbacks refunds to businesses in the first phase. The successful
implementation of this project will be a milestone towards digitization of G2P payments and will help
in the government’s initiatives for ease in doing business.
Strengthening Financial System Stability and Effectiveness: To further strengthen its regulatory
and supervisory framework, various measures were taken which include establishment of National
Financial Stability Council, publication of Financial Stability Review, conducting surveys to assess
risks emanating from COVID-19, revision of stress testing guidelines, enhancing macro stress testing
regime and conducting the first joint industry-wide Business Continuity Planning (BCP) drill.
In its flagship publication “Financial Stability Review (FSR)” for CY19, issued in June 2020, SBP
presented performance and risk assessment of various segments of the financial sector including
banks, non-banking financial institutions, financial markets, non-financial corporates and financial
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market infrastructures. The emerging challenge posed by COVID-19 outbreak and the mitigating
measures undertaken by SBP to limit its adverse implications, for the economy and the financial
sector, have also been covered in the report. FSR also focused upon assessment of banking sector
resilience against economic and financial vulnerabilities, giving special emphasis to COVID-19
pandemic. An empirical study on countercyclical buffers was also undertaken to identify periods of
risk excesses and assess the need for building resilience of banks against systemic risks.
SBP also conducted fourth and fifth wave of Systemic Risk Survey (SRS), in July 2019 and January
2020, which helped to gauge the views of market participants and experts about various existing and
emerging risks that can potentially undermine the stability of the financial system. In order to assess
the implication of COVID-19 pandemic for financial institutions, SBP conducted two surveys in
March and April 2020. SBP issued an advisory circular to ensure availability and continuity of
financial services based on the findings of first of these surveys.
The Terms of Reference of Joint Task Force of SBP and SECP for consolidated supervision
framework were also reviewed and updated and a quantitative criterion was developed to supervise
and assess banking groups on consolidated basis. Further, forecasting and scenario analysis suite of
econometric models for stress testing has been strengthened by inclusion of latest models. Guidelines
for stress testing were also updated to align with the changing local dynamics and international best
practices.
Under Risk Based Supervision (RBS), pilot testing of certain significant activities in two selected
banks was conducted to fine tune the developed methodologies. Capacity building of supervisory
resources and key executives of financial institutions (FIs) was also carried out through a series of
training and awareness sessions.
In order to enhance financial inclusion, SBP revised the Branchless Banking (BB) Regulations for
Financial Institutions (FIs) to increase outreach of BB operations. Further, SBP issued Rules and
Regulations to Banks/Microfinance Banks (MFBs) for digital on-boarding of Merchants to facilitate
growth of digital payments in the country.
To ensure smooth provision of banking services throughout the country, SBP took a number of
measures which mainly include extension in deadline for Biometric verification for BB, deferment in
repayment of principal loan, reduction in Capital Conservation Buffer (CCB) from 2.50 percent to
1.50 percent to provide additional loans, enhancement in regulatory retail portfolio from Rs.125
million to Rs.180 million and relaxation in debt burden requirement for consumer loans from 50
percent to 60 percent.
SBP also made some important amendments in its regulatory framework to further align AML/ CFT
Regulations with the recommendations of Financial Action Task Force (FATF). This will provide
further clarity on implementation of AML/ CFT requirements on Risk Based Approach ( RBA),
Customer Due Diligence (CDD), Targeted Financial Sanctions (TFS) on Terrorism Financing and
Proliferation Financing (PF), reporting of Suspicious Transaction Reports (STRs)/Cash Transaction
Reports (CTRs), record keeping, identification of ultimate beneficial ownership and politically
exposed persons (PEPs), correspondent banking and wire transfers/ funds transfers.
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Executive Summary
SBP issued approximately 800 new branch licenses to commercial banks/microfinance banks
during FY20 to enhance outreach of financial services to general public. Out of these new branches, at
least 23 percent of branches have been opened in rural, underserved and unbanked areas. Special
focus remained on the priority areas of Baluchistan, Khyber Pakhtunkhwa, AJK and Gilgit Baltistan
for which 164 new branches were approved during FY20.
During FY20, regular as well as focused on-site inspections of Banks, DFIs, MFBs and Exchange
Companies were conducted. Areas of supervisory concerns included assessment of corporate
governance, weaknesses in systems and controls, cyber security, compliance with AML/CFT regime,
business conduct, etc. which were taken up with the banks' Board of Directors and senior management
for corrective actions. Similarly, thematic inspections during FY20 included assessment of high risk
customers in high risk geographies, cyber security assessment review of NGO/NPO/INGO accounts,
review of transaction monitoring and sanctions screening systems in Exchange Companies (ECs) and
inspection of outlets of Exchange Companies in high risk jurisdictions.
To strengthen its Fair Treatment of Consumer regime, SBP conducted four years (2016-2019) review
of consumer complaints against Banks/MFBs/DFIs to have insights on complaints management
trends. The salient features of the review were published to emphasize SBP’s narrative regarding
responsible complaint handling and to boost banks’ performance in handling complaints. A project
was also initiated in FY20 to assess ease of lodgment of complaints with banks especially for
vulnerable segments of society including disabled, illiterate, women in rural areas, senior citizen, etc.,
recording of complaints in the system, processing of complaints as per Turn Around Time (TATs),
root cause analysis and corrective actions taken by the banks.
In pursuance of Ease of Doing Business (EODB), SBP, in collaboration with the SECP, World Bank
and Board of Investment, proposed legal amendments in the Financial Institutions (Secured
Transactions) Act 2016 which were issued through a Presidential Ordinance in April 2020 to improve
Pakistan's score in “Getting Credit” indicator of the EODB index.
Broadening Access to Financial Services: During FY20, significant progress was made under
National Financial Inclusion Strategy which include creating an enabling legal and regulatory
environment, establishing financial market infrastructure, developing innovative products & services,
new alternate delivery channels and enhancing capacity building and awareness initiatives.
During second half of FY20, Pakistan’s agricultural sector faced multiple challenges due to COVID-
19 and threats of locust attacks, which reduced the sector’s growth prospects and put millions of
farmers under distress. Despite ongoing challenges, Participating Financial Institutions (PFIs) were
able to disburse around Rs.1,215 billion, being 90 percent of the overall target and 3.5 percent higher
than the disbursements of Rs.1,174 billion of corresponding period.
At the close of FY20, MFBs’ assets base crossed Rs.400 billion from Rs.350 billion recorded in
previous corresponding period. MFBs also witnessed a growth of 5.2 percent (i.e. Rs.10.9 billion) in
its microcredit portfolio to reach Rs.218.3 billion as against Rs.207.5 billion at the end of preceding
fiscal year. Likewise, the number of MFBs’ borrowers recorded an increase of 1.6 percent to grow
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over 3.5 million by the end of FY20. The number of depositors increased by 15 million to reach 49.3
million in FY20 from 34.3 million in FY19, registering an impressive growth of 43.8 percent in
outreach of deposit services.
Further, all key indicators of Branchless Banking (BB) exhibited an encouraging growth, which bodes
well for the gradual adoption of digital channels and usage of basic financial services in the country.
The number of BB accounts reached 52.5 million with an annual growth of 47 percent. BB deposits
also increased by 42.8 percent during FY20 to reach Rs.36.7 billion from Rs.25.7 billion, compared to
the previous year. Branchless Banking players have also increased their agent network throughout the
country to reach 445,181 by FY20 as compared to 421,053 in previous year, showing a growth of 5.7
percent. The number of transactions made during FY20 through BB channel were 1.49 billion with
total value of around Rs.5.2 trillion.
The outstanding portfolio of SME Financing by Banks/ DFIs as of June, 2020 stood at Rs.401 billion
as compared to Rs.464 billion as of June, 2019, showing YoY decline of 13.7 percent. Main reason
for the decline was COVID-19 pandemic which affected businesses and their borrowing capacity.
Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES) was launched in
October, 2019 to enable youth to avail affordable financing for starting up new business or
strengthening their existing business. As of June 2020, disbursement of Rs.655 million has been made
to 1,595 borrowers under the scheme by the banks.
To support the business community and health sector during COVID-19 pandemic, a number of
refinance schemes were introduced which included Temporary Economic Refinance Facility (TERF),
Refinance Facility for Combating COVID-19 (RFCC), Refinance Scheme for Payment of Wages and
Salaries to the Workers and Employees of Business Concerns and Relaxations on financing under
SBP’s Refinance Schemes. Further, banks have been allowed to release and use the general provision
maintained in terms of Regulation HF-9 of Prudential Regulations for Housing Finance, against the
specific provision requirement of the housing finance portfolio until December 31, 2021.
The financing to infrastructure projects from banks and DFIs witnessed 5.43 percent increase during
FY20. As of June 2020, the outstanding financing for infrastructure projects reached Rs.767.7 billion
as compared to Rs.728.1 billion as of June 2019.
Islamic Banking: The Islamic Banking Industry continued its growth trend during FY20. The assets
and deposits of the Islamic banking industry grew by 21.4 percent and 22 percent, respectively.
Financing to Deposit Ratio (FDR) of Islamic Banking Industry was recorded at 57.6 percent, which is
higher than the overall banking industry’s advances to deposits ratio of 46.3 percent. The Islamic
Banking Institutions (IBIs) are providing Shariah-compliant products and services through their
networks of 3,274 branches in 122 districts. To enhance outreach of Islamic banking products and
services, IBIs added 361 branches to their branch network during FY20. SBP also issued Shariah
guidelines in April 2020 to facilitate the customers of IBIs for smooth implementation of relaxation,
provided by SBP regarding deferment of principal or rescheduling and restructuring of financing
facilities due to COVID-19 pandemic. Further, SBP notified adoption of three Shariah Standards of
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
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Executive Summary
Institutional Strengthening: The five year strategic plan, SBP Vision 2020, ended in FY20.
Significant achievements have been made to accomplish the strategic goals. At SBP, the strategic plan
is operationalized through annual business planning exercises, chaired by the Governor, wherein
strategic goals are cascaded down at departmental level as their development projects and initiatives.
During the currency of SBP Vision 2020, more than 1200 development projects linked with strategic
goals/ tactical objectives of SBP Vision 2020 have been undertaken. Effective implementation of the
strategic plan has been also ensured through a regular monitoring mechanism which is also overseen
by Strategic Planning Steering Committee (SPDC).
SBP strives to promote a performance-oriented culture and create an enabling environment for
employees to contribute towards achievement of organizational objectives. During FY20, SBP
witnessed major initiatives in the areas of workforce rationalization, talent resourcing, career growth,
capacity building and automation. Being an equal opportunity employer, SBP facilitates the evolving
role of women and the strategic significance of their inclusion in the workforce to achieve
organizational objectives. Against a national requirement of 10 percent, SBP’s workforce consists of
11 percent of female employees in diverse roles at each level of hierarchy.
IT Strategy, being an important area of Strategic Plan, was implemented to provide uninterrupted
services to SBP and its subsidiaries. Further, IT Policy Framework has been developed in line with
international standards and best practices. Similarly, important developments were made in
implementation of Knowledge Management system which included Business Process Management
(BPM), Internal Case Management System (ICM), Enterprise Content Management (ECM), External
Case Processing Portal, pilot launch of Inspection Management System and a Knowledge Transfer
Framework. A multi-factor (MFA) based Single Sign-On (SSO) service was also developed during
COVID-19 pandemic to access data warehouse application from home. Access of BPM and ECM to
employees during COVID-19 has facilitated the continuity of business processes in an efficient and
effective manner.
In order to ensure organization wide resilience and preparedness, an effective Business Continuity
Management has been put in place. During FY20, more than 175 BCP exercises were performed by
the Critical Time Sensitive Departments, Critical Support Function Departments and SBP-BSC
Offices at their respective Back-up Sites.
To identify and address critical gap areas regarding cyber risk management, SBP completed multiple
risk-assessment exercises during FY20. These engagements included collaboration with the World
Bank, Microsoft Professional Services, as well as SWIFT Belgium Cyber Resilience and Operational
Excellence Teams.
During FY20, SBP issued its ‘Risk Policy Statement’ under the Enterprise Risk Management (ERM)
framework, applicable to SBP and its subsidiaries. The risk policy statement resolves to successfully
implement ERM framework, which is critical for the Bank in achieving its objectives such as
monetary and financial stability and inclusive financial system. The risk policy statement underpins
the three lines of defence model to ensure that the risks are effectively managed at the entity level.
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SBP Subsidiaries: The SBP Act, 1956 provides for the establishment of subsidiaries for managing
functions such as receipt, supply and exchange of currency notes and related operational functions to
protect small depositors and for training and development needs of its employees. SBP has four
subsidiaries including State Bank of Pakistan-Banking Services Corporation (SBP-BSC), National
Institute of Banking and Finance (NIBAF), Pakistan Security Printing Corporation (PSPC) and
Deposit Protection Corporation (DPC). All subsidiaries of SBP continued to provide seamless support
and services to banking industry, government agencies and people of Pakistan to ensure smooth
functioning of banking operations across the country.
Financial Performance: The stability in the exchange rate allowed SBP to return to profitability
after incurring loss in the preceding year. The profit so earned by the Bank in the year ended June 30,
2020 is highest in its history. The high interest rate prevalent in the first three quarters of the year
allowed the Bank to accrue significant amount of interest income from the interest sensitive assets,
particularly lending to the Government and income from the Bank’s open market operations. Further,
during the year, the liquidity mopping up operations were relatively on reduced scale and hence the
interest expense registered a substantial decline.
The total assets stood at Rs.12,273 billion as at June 30, 2020 as compared to Rs.11,467 billion on
June 30, 2019, registering an increase of Rs.806 billion primarily due to increase in foreign currency
accounts and investments. Similarly, the total liabilities of the bank stood at Rs.11,219 billion as at
June 30, 2020 as compared to Rs.10,761 billion as at June 30, 2019, registering an increase of Rs.458
billion. This rise was primarily led by increase in currency in circulation.
SBP introduced certain interest free/subsidized refinancing schemes during COVID-19 pandemic. As
per the requirements of IFRS-9, the subsidized loans are required to be recorded at fair value.
Accordingly, an amount of Rs.4,194 million has been recognized as fair valuation adjustment
against these loans. This fair valuation adjustment will be amortized and recorded as income over the
period of loans.
12
Governance Structure
The State Bank of Pakistan (SBP) is governed under the SBP Act, 1956, which gives the Bank the
authority to function as the central bank of the country. The Act mandates the Bank to regulate the
monetary and credit system of Pakistan and to foster economic growth in the best national interest
with a view to secure monetary stability and maximize utilization of the country’s productive
resources.
Board of Directors
The SBP is governed by a Board of Directors, which is responsible for the general supervision of the
Bank, other than the functions assigned to Monetary Policy Committee. The ten-member Board is
chaired by the Governor comprising eight non-executive Directors and the Federal Secretary, Ministry
of Finance (as an ex-officio member). Non-executive members of the Board are appointed by the
Federal Government for a period of 3 years, under Section 9(2) (c) of the SBP Act, 1956. Seven
meetings of the Board were held during FY20.
Executive Management
The Governor is the Chief Executive Officer of SBP and heads the executive management. He is
assisted by one or more Deputy Governors. The management hierarchy includes Group Heads and
the Departmental Heads (Organogram is placed at Annexure - B).
The Governor
The President of Pakistan appoints the Governor for a term of three years that may be extended for
another term of three years. The Governor is the Chief Executive Officer and manages the affairs of
the Bank. Dr. Reza Baqir is serving as Governor, SBP since May 5, 2019.
Deputy Governors
Mr. Jameel Ahmad is serving as Deputy Governor (Banking & FMRM). He was re-appointed as
Deputy Governor by the Federal Government on October 25, 2018 for a period of three years. Earlier
he served as Deputy Governor from April 11, 2017 to October 15, 2018.
Dr. Murtaza Syed is serving as Deputy Governor (Policy). He was appointed as Deputy Governor by
the Federal Government on January 20, 2020 for a period of three years.
13
Board of Directors
Dr. Reza Baqir, Governor, Chairman Board of Directors and Chairman Monetary Policy Committee.
Dr. Reza Baqir is serving as Governor since May 05, 2019. He was appointed as the Governor SBP by
the President of Pakistan on May 04, 2019 for a period of three years from the day he assumes the
office of the Governor. He assumed his responsibilities on May 05, 2019. Dr. Reza Baqir has eighteen
years of experience with the IMF and two years with the World Bank. He was the Head of the IMF's
Office in Egypt and Senior Resident Representative since August 2017. He has also held positions as
IMF Mission Chief for Romania and Bulgaria, Division Chief of the IMF's Debt Policy Division,
Head of the IMF delegation to the Paris Club, Deputy Division Chief of the IMF's Emerging Markets
Division, IMF Resident Representative to the Philippines and numerous other positions.
Dr. Baqir's research has been published in top journals of the economics profession, including the
Journal of Political Economy and the Quarterly Journal of Economics. Dr. Baqir holds a Ph.D. in
Economics from the University of California at Berkeley and an A.B. (Magna cum Laude) in
Economics from Harvard University.
Mr. Naveed Kamran Baloch (Member, Board since May 24, 2019)
Secretary, Finance Division, Government of Pakistan is an ex-officio member
of the Board. A civil servant with 35 years of experience in Public
Administration. He has served the Federal and Provincial governments in
various positions. Mr. Baloch holds an MSc in Social Policy and Planning in
Developing Countries from London School of Economics, UK. Prior to his
present posting, he had been posted as Secretary, Cabinet Division and Chief
Secretary, Khyber Pakhtunkhwa. He also remained Federal Secretary,
Ministry of National Health Services, Regulation & Coordination,
Government of Pakistan. He also had an additional charge of Secretary,
Revenue Division from June 2019 to July 7, 2020.
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Dr. Tariq Hassan (Member, Board since July 23, 2019)1

Attorney and Advocate, Supreme Court of Pakistan. Dr. Hassan is a former
Chairman, Securities and Exchange Commission of Pakistan as well as the
Audit Oversight Board and has served as advisor to the Finance Minister of
Pakistan. He has also been associated as legal Counsel with the World Bank
Group in Washington, DC, International Fund for Agriculture Development in
Rome and Shearman & Sterling in New York. In addition to practicing law, he
has been teaching law as an adjunct professor at George Washington
University and Fletcher School of Law & Diplomacy, USA and Departments
of Law at LUMS and International Islamic University, Pakistan. He did his
PhD in Juridical Science from Harvard University, USA.
Mr. Atif R. Bokhari (Member since November 14, 2018; He submitted his
resignation from the Board on March 26, 2020)
Mr. Bokhari is a seasoned banker of the country. He was President and CEO
of the Untied Bank Limited from 2004 to 2014. Earlier, he has served Habib
Bank Limited, Bank of America and ICI Pakistan Limited. Mr. Bokhari was
Chairman on the Board of UBL Switzerland AG and UBL Bank (Tanzania)
Limited. He was member on the governing bodies of United Bank UK,
Karachi School of Business & Leadership and World Economic Forum. Mr.
Bokhari did Masters in Business Administration from Central Missouri
State University, USA. Upon appointment as Chairman, Board of Investment
(BoI), he resigned from the SBP Board on March 26, 2020.
Mr. Azam Faruque (Member since November 14, 2018)

Mr. Azam Faruque is CEO of Cherat Cement Company Limited, a company
he has been associated with since 1987. Mr. Faruque is also serving as
Director on the Board of Directors of International Industries Limited, Indus
Motor Company and Atlas Batteries Limited. He was Chairman Board of
Directors of KPOGCL and has also served on the Board of Atlas Asset
Management Limited, Atlas Insurance Company Limited, the National
Committee of the Aga Khan Foundation Pakistan, Oil and Gas Development
Corporation and National Commission of Science and Technology. Mr.
Faruque has a Masters in Business Administration from Booth School of
Business – University of Chicago and a Bachelors degree in Electrical
Engineering and Computer Science from Princeton University, USA.
1
Earlier Dr. Tariq Hassan served as a member SBP Board from March 22, 2016 to March 21, 2019.
15
Mr. Ali Jameel (Member since July 23, 2019)

Mr. Ali Jameel is the CEO of TPL Corp Ltd. He is also the Director of TRG
Pakistan Ltd. Formerly, Mr. Jameel was the Chief Executive of Jahangir
Siddiqui Investment Bank. He has also held several advisory positions in Board
of Investment, Economic Advisory Council, Pakistan’s information technology
and telecommunication sectors, including appointments on the Task Force on
Telecom Deregulation, the Fiscal Incentive Group on the IT Commission and
the Task Force on Venture Capital. Mr. Jameel received his B.Sc. degree in
Economics from London School of Economics. He is also an Associate
Member of the Institute of Chartered Accountants in England & Wales and
qualified in 1994 at KPMG Peat Marwick in London.
Mr. Muhammad Saleem Sethi (Member since July 23, 2019)

Mr. Saleem Sethi is a retired Federal Secretary of the Government of Pakistan.
He belongs to the Pakistan Audit & Accounts Service. He possesses a diverse
experience of 36 years in the field of public finance, policy formulation and audit.
During his illustrious carrier, he served as Secretary Finance in Government of
Baluchistan, AJK and as DG Controller General of Accounts besides various
other important positions. He served as Secretary Economic Affairs Division.
During his career, he has served as Executive Director at the Board of Islamic
Development Bank (IDB) and remained on the Audit Committee of the
Board. Mr. Sethi has also been the Senior Advisor Middle Eastern
Constituency at the Executive Board of the IMF, Washington DC.
He holds a Master degree in Development Administration from USA and
specialized training in Financial Programming and Policy from IMF
Institute, Washington, DC.
Corporate Secretary
The Corporate Secretary is the Secretary to the Board, its Committees and the Monetary Policy
Committee (MPC). He acts as a focal person for communications between the Board and the
management. The Corporate Secretary is responsible for recording the proceedings of the meetings of
the Board, its Committees and the MPC as well as ensuring compliance with statutory and regulatory
requirements for effective implementation of the Board’s decisions.
The Corporate Secretary is also responsible for ensuring effective Corporate Governance standards
and availability of relevant information to the Board, its Committees and MPC members to facilitate
informed decision-making. Further, he interfaces with the Federal Government on matters related to
the Governor, Deputy Governors, Board of Directors and External Members of the MPC.
Monetary Policy Committee

The Monetary Policy Committee, established under the SBP Act, 1956, is an independent forum
responsible for formulating Monetary Policy. The MPC consists of ten members, with the Governor
as Chairman, three members of the Board nominated by the Board, three senior executives of the SBP
16
nominated by the Governor and three external members (economists) appointed by the Federal
Government on the recommendation of the Board. The external members are appointed for a term of
three years.
Under Section 9(E) of the SBP Act, 1956 (as amended), the MPC is responsible for formulating
monetary policy and making decisions relating to intermediate monetary objectives, key interest rate,
and money supply in the country, to support the general economic policies of the Federal
Government.
The present composition of the MPC includes Dr. Reza Baqir, Governor SBP as Chairman MPC, Mr.
Atif R. Bokhari2, Mr. Azam Faruque and Dr. Tariq Hassan as members of the Board. Dr. Asad
Zaman, Dr. Naved Hamid and Dr. Hanid Mukhtar are three External Members (Economists) whereas
Mr. Jameel Ahmad - Deputy Governor (Banking & FMRM), Dr. Murtaza Syed - Deputy Governor
(Policy) and Dr. Inayat Hussain - Executive Director (BSG) are three Senior Executives of the Bank.
The Committee met eleven times during FY20. Brief profiles of the members are as follows:
Dr. Asad Zaman (Member, MPC since June 3, 2019) 3

[BS Math MIT (1974), Ph.D. Econ Stanford (1978)] has taught at leading
universities like Columbia, U. Penn., Johns Hopkins, Cal. Tech. and Bilkent
University, Ankara. He served as Vice Chancellor of Pakistan Institute of
Development Economics from December 2013 to March 2019. His textbook
Statistical Foundations of Econometric Techniques (Academic Press, NY,
1996) is widely used as a reference in advanced graduate courses. He is
managing editor of International Econometric Review and Pakistan
Development Review. His publications in top ranked journals like Annals of
Statistics, Journal of Econometrics, Econometric Theory, Journal of Labor
Economics, etc. have over 1000 citations as per Google Scholar.
Dr. Naved Hamid (Member, MPC since January 24, 2019)

Dr. Naved Hamid is Director, Center for Research in Economics and Business
(CREB) and Professor of Economics at the Lahore School of Economics. He
has contributed as Principal Economist at the Asian Development Bank,
Manila, Philippines, Professor at the Lahore University of Management
Sciences and Associate Professor, Economics Department at the Punjab
University.
Dr. Hamid is also a member of the Advisory Committee of Planning

Commission and Country Co-Director, Pakistan, International Growth Centre
(IGC). He was a member of the Prime Minister’s Economic Advisory
Council, the Governing Council of the Pakistan Bureau of Statistics, the
Punjab Chief Minister’s Economic Advisory Council and the Advisory Panel
2
Resigned from the SBP Board on March 26, 2020.
3 Earlier Dr. Zaman served on MPC from January 25, 2016 to January 24, 2019.
17
of Economists and the Chair of the Working Group on "Export

Competitiveness & Growth Strategy", constituted by the Planning
Commission. He did his Ph.D. in Economics from Stanford University,
California, USA.
Dr. Hanid Mukhtar (Member, MPC since June 3, 2019)

Dr. Mukhtar is a senior economist of the country. He has worked at World
Bank as Senior Economist. He was Senior Research Economist at Applied
Economic Research Centre, University of Karachi from 1985-1990. He was
also a Lecturer at Economics Department, Quaid -i-Azam University and was
Economic Affairs Officer at United Nations Economic and Social
Commission for Asia and Pacific, Bangkok, Thailand. Dr. Mukhtar has also
worked as visiting Associate Professor at Economic Department, Boston
University, Lecturer at Management Science Department, Northeastern
University and Lecturer at Management Science Department, University of
Massachusetts.
Dr. Mukhtar did Ph.D. in Economics from Boston University, USA.
Mr. Jameel Ahmad (Member since January 30, 2016)

Mr. Jameel Ahmad – Deputy Governor (Banking & FMRM) is serving
on the MPC since January 2016. Mr. Ahmad’s illustrious career as an
accomplished central banker spans over 29 years at senior positions at the
SBP and the Saudi Arabian Monetary Agency (SAMA). His association
with the SBP dates back to 1991 in various capacities including Deputy
Governor and Executive Director. He has also served as Advisor to
SAMA from July 2009 to April 2015.
Mr. Ahmad attained a Masters degree in Business Administration from

University of Punjab, Lahore in 1988 and is a Fellow Member of the
Institute of Cost and Management Accountants of Pakistan and Institute
of Bankers Pakistan.
Dr. Murtaza Syed (Member MPC since January 27, 2020)

Dr. Murtaza Syed – Deputy Governor (Policy) is serving on the MPC
since January 2020. Dr. Syed has more than 20 years of experience in
macroeconomic research and policy making. He worked with the IMF
for 16 years before resigning to join the SBP. Most recently, he served as
Advisor in the IMF’s Institute for Capacity Development, overseeing the
planning and implementation of IMF training and technical assistance
programs around the world. Earlier, he was Deputy Division Chief in the
IMF’s Strategy, Policy and Review Department and was involved in IMF
programs and surveillance of various emerging markets and advanced
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economies, including Colombia, Cyprus, the Euro Area, Japan and

Korea. He also served as the IMF’s Deputy Resident Representative in
China between 2010 and 2014 and as IMF mission chief to Macao. He
started his career at the IMF in the Fiscal Affairs Department before
moving to the Asia and Pacific Department, where he worked on a
variety of emerging markets and developing countries.
Dr. Syed started his career in the late 1990s as a Senior Policy Analyst at
the Islamabad-based, Human Development Center under former Finance
Minister of Pakistan, Dr. Mahbub ul Haq. Later, he worked for the
Institute for Fiscal Studies in London, the UK's premier public policy
think tank, where he conducted research projects on business investment
and employment behavior, as well as evaluating two large Latin
American antipoverty programs.
Dr. Syed has a Ph.D in economics from Nuffield College at the

University of Oxford. He has published papers on a variety of
macroeconomic issues, including fiscal and monetary policy, financial
stability, economic crises, investment, demographics, poverty and
inequality. He has also delivered lectures on public policy at Cambridge
and Oxford Universities.
Dr. Inayat Hussain – Executive Director BSG (Member since May 8,

2017)
Dr. Inayat Hussain serves as Executive Director of the Banking
Supervision Group at SBP. At this position, he leads Banking
Supervision Group that consists of two Banking Inspection Departments
(I&II), Offsite Supervision and Enforcement Department, Financial
Stability Department and Banking Conduct & Consumer Protection
Department. He is responsible for financial stability, supervision of
financial institutions, enforcement function and banking conduct. He
brings a diversified experience spanned over two decades in banking
supervision, regulations, policy and operations.
Dr. Hussain is member of the MPC, Council of Regulators (a body

consisting of representatives from SBP and SECP to deal with financial
sector vulnerabilities) and Financial Stability Executive Committee of
SBP. He also serves as a director on the Board of Pakistan Institute of
Corporate Governance and on the Council of Institute of Bankers in
Pakistan. He holds a doctorate degree in Economics and Finance from
Curtin University, Australia. He is a member of CFA Institute, a fellow
member of Institute of Cost and Management Accountants in Pakistan
19
and Institute of Bankers in Pakistan. He also holds FRM designation and

an MBA degree in Finance.
Dr. Saeed Ahmed, Chief Economist (Member from March 14, 2018 to
January 5, 2020)
Dr. Saeed Ahmed was the Chief Economist and Executive Director of
Monetary Policy & Research Group at SBP with substantive experience in
monetary policy formulation, negotiations with IMF and IFIs, applied
economic analysis, financial inclusion, development finance policy, and
tax policy & administration. In 2015, under his leadership, SBP devised
the first-ever “National Financial Inclusion Strategy” for Pakistan, in
partnership with the World Bank and other key stakeholders, with the
objective to push forward a comprehensive set of financial sector reforms
to enhance financial inclusion in Pakistan. His term ended on January 5,
2020 following his deputation as Senior Advisor to the Executive Director
of Pakistan’s Constituency on IMF’s Board of Executive Directors in
Washington DC, USA.
Dr. Ahmed holds Ph.D. in Economics from the University of Cambridge,

UK and MSc in Economics from the University of Warwick, UK where
he was a British Chevening Scholar from Pakistan.
Committees of the Board

Committees of the Board ensure oversight function of the Board in certain specialized areas. The
functioning of the Committees is summarized as under:
Committee on Audit
The Committee assists the Board in reviewing SBP’s financial statements, auditing, accounting and
related reporting processes, assurance on the system of internal controls, governance, business
practices, risk management process and standards of conduct established by the management and the
Board. The Committee met seven times during FY20. It is chaired by Mr. Muhammad Saleem Sethi
with Mr. Atif R. Bokhari (resigned from the SBP Board on March 26, 2020) and Dr. Tariq Hassan as
members.
Committee on Investment
The Committee assists the Board in fulfilling its oversight responsibilities relating to management of
foreign exchange reserves. It reviews the strategy and policy for reserves management and approves
operational guidelines for investment and appointment of asset managers, custodians and investment
consultants. It also reviews the performance of the foreign exchange reserves managed in-house and
externally and the appropriateness of the approved investment policy, its benchmarks and guidelines
on an annual basis or as warranted by global market conditions. The Committee met two times during
FY20. The current composition includes Mr. Naveed Kamran Baloch, Mr. Atif R. Bokhari (resigned
from the SBP Board on March 26, 2020 and Mr. Ali Jameel.
20
Committee on Human Resources

The Committee assists the Board in reviewing and approving HR policies prepared by the
management. It reviews all the proposals requiring approval of the Board on formulation, revision,
modification or interpretation of HR policies and submits its recommendations to the Board. The
Committee also reviews the terms and conditions of employment of senior level Bank officers
including those reporting directly to the Governor. The Committee met five times during FY20. It is
chaired by Mr. Azam Faruque with Dr. Tariq Hassan and Mr. Ali Jameel as members.
Publications Review Committee (PRC)

This Committee of the Board assists the Board in the review and approval of the Annual and
Quarterly Reports on the State of the Pakistan Economy, Annual Performance Review of SBP and the
Financial Stability Review. The Committee deliberates on the draft reports and reviews them for the
consideration and final approval of the Board. The Committee met five times during FY20. It is
chaired by Mr. Muhammad Saleem Sethi with Mr. Azam Faruque as member.
Enterprise Risk Management Committee

The Committee assists the Board in fulfilling the oversight responsibilities with respect to risk
management in the Bank. The Committee oversees that the management identifies and assesses all the
risks that the Bank faces, supported by a risk management infrastructure capable of addressing those
risks. The Committee reviews and approves Bank’s risk management policy and plan. The Committee
also coordinates, when required, with the ERM Committee of the management and with other
Committees of the Board. The Committee met two times during FY20. It is chaired by Mr. Ali Jameel
with Mr. Azam Faruque and Mr. Muhammad Saleem Sethi as members.
Financial Law Reform Committee (FLRC)

The Committee assists the Board in proposing a cohesive and comprehensive legal framework,
reflecting the principles of financial regulatory authorities as practiced globally and as applicable in
the domestic environment. Besides formulating its recommendations regarding amendments in the
legal framework, the Committee also takes into account comments and observations of the various
departments on inconsistencies and anomalies in the legal framework. The Committee met two times
during FY20. It is chaired by Dr. Tariq Hassan with Mr. Atif R. Bokhari (resigned from the SBP
Board on March 26, 2020) as a member.
Management Committees
In order to discuss critical and operational issues and take policy decisions, various management
committees have been formed which include:
Corporate Management Team (CMT) and CMT-HoD Forum

The Corporate Management Team (CMT) serves as the principal forum for discussion and
consultation on critical management and operational issues. It facilitates decision making and their
implementation, especially in matters where several departments are involved. The CMT is headed by
the Governor and comprises Deputy Governors and Executive Directors, as well as Managing
Directors of the SBP subsidiaries i.e., SBP-BSC, NIBAF, PSPC and DPC. In addition to the CMT,
combined meetings of the CMT and the Heads of Departments (HoDs) provide a broader platform to
21
deliberate issues of wider implications. The Corporate Secretary is also secretary to both, the CMT
and the CMT-HOD. Depending on the agenda, Executive Directors and HoDs of SBP-BSC are also
invited to attend the meetings. CMT met fourteen times during FY20.
The following are the other major management committees, which assist the Governor in decision-
making and formulation of various policies:
• Banking Policy Committee

• Monetary Operations Committee
• Budget Committee of Management
• Business Continuity Planning Committee
• Data Warehouse Committee
• Derivatives Approval & Review Committee
• Strategic Plan Steering Committee
• Enterprise Risk Management Committee
• Investment Committee of Management
• Library Committee
• Management Committee on Information Technology
• Management Committee on Properties and Equipment
• Payment Systems Policy Committee
• Publications Review Committee
• Refund Committee (Export Refund Committee)
• Financial Stability Executive Committee
• Sports Committee
22
Corporate Management Team (CMT)4
Dr. Reza Baqir

Governor
Mr. Jameel Ahmad Dr. Murtaza Syed Ms. Sima Kamil

Deputy Governor (Banking & FMRM) Deputy Governor (Policy) Deputy Governor
(FI, DFS & IT)
Mr. Qasim Nawaz Dr. Inayat Hussain Mr. Muhammad Ashraf Khan Mr. Muhammad Haroon Rasheed
Executive Director (HR) Executive Director (BSG) Managing Director (SBP-BSC) Managing Director (PSPC)
Syed Samar Husnain Syed Irfan Ali Mr. Muhammad Ali Malik Mr. Riaz Nazarali Chunara
Executive Director (DFG) Managing Director (DPC) Executive Director (FMRM) Managing Director (NIBAF)
Mr. Saleemullah Dr. Muhammad Ali Choudhary Mr. Muhammad Amin Mr. Mohammad Mansoor Ali
Executive Director (FRM) Research Advisor Chief Information Officer Director OCS/ Corporate Secretary
4 CMT Composition as of October 27, 2020.
23
SBP Subsidiaries
The SBP Act, 1956 (as amended) provides for the establishment of subsidiaries for managing functions
such as receipt, supply and exchange of currency notes and related operational functions to protect small
depositors and for training and development needs of its employees. In line with these provisions, SBP
has four subsidiaries, including the State Bank of Pakistan-Banking Services Corporation (SBP-BSC),
National Institute of Banking and Finance (NIBAF), Pakistan Security Printing Corporation (PSPC)
and Deposit Protection Corporation (DPC). A brief description of these subsidiaries is as under:
SBP-BSC
Established under the SBP BSC Ordinance 2001, SBP-BSC is a fully owned subsidiary of SBP,
formed with the mandate to provide operational support to the central bank. Accordingly, SBP-BSC is
responsible for currency management, management of various public debt schemes (as an agent to the
Government), acts as Banker to Federal, Provincial, local Governments (collects revenue & makes
payments on behalf of the Government) and Financial Institutions (facilitates the inter-bank
settlement systems). Additionally, SBP-BSC is also directly engaged in formulating operational
policies and conducts operations in the areas of Development Finance, Foreign Exchange Operations
and Export Refinance. SBP-BSC also provides support services to the central bank in areas of
Engineering, Medical, Procurement and Internal Security.
The Managing Director of SBP-BSC, appointed by SBP, is the Chief Executive Officer of the
organization. The SBP-BSC Board of Directors, chaired by Governor SBP, comprises of all the
members of the SBP Board and the Managing Director.
NIBAF
National Institute of Banking and Finance (NIBAF) is the training arm of SBP with the mandate to
develop, design and conduct training and capacity building programs in the area of banking and
finance. SBP and its subsidiaries remain the key focus of its training activities, where NIBAF
conducts pre-induction trainings as well as programs pertaining to various functions of central
banking operations. NIBAF supports the central bank in its efforts to promote financing to priority
areas (agriculture, SME, housing, microfinance and Islamic banking). For this purpose, NIBAF
introduced several programs on capacity building of commercial banks in the area of development
finance. Further, with a view to improve financial inclusion in the country, NIBAF is steering
National Financial Literacy Program for Youth that aims to directly reach 1.6 million youth in the
three age groups (from ages 9-12; 13-17 and 18-29 years) across the country and teach them the
basic financial concepts and skills. NIBAF also arranges international courses on central and
commercial banking in collaboration with the Federal Government and SBP on annual basis.
PSPC
The PSPC was acquired by SBP in FY17 from the Federal Government to have full control over the
spectrum of the banknote printing function. The core mandate and function of PSPC is to print
banknotes and prize bonds as per the indent raised by SBP. PSPC holds 40.03 percent and 47 percent
equity stakes in Security Papers Limited and SICPA Inks Pakistan (Pvt) Limited respectively. These
entities are the sole suppliers of banknote paper and security ink to PSPC respectively. The Board of
Directors of PSPC consists of Governor as the Chairman and Deputy Governor as the Vice
24
Chairman. Other members include Senior Joint Secretary, Finance Division, Managing Director
SBP-BSC, Executive Director FRM, Managing Director PSPC and three independent directors.
DPC
The primary objective of DPC is to protect the deposits of the small depositors in the event of failure
of a member bank. All the banks operating in Pakistan are compulsory members of the Corporation
and are liable to comply with its instructions and pay premiums as prescribed by DPC.
The DPC has been established as a subsidiary of SBP, under the Deposit Protection Corporation Act,
2016 (DPCA). The Board of DPC consists of seven directors, including a Deputy Governor of SBP
as Chairman and a senior SBP official as its Managing Director. An official from the Finance
Division, Ministry of Finance is also appointed as a director on its Board, while the remaining four
members are from the private sector. A Board Audit Committee has also been established that is
entrusted with the review of periodical accounts and audit reports of DPC.
Since the formal commencement of its business in June 2018, DPC has made significant progress and
rolled out components of the deposit protection framework in the shape of “Deposit Protection
Mechanism for Banking Companies”. Similarly, a separate mechanism for Islamic deposits titled
“Shariah Compliant Deposit Protection Mechanism” was introduced. The Banks have also been
instructed to update their software and information systems and develop the capacity to generate
Single Depositor View to improve the quality of information on depositors.
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1 Enhancing Effectiveness of Monetary Policy
1.1 Monetary Policy Stance in FY20
The fiscal year 2019-20 was an eventful and challenging year from the monetary policy perspective.
The first half of the year witnessed prudent policy actions to support stabilization in the economy and
signs of revival in macroeconomic indicators. The second half was suddenly hit by a severe shock
emanating from the COVID-19 pandemic, which required timely, forceful and innovative policy
responses amid heightened uncertainty.
Under these scenarios, the discussion on the monetary policy stance in FY20 can be bifurcated into
two distinct phases: a first phase of maintaining tight monetary policy that continued until March
2020 meeting of Monetary Policy Committee (MPC) and the second phase of swift monetary easing
in the post COVID-19 period.
In its first meeting of FY20, the MPC increased the policy rate by 100 basis points to 13.25 percent in
July 2019. This was in continuation of the tight monetary policy stance of the previous year when the
policy rate was increased by a cumulative 575 basis points along with the implementation of market-
determined exchange rate in May 2019 as part of stabilization policies. Such a stance was inevitable
due to persistent inflationary pressures emanating from exchange rate depreciation, upward
adjustment in utility tariffs, and rationalization of subsidies and taxes in the Federal budget FY20. In
order to manage market expectations, the MPC for the first time provided forward-looking guidance
in its statement and articulated that, “the adjustment related to interest rates and the exchange rate
from previously accumulated imbalances has taken place. Going forward the MPC will be ready to
take action depending on economic developments and data outturns.”
The policy rate was kept unchanged at 13.25 percent in subsequent meetings of MPC held in
September 2019, November 2019 and January 2020 as the inflation projections and actual average
inflation for the year remained in the range of 11-12 percent. Moreover, the interbank foreign
exchange market had also adjusted relatively well to the introduction of the market-determined
exchange rate during the period.
The monetary and exchange rate policies along with fiscal consolidation started bearing fruit in the
form of sustained improvement in the country’s fiscal and external accounts, a revival in the real
economy and positive business and consumer sentiment. Specifically, the current account deficit
declined by 73.1 percent to USD 2.8 billion during the first nine months of the year (pre COVID-19
period); and the fiscal deficit was contained to 3.8 percent of GDP during the first three quarters
compared to 5 percent during the same period last year. National CPI inflation averaged at 11.5
percent during Jul-Mar FY20, which was in line with the inflation forecast range for the year.
Economic activities in export-oriented and import competing industries also witnessed gradual
improvement.
However, the outbreak of COVID-19 and ensuing lockdown led to a dramatic change in the economic
landscape. This shock was unique in modern economic history. First, it struck almost all countries
27
around the globe in a very short span of time. Second, lockdowns of varying degrees led to a collapse
of demand as consumption was primarily restricted to necessities. Third, the supply side was also
disrupted by lockdowns, transportation restrictions, and the closing of borders, which led to a sharp
increase in unemployment and furloughs.
This unprecedented shock necessitated an unprecedented policy response – both by monetary and
fiscal authorities. Being cognizant of unfolding impact of COVID-19 on Pakistan's Economy, SBP
implemented extraordinary policy measures to safeguard businesses and households. The SBP policy
response was designed in a way that provided immediate and targeted relief to severely affected
sectors without compromising on financial stability. It was made possible by the increased credibility
and policy buffers, particularly on the external side, that had been achieved in the first nine months of
the fiscal year.
The key highlight of SBP policy reaction was a cumulative 625 basis point cut in the policy rate
during a short span of time. The MPC held 5 meetings from mid-March to June 2020 and proactively
reduced the policy rate from 13.25 percent to 7 percent. In fact, SBP undertook one of the fastest and
largest policy rate cuts globally (Figure 1.1 & 1.2). The reduction in policy rate was also supported
by a number of targeted and temporary interventions in the credit market through refinance schemes
that provided much needed cash flow relief to households and businesses.
Figure 1.1: SBP reduced the policy rate more aggressively in the post Covid-19 outbreak, since Feb 1, 2020
700
600 100
Feb Mar Apr May Jun
500
Basis Points
100
400
300 200
200
100 225
0
Taiwan
Bangladesh
China
Serbia
Hong Kong
Mongolia
Indonesia
Thailand
Malaysia
Chile
Poland
Vietnam
Egypt
Pakistan
Hungary
Peru
Jamaica
Georgia
Romania
Turkey
Ukraine
Korea
Nigeria
Morocco
Philippines
Russia
Mexico
Mozambique
Albania
Tunisia
Saudi Arabia
Kenya
Jordan
Ghana
Brazil
South Africa
Sri Lanka
India
Colombia
Note: Argentina
Figure has reduced
1.2: MPC reduced policy rate byrate
SBP Policy 1,000 bps to 38 percent.
cumulatively by 625 bps
Source: tradingeconomics.com;
Y/Y inflation and policy rate inand cbrates.com;
percent
Post Covid-19
14.00 14.00
12.00 National CPI Inflation SBP Policy Rate 12.00
10.00 10.00
8.00 8.00
6.00 6.00
4.00 4.00
2.00 2.00
0.00 0.00
Sep-17
Feb-18
Mar-18
Sep-18
Feb-19
Mar-19
Sep-19
Feb-20
Mar-20
May-20
Oct-17
Dec-17
May-18
Oct-18
Dec-18
May-19
Oct-19
Dec-19
Apr-18
Jun-18
Apr-19
Jun-19
Jul-17
Jul-19
Apr-20
Jun-20
Aug-17
Nov-17
Jan-18
Jul-18
Aug-18
Nov-18
Jan-19
Aug-19
Nov-19
Jan-20
Source: State Bank of Pakistan; and Pakistan Bureau of Statistics
28
Enhancing Effectiveness of Monetary Policy
1.1.1 Policy Coordination

An important component of macroeconomic policy formulation is coordination among different
policymaking entities. Accordingly, SBP maintained close liaison with national and international
institutions during FY20. It played an active role in negotiations between GoP and IMF for signing a
39-month Extended Fund Facility arrangement of USD 6 billion in July 2019. The first review under
the program was successfully completed and staff level agreement was reached on Memorandum of
Economic and Financial Policies for the second review. The policy interventions were aimed at
further strengthening of macroeconomic stability and facilitating the implementation of much needed
structural reforms.
While the second review was put on hold due to outbreak of COVID-19, the GoP requested for a loan
under the IMF’s Rapid Financing Instrument to fight the pandemic related economic uncertainty. The
IMF Executive Board approved the disbursement of USD 1.386 billion. This, along with close
coordination with the World Bank, Asian Development Bank and the Asian Infrastructure Investment
Bank, paved the way for further disbursements during the last quarter of FY20.
Policy coordination among internal stakeholders also remained an important component of overall
economic policy strategy. Monetary tightening pursued during the first three quarters of the year was
in sync with the government efforts towards fiscal consolidation. Similarly, the government decision
to announce a medium-term inflation target range of 5-7 percent in the Federal Budget FY20 was one
of the key steps towards establishing price stability as a key objective of monetary policy. These
steps were complemented by restriction on government borrowing from SBP, which is considered
relatively more inflationary as compared to other sources of deficit financing. The Monetary and
Fiscal Policies Coordination Board, among other forums, helped in aligning, discussing and debating
the policy initiatives among the key internal stakeholders.
1.1.2 Measures For Effective Communication
Policy communication
Monetary policy effectiveness can only be ensured if it is accompanied by a well-articulated
communication strategy. SBP has further improved its communication through the following
approaches:
 Restructuring the Monetary Policy Statement (MPS): An important instrument of policy

communication is the MPS, which is issued after every meeting of the MPC. Instead of being just
a statement of facts and policy announcement, the MPS since July 2019 was restructured in such a
way that it anchors market expectations, educates the stakeholders about economic outcomes and
generates debate on key issues.
 Sessions with researchers, academia and print and electronic media persons: SBP for the
first time started full-length sessions with market researchers working outside SBP, after every
regular monetary policy meeting to discuss the policy background and its implications. Moreover,
senior SBP officials, including Governor, Deputy Governors and Executive Directors made
frequent interactions with other stakeholders including print and electronic media, business
29
community, academia and students. These interactions have helped provide forward guidance
regarding the monetary policy stance and anchored market expectations.
 Dialogue with the business community: SBP Governor, Deputy Governors and other senior
officials also held regular meetings with representatives of the Chambers of Commerce, exporters,
small scale and other businesses to discuss key macroeconomic developments, including inflation
and economic activities. The objective of such interactions has been to foster investor’s
confidence, acquire feedback from stakeholders, and design policy interventions that better
address challenges being faced by the private sector.
1.1.3 Strengthening Monetary Policy Formulation
Economic models
One of the key measures of the effectiveness of monetary policy is the forecasting ability of the
central banks. Dynamic Stochastic General Equilibrium (DSGE) and Forecasting and Policy Analysis
System (FPAS) models are the most effective tools to forecast the future paths of macroeconomic
variables and for policy scenario analysis. To enhance the forecasting ability of models, the SBP staff
has further extended DSGE and FPAS models during FY20, notably by adding new features relevant
to Pakistan’s economy.
The aggregate supply block of the FPAS model has been revised in the light of rebasing of Consumer
Price Indices (CPI) and introduction of Urban and Rural indices. The revised models have also been
operationalized to provide regular inputs to the Monetary Operation Committee (MOC) and Monetary
Policy Committee (MPC) for policy formulation.
Besides, FPAS, SBP staff also continued to improve and update its other econometric models for
understanding key economic linkages as well as its forecasting suites. These models also provide
crucial input for monetary policy making.
Trends and developments

In order to facilitate the MPC in its policy deliberations, the SBP staff prepares an extensive analytical
account of economic developments and presents this in every MPC meeting. This background
material includes high quality and innovative research on emerging economic trends, a full
macroeconomic framework and forecasts of key indicators. The idea is to present a 360-degree
viewpoint to the members of MPC, covering all the relevant parts of the economy, including the real,
external, monetary and fiscal sectors.
Perception surveys
Another important input for monetary policy formulation is the perception of different agents about
the economic conditions. While perceptions of consumers, businesses and banking professionals
continued to be collected by SBP, a new survey of professional forecasters was also added to the suite
of SBP perception surveys during FY20.
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SBP continued its survey activity despite the outbreak of COVID-19, and also added questions in all
its surveys about the opinion of respondents on the impact of the pandemic on their living and
business conditions.
Change in Monetary Policy Implementation Framework – Transition to Symmetric Interest

Rate Corridor (IRC)
In May 25, 2015, SBP introduced a reformed Interest Rate Corridor (IRC) framework to signal the
SBP’s monetary policy stance and achieve monetary policy objectives. At that point, the policy rate
was set asymmetrically 50 basis points below the SBP Reverse Repo (Ceiling) rate and 150 basis
points above the SBP Repo (Floor) rate (with an IRC of 200 basis points).
In March 2020, SBP revised its IRC framework by adopting a symmetric IRC framework with the
SBP policy rate set symmetrically between the Ceiling and the Floor rate i.e. Ceiling/Floor +/- 100
bps. This revision in the framework aligns the IRC framework with international best practices, as
most emerging and developed economies (e.g. Australia, South Korea, Malaysia, Thailand, Turkey,
etc.) have symmetric corridor frameworks in place.
Previously, since the ceiling rate was 50 bps above the policy rate and the floor rate was 150 bps
below it, the ceiling rate was less penal compared with the floor rate for the banks thus, the
disincentive of being short of funds on required reserves was lower than that of surplus funds. The
symmetric IRC framework has addressed this issue and streamlined/equalized the disincentives/cost
of accessing the Ceiling or the Floor facilities at penal rates by the banks in case of ineffective or
inefficient reserve/cash flow management at their end. This should encourage banks to improve their
liquidity management through the market and reduce their reliance on both the ceiling and the floor
facilities.
End to Debt Monetization from the SBP

Previously, GoP used to borrow from the SBP as and when required. This borrowing from the SBP
was highly inflationary, which diluted monetary policy implementation and made it difficult for the
SBP to manage inflation expectations. Ending debt monetization would also incentivize the fiscal
managers to improve debt management policies and practices, efficiently manage GoP funds and
undertake the much need fiscal reforms.
Since July 2019, a mechanism has been put in place to ensure that there is no fresh credit from the
SBP to GoP. This end of debt monetization by the GoP from the central bank has resulted in a
number of benefits, including:
• Enhanced fiscal discipline: Encouraged fiscal discipline and stimulated the pace of fiscal
reforms in Pakistan.
• Improved cash flow forecasting and management: Created incentives for fiscal and debt
managers to strengthen debt management practices with improved cash flow forecasting and
management of GoP funds.
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 Strengthened SBP’s autonomy: Helped in further institutionalizing monetary policy, in line with
the government’s priority on strengthening the country’s institutions.
 Improved SBP’s ability to anchor inflation expectation and manage inflation.
Market Based Exchange Rate Regime

Since May 2019, Pakistan has adopted a flexible, market-determined exchange rate regime. The
interbank foreign exchange market adjusted well to the market-based exchange rate system. The
adoption of a flexible, market-determined exchange rate regime is in line with international best
practices. The flexible exchange rate, better reflecting fundamentals, served as a buffer against
external shocks and, together with other policy measures, has contributed toward reducing the current
account deficit significantly in FY20. The flexible exchange rate regime will further strengthen the
functioning of the financial markets and contribute to a better allocation of resources in the economy.
As a result of stabilization measures taken by SBP during last couple of years and adoption of
flexible exchange rate regime, SBP’s FX reserves have maintained strong growth during FY20.
SBP’s FX Reserves increased from USD 7.3 billion at end-June 2019 to USD 12.1 billion as of
end-June 2020 showing an increase of USD 4.8 billion.
1.2 Money and Debt Market

The following major initiatives were undertaken during FY20:
1.2.1 Introduction of Re-opening Auction and Abolishing Limit on Floating Rate PIBs for
SLR
SBP, in coordination with Ministry of Finance, introduced a mechanism for re-opening auctions of
existing issues of Floating Rate PIBs (FPIBs). Previously due to absence of re-openings, each issue of
FPIBs would be a separate security which resulted in market fragmentation and low liquidity.
Further, SBP also abolished SLR eligibility limit on FPIBs. Earlier, FPIBs, to the extent of 15 percent
and 5 percent of Total Liabilities (subject to SLR), could be counted towards SLR for banks and DFIs
respectively. Issuance of FPIBs through re-opening auctions and abolishing limit on SLR eligibility of
FPIBs improved market participation in the auction of FPIBs and secondary market liquidity.
1.2.2 Rationalization of PIBs Holding Limit

Holding limit for a given issue of PIBs (having maturity of more than one year) was earlier linked to
lower of issued or target amount. In case lower than target amount is accepted by the Government,
linkage of holding limit with issued amount was constraining banks’ participation in the PIBs auctions.
To address this issue, SBP revised the rules to link the holding limit to the higher of target amount or
issued amount. In addition, SBP also abolished holding limit for Floating Rate PIBs. This would also
help in improving market participation in auctions of long term papers.
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1.2.3 Restricting Institutional Investors from Participating in NSS

Previously, institutions managing provident, pension, gratuity and superannuation funds were
allowed to invest in National Saving Schemes (NSS) as well as marketable GoP securities (i.e. MTBs
and PIBs). However, this resulted in following issues:
• Since NSS instruments offer all investors the option to sell the instrument at any time before
maturity at a price which is not linked to the prevailing market yields (i.e. a free ‘put’ option),
these financially savvy institutional investors could exploit arbitrage opportunities by shifting
their investments between NSS and marketable securities (e.g. PIBs). This resulted in higher
interest payments by the GoP.
• These institutional investors and savvy investors are wholesale and have massive potential to
add significant liquidity and competition which would help in diversifying investor-base of
GoP marketable securities, particularly longer-dated PIBs.
Accordingly, in June 2020, GoP, on recommendation of the SBP, restricted participation of

institutional investors in the NSS. This measure would reduce cost of borrowing for the GoP, enhance
liquidity in the tradable government securities market, reduce market fragmentation and allow GoP to
introduce specialized saving products that are tailored to the saving needs of small investors.
1.2.4 Simplification of Tax Regime for Non-Resident Investors to Encourage Investment in

Long-Term Debt Securities
In December 2019, the Federal Board of Revenue (FBR) issued notification for amendments in the
Income Tax Ordinance 2001 to simplify tax regime for non-resident companies investing in debt
instruments and government securities in Pakistan. This aims to deepen our capital markets, support
availability of long term rupee financing sources, support competition in the local currency debt
market and diversify the source of funding for the government.
1.2.5 Signing of International Agreements with Counterparties

SBP signed international agreements with certain counterparties for safeguarding its interests in
international financial markets. On strengthening the SWIFT side, two important assessments were
undertaken. Firstly, in order to detect SBP’s SWIFT infrastructure security vulnerabilities and assess
its ability to prevent unauthorized activities; ‘SWIFT Infrastructure Security Review (SISR)’ was
completed. In parallel with SISR, that mainly focuses on technical side, robustness of business side
was also testified through, “Operational Excellence Review”. As mandated under Customer Security
Program (CSP) of M/s. SWIFT Belgium, implementation of 19 mandatory and 10 advisory controls
under ‘Customer Security Control Framework (CSCF) Version 2019’ was completed. Further, a
comparative study covering domestic SWIFT business practices prevalent at five commercial banks
was conducted by SBP with a view to facilitate commercial banks in Pakistan on implementation of
guidelines set forth in CSCF of M/s SWIFT Belgium.
1.3 Foreign Exchange Reserve Management

FY20 was marked by two distinct halves. The macro backdrop of the first half comprised continued
global expansion, controlled inflation, high employment and supportive central banks for most
33
advanced and developing economies. Although faced with greater uncertainty than in recent years,
given Brexit negotiations running longer than expected and rising trade tensions between United
States and China, the global economy continued to grow at a steady, albeit moderate pace. The first
half ended with the reporting of the initial corona cases in China.
As COVID-19 cases rose exponentially in the second half, governments around the world began to
implement necessary social distancing and lockdown policies. These policies had a significant
economic impact as many businesses were forced into lockdown. Certain sectors such as retail, travel
and tourism were hit particularly hard. The impact did not remain limited to the real sector, as
uncertainty surrounding the full impact of lockdowns and rising risks to growth generated a risk-off
sentiment, severely disrupting credit flows and resulting in a double shock to the system as both real
and financial markets began freezing up. Given the scale of the fallout, policymakers swiftly
implemented substantial broad-based as well as targeted fiscal, monetary and financial market
measures to support affected sectors. The large amount of liquidity pumped into the system stabilized
markets, but also elevated risks as central bank balance sheets have ballooned substantially from the
already inflated levels from the previous response to the Global Financial Crisis. The road to global
recovery is expected to be a gradual and policy rates are expected to remain lower for longer period as
central banks remain ready to provide full monetary support to curtail the impact of the COVID-19
pandemic.
During FY20, SBP’s FX reserves position improved significantly reaching USD 12.1 billion at year-
end, an increase of approximately USD 4.8 billion over previous year levels. The increase was driven
by improved trade balance, record high remittances, and foreign currency inflows from IFIs. Given
the low yield environment in most of the traditional reserve management markets, the reserve mix
was repositioned to take advantage of relative value within investment avenues while remaining under
the allowable risk parameters. SBP maintains a positive view on the foreign exchange reserve
outlook, given favorable oil prices, although tail risks emanating from COVID-19 persist. Going
forward, the reserve management function will be enhanced by further developing in-house capacity
for incorporating new markets and asset classes into the reserve mix, formulating and assessing any
new risk diversification and yield enhancing investment policies under the broad investment
guidelines of Safety, Liquidity and Optimal Return.
1.4 Remittances and other Initiatives

Remittances increased to a record high of USD 23.12 billion in FY20 compared to USD 21.74 billion
during FY19 (an increase of 6.4 percent) despite the unprecedented COVID-19 pandemic during the
last four months of FY20, affecting Pakistan and all remittance sending countries. The increase in
remittances is mainly attributed to supportive Government policies, pro-active strategy of SBP and
Pakistan Remittance Initiative (PRI) and positive response of Banks and Exchange Companies (ECs)
to implement SBP/PRI strategy. A brief description of some major steps taken during FY20 to boost
remittances through formal channels are as follows:
• Developing performance based incentive scheme for marketing of Home Remittances scheme by
GoP and SBP during FY18, which has been extended with necessary revisions in FY20. This will
34
motivate larger players in the industry with a high base to increase their effort to channelize
remittances to Pakistan.
 Launching massive public marketing campaign for home remittances to increase awareness of the
general public about existing facilities of receiving remittances in Pakistan. The measures helped
in building public’s trust in regulated channels so that more and more people use formal channels
for remittances.
 Implementing a flat rate of SAR 20/- for all transactions of USD 100/- and above (earlier it was
USD 200) with effective from April 15, 2020 to support small remitters as reimbursement of TT
Charges against Home Remittances, subject to the condition that the remitter and the beneficiary
have not been charged any remittance fee or any other charges for execution of home remittance
transaction.
 Allowing banks to effect Business to Customer (B2C) and Customer to Business (C2B)
transactions through foreign correspondent entities under their existing/new home remittance
agency arrangements to further facilitate overseas Pakistanis.
 Approving Pakistan Post Office (PPO) Disbursement Network from 240 locations to additional
500 locations. PPO has also started paying remittances routed by NBP from June 22, 2019
through its post offices after receiving sub-agent status.
 Working with the Ministry of Overseas Pakistanis and Human Resource Development
(MOP&HRD), which amended the rules for intended emigrant workers by introducing a
mandatory requirement of an active bank account of intended emigrant worker and at least one
his/her family member.
1.4.1 Ease of Doing Business

In order to improve ease of doing business for the industry, SBP took a number of regulatory
measures to facilitate cross border trade and investment. Key measures are:
 Enhancing advance payment limit from USD 10,000 to USD 25,000 for manufacturing &
industrial concerns and commercial importers of raw material, spare part and machinery.
 Enhancing advance payment limit for imports against letter of credit (LC) from 50 percent to 100
percent of the value of LC for manufacturing concerns for import of plant, machinery, raw
material and spare parts.
 Extending import on open account basis to commercial importers to facilitate small & medium
manufacturing concerns, which were not in a position to import directly due to their small
volume business requirements. Earlier this facility was confined to manufacturing and industrial
concerns only for import of raw material and spare parts.
 Allowing exporters of sound track record and performance history, to make and dispatch
shipping documents directly to the importer. This will keep the exporters competitive and enable
them to meet the requirements of international buyers.
 Allowing opening of non-resident PKR accounts remotely to overseas Pakistanis. The account
can be operated through all the digital means and funds in these accounts are fully repatriable.
Moreover, investment from this account has also been allowed in government debt securities and
term deposit schemes of the bank maintaining this account.
35
 Allowing banks to remit up to USD 10,000 per annum without any regulatory approval for
acquisition of services from abroad by residents. For payments exceeding USD 10,000/- banks
may remit periodic payments as per underlying agreement after its registration with Foreign
Exchange Operations Departments, SBP-BSC without any additional regulatory approval.
 Delegating registration of most common types of foreign currency (FCY) loans of local entities
from abroad to banks for the purpose of project, working capital and trade finance.
 Introducing Regulatory Approval System (RAS), an online platform for banks for submission of
cases and to receive regulatory decisions there against on behalf of their customers. The system
has improved the overall visibility for the customers to know about the status of their foreign
exchange related applications.
 Revising and updating Foreign Exchange Manual and Exchange Companies Manual by
incorporating foreign exchange regulations, related Notifications, FE Circulars and Circular
Letters. The manuals are available on SBP website to facilitate all stakeholders.
1.4.2 E-Commerce
E-commerce trade has been taking place both at domestic and international level for quite some time.
However, this trend has surged during recent years, in particular during the pandemic its significance
has increased tremendously.
Accordingly, SBP prepared a regulatory framework to facilitate cross border B2C e-commerce exports.
This would not only help the established businesses but also new start-ups to reach out to global
customers through e-commerce platforms. Moreover, this framework also aims at bringing the e-
commerce exports into formal channel where the proceeds of exports would be formally recognized as
exports and reflected in country’s balance of payment figures, which would improve the country’s trade
and current account balances.
The framework has been shared with Pakistan Customs for implementing necessary changes in its
WeBOC system, after which it will be rolled out.
1.4.3 FATF Action Plan And Pakistan’s Mutual Evaluation

Pakistan is concurrently undergoing FATF Action Plan and Mutual Evaluation. In line with GoP’s
full commitment at highest level to comply with international AML CFT standards and requirements,
SBP further strengthened AML CFT regime in Pakistan. Key initiatives taken in this regard in FX and
Exchange Companies’ area are outlined below:
 Foreign Exchange Regulation Act (FERA), 1947 has been amended in February 2020. The
amendments are aimed at making the law more potent to curb illegal money/value exchange and
transfer. These amendments have made violations of FERA permanently cognizable and non-bail
able whereby punishments have been enhanced and trials are to be concluded within 6 months to
a year.
 Issued detailed instructions for exchange companies on Targeted Financial Sanctions for
prevention of Terrorism Financing and Proliferation Financing, to ensure meticulous compliance
36
of Statutory Regulatory Orders and Notifications of Government of Pakistan in terms of United

Nations (Security Council) Act, 1948 and The Anti-Terrorism Act (ATA), 1997.
 Issued detailed instructions to exchange companies by aligning AML CFT regulations with FATF
recommendations and bringing clarity in the relevant instructions, with special emphasis on risk
based approach.
 Issued detailed instructions to banks for countering ‘Trade Based Money Laundering’.
 Developed and delivered training and awareness sessions for regulated entities at different high
risk geographical locations. Regulated entities also carried out hundreds of training programs
throughout Pakistan. Dedicated capacity building sessions were also arranged for Law
Enforcement Agencies.
 Launched an extensive awareness campaign through print and social media to deter the illegal
Money or Value Transfer Services (MVTS). SBP regulated entities were also engaged for raising
awareness through their branch network, websites, social media handles, etc. besides, using the
social media handles of SBP. The advertisements were also published in newspapers.
1.4.4 Measures During COVID-19

Unprecedented global COVID-19 pandemic has affected all areas of economy. Some important
measures taken in this regard are given below:
 Took measures to prevent downfall in home remittances during COVID-19. Banks were advised
to conduct aggressive awareness campaigns regarding available digital/online channels for
sending and receiving remittances, use of social media and direct messages to reach out to
existing customers and promote remittances through different marketing activities and
promotional schemes. Banks were also advised to ensure availability of cash in remittance rich
areas and enhance their limit for cash over counter. As per World Bank, remittances to Pakistan
are estimated to decline by 23 percent during CY2020. The above measures helped to offset the
adverse impacts of COVID-19 on inflow of home remittances as remittances rose by 7.8 percent
during March - June 2020 over the same period of 2019.
 Allowed banks to give extension of 90 days in realization of export proceeds to exporters until
June 30, 2020 beyond the six months period already allowed to exporters.
 Allowed banks to extend the time period for import of goods and submission of shipping
documents against advance payment, up to 90 days from the due date of import of goods until
June 30, 2020 beyond the four month period already allowed to importers.
 Allowed banks to make advance payment up to 100 percent of the value of imports and open
account payments without any limit on behalf of federal and provincial government departments
and organizations, public and private sector hospitals or their approved agents, charitable
organizations and commercial importers for the import of medical equipment, medicines and
ancillary items for the treatment of COVID-19 patients.
 Arranged special awareness campaigns through regulated entities (Banks/Exchange Companies)
for use of formal channels for remitting donations especially during COVID-19 and ensure that
funds are remitted through legal channels and are to be sent only to non-proscribed NPOs in
Pakistan. SBP also circulated the messages through its website and social media handles.
37
 Allowed consignment based export of permissible foreign currencies through cargo/security

companies to continue operations during COVID-19.
 Instructed exchange companies to carry out capacity building sessions through on-line means
during COVID-19.
1.5 Research
SBP also conducts in house research on macroeconomic issues relevant to monetary policy, exchange
rate, trade and other topical issues. Some of the research papers were published in SBP publications
including SBP Research Bulletin, Working paper series and Staff Notes. A wide range of topics were
covered in these research, some of which are mentioned below:
 Negative call-repo spread puzzle
 The Conundrum of rising demand for currency
 Inflation and growth nexus: estimation of threshold for SAARC countries
 Firms reaction to currency fluctuation of the PKR
 Inflation forecasting using DSGE models
 Developing a debt sustainability analysis framework for Pakistan
 Impact of COVID-19 on food prices, worker remittances, external trade and current account
 Individual Incentives and Workers’ Contracts: Evidence from a Field Experiment published in
Oxford Economic Papers, November 2019
 Green Banking and Islam: two sides of the same coin published in Journal of Islamic Marketing,
July 2019.
Further, in order to strengthen debate on economic issues, SBP organized three seminars:
 A talk by Mr. Athanasios Arvanitis, Deputy Director IMF, on Managing Crises in Emerging
Markets, followed by a panel discussion. In his address, Arvanitis highlighted some of the
common features of crises across Emerging Markets, notably the role typically played by elevated
levels of debt, high public and external deficits, inflexible exchange rates, lack of
competitiveness, low savings and investments and maturity and currency mismatches. This
session was organized jointly by SBP and Pakistan Business Council (PBC).
 A conference on Firms and Growth in collaboration with the International Growth Center (IGC),
and Pakistan Business Council. The objective of the seminar was to share research insights with
policymakers, think tanks, academics, the private sector, media and the donor community.
 SAARCFINANCE Seminar on “Emerging Trends in Good Governance of Banking Sector in
SAARC Region, held in Islamabad in collaboration with BPRD and NIBAF. The seminar was
attended by delegates from Afghanistan, Bangladesh, Bhutan, Sri Lanka and Nepal.
SBP also released a series of video clips (podcasts) on the implications of COVID-19 for Pakistan’s
economy. During the period of uncertainty, these podcasts were well received by the stakeholders and
went a long way to increase understanding of general public on linkages of COVID-19 with various
sectors of the economy.
38
Besides, organizing seminars for policy debates and releasing podcasts, SBP also participated in
meetings of Prime Minister’s Task Force for Make-in-Pakistan initiative with industry stakeholders to
discuss strategic policy issues.
1.6 Economic Analyses / Publications

The SBP publishes its quarterly and annual reports on the State of Pakistan’s Economy, which
provide analysis on the recent economic trends, issues and challenges. During FY20, the COVID-19
pandemic forced many economies, including Pakistan, to impose lockdowns to contain the spread of
the disease. The SBP’s flagship publications provided in-depth coverage on the adverse impact of the
COVID-19 crisis on Pakistan’s economy during FY20.
On the agriculture side, the changing dynamics of credit, implications of indicative pricing for cotton
and threats posed by locust attacks were highlighted. In addition, economic measures taken to combat
the fallout of COVID-19 situation on the domestic economy and exports performance were also
discussed. On the fiscal front, issues such as FBR’s documentation measures were reviewed and the
economic implications of ending the zero-rating regime for export-oriented industries were analyzed.
The publication also shed light on the significance and impact of the rebasing price indices with
respect to trends in inflation.
During FY20, various pressing economic issues were covered in the form of special chapters and
sections. In the Annual Report on the State of Pakistan’s Economy FY19, a thematic chapter, titled
“Factors Constraining Investments in Pakistan” was published with the objective to highlight
discrepancies in the country’s investment policies, laws and bilateral treaties and how these issues
increase the risk of potential contract enforcement disputes arising between the state and the
enterprises. Concerning the private sector, stagnancy in the SME segment was highlighted as a major
reason for the dispersed and inadequate nature of investment activities in Pakistan. Also discussed in
the chapter were the poor state of human capital development, dysfunctional institutional and
operational infrastructure and an unsatisfactory focus of the government on investment retention
practices.
In the quarterly reports, special sections on various economic topics of a timely and crucial nature
were published. In the First Quarterly Report, “Global Value Chains (GVCs) – Implications for
Pakistan” emphasized upon the importance for domestic firms to leverage on the facilitative policies
to gain a foothold in the GVCs in order to align the product mix with trends in global demand and put
exports on a sustainable growth path. In the Second Quarterly Report, “The State of Competition in
Pakistan” highlighted the importance of competition for achieving economic growth and price
stability and argued that a fundamental rethinking is required with respect to the regulatory structure
of Pakistan’s economy. In the Third Quarterly Report for FY20, “Technical and Vocational
Education and Training (TVET) in Pakistan: Issues and Challenges for Productivity Enhancement”
stressed the importance of TVET education with regards to human capital development, export
competitiveness and economic growth, described the deficiencies in the current domestic TVET
ecosystem and provided suggestions to correct the trend going forward.
39
1.7 Data Management System

In line with SBP Vision 2020, the statistics compiled by SBP largely follows international standards.
The Balance of Payments statistics, monetary statistics, external sector statistics and flows of fund
accounts are compiled in accordance with the guidelines provided in the manuals designed by
international agencies such as the IMF, UN and the World Bank Group. Statistics produced by SBP is
used for analyses, research and policy formulation both within and outside SBP by various
stakeholders.
A number of initiatives were taken in data compilation and dissemination during FY20 as given
below:
 Compilation of information on “Loans Classified by Borrowers” and “Deposits Distributed by

Category of Deposit Holders” by implementing UN’s International Standard Industrial
Classification, ISIC Rev 4. This standard places more emphasis on production processes and goes
to granular level to produce reliable, comparable and methodologically sound statistics.
 Pursuant to approval of methodology by the Governing Council, the Pakistan Bureau of Statistics
(PBS) released price statistics on new base (2015-16) with effect from August 2019. The PBS,
besides changing the composition of basket of goods also introduced Rural, Urban and National
Price Indices. All the changes / improvements have been implemented and SBP now disseminates
key prices statistics on regular basis. Coverage of Inflation Monitor has accordingly been
enhanced by including new features and analysis.
 Compilation of Monetary Policy Information Compendium (MPIC) by incorporating new
versions of two chapters on (Prices and external).
 For the IMF’s Enhanced General Data Dissemination System (e-GDDS), SBP provided data on
financial and external sectors for National Summary Data Page of Pakistan maintained by PBS.
 REER and Daily NEER data have been revised from January 2013 as the trade weights and
trading partners were revised by IMF based on 2013-15 trade data. This update led to increase in
number of basket currencies to 37, which were previously 25 based on 2010-12 trade data.
 Improved the ITRS client application (software used by banks for data reporting of foreign
exchange returns) by incorporating the revamped foreign exchange coding guide for acquisition
of data from banks.
 All activities relating to compilation of SBP trade data by quantity, unit and price have been
performed and the latest list of HS codes acquired from Pakistan Revenue Automation Ltd
(PRAL) is being incorporated in the ITRS client application.
 Completion / rollout of E-form data acquisition system through DAP from all banks.
 Completion of the development mechanism for reconciliation of trade data reported through ITRS
and Web-based-one-custom (WeBOC)
 Exchange rates data compilation system has been migrated from DWH portal to DAP4. This is
more efficient as compared to previous system.
 The scope of NBFCs and ICs in Data Acquisition Portal has been enhanced to fulfill IMF
requirement pertaining to Financial Soundness Indicators (FSIs)
 The coverage of Lending and Deposit Rates has been enhanced by including data of Microfinance
Banks (MFBs) and Development Finance Institutions (DFIs)
40
 Compilation of half-yearly scheduled banks statistics on ISIC 4 together with inclusion of branch
wise data of MFBs and DFIs as a separate chapter in the publication ‘Statistics on Scheduled
Banks in Pakistan’.
Similarly, the following modules have been implemented for various departments of SBP during
FY20:
 Implementation of ISIC4 and updated prudential regulations of SME in compilation of monthly

Islamic/conventional banking statistics (A07 and A05).
 Compilation of half yearly statistics on scheduled banks.
 Data acquisition and compilation system for MFBs Capital Adequacy Ratio and integration with
FSSD Dashboard (Phase 2).
 Basel III Liquidity Risk Reporting through DWH (Phase-I).
 Data Acquisition of Daily Cash Flow from commercial Banks.
 Monthly Reporting of Foreign Currency Deposits and Borrowings and their utilizations.
Besides, software development of the following modules was done, which are under implementation
stage:
 Compilation of CAELS, CRR and SLR and integration with FSSD Dashboard (Phase 2).
 Data Acquisition on National Financial Literacy Program.
Further, the analysis of following modules and their requirement specifications for software
development were also completed during FY20:
 Data Acquisition from Electronic Money Institution (EMI) Phase- I.
 Revamping of Foreign Exchange Computerized Reporting System (FXCRS).
 Data acquisition system for Quarterly Return on Consumer Grievance Handling Mechanism.
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2 Payment System
The role of Payment Systems, which establishes common standards and procedures, has been
considered vital as it promotes competition in the provision of payment services and enhances
efficiency by enabling interoperability. Interoperability would improve user convenience through
sharing of different alternate delivery channels like ATMs, POS terminals, agents, etc., and promoting
competition among digital financial service providers.
In the wake of COVID-19 global pandemic which has posed serious economic and social challenges
for regulators, policy makers and services providers, etc., the digital transformation has become vital,
not only for payments and financial services but also for every sector of the economy catering to
financial needs of the customers. SBP, being the regulator of payments and financial industry, has
played a great role to promote and develop payment and digital financial services in the country. As
regulator of payment systems, SBP took numerous steps, which, inter alia, include promoting and
developing interoperable payments infrastructure, issuing enabling regulations especially for retail
payment providers and FinTechs, ensuring the trust and security of digital payment channels,
promoting new technologies and innovations etc.
These initiatives are primarily aimed at development of digital payment platforms, provision of a
conducive regulatory environment for the industry and promotion of innovative and convenient digital
payment instruments in the economy. As a result, the payments industry in Pakistan continued to
show a healthy growth, both in terms of volume and value of transactions conducted during FY20. A
detailed analysis of the key digital payments indicators and initiatives of SBP to promote payment
systems and digital financial services in the country is given in the following sections.
2.1 Trends in Payment and Settlement Systems

In recent years, banking
Graph 2.1 Internet Banking vs Mobile Banking
through digital channels has
been gaining popularity in the 5,500,000 9,000,000
Internet Banking Users (in actual)
Mobile Banking Users (in actual)
8,000,000
country and number of 4,500,000
7,000,000
transactions through digital
3,500,000 6,000,000
means has seen considerable
5,000,000
growth in FY20. These 2,500,000
4,000,000
channels offer alternatives 1,500,000 3,000,000
resulting in faster delivery of 2,000,000
500,000
financial services to a wide 1,000,000
range of customers. As -500,000 FY16 FY17 FY18 FY19 FY20 0
evident from the fact that in Internet Banking Users Mobile Banking Users
the last 5 years, significant
progress has been observed in the usage of Internet Banking and Mobile Banking channels showing
annualized transactions growth of 31 percent and 88 percent respectively. It is further corroborated
from the fact that substantial growth has been observed in the user base of these channels, during the
same period, as is evident from the Graph 2.1.
43
Further, growth was observed in the number of Inter-Bank Fund Transfer (IBFT) transactions too,
especially after the start of lockdown period imposed due to COVID-19 pandemic, wherein SBP after
consultation with market participants, waived all charges on fund transfer transactions conducted
through online channels. Before the regulatory intervention, the number of interbank fund transfers
were recorded at a daily average of approximately 188000, whereas, after the intervention, the number
rose to more than double on a daily average basis.
In addition, the adequate increase has been witnessed in digital access points and infrastructure
whereby number of ATMs showed continuous growth, with YOY growth of 6 percent. The number of
POS machines, which have remained stagnant during the last few years, is expected to improve due to
the regulatory intervention made by SBP.
Graph 2.2 Number of ATM Graph 2.3 Number of POS
FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20
Number of debit cards increased substantially,

Graph 2.4 Debit Card Trends
mainly due to the mandate given by SBP for
issuing Europay Master Visa (EMV) Chip and PIN
Compliant cards, thus adding more security
without compromising customer experience. The
number of debit cards at the end of FY20 have
been 26.7 million, observing a YOY growth of 7.5
percent.
The usage of digital channels has seen growth FY17 FY18 FY19 FY20
compared to last year, which is summarized as
under:
Table: 2.1 FY19 FY20 Percentage Change
Volume (in Value (in PKR Value (in PKR Volume Value
Channel Volume (in million)
million) billion) billion)
RTOB 187.4 49,430.7 173.7 54,433.2 (7.3) 10.1
ATM 523.3 6,399.6 512.1 6,429.4 (2.1) 0.5
POS 72.4 366.2 70.3 364.2 (2.9) (0.5)
E-commerce 5.7 26.1 10.2 34.9 78.9 33.7
Internet 39.7 1,722.2 56.6 2,952.7 42.6 71.4
Banking
Mobile 41.1 866.8 82.8 1,763.6 101.5 103.5
Banking
44
Payment System
2.2 Performance of Payment Systems During FY20

SBP took significant steps that are expected to provide strategic direction and roadmap to build a
more modern and robust payment systems in Pakistan, as envisaged in SBP’s Vision 2020. Some of
the major steps taken during FY20 are as follows:
2.2.1 Launch of National Payment Systems Strategy (NPSS)

SBP, in its Vision 2020, aimed to develop modern and robust payment systems by developing
National Payment Systems blueprint in the country. The objective was to provide recommendations to
design a comprehensive national payment architecture in line with international standards. In this
regard, SBP through World Bank’s Financial Inclusion Support Framework (FISF) program, drafted a
comprehensive National Payment Systems Strategy after consultation with all relevant stakeholders
including Government agencies, Banking and Financial Industry leaders, Technology Service
providers, FinTechs, etc.
Governor SBP, Dr. Reza Baqir in a ceremony attended by World Bank President Mr. David Malpass,
launched NPSS on November 01, 2019. The strategy outlines various recommendations in six major
areas of national payment systems i.e. legal and regulatory framework, payment infrastructure, retail
market, government payments, oversight of payment systems and remittance market.
Since the launch of the NPSS, SBP has been leading industry engagement through various
consultations and sessions to drive the digitization objectives as laid down in the strategy. In this
regard, SBP has already taken several initiatives in line with NPSS to improve payment infrastructure,
increase digital payments acceptance points, facilitate digitization of government payments and
promote non-banking payment entities and FinTechs by providing an enabling and level playing field.
2.2.2 Implementation of the Micro Payment Gateway (an Instant Payment Scheme)
Micro Payment Gateway (MPG) – an instant payment scheme - is an initiative taken by SBP to
achieve its strategic goal of developing modern and robust payment systems in the country. MPG is a
state-of-the-art, interoperable and secure payment platform that would enable consumers, merchants
and government entities to exchange funds in a seamless, instant and cost effective manner. It has
advanced functionalities to process instant/near real-time and alias based payments, bulk transfers and
Request-to-Pay and capability to on-board participants including banks, merchants, Electronic Money
Institutions (EMIs) etc. through Application Programming Interfaces (APIs).
SBP, in collaboration with international partners, experts, vendors and financial industry, has
achieved various milestones. It has accomplished the major milestone of the project by ensuring
deployment of the state-of-the-art infrastructure to build and operate the gateway. SBP is now in the
final stages of going live with first use case i.e. bulk transfers including government to person (G2P)
transfers, tentatively by the end 2020.
2.3 Regulatory Measures Taken by SBP during FY20

Key achievements to strengthen and promote Payment Systems regulatory regime are listed below:
45
2.3.1 Improving Payments Card Acceptance in Pakistan

The payment acceptance infrastructure in Pakistan has not gained traction and number of access
points particularly POS terminals remained stagnant for the last many years. SBP, after analyzing the
payment cards market, found that this distortion is mainly due to asymmetry in the market, whereby
issuers (institutions issuing payment cards to their customers) were the most profitable, leaving less
margins for acquirers (institutions in the business of deploying POS machines) as they were operating
at a loss.
In order to address the challenges in POS acquiring business such as undercutting, rationalizing card
issuers’ share and increasing POS card acceptance infrastructure in the country, SBP intervened
through policy interventions, which include:
 Mandating floor on the Merchant Discount Rate (MDR) for POS acquiring
 Capping Interchange Reimbursement Fee (IRF) for debit and prepaid cards
 Mandating banks/card issuers to offer SBP approved Domestic Payment Scheme (DPS) Card as
the default card at the time of issuance or renewal of debit cards.
2.3.2 Standardization of QRs – First step towards achieving QR payments Interoperability

Keeping in view the merchant profile in the country, it is not feasible for many small merchants
working at small margins to deploy POS machines that have high variable costs. One of the
alternative ways to address this situation is to promote acceptance of payments through QR codes.
Although QR codes have been deployed in substantial numbers in the country, the volume of
transactions did not achieve desired levels mainly due to their lack of interoperability.
Therefore, as a first step towards achieving interoperability, SBP advised all QR code issuing and/or
acquiring institutions to adopt EMVCo’s QR Code Specifications. This is expected to enable financial
institutions to innovate and expand their acquiring business without creating proprietary
systems/schemes and provide a foundation to achieve inter-scheme interoperability.
2.3.3 Digital Onboarding of Merchants

SBP issued rules for Digital On-boarding of Merchants to facilitate growth of digital payment
acceptance points in the country. The rules provide minimum requirements for simplified due
diligence process of on-boarding individual and self-employed persons as merchants, services to be
offered by merchants, transaction limits, maximum account balance limits, security measures, dispute
resolution mechanism, etc. These rules are designed to facilitate the acquiring institutions to onboard
small retail merchants seamlessly and enable them to accept their payments digitally, thus providing
new payment options to consumers and broadening the financial inclusion base in the country.
2.3.4 Regulatory Measures to Promote Digital Payments during COVID-19 Pandemic and
other Initiatives For Promoting New Technologies
During FY20, COVID-19 brought new unforeseen challenges to the mix which has drastically
impacted the global financial industry. SBP, after consultation with stakeholders, instructed regulated
institutions to provide their services seamlessly by reducing the risk to customers’ exposure amid the
pandemic. The objective of these measures is to reduce the need for visiting bank branches or the
ATMs and to promote use of digital payment services such as internet banking, mobile phone
46
Payment System
banking, etc. The regulated entities have also been advised to increase their cyber-resilience keeping
in view the expected increase in the usage of digital financial services. These measures include:
 Waiving Charges for Online Fund Transfers: SBP, in order to facilitate transactions through
digital means, has waived all the transactional fees charged by regulated financial institutions
against all the fund transfers through online channels. SBP also waived charges against all
customer transfers performed through SBP operated Real Time Gross Settlement System (RTGS).
Further, to enable easy on-boarding of customers on online banking channels, SBP has waived the
requirement of biometric verification for activation of internet and mobile banking, till further
instructions.
 Measures to Enhance Cyber Resilience amid COVID-19 Threat: SBP taking proactive steps,
issued instructions to the industry to ensure continuity of business and operations, exercise due
diligence and implement stronger and robust cyber security measures to protect their customers
from the risks associated with cyberspace during the coronavirus pandemic. The steps taken by
SBP to increase cyber-resilience include instructions for work from home and access of critical
infrastructure under prescriptive conditions, effective sharing of cybersecurity and threat related
information, establishment of Cyber Threat Intelligence Units and deployment of Emergency
Response teams, etc.
 Facilitation regarding Paper-based Clearing Operations: In order to address the financial

needs of customers due to reduced operating hours of banks, SBP introduced Direct Cheque
Deposit Facility, which reengineered the whole process of clearing of cheques. Under this facility,
the customer instead of going to their Drawee/account maintaining branch, can present a crossed-
cheque to any branch of the paying bank, in order to have immediate transfer of funds to their
accounts. SBP has also allowed banks to provide following services to their customers:
(i) Doorstep Cheque Collection Facility and Drop box Cheque Collection Facility
(ii) Clearing of scanned image of cheque for priority/corporate customers and Image Based
Clearing (IBC) functionality
 Facilitation of EMIs, Payment System Operators and Payment Service Providers: In order to
foster innovations in payments by use of technology and provide enabling regulatory environment
to non-bank entities, SBP further strengthened the already laid building blocks for payment
service providers, by introducing Regulations for Electronic Money Institutions last year. Since
then, SBP has received tremendous response as it has provided a new space to numerous
FinTechs operating in Pakistan.
Since the launch of EMI regulations, SBP processed six applications for an EMI license, out of
which three EMIs have started their pilot operations and are on track to launch their operations on
a commercial scale, in the coming few months. The rest of the three (03) EMI licensees have been
given in-principle approval and are soon expected to start their pilot operations as well. It is quite
promising to see that many more international and local FinTechs have shown interest for a
47
potential EMI license in Pakistan, with a vision to provide pioneering payment solutions and
digitization of the economy.
In addition of facilitating the EMIs, SBP also enabled PSOs and PSPs to offer White label ATM
5
services, payment initiation and account aggregation services and e-payment gateway services to
promote innovative payment products and services in the country.
 Improving Large Value Payment and Settlement System: In addition to the setting up MPG,
SBP also laid down the foundation to improve the large value payment systems of the country.
Under the World Bank’s Financial Inclusion Infrastructure Project (FIIP), SBP decided to replace
the current RTGS (the only large value payment system in the country) with an Automated
Transfer System (ATS+) with an ACH system to bring efficiency in the large value settlement
systems of the country, enabling SBP to facilitate the settlement of securities and transactions
performed through the Micropayment Gateway and other ancillary systems in Pakistan.
 Strengthening the Legal & Oversight Framework in line with National Payment Systems
Strategy: The payment systems play a vital role in improving the financial stability, economic
growth and monetary policy objectives of any country. But the strength is certain to change into a
weakness, when the legal and regulatory landscape is not sufficient enough to keep up with the
ever evolving pace of payment system innovations. This has been recognized in the recently
launched NPSS, whereby one of the major recommendations is to review existing legal and
regulatory framework of the payment systems of the country, identify gaps and subsequently fill
these gaps by suitable amendments in the legal and regulatory framework of the country. SBP has
finalized the procurement process to acquire services of a competent legal consulting firm, with
support from World Bank under the Financial Inclusion Infrastructure Project (FIIP).
2.4 Developments in Government Payments

During FY20, SBP intensified efforts to digitize government receipts and payments. In order to bring
the cost of digital tax payments and manual paper based tax payment, the nominal fee on digital
payment of taxes on the tax payers was eliminated which would be absorbed by SBP. As the fee is
nominal as compared to the agency commission, the SBP pays to agent banks for traditional paper
based tax collection, the absorption of digital tax payment fee by SBP, will in fact reduce the net cost
of tax collections for SBP. Further, in a significant development in this respect, timelines were agreed
with FBR to gradually eliminate the manual tax collections by January 2021. As a first step in this
direction, the option of manual tax payment by corporate sector was eliminated from August 2020.
2.4.1 Collection of Government Taxes and Fees through ADCs

The Alternate Delivery Channels (ADC) system for collection of government taxes is functioning
and robustly for different agencies of GoP and Government of Punjab. The taxpayers pay their
taxes through internet banking, mobile banking, ATMs and Over-the-Counters (OTC) facility of
branches of
5
White Label ATMs are owned and operated by non-financial entities.
48
Payment System
commercial banks across the country. Since its launch in March 2018, an aggregate amount of Rs.829
billion of government taxes and duties has been collected. In order to promote digital payments of
government taxes and duties, SBP with effect from January 1, 2020, eliminated the transaction fee for
taxpayers using digital modes for payment of duties and taxes of federal and provincial governments.
Further, to utilize the potential of ADCs system fully, SBP and FBR have agreed to gradually replace
the manual payments of FBR’s taxes with the ADCs system starting with corporate taxpayers from Q1
of FY21. Accordingly, payments of FBR’s Taxes by AOPs/Partnerships and individuals will be shifted
completely on the ADCs in the Q2 and Q3 of FY21 respectively.
Similarly, SBP is negotiating with other provincial governments to use this facility for their taxpayers
and utilize the umbrella of ADCs for collection of their taxes and levies. Recently, SBP, M/s 1Link
and Islamabad Capital Territory Administration (ICTA) have executed a tripartite agreement for
extension of ADC system for collection of ICTA taxes and duties. While negotiation with Finance
Department, Khyber Pakhtunkhwa are at advance stage for initiation of online collections, negotiation
with other provincial governments will be initiated in FY21. The project will be broadly based on the
model already implemented for FBR and Government of Punjab.
2.4.2 Automation of Duty Drawback Refunds

After digitization and automation of Person to Government (P2G) payments, SBP and GoP are now
working on digitization of Government to Person (G2P) payments. As a part of G2P digital
payments, SBP and Pakistan Customs are working on digitization of Duty Drawbacks refunds to
business in the first phase. After digitization of this process, Customs will generate and deliver a
message to SBP for payment of refunds directly into the exporter’s bank account upon realization of
foreign exchange proceeds of export consignment. The successful implementation of this project will
be a milestone towards digitization of G2P payments and will help in the government’s initiatives for
ease in doing business.
2.5 Ensuring Quality of Banknotes and Efficiency of Currency Management System

SBP Vision 2020 envisions availability of clean and good quality banknotes with state of the art
security features and automation of currency management system. In this context, the Bank initiatives
included implementation of Currency Management Strategy (CMS), introduction of latest security
features in banknotes and exploring innovative techniques to improve the quality and durability of
banknotes. Subsequent to the implementation of CMS, good quality banknotes remains in the
circulation.
2.5.1 Implementation of Currency Management Strategy

SBP introduced the Currency Management Strategy (CMS) in 2015 which inter-alia aims at reforming
the currency management function from manual to automated environment, standardization of
packaging and transportation of banknotes. Subsequent to the successful implementation of CMS,
now all commercial banks’ branches and ATMs are disbursing machine authenticated banknotes of Rs
100 and above denominations. The scope of the strategy would be enhanced to include machine
processing of Rs 50 banknotes by January 2021. In order to standardize the banknotes packaging
practices across the industry, commercial banks are following SBP’s Banknote Packing Instructions
(BPI) for packing of all banknotes denominations. It is worth mentioning that banks have installed
49
8,265 banknotes authentication machines and 8,047 banknotes packing machines which are deployed
at CPCs and standalone branches. It is further stated that banks have established 709 Cash Processing
Centers (CPCs) which are providing machine processed banknotes to 9,604 bank branches. Banks
have equipped 5,665 branches with the individual banknotes processing machines to meet their own
needs. Moreover, 550 bank branches have made arrangements with other banks for the provision of
machine authenticated banknotes.
2.5.2 Banknote related instruction issued during the COVID-19 pandemic

In wake of the COVID-19 pandemic, SBP has issued special instructions to the banks to aid in the
efforts to contain the spread of the disease. Banks were advised to take additional precautionary
measures with regards to disbursement and collection of cash. In this regard, SBP has mandated a
fourteen (14) day quarantine period for all banknotes received by the bank before their re-issuance to
customers and the public. Furthermore, banks have been instructed to make special arrangements for
the collection of the cash received from Hospitals and Clinics. The same may then be disinfected,
sealed, secured and quarantined separately.
The SBP has also advised banks to preferably issue banknotes received from SBP, or fresh/unissued
banknotes. Banknotes received from the public, may only be re-issued as a last resort, only if the
banknote have been kept by the bank for the prescribed quarantine period.
2.6 The Way Forward

SBP, in its intent to adapt with the changing payment systems dynamics, envisages upon gradually
building an environment of digitization which will not only entail the benefits of transparency but also
economic growth. In the next steps, SBP plans to implement the action items identified in NPSS with
particular focus on enhancement of legal and oversight of payment systems, digitization of
government payments, increasing access points and facilitation of FinTechs in the country. Further,
SBP also aims to enable the industry to utilize the services of cost effective cloud based services and
enhance cyber security of payment systems.
SBP is also working with some banks to provide Digital Accounts to Overseas Pakistanis under which
Non Resident Pakistanis (NRPs) would open accounts digitally/remotely in Pakistani bank through
online portals and use online banking and avail lifestyle banking product suite. SBP in a continuous
effort is working to strengthen and develop new policies to support the FinTechs, EMIs and banking
and financial industry that would help to accelerate the digitization of payments landscape in the
country.
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3 Strengthening Financial System Stability and Effectiveness
Smooth functioning of the financial system is an essential condition to build confidence of the market
participants and enable them to play their role in efficient resource allocation. Ensuring financial
system stability requires SBP to remain vigilant and cognizant of the emerging challenges and risks
and take proactive policy measures. In this perspective, SBP has further strengthened its regulatory
and supervisory framework. Some of the key achievements during FY20 included establishment of
National Financial Stability Council, publication of Financial Stability Review, surveys to assess risks
emanating from COVID-19, revision of stress testing guidelines, enhancing macro stress testing
regime and conducting the first joint industry-wide Business Continuity Planning (BCP) drill.
3.1 Institutionalization of Financial Stability Framework
3.1.1 Establishment of National Financial Stability Council

A well-structured institutional set-up is essential for an effective Macroprudential Policy Framework
(MPPF). Towards this end, SBP in collaboration with Securities & Exchange Commission of Pakistan
(SECP) and Ministry of Finance (MoF) established the National Financial Stability Council (NFSC).
The Council is envisaged to deliberate on the issues and trends in the financial system affecting
financial stability and responding to the threats appropriately. It also aims at enhancing the inter
agency collaboration to provide coordinated responses to systemic risk especially those with cross-
system implications.
3.1.2 Financial Stability Review, Half-Yearly Performance Review and Quarterly

Compendium
SBP issued its flagship publication, “Financial Stability Review (FSR)” for CY19 in June 2020. The
review presents performance and risk assessment of various segments of the financial sector including
banks, non-banking financial institutions, financial markets, non-financial corporates and financial
market infrastructures. The emerging challenge posed by COVID-19 outbreak and the mitigating
measures undertaken by SBP to limit its adverse implications, for the economy and the financial
sector, have also been covered in the report.
During FY20, SBP published Mid-year Performance Review of the banking sector, for the period,
January-June 2019. Further, SBP continued to disseminate financial sector’s data through regular
publication of Quarterly Compendium (QC) Statistics of the Banking System. The Compendium
includes data of commercial banks, Islamic banks, MFBs and DFIs.
3.1.3 Risk Surveys

SBP conducted 4th and 5th wave of Systemic Risk Survey (SRS), respectively, in July 2019 and
January 2020. SRS helps gauge the views of market participants and experts about various existing
and emerging risks that can potentially undermine the stability of the financial system.
In order to assess the implications of the COVID-19 pandemic for financial institutions and to firm up
policy response, SBP conducted two surveys in the month of March and April 2020. Based on the first
51
survey results, SBP issued an advisory circular to ensure the availability and continuity of financial
services.
3.1.4 Strengthening of Consolidated Supervision Framework

SBP has been conducting the consolidated supervision of banks to assess their financial health and
key risks at group level. For this purpose, a dedicated Joint Task Force of SBP and SECP is working
to monitor and manage the risks posed by conglomeration in the financial sector. Both the regulators
recently reviewed and updated the Terms of Reference of the task force to better achieve the
underlying objectives and address changes in the dynamics of the financial system. During FY20, the
SBP developed a quantitative criterion to supervise and assess the banking groups on consolidated
basis.
3.1.5 Assessment of Banks’ resilience through Stress Testing

SBP uses various stress testing approaches to assess resilience of banks against hypothetical but
plausible extreme conditions, which include single-factor sensitivity analysis and multi-factor
dynamic macro stress tests. During FY20, forecasting and scenario analysis suite of econometric
models has been strengthened by including Bayesian Vector Autoregressive (BVAR) models. Based
on the results of these stress-testing exercises, supervisory departments of SBP engage with banks
exhibiting capital shortfall. Stress testing exercise is also an integral part of SBP’s annual publication,
Financial Stability Review (FSR), where resilience of banks is assessed against domestic and foreign
risk factors. The FSR for FY20 focused upon assessment of banking sector resilience against
economic and financial vulnerabilities, giving special emphasis to COVID-19. Further, stress testing
framework is being regularly upgraded in line with the latest developments in the area.
3.1.6 Revision of Stress Testing Guidelines

The Stress Testing Guidelines (STGs), first issued in 2005, were revised in 2012. The SBP, in
pursuance of its goal to further strengthen the risk management capacity of banks, DFIs and MFBs,
updated the existing guidelines on Stress Testing to align with the changing local dynamics and
international best practices.
The scope of revised ST guidelines has been broadened to incorporate guidance on Scenario Analysis,
aka Macro-stress Testing (MST) and Reverse Stress Testing (RST) besides the Sensitivity Analysis
(SA) with enhanced number of shock scenarios. In terms of coverage, besides banks/DFIs, Islamic
banks, Islamic bank branches (IBs/IBBs) and micro-finance banks (MFBs) are required to conduct SA
exercise. Further, the sample of Domestic Systemically Important Banks (D-SIBs) are required to
compulsorily conduct MST and RST and report it as part of their Internal Capital Adequacy Process
(ICAAP) document. Finally, the data submission requirements have been rationalized and financial
institutions are now required to furnish data on a minimal number of variables.
3.1.7 Assessment of Relevance and Implications of Counter-cyclical Capital Buffers in Pakistan

The macro-prudential policy framework (MPPF) ensures system-wide stability of the financial sector.
To enhance its assessment of pro-cyclical systemic risk capabilities, SBP substantially improved its
macro stress-testing regime to capture the macro-financial interlinkages. Moreover, a number of
variables have been identified as Early Warning Indicators (EWIs) of systemic risk. To further
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Strengthening Financial System Stability and Effectiveness
strengthen its assessment and identification of build-up of systemic vulnerabilities due to business
cycles, SBP undertook an empirical study to identify the periods of risk excesses and assess the need
for building resilience of the banks against such systemic risks.
To this end, the gaps of broader and narrower measures of credit, namely, the credit to private sector
(CPS) and advances (ADV) of the banking sector have been used as risk indicators. Besides
normalizing these measures by GDP, the deviations of the growth rates of real and nominal values of
the two credit measures from trend have also been used. In terms of methodology, three filtering
methods have been deployed i.e. two-sided and one-sided versions of Hodrick-Prescott (HP) Filter as
well as Christiano-Fitzgerald Filter.
The indicators used to gauge the excesses could identify a few episodes of credit excesses, which are
followed by economic downturns. The banking sector’s behavior with respect to capital has been
found to be pro-cyclical, which effectively results in banks shunning the credit disbursements during
downturns. Further, the infection ratios increase during the economic downturns while subside during
upturns – at least during last two decades.
3.1.8 Crisis Preparedness Initiatives

The financial systems remain expose to operational disruptions due to wide-spread natural disasters
and man-made threats. International standard setting bodies encourage banks to have an effective
Business Continuity Regime.6 Bank for International Settlement (BIS) encourages financial
authorities and key financial industry participants to run market or industry-wide tests to assess the
level of resilience across markets and the compatibility of the recovery strategies of individual market
participants. In this backdrop, SBP conducted the first joint industry-wide Business Continuity
Planning (BCP) drill under a carefully designed scenario. The BCP/DR drill was successfully
conducted on December 07, 2019. The scenario envisaged that the primary sites for some critical
functions related to payment system of all banks, 1-Link7 (Payment Service provider) and SBP
became inaccessible due to some disaster. As a result, all the participants moved to their BCP sites.
SBP and 1-Link also transferred their respective systems to DR servers and banks accessed their
systems and platforms from BCP/ DR sites. This was a mock exercise that generated a host of data
and information regarding readiness of BCP/DR sites and effectiveness of business continuity plans
that would be helpful in forming industry’s future response to a crisis.
A well-functioning financial safety net is crucial for preserving and promoting the financial stability
in the economy. The Lender of Last Resort (LOLR) facility is an integral element of financial sector
safety net, as it helps a bank in overcoming short-term liquidity strain and thus prevents any panic
among depositors and contains the possibility of bank run and contagion risk. As per the requirement
of Section 17-G of the SBP Act, 1956, SBP is working on the development and implementation of an
operational framework for the LOLR facility.
6
Please see “Guidance on Arrangements to Support Operational Continuity in Resolution”, FSB, August 2016
7 1-Link is an authorized payment system operator/payment service provider.
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3.1.9 Cooperation in Banking Supervision

As part of its efforts to share information and contribute to various regional and international studies,
SBP provided its feedback on various international surveys and consultative documents e.g. FSB
Survey on Cyber Incident Response and Recovery, World Bank Survey on Interest Rate Controls, etc.
SBP has also updated the 2019 IMF Annual Report on Exchange Arrangements and Exchange
Restrictions (AREAER) and the Macroprudential Policy Survey. The Macroprudential Policy Survey
collect information on measures that have been adopted with the objective of containing systemic risk
and on the institutional aspects of the macroprudential policy framework in member countries. In
addition, SBP provided updates to the Financial Stability Board (FSB) on SBP's COVID-19 related
polices and measures. SBP has also participated in FSB Regional Consultative Group for Asia (RCG
Asia) Conference Call where the impact of COVID-19 on the Asian region was discussed, along with
other financial stability issues such as Cyber incident response and recovery.
3.2 Progress towards Risk Based Supervision

Development of Risk Based Supervision (RBS) framework continued with steady pace. SBP has
engaged Toronto Centre (TC) under the Long Term Country Engagement (LTCE) program for
development & implementation of RBS Framework whereby five capacity building sessions have
been conducted by TC experts till date. RBS, being a forward-looking framework, will help in better
understanding of a bank’s risk profile with reference to both external and internal risks. This, in turn,
will facilitate the supervisors in early identification of problems, efficient deployment of supervisory
resources towards riskier areas and initiating prompt corrective actions. A pilot testing of certain
significant activities in two selected banks, on recommendation of TC experts, to fine tune the
developed methodologies were conducted. Capacity building of supervisory resources is also being
carried out through a series of training sessions. In addition to internal stakeholders, awareness
sessions were also conducted for selected key executives of FIs in order to achieve seamless
supervisory transition.
3.3 Strengthening Regulatory Framework

3.3.1 Revision of Branchless Banking Regulations
To increase outreach of BB operations for achieving the objective of financial inclusion and
strengthening the controls related to Money Laundering (ML)/ Terrorist Financing (TF) risks SBP
revised the Branchless Banking (BB) Regulations for Financial Institutions (FIs) in December 2019.
The key highlights of the revised regulations include phasing out of Person to Person transfer till June
30, 2020, enhancing per month transaction limit of BB level “1” account to Rs.200,000, mandatory
biometric verification of legacy BB level 1 accounts and risk assessment of BB Operations by FIs.
3.3.2 Regulations for Digital Onboarding of Merchants

To facilitate growth of digital payment acceptance points in the country, SBP issued Regulations for
Digital on-boarding of Merchants for Banks/MFBs. The key features of these regulations include
minimum requirements for simplified due diligence process of on-boarding individuals and self-
employed persons as merchants, transaction limits, maximum account balance limits, security
measures, dispute resolution mechanism etc. Further, SBP also advised Banks/MFBs to ensure that
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these accounts would be only used for digital collection of payments against the provision of
legitimate goods and services.
3.3.3 Guidelines on transfer of Non-Performing Assets to Corporate Restructuring Companies

SBP issued guidelines for “Transfer and Assignment of Non- Performing Assets to Corporate
Restructuring Companies”. This will address the issue of growing size of non-performing loans in the
banking industry.
3.3.4 Measures Related to COVID-19

To dampen the adverse effects of COVID-19 on the economy and ensure continuous provision of
banking services throughout the country, SBP took a number of measures some of which are detailed
below:
 To enable the customers to open and use BB platform, the deadline of Biometric Verification of
legacy BB Level-1 accounts was extended till September 30, 2020. SBP encouraged the
Authorized Financial Institutions (AFIs) to introduce Biometric Verification through smart phone
applications and use digital channels for BB agents’ onboarding with an objective to increase
financial services access points.
 To ease out borrowers’ repayment capacity, Banks/DFIs were advised to defer repayment of
principal loan amount for one year upon written request of the obligors received by September 30,
2020 including the repayment of Sukuk and Term Finance Certificates as well.
 Banks/DFIs were allowed to recognize impairment loss, if any, resulting from the valuation of
listed equity securities held as ‘Available for Sale’ (AFS) in phased manner equally on quarterly
basis during calendar year ending December 2020.
 Banks/DFIs were allowed to take exposure against the shares issued by its group companies to
ease out the liquidity requirements of the companies
 The criterion for classification of “Trade Bills” was relaxed by six months till September 2020.
 To support the banking sector to supply additional loans to businesses and households, Capital
Conservation Buffer (CCB) was reduced from 2.5 percent to 1.5 percent. This relaxation made
available approximately, an additional Rs.800 billion for lending/investments.
 The regulatory retail portfolio limit of Rs.125 million was enhanced to Rs.180 million to support
the growth of credit to the retail sector and small & medium enterprises.
 To minimize the risk of exposure to COVID-19 and save the transaction time of public, the Banks
were advised to maintain separate list for closed branches along with the addresses of nearest
operational branches at prominent place on their website.
 Debt Burden requirement was relaxed for consumer loans from 50 percent to 60 percent. This
measure enabled approximately 2.3 million individuals to borrow more from banks.
 Margin requirement on exposure against shares of listed companies was relaxed from 30 percent
to 20 percent and margin calls from 30 percent to 10 percent to counter volatility in the Pakistan
Stock Exchange.
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3.3.5 Implementation of IFRS 9

To comply with the International Financial Reporting Standard 9 (IFRS 9), SBP advised the banking
industry to prepare IFRS 9 compatible pro-forma Financial Statements for year-ended 2019. It was
also advised to initiate parallel run of IFRS 9 during FY20, which would pave way for full
implementation of IFRS 9 in Pakistan from January 2021.
3.3.6 Enhanced Disclosure Requirements for Banks in Financial Statement

The financial statements are the main source of information for public at large. To enhance the
transparency in banks’ affairs and to boost the confidence of stakeholders in banking system, SBP
revised the format of interim financial statements (quarterly and half-yearly) of banks. The new
format is compatible with the best international practices of disclosures and will present banks’
business performance and value in a clear and concise manner.
3.3.7 SBP AML/CFT Regime

To further align AML/ CFT Regulations with the recommendations of Financial Action Task Force
(FATF) and to bridge the gaps identified in Pakistan’s Mutual Evaluation Report, SBP made some
important amendments in its regulatory framework. The introduction of amendments will provide
further clarity on implementation of AML/ CFT requirements through Risk Based Approach ( RBA),
customer due diligence (CDD), Targeted Financial Sanctions (TFS) on Terrorism Financing and
Proliferation Financing (PF), reporting of STR/CTR, record keeping, identification of ultimate
beneficial ownership and politically exposed persons (PEPs), correspondent banking and wire
transfers/ funds transfers.
3.3.8 Branch Network Expansion

To enhance outreach of financial services to the general public, SBP issued approximately 800 new
branch licenses to commercial banks/microfinance banks during FY20. Out of these new branches, at
least 23 percent of branches are opened in rural, underserved and unbanked areas. Special focus
remained on the priority areas of Balochistan, Khyber Pakhtunkhwa, AJK and Gilgit Baltistan for
which 164 new branches were approved during FY20.
3.3.9 SAARC Finance Seminar on Emerging Trends in Good Governance

SBP successfully hosted a three-day international SAARCFINANCE Seminar on ‘Emerging Trends
in Good Governance of Banking Sector in SAARC Region’ during December 2019 at NIBAF
Islamabad. The seminar was mainly organized to highlight the importance of efficient and robust
governance structure in the banking industry for sustainable economic growth of a country. Besides
dignitaries from Pakistan, the seminar was also attended by delegates from Afghanistan, Bangladesh,
Bhutan, Sri Lanka and Nepal.
3.3.10 Role in Privatization Program

SBP is actively facilitating the privatization of state owned financial institutions i.e. SME Bank,
FWBL and HBFCL in order to realize non- fiscal proceeds and address continuous burden on
exchequer.
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3.3.11 Raising Additional Tier 1 capital through foreign sponsors

To encourage further investment in the capital instruments, SBP allowed banking industry with
majority foreign shareholding (more than 50 percent) to raise Additional Tier 1 capital in the form of
Foreign Currency (FCY) subordinated debt/ loan from their existing foreign sponsors.
3.4 Supervisory Initiatives

In line with the SBP Vision 2020, SBP undertook various developmental initiatives to enhance
effectiveness and operational efficiency of the inspection process.
 Updation of AML/CFT Inspection Framework & Manual

Pakistan has been under Financial Action Task Force (FATF) action plan since June 2018. As the
action plan was focused on “effectiveness” component of the recommendations, an internal action
plan was developed and dedicated specialist resources were deployed for the same. Further, the IMF -
Technical Assistance in the area of AML/CFT also suggested revisions / additions in the existing
supervisory framework relating to the risks in the areas of ML/TF and PF. The following activities
were also undertaken to enhance the AML/CFT regime:
 Updated the existing ML/TF and PF risk assessment methodology under the broad mandate
of Risk Based Supervision.
 Updated AML/CFT Inspection Manual in the light of the latest developments.
 Derived risk rating through ML/TF and PF Risk Assessment Framework to determine the
frequency and intensity of inspections.
 Revised likelihood ratings of inherent risk in light of National Risk Assessment - 2019.
 Developed factors for categorizing High Risk Geographies for both domestic and
international.
 Developed checklist and red-flags for assessment of transnational risk pertaining to ML/TF
emanating from and impacting the banking industry.
 Developed a process to identify significant emerging risk in the area of ML/TF/PF.
 Developed a mechanism to incorporate vulnerabilities identified in NRA in the supervisory
assessments methodology.
 Addition of structural risk component in inherent ML/TF/PF risk rating methodology.
 Development of questionnaire for off-site assessment of controls of FIs.
 Inspection Methodology for PSO/PSP and EMI

SBP granted licenses to Payment Services Providers/Payment System Operators (PSO/PSPs) in line
with rules issued for PSO/PSPs in 2014. Moreover, Electronic Money Institutions (EMIs) regulations
were issued in 2019 and process of granting in principle approvals to interested entities for
establishing EMIs has been initiated. In view of the developments, SBP decided to develop a
comprehensive Inspection Manual. The focus of the inspection methodology is to identify key risks in
activities performed by PSO/PSPs and EMIs and controls implemented by them to mitigate associated
risks while ensuring broader objectives of financial inclusion and customer protection.
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 Revamping the Methodology for Inspecting Banks’ Operations

In order to bring efficiency in the inspection process, initiatives were undertaken to revamp the
Methodology for inspecting banks’ operations. The objective was to make optimum use of data
relating to AML/CFT and general banking operations available with the bank in electronic form and
transform present Bottom-Up approach of inspection, largely relying on transaction testing, to a Top-
Down approach based on extensive data analysis. The revised methodology broadly consists of data
procurement through standardized data tables, analytical tools to analyze the data and predefined set
of red flags, which identify grey areas requiring inspection focus. The mechanism will augment pre-
inspection planning of examining ML/TF risk and overall general banking operations and help
allocate supervisory resources towards high risk areas. The revised methodology, after development,
is in pilot test phase.
 Parallel Run of “Assessment of Credit Risk through Red Flag System”

In order to bring efficiency in the process of review of quality of assets of Banks, DFIs and MFBs, a
developmental project of “Revamping the Process of Inspection of Assets Quality” was carried out in
in FY 19. This was in line with Strategic Goal of SBP’s Strategic Plan 2016-20. The revised
inspection methodology takes into account the ‘Top-down Approach’ by analyzing the overall quality
at portfolio level, through Red Flag Utility and thereby identifying major risky areas for further
detailed review. In order to ensure comprehensive testing before full implementation of the revised
methodology, parallel run was carried out in various banks during FY20. The results of Red Flag
Utility, in cases where correct data was available, were found to be at par thereby endorsing the
correct working of Red Flag System concept.
 Implementation of Team Spaces in KM ECM System

SBP successfully implemented Team Space functionality for its inspection teams. It is designed to
work as a Private Cloud Service (SBP access only) wherein data and information is shared among
members of an inspection team. Besides, availability, integrity and confidentiality of data, this system
addressed the challenge of loss of data due to any adverse scenario. With the implementation of this
system, the officers while working from home, can place their data securely on this corporate cloud
and when needed share it with other officers, with complete control on access management.
 Implementation of Workflow System for Managing Internal Cases

SBP successfully implemented Internal Case Management System (ICM) which is a workflow system
for processing internal cases using electronic means and hence contributed significantly towards
paperless environment. The system covers complete life-cycle of internal case processing. Using the
system, now all cases of the departments are processed electronically i.e. noting, approvals, obtaining
and sharing feedbacks from/with other departments or sending inter office memorandums.
3.4.1 On-site Inspections

The Banking Inspection Departments undertake onsite inspections to assess the safety, soundness of
the financial institutions as well as their compliance with applicable laws and regulations. The
supervisory objectives are achieved through conducting full scope, limited scope, thematic, focused
inspections and special investigations. During FY20, on-site inspections of Banks, DFIs, MFBs and
Exchange Companies were conducted as per approved inspection plan. Areas of supervisory concerns
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which, inter alia, included assessment of corporate governance, weaknesses in systems and controls,
cyber security, compliance with AML /CFT regime and business conduct etc. were taken up with the
banks' BoDs and senior management for corrective actions. In addition, statutory reports on written-
off loans and advances were prepared as per the requirement of section 25AA of the BCO, 1962.
3.4.2 Thematic Inspections

Thematic inspection is a supervisory tool which focuses on assessment of risks in a particular business
activity across banking industry. Onsite thematic inspections are used to identify inherent risks due to
non-compliance with regulatory regime or adverse practices in specific area across industry and to
facilitate issuance of further guidance or direction to the industry besides enforcement action against
non-compliant institutions. During FY20, following thematic inspections were carried out:
 Assessment of High Risk Customers in High Risk Geographies

To assess the preparedness and robustness of banks’ systems and controls to mitigate TF risk in
dealing with these high risk customers in high risk geographies, thematic inspections were carried out.
The National Risk Assessment for Terrorism Financing (NRA-TF) report identified various high risk
threats including NPOs/ NGOs/ Charities/ Trusts, Afghan refugees/foreign nationals, extremist
religious groups, Designated Non-Financial Businesses and Professions (DNFBPs), armed outfits of
political parties/nationalist groups and employees of exchange companies posing significant
Terrorism Financing (TF) risk to financial sector falling under regulatory ambit of SBP.
The objective of this inspection was to assess alignment of banks’ policies and framework with the
threats and vulnerabilities highlighted in NRA-TF. Besides, comprehensiveness of internal TF risk
assessment, appropriateness of banks’ strategies & oversight; effectiveness of devised deterrence
measures; robustness of TF detection tools & techniques; transparency & adequacy of suspicious
transactions reporting and capacity of relevant human resources was also reviewed.
 Cyber Security Assessment

During the last decade, higher reliance of FIs on information technology based platforms has
increased vulnerability of country’s financial system towards cyber exploits. Thus Cyber Security has
become one of the serious concerns for SBP as well as for FIs. Accordingly, Cyber Security
assessments were conducted during FY20. Preparedness of FIs in the area of Governance, Technology
operations, ADC channels and Cyber security Operations with respect to emerging Cybersecurity and
Technology Risk were assessed during the inspection. The scope also included to review
implementation of basic pillars of Information/Cyber security (Confidentiality, Integrity and
Availability) and rate the FIs with respect to its ability to investigate, detect, protect, respond and
recover in case of cyberattack.
 Review of NGO/NPO/INGO Accounts

The objectives of inspection included assessment of adequacy of banks’ policies/ procedures
addressing risks emanating from NGOs, NPOs and charitable institutions’ accounts operations,
assessment of effectiveness of on-going monitoring including transaction monitoring mechanism and
name screening process and review effectiveness of banks’ controls related to KYC/CDD/EDD
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including determination of the true identity of account holders/operators of the NGOs/NPOs/

Charitable institution’s accounts.
 Review of Transaction Monitoring and Sanctions Screening Systems in Exchange

Companies (ECs)
Review of Transaction Monitoring and Sanctions Screening Systems in ECs was conducted to assess
the effectiveness of the methods (system based & manual) adopted by ECs for identification of
suspicious transactions and efficiency of Sanction Screening system/mechanism adopted by ECs.
During the course of inspection, role of BoDs and senior management regarding monitoring TMS and
name screening, comprehensiveness of relevant policies and effectives of TMS scenarios and other
methods employed by EC for detection of suspicious transactions were assessed.
 Inspection of Outlets of Exchange Companies in High Risk Jurisdictions

The main objective of this inspection was to assess Money Laundering and Terrorist Financing risk of
exchange companies through inspection of selected outlets located in border areas and effectiveness
of the controls to mitigate those risks. The areas specifically focused during the inspection included
role of BoDs and senior management regarding oversight of affairs of the business outlets
comprehensiveness of the relevant polices/procedures and effectiveness of compliance, internal audit
and systems/mechanism to mitigate ML/TF risk.
3.4.3 Limited Scope Special Inspections
 Assessment of Controls related to AML/CFT

Thematic inspection of selected banks/DFIs were carried out to assess the oversight and controls
related to AML/CFT in line with the revised ML/TF risk assessment methodology. The objective was
to review controls and oversight of the institution to assess, monitor and mitigate ML/TF risk
emanating from the FI’s activities including customers, products, channels and geographies.
Effectiveness of BoD and management oversight, adequacy and effectiveness of CDD & AML/CFT
policies & procedures, effectiveness of Name screening & Transaction Monitoring System,
assessment of measures taken by the FIs to mitigate ML/TF risks including the transnational TF risk
and adequacy and effectiveness of Compliance and Internal Audit functions were assessed during the
inspection.
 Monitoring of AML/CFT regime of SBP:

In order to ensure that banking channel is not used for ML/TF, SBP has taken banking sector-wide
measures. These initiatives have been taken as part of SBP’s strategic goal regarding, ‘Strengthening
and streamlining the regulatory and supervisory framework’:
- Biometric verification of banks accounts: As a result of supervisory follow up on instructions

issued by SBP, 98 percent of banking industry’s customers’ (active) accounts have been
validated through the use of biometric technology by May 2020. The exercise aims to alleviate
FATF concerns regarding Pakistan’s effort to fight money laundering and boost country’s image
and economy.
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- Assessing effectiveness of regulatory regime on AML/CFT: To assess the effectiveness of

SBP instructions in improving compliance of regulatory requirements on AML/CFT, banks are
regularly reporting data on existence of policies and procedures on a prescribed template. Major
areas covered in the template include oversight of senior management/Board, role of internal
audit, compliance, name screening systems, transaction monitoring system, mechanism of
reporting of suspicious transactions, data cleansing exercise and capacity building. The positive
impact of rigorous off-site monitoring is visible in upgraded areas such as IT systems, data
cleansing, HR, STR reporting and internal risk assessment functions.
3.4.4 Capacity Building of Staff

Keeping in view the supervisory transition to RBS Framework, capacity building program for
supervisory officers was initiated through a series of training module. The contents of the training
module not only covered the assessment methodologies, but case studies and exercises were included
to give participants a flavor of practical implications under RBS supervisory regime. Further, awareness
sessions for selected key executives of FIs were also conducted wherein broad contours of RBS
framework and supervisory expectations were discussed.
With increasing emphasis on AML/CFT, SBP undertook capacity building of officers through internal
resources. Furthermore, two capacity building sessions were conducted for officials of banks on risk
based approach for applying AML/CFT controls. A session was also conducted for the officials of Law
Enforcement Agencies on the National Risk Assessment and the legal frameworks relating to Pakistan's
AML/CFT regime.
3.5 Enhancements in SBP's Conduct Regulation and Supervisory Regime

SBP has been making efforts to enhance banking conduct and consumer protection regime under SBP
Vision 2020. Some of the key milestones in this regard, achieved during FY20 are as under:
3.5.1 Review of Complaints against Banks/DFIs/MFBs

SBP has put in place effective and efficient consumer grievance handling mechanisms and Fair
Treatment of Consumer (FTC) regime. During FY20, SBP conducted four years (2016-2019) review
of consumer complaints against Banks/MFBs/DFIs to have insights on complaints management
trends. The analysis was reviewed at the level of the Board of Directors of SBP. The salient features
of the review have been published to emphasize SBP’s narrative that responsible complaint handling
is the core element of FTC and to boost banks’ performance in handling complaints. Further, various
measures were taken to increase awareness of banking consumers.
3.5.2 An integrated approach for Improvement of Complaint Handling Mechanism at banks

SBP has taken up a project in October 2019 to review the complaint handling mechanism at banks in
more detail and to develop an integrated approach for sustained improvement in complaint
management at banks. The project is being executed in collaboration with other departments within
SBP. The project focuses on the assessment of ease of lodgment of complaints with banks especially
for vulnerable segments of society including disabled, illiterate, women in rural areas, senior citizen,
etc. recording of complaints in the system, processing of complaints as per TATs, root cause analysis
and corrective actions taken by the banks. In the first stage completed in FY20, the data from the
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banks was collected, which indicated deficiencies and inadequacy of staff in complaints handling
divisions. In light of the findings, the deficiencies were taken up with the Presidents of the banks for
taking corrective actions. Further, SBP conducted mystery calls to all banks/MFBs to assess the
effectiveness of call centers in the lodgment of complaints. The project has now entered into second
phase, where targeted inspection and mystery shopping will be conducted.
3.5.3 Conduct Assessment Framework (CAF):

SBP issued Conduct Assessment Framework(CAF) which comprises a separate module on dispute
resolution mechanism whereby the banks are required to assess adequacy of complaint handling staff,
visibility of complaint handling function, availability of escalation matrix, surveys on complaint
handling, TATs, etc. CAF is a self-assessment tool, which is submitted to SBP after approval of the
banks’ board of directors. Meetings with all banks/MFBs were conducted during FY20 whereby the
complaint handling module in CAF was discussed in detail and banks were advised to take initiatives
to enhance their internal dispute resolution mechanism (IDR).
3.5.4 Consumer Grievance Handling Mechanism (CGHM)

In light of various enhancements in conduct regulatory corridor and use of technology in banking, a
need was felt to introduce new categories in the complaint template for better analysis as the same
was being reported in the miscellaneous category. SBP, after taking feedback from Pakistan Banks
Association (PBA) and internal stakeholders revised the template with comprehensive coverage of
complaint areas which will be issued in FY21. The new template will also cover details on the number
and volume of transactions and aging of turnaround time.
3.5.5 Engagements and assistance

Given the globally growing focus on Financial Consumer Protection and Conduct Supervision, the
related role of regulators has been largely revitalized. Resonating with the enhanced role to promote
Fair Treatment of Consumer (FTC) and Responsible Banking Conduct, extensive engagements and
review meetings were held with banks separately on various aspects of conduct including but not
limited to complaint handling and conduct assessment framework. Further, several meetings were
held with internal and external stakeholders for bringing synergies in conduct supervision regime.
SBP also arranged awareness session at SBP BSC, Lahore and Sialkot to create awareness among
consumers regarding complaint resolution mechanisms, availability of dispute resolution forums and
rights and responsibilities as a banking customer.
Moreover, additional measures were taken to facilitate and assist customers on SBP’s initiatives to
dampen the effect of COVID-19 outbreak. The capacity of the helpline of SBP was enhanced to
facilitate more people. Similarly, a separate email ID was created to respond to the specific queries
and complaints on relief packages introduced by SBP in the wake of COVID-19.
3.5.6 Handbook on Conduct Regulations

SBP, being cognizant of the global trend and good practices, has undertaken a project to develop and
issue a comprehensive Handbook on Conduct Regulations that will not only consolidate the conduct
regulations at one place but also remove redundancies. The milestones set for FY20 have been
completed.
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3.5.7 Review of website management

The website, is one of the key customer touchpoints which needs management to reduce information
asymmetries and other allied conduct risks. Given its vitality, SBP conducted a review of website
management at banks covering areas of ‘Policy and oversight’, ‘Content development &
management’ and ‘Monitoring and Improvements’. Data on these areas were acquired from banks
through a questionnaire. Besides, the experiential aspects like website’s aesthetics, user/consumer
friendliness and perception were covered through mystery monitoring of sampled banks. The
recommendations of the review are in the process of implementation that will be completed next year.
SBP is also responding and handling a large number of complaints through various channels including
Pakistan Citizen Portal established by the Prime Minister Delivery Unit. The quantum of the
complaints/queries have increased substantially in the wake of pandemic situation that were handled
effectively and also recognized by the stakeholders.
3.5.8 Regulatory Enhancements in Private Credit Bureaus/Credit Registry-eCIB
 Membership of Licensed Credit Bureaus

Under the Credit Bureaus Act, 2015, all credit institutions are required to become a member of at least
one licensed Credit Bureau. Accordingly, the existing Credit Bureaus Regulations, 2016 amended to
allow membership of Credit Bureaus by all Credit Institutions to start sharing their consumers,
commercial, SMEs, and corporate data. Resultantly, almost all Credit Institutions have become
members of Licensed Credit Bureaus. The dissemination of Credit Information Report along with
value added services and products by the licensed Credit Bureaus, would further strengthen Credit
Reporting regime of Pakistan.
 Use and Reporting of Alternate Data for Access to Finance

Access to financing remains one of the most significant constraints for the survival, growth, and
productivity of MSMEs and individuals. The access to finance to informal sector with no or thin
credit history can be enhanced and expanded by promoting the use of alternate data in Credit
Reporting. Efforts were made by SBP to allow utility companies to become a member of licensed
credit bureaus and start sharing their data. At the initial stage, Telecom companies had to share their
data. Subsequently, the companies supplying gas or electricity through distribution or transmission
lines have to share the data enabling the licensed Credit Bureaus to analyze this data enabling the
informal sector to develop their credit history to access to finance. Federal Government has issued
requisite notifications in this regard.
 Improvements in quality of data reported by FIs to eCIB-SBP

SBP has been continuously monitoring the quality of data reported by the member FIs. SBP has
recently undertaken an initiative of in-depth assessment of the Banks/DFIs/MFBs’ overall mechanism
put in place for ensuring quality data reporting.
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3.6 Other Initiatives
3.6.1 Ease of Doing Business (EODB) Index of World Bank

Since 2017, SBP is leading the reform efforts for improving Pakistan’s ranking in the “Getting
Credit” indicator of Ease of Doing Business Index of the World Bank. SBP has been actively
collaborating with federal agencies, the World Bank and other stakeholders on implementation
of reforms. SBP continued to focus on awareness and dissemination of relevant information amongst
the stakeholders. SBP, in collaboration with SECP, World Bank and BOI, proposed legal amendments
in the Financial Institutions (Secured Transactions) Act 2016 which were issued through a
Presidential Ordinance in April 2020 to improve Pakistan's score in the Getting Credit indicator of the
EODB index.
3.6.2 Consolidated List of SBP’s Regulated Institutions on SBP Website

SBP regulates multiple categories of Financial Institutions (FIs) including Banks, Development
Finance Institutions, Micro Finance Banks, Exchange Companies, Credit Bureaus and Payment
System Operators/Payment Service Providers. The Basel Core Principles for Effective Banking
Supervision (BCPs) require supervisors to ensure availability of current list of FIs, operating within its
jurisdiction in a way that is easily accessible to the public. While information on SBP regulated
entities was available on the website, it was in a scattered form. Accordingly, to align the availability
of information with the BCP, SBP has made available the consolidated list of the regulated
institutions at a single web link. Apart from the general information on contact details of the regulated
entities, the consolidated list now provide additional information on the details of complaint handling
units and licenses/authorizations/ permissions held by each of the institution.
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4 Broadening Access to Financial Services
4.1 National Financial Inclusion Strategy (NFIS)
SBP, being the apex policy and Table 4.1: Financial Inclusion Indicators
Indicators Jun 15 Jun 20 Growth
regulatory body for financial sector, (Percentage)
is fully committed towards In terms of outreach
broadening access to financial No. of Deposit Accounts (million) 41.7 59.9 43.6
No. of Branchless Banking Accounts 10.8 52.5 386.1
services and implementing (million)
development finance reforms and Scheduled Bank Deposits (Rs. in billions) 9,153 16,205 77.0
In terms of payment Infrastructure
policies. The stated vision for
No. of ATMs 9,597 15,612 62.7
financial inclusion in Pakistan is to No. of Bank Branches 11,937 16,067 34.6
improve the access and usage of No. of POS Machines 41,183 49,067 19.1
quality financial services among Source:
Statistics on Scheduled Banks in Pakistan
individuals and firms, with dignity Agricultural Credit & Microfinance Department, SBP
Payment System Review
and fairness.
In order to promote financial inclusion and improve access to finance for priority sectors,
Government of Pakistan (GoP) and SBP adopted National Financial Inclusion Strategy (NFIS). The
key objective of the Strategy is to achieve inclusive economic growth through enhanced access to
finance & deposit base, promotion of small & medium enterprises, easy and affordable access to
finance to farmers, facilitation in low cost housing finance and provision of Shariah compliant
banking solutions.
NFIS has made significant Table 4.2: Sectoral Progress
headway in terms of creating an Sector Item Baseline FY 19-20 Percentage
FY 15 As of Jun change
enabling legal and regulatory Agricultural Agri Credit Disbursement 515.9 1,215 135.5
Finance (Billion Rs.)
environment; establishing Outstanding (O/S) 2.18 3.74 71.6
financial market infrastructure, Borrowers
(Millions)
developing innovative products Microfinance MF Gross Loan Portfolio 45.6 218.2 378.5
& services and new alternate (MFBs) (Billion Rs.)
No. of Outstanding 1.29 3.54 174.4
delivery channels; and Borrowers
enhancing the capacity building (Millions)
SME Outstanding SME financing 260.7 401.13 53.8
& awareness initiatives. As a Finance (Billion Rs.)
Outstanding SME borrowers 152,495 188,804 23.8
result of these initiatives, the
unique account ownership in
Pakistan reached up to 66 million accounts with 60 percent active accounts. Regarding progress in
priority sector lending, all the sectors have shown positive growth in terms of credit disbursement and
outreach (Table 4.2). Further, the progress on major initiatives taken by SBP under NFIS are
mentioned in Box 4.1.
65
Box 4.1: Initiatives under NFIS Strategy

 Development of Asaan Mobile Account (AMA) Scheme: The AMA Scheme has been developed to improve
accessibility of new customers for account opening, drive usage of digital financial services through increased
transaction volume across various channels and increase access to financial services through digital means. Pilot
testing of AMA scheme in a live environment was completed in March 2020 and commercial launch is expected
soon.
 Setting up of Digital Financial Services (DFS) – Innovation Challenge Facility (ICF): The ICF facility was set
up to support financial service and financial technology providers/institutions to develop new or expand on existing
digital financial products, services and delivery platforms that increase financial access for people living at the
bottom of the pyramid. Currently, the facility focuses on two areas, i.e. (i) improving digital financial inclusion of
small businesses and (ii) scale up an affordable online tax filing portal for SMEs.
 Automation of Central Directorate of National Savings (CDNS): CDNS was provided support to automate
its 165 branches to enable CDNS to: (i) reduce the cost of funds by at least 25 percent; (ii) Increase customer
base by at least 50 percent (iii) develop new digital channels to enhance customer experience; and (iv) develop
HR capability and capacity regarding digitalization.
 Automation of Securities and Exchange Commission of Pakistan (SECP): SECP has been supported for its
Leading Efficiency through Automation Prowess (LEAP) Programme to help SECP in digitization and
automation of its business processes to improve ease of doing business in Pakistan. Particularly, under the
LEAP program, SECP has established an electronic Secured Transactions Registry (STR) in line with Secure
Transaction Act 2016. The registry helps SMEs to obtain financing from banks/DFIs against a registered charge
on their movable assets.
 National Financial Literacy Program (NFLP): NFLP is SBP’s flagship program focused on imparting basic
financial education to unbanked/ underserved segments of population especially the women & youth. Keeping
in view the diversity & literacy level of target audience, the NFLP program has been segmented into two
components i.e. National Financial Literacy Program for Adults and National Financial Literacy Program for
Youth. As of June 2020, more than 924,000 individuals have benefited from these programs.
 Banking on Equality-A Policy to Reduce the Gender Gap in Financial Inclusion by tackling the rising gender
gap in access and usage of financial services in Pakistan. The policy aims to introduce a gender lens within the
financial sector through identified pillars and specific measures, to bring about a shift towards women friendly
business practices. The policy document will soon be made available for public consultation. Once issued, identified
policy measures will be applicable on Commercial Banks, Islamic Banks, Microfinance Banks, Development
Finance Institutions (DFIs) and Electronic Money Issuers (EMIs).
 Development of Electronic Warehouse Receipt (WHR) financing mechanism. The mechanism is being
developed to enhance farm credit and reduce post-harvest losses. The Securities & Exchange Commission of
Pakistan (SECP) in collaboration with SBP has issued the Collateral Management Companies (CMC) Regulations
on July 31, 2019, under the Companies Act 2017. Further, in line with CMC Regulations 2019, SBP has issued the
necessary amendments in Prudential Regulations for Agri. Financing, SME Financing, and Corporate &
Commercial Banking to facilitate banks to provide financing against WHR.
• Financial Inclusion and Infrastructure Project (FIIP): In order to support the NFIS implementation, World Bank
(WB) committed to provide a financial intermediary loan of USD 137 million to Govt. of Pakistan (GoP). SBP is
responsible for implementing program components worth USD 127.6 million. This initiative aims to improve the
access of financial services among masses by providing a line of credit to MFBs, MFIs and NBFCs for lending to
micro-borrowers / enterprises. SBP successfully disbursed Rs. 9.1 Billion to the Participating Financial Institutions
(PFIs). The PFIs have disbursed more than two hundred thirteen thousand (213,000) micro loans including more
than one hundred fifty-five thousands (155,000) loans to women micro-borrowers. These loans are targeted to the
poorest sector of the economy, especially women and will help in eliminating poverty and achieving a sustainable
standard of living. Under FIIP, SBP is also developing a National Payment Gateway-NPG that provides an
interoperable platform for micro, retail and high value payments.
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Broadening Access to Financial Services
4.2 Agricultural Finance

During the Table: 4.3 Agricultural Credit Targets and Disbursement (Rupees in billions)
FY 2019 - 20 FY 2018 - 19
second half of
Banks Target Disbursed % Target Disbursed % %
FY20, Pakistan’s achieved achieved YoY
agricultural 5 Big CBs 705.0 708.3 100.5% 651 654 100.5% 8.3%
ZTBL 100.0 62.3 62.3% 100 72 72.0% -13.5%
sector faced PPCBL 13.0 8.8 67.9% 13 10 76.9% -12.0%
DPBs(14) 253.6 225.0 88.7% 245 212 86.5% 6.1%
multiple IBs(5) 55.0 42.1 76.6% 50 39 78.0% 7.9%
challenges due to MFBs(11) 184.0 139.3 75.7% 156 154 98.7% -9.5%
MFIs/RSPs 39.4 28.9 73.4% 35 34 97.1% -15.0%
the COVID-19 Total 1,350 1,215 90.0% 1,250 1,174 93.9% 3.5%
and locust attack,
which reduced the sector’s growth prospects and put millions of farmers under distress. To overcome
these challenges, SBP along with the government and financial sector, made efforts to provide relief to
farming communities. For FY20, a lending target of Rs.1,350 billion was allocated to Participating
Financial Institutions (PFIs), to meet the growing credit demand of farmers. Despite the
abovementioned challenges, PFIs were able to disburse around 90 percent of the overall target i.e.
Rs.1,215 billion, an increase of 3.5 percent compared to last year disbursement of Rs.1,174 billion
(Table 4.3)
The growth and resilience of agricultural financing can be attributed to SBP’s continuous monitoring
and follow-up of assigned targets with concerned financial institutions. Major initiatives taken by SBP
to support agriculture sector include the following:
Box 4.2: Initiatives for promotion of Agriculture Financing

 Loan repayment relief to dampen the effects of COVID-19
Banks have been instructed to allow deferment of loan principal to agri. borrowers, for one-year, upon their request.
Regulatory space is also provided to facilitate banks in rescheduling/restructuring of loans for borrowers who cannot
service markup or need deferment exceeding one year.
 Regulatory space for innovative financing
Relevant Prudential Regulations have been amended to allow Electronic Warehouse Receipt (EWR) as acceptable
collateral for bank financing. Further, the maximum tenure for agricultural development loans has been increased
from 5 to 10 years to encourage development and mechanization for efficiency, resource conservation and yield
enhancement. Additionally, Indicative Credit Limits and Eligible Items for Agri. Financing have also been revised
to allow banks to provide loans to farmers as per their internal policies. This will also facilitate provincial planning
departments in estimating the total financial and credit requirements of provinces/regions for agriculture sector.
 Crop Loan Insurance Scheme (CLIS) & Livestock Insurance Scheme for Borrowers (LISB)
CLIS has enabled financial access for farmers, with premium for small farmers being borne by the government.
During the period July 2008 to June 2019, banks have submitted premium claims of Rs.8.2 billion against 6.1
million beneficiaries. Insurance premium for small livestock farmers, availing bank financing, continues to benefit
farmers as claims of Rs.2.3 billion against 0.6 million beneficiaries have been received during period July 2014 –
June 2019.
 Adoption of Automation of Land Record for Agri. Financing
SBP is working in collaboration with provincial governments and financial institutions for implementing and
mainstreaming electronic land verification records and charge creation for availing bank loans. In Punjab, 32 out of
35 banks doing agriculture financing have signed MOU with Punjab Land Revenue Authority (PLRA) for availing
these services. Out of these, 20 banks are already using the portal for issuing loans to farmers, while other banks are
in process of integrating their banking system with the PLRA portal.
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4.3 Microfinance
During FY20, the microfinance industry, constituted by Microfinance Banks (MFBs) and Non-Bank
Microfinance Companies (NB-MFCs), was expected to continue to register growth across the board.
Microfinance Sector is the largest contributor towards financial inclusion at the base of the pyramid in
Pakistan and a major engine for poverty reduction and employment for the unbanked and underserved
segment of the economy. As of June 2020, around 46 Microfinance Providers (MFPs) reported
provision of microfinance services to poor and low-income clientele to help them increase their
income and improve their standard of living. Microfinance Banking sector includes 11 deposit taking
Microfinance Banks (MFBs) and MCB Islamic Bank8 that are regulated by SBP while the rest were
NB-MFCs regulated by Securities & Exchange Commission of Pakistan (SECP). MFPs are offering a
host of financial services to low income segment to improve their livelihood opportunities and social
well-being.
At the close of FY20, MFBs’ asset base crossed Rs.400 billion, an increase of 14 percent from previous
corresponding period (Rs.350 billion). Table 4.4: Microfinance Banking Indicators
MFBs witnessed a growth of 5.2 percent (Rupees in billions)
(Rs.10.9 billion) in its microcredit portfolio Indicators Annual
FY19 FY20
Growth
to reach Rs.218.3 billion as against Rs. No. of Borrowers 3,485,757 3,541,183 1.6 %
207.5 billion at the end of preceding fiscal Gross Loan Portfolio 207.500 218.360 5.2 %
Loan 59,528 61,663 3.6 %
year. Likewise, the number of MFBs’ Average Balance (in Rs.)
microcredit borrowers recorded an increase Deposits 248.809 292.239 17.5 %
of 1.6 percent to grow over 3.5 million by No. of Depositors 34,327,968 49,360,158 43.8 %
Equity 47.176 43.445 -7.9 %
the end of the FY20. Similarly, growth was
Assets 350.139 400.417 14.4 %
also witnessed in MFBs’ deposits that Borrowings -10.7 %
27.329 24.408
reached Rs.292.2 billion from Rs.248.8 Source: Agricultural Credit & Microfinance Department, SBP.
billion, registering an impressive growth of
17.5 percent (Rs.43.4 billion). Concurrently, the number of depositors increased by 15 million to reach
49.3 million in FY20 from 34.3 million in FY19, an impressive 43.8 percent growth in outreach of
deposit services. By the end of FY20, MFBs’ aggregate equity stood at Rs.43.4 billion. (Table 4.4)
Altogether, banks and non-bank Table 4.5: Microfinance Industry Major Indicators
microfinance providers were able to (Rupees in billions)
Indicators FY19 FY20* Annual Growth
register 2.1 percent growth in
No. of Borrowers 7,142,247 6,885,117 -3.60 %
aggregate microcredit portfolio, Gross loan portfolio 299.948 2.13 %
293.695
which grew by Rs.6.2 billion to Average Loan Balance (in Rs.) 41,121 43,565 5.94 %
surpass Rs.299.9 billion as of FY20 Source: PMN MicroWatch, Issues 52 & 56.
from Rs.293.6 billion in previous
fiscal year. However, the number of borrowers dropped by 3.6 percent to over 6.8 million at the end of
FY20.
8
Through separate counters in existing branches.
68
Over the years NB-MFCs served a larger number of borrowers, however, it was for the first year that
MFBs were able to register their lead by serving 52 percent borrowers. Moreover, the MFBs also
continued to be front-runners in terms of the aggregate value of loans (72 percent). The industry-wide
average outstanding loan balance increased to Rs.43,565 billion, however, average outstanding balance
of loans offered by MFBs (Rs.61,663) continued to be on a higher side (Table 4.4) when compared
with their non-banking counterparts. (Table 4.5).
Box 4.3: Initiatives for Promotion of Microfinance
SBP has provided continued support to microfinance sector to boost financial inclusion in Pakistan. Key initiatives to
promote the sector are as follows:
a) Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for MFBs were further aligned
with the Financial Action Task Force (FATF) recommendations. The revisions are aimed at adding clarity besides
strengthening the framework to preserve the integrity, soundness and safety of the financial system and deter against
possible use of MFB channel for money laundering, terrorist financing, proliferation financing and other illicit activities.
 Amendments to align AML/CFT Regulations for MFBs with the Financial Action Task Force (FATF)
recommendations9.
 Compliance of AML/CFT Regime for MFBs, that require time bound biometric verification of accounts.10
b) Additional guidance on Fit & Proper Test (Criteria) for MFBs were issued to ensure that persons subject to FPT
shall become disqualified if they are designated/proscribed or associated directly/indirectly with designated/proscribed
entities/persons under United Nations Security Council Resolution on Anti-Terrorism Act 199711.
c) The scope of SBP’s AML/CFT Guidelines on Risk Based Approach (RBA) has been broadened to include MFBs.
These guidelines emphasize on (i) identifying and assessing the ML/TF risks in line with nature, scale, diversity and
complexity of business, (ii) ensuring that internal policies, procedures etc. are compliant with applicable AML/ CFT
laws and regulation and (iii) implementing adequate, reliable, efficient automated systems and technologies
proportionate to ML/ TF/ PF risks.
d) SBP has enhanced the lending limits under ‘Housing Finance’ for MFBs by increasing the maximum loan size from
Rs. 500,000 to Rs. 1,000,000. Moreover, the restriction to maintain 60 percent of housing portfolio within the loan
limit of Rs.250,000/- has also been removed. MFBs have been advised to develop related institutional capacity and
appropriate mechanisms for monitoring the housing finance exposure.
e) Regulation G-2 ‘Remuneration to Directors’ has been revised to enhance remuneration ceiling and provide detailed
guidance to ensure transparency and disclosure12. The revision is expected to enable MFBs to hire and retain experts
on their BoD for a better strategic direction and long-term growth.
f) Measures to dampen the adverse effects of COVID-19 for MFBs/microfinance borrowers

In order to dampen the adverse effects of COVID-19 for microfinance borrowers and to enable the Microfinance Banks
to continue to fulfill their role in funding the real economy, following significant decisions had been taken by State
Bank of Pakistan.
 Payment of principal on loan obligations will be deferred by Microfinance Banks (MFBs).

Microfinance Banks will defer the payment of principal loan amount by one year. To avail this relaxation,
borrowers should submit a written request to the MFBs before June 30, 2020. They will, however, continue to
service the mark-up amount as per agreed terms and conditions. The deferment of principal will not affect
9 AC&MFD Circular No. 03 of 2019

10 AC&MFD Circular No. 04 of 2019
11 AC&MFD Circular Letter No. 04 of 2019
12
AC&MFD Circular No. 01 of 2019
69
borrower's credit history and such facilities will also not be reported as restructured in the credit bureau's data. As
COVID-19 pandemic prevails, the relief period has been extended up to September 30, 2020.
 Regulatory criteria for restructuring/rescheduling of loans have been temporarily relaxed till 31st March 2021 for
MFBs.
For borrowers, who are not able to service the mark-up amount and their financial conditions require extension
exceeding one year, SBP has relaxed the regulatory criteria for restructuring/rescheduling of loans. The loans that
are re-scheduled/restructured within 90 days from the due date of payment will not be treated as defaults and such
facilities not be reported as restructured in the credit bureau's data. By the end of June 2020, around 1,018,204
microfinance banks’ borrowers have applied for afore-stated relief and over Rs. 64 billion has been restructured or
rescheduled by the microfinance banks for the period up to one year to ease the financial burden on low-income
households from the impact of COVID-19.
Relief to borrowers adversely affected by natural calamity: MFBs continued to provide relief to adversely
influenced borrowers in eight districts declared as calamity affected by the Government of Sindh namely
Tharparkar, Umer Kot, Sanghar, Thatta, Jamshoro, Dadu, Badin and Kamber Shahdad Kot. Microfinance banks
were advised to undertake all possible measures in line with Prudential Regulation R – 9: ‘Rescheduling/
Restructuring of Loans.’ The regulation requires MFBs to have in place a policy duly approved by their Board of
Directors that among other things shall envisage steps to provide relief to borrowers adversely affected by natural
calamities. As of June 2020 MFBs collectively provided relief of Rs.706 million to 11,636 borrowers in terms of
restructuring and rescheduling of loans. Keeping in view ongoing Coronavirus Pandemic situation, aforesaid relief
provided to MFBs' borrowers in calamity affected areas of Thar has been extended by SBP for one year till March
2021.
 Similarly, amid prevailing pandemic, MFBs have been advised to resume biometric verification, prescribed vide
AC&MFD Circular No. 04 of 2019 with revised timelines of January 31, 2021 and March 31, 2021 for customers
assigned medium and normal priorities, respectively.
4.4 Branchless Banking (BB)

Performance of the Branchless Banking Industry
During FY20, all key indicators of branchless banking exhibited an encouraging growth, which bodes
well for the gradual adoption of digital channels and usage of basic financial services in the country.
At the end of FY20, thirteen Table 4.6 : Branchless Banking Indicators
Authorized Financial Institutions BB Indicators FY19 FY20 Growth
(AFIs/branchless banking players) Number of Agents 421,053 445,181 5.7 %
were operating and providing basic Number of Accounts 35,730,704 52,522,222 47.0 %
financial services across the country. Deposits (Rs. in millions) 25,664 36,660 42.8 %
The number of BB accounts reached No. of transactions ('000') 1,116,266 1,489,664 33.5 %
Value of transactions (Rs. in
52.5 million after witnessing growth millions) 4,128,868 5,151,391 24.8 %
of 47 percent as compared to Source: Agricultural Credit & Microfinance Department, SBP.
previous year. BB deposits increased
by 42.8 percent during FY20 to reach Rs.36.7 billion from Rs.25.7 billion, compared to last year.
Branchless banking players have also increased their agent network throughout the country to reach
445,181 by FY20 as compared to 421,053, showing a growth of 5.7 percent. Similarly, the volume
and value of transactions witnessed 33.5 and 24.8 percent increase, respectively over FY19, which is a
positive indicator regarding usage of BB channel. The number of transactions performed during FY20
70
were 1.49 billion with total value of around Rs.5.2 trillion. These compute to more than 4 million
transactions per day and average transaction size of Rs.3,458.
Box 4.4: Initiatives for Promotion of Branchless Banking
a) Branchless Banking Regulations for Financial Institutions: In order to enhance the outreach of Branchless
Banking (BB) operations for achieving the objective of financial inclusion and strengthening the controls
related to Money Laundering (ML)/ Terrorist Financing (TF) risks, SBP issued revised Branchless Banking
(BB) Regulations for Financial Institutions vide BPRD Circular No. 10 of 2019 dated December 30, 2019. It
may be noted that SBP introduced BB in 2008 which is updated from time to time based on technological
developments and market assessment/demand. The BB Framework of 2019 emphasized the prerequisites of
Simplified Due Diligence of BB Operations in light of Financial Action Task Force (FATF)’s
recommendations. Other key highlights of BB Framework of 2019 include:
 Gradually phasing out of Person-to-Person (P2P) transfer by June 30, 2020

 Biometric Verification is made mandatory for all Level 1 account
 Complete Biometric verification of all legacy BB accounts
 Enhance monthly limit of BB level 1 account to Rs. 200,000/- per month
b) Measures to dampen the adverse effects of COVID-19: SBP prescribed following measures (vide BPRD
Circular Letter No. 10 dated March 26, 2020) to minimize the risks of the pandemic;
 Extended timelines for Biometric Verification of legacy BB Level - 1 accounts since March 2020 till
September 30, 2020 enabling customers to open and use BB platform for financial services.
 Encouraged AFIs to introduce Biometric Verification through smart phone applications after complying
with NADRA's security standards and also use digital channels for BB agents on-boarding with an
objective of increasing financial services access points.
 Directed AFIs to ensure safety and hygiene measures, including the availability of liquid Soap/ Sanitizers,
at all biometric touch-points.
c) Capacity Building Program of BB Agents: SBP initiated capacity building of BB agents on nationwide scale.
In Phase-1 of the project, 73 bank officials were trained as trainers. During 2019, SBP launched Phase-2 of this
project, under which the trained bank officials will further impart training to 10,000 unique BB agents in two
years. This project is expected to enhance the capacity of BB agents through classroom training. As of
December 2019, 4,140 BB agents were trained across 15 major cities.
4.5 Small and Medium Enterprise Finance

Small and Medium Enterprise (SME) sector is playing a pivotal role in the economy of Pakistan. SME
sector is considered as backbone of the economy as it employs more than 80 percent of non-
agricultural workforce. However, banks have been reluctant to lend to SME sector due to multitude of
factors. This includes lack of acceptable collateral, perceived riskiness of the sector, corporate
mindset, high transaction cost, lack of banking products matching with the business needs of SMEs,
low level of financial literacy, taxation issue, religious mindset of potential borrowers, etc. SBP has
taken following initiatives for promotion of SME financing during FY20:
4.5.1 Outstanding SME Finance

The outstanding portfolio of SME Financing by Banks/ DFIs as of June, 2020 stood at Rs.401 billion
as compared to Rs.464 billion as of June, 2019, showing YoY decline of 13.7 percent. Main reason
for this decline was COVID-19 pandemic which affected businesses and their borrowing capacity.
Besides, banks also adopted cautious approach while lending to SMEs.
71
4.5.2 Establishment of Pakistan Credit Guarantee Company

Pakistan Credit Guarantee Company (PCGC) has been established to provide risk sharing facility to
banks on their lending to SMEs. The company has been incorporated with SECP and has been
notified as DFI by Federal Government and is being operationalized.
4.5.3 Strengthening Secured Transactions Framework in Pakistan

SBP provided support and coordinated with Ministry of Finance, Government of Pakistan and SECP
in setting up electronic Secured Transactions Registry (STR). The registry has been made operational
under the ambit of SECP since April 30, 2020. The STR would enable SMEs to avail financing
against their movable assets as collateral since this registry will allow banks to create charge on
movable assets. The process of charge registration with STR has also started and SBP provided
necessary support by holding awareness sessions for banks in May-June, 2020.
4.5.4 Prime Minister's Kamyab Jawan – Youth Entrepreneurship Scheme (PMKJ-YES)

Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES) was launched in
October, 2019 to enable youth to avail affordable financing for starting up new business or
strengthening their existing business. The scheme has been launched with the main objective of
providing subsidized loans to unemployed youth aged between 21 and 45 years, however, minimum
age limit for IT/e-commerce related businesses is 18 years. Government is providing markup subsidy
to make loans affordable for the borrowers, while risk coverage of upto 50 percent is also provided by
the government under this scheme to motivate banks to extend loans to SME sector. As of June 30,
2020, disbursement of Rs.655 million has been made to 1,595 borrowers under the scheme.
4.5.5 Capacity Building and Awareness Creation Campaign

In FY20, NIBAF conducted 20 training programs on SME financing for the banking officials. In
addition, NIBAF conducted 14 awareness cum handholding sessions for SMEs in different cities of
the country. Total 1,373 participants attended these training and handholding sessions. Additionally,
SBP-BSC conducted 281 awareness sessions across the country in FY20. These programs are being
held under capacity building and awareness creation campaign launched by SBP.
4.5.6 Regulatory Relief to Dampen the effect of COVID-19

SBP allowed banks/DFIs to defer repayment of principal part of loan amounts by one year, upon
receipt of written request of SME borrowers and housing finance borrowers till September 30, 2020;
provided the obligor will continue to service the mark-up as per agreed terms & conditions. In case
where obligors are unable to service the mark-up amount or need deferment exceeding one year, SBP
allowed banks/DFIs to reschedule / restructure such financing facilities upon written request of the
borrowers. If the rescheduling / restructuring is done within 180 days of the loans being past due, such
financing facilities will continue to be treated as regular and reported in the eCIB accordingly.
4.5.7 Increase in regulatory limit on extension of credit to SMEs

In an era of economic turmoil, SMEs are typically at the forefront to bear the brunt of credit supply
contractions. Therefore, as a tool to incentivize banks to provide additional loans to SMEs, the
existing regulatory retail limit of Rs.125 million has been enhanced to Rs.180 million. This measure
will incentivize banks to provide loans to SMEs since such loans will attract less capital charge.
72
4.6 SBP Refinance Schemes

SBP is continuously making efforts to emphasize banks and DFIs to meet the financing needs of
different priority segments of the country including SMEs and exporters. SBP launched a number of
refinance schemes under which short and long-term financing facilities are available to priority
segments through banks at concessional mark-up rates. Major SBP refinance schemes are as under:
4.6.1 Export Finance Scheme and Islamic Export Refinance Scheme (EFS/IERS)
Export Finance Scheme is a short-term financing facility for exports of value added goods available
through participating banks as per the limits allocated to individual banks. Maximum loan tenor for
financing is 180 days. The existing rate of mark-up under EFS is 3 percent per annum while higher
export performance against availed ERF facilities qualifies the exporters for additional markup rebate.
Shariah compliant mode of financing is also available for exporters under Islamic Export Refinance
Scheme (IERS). The outstanding export finance as of June 30, 2020 stood at Rs.504 billion, which is
33 percent higher on YoY basis (Rs.379 billion as of June 30, 2019).
4.6.2 Long-Term Financing Facility (LTFF)/ Islamic Long Term Financing Facility (ILTFF)
LTFF / ILTFF is a long-term refinance facility to promote export oriented industrial development.
With a view to promote industrial development, the per project limit under LTFF/ ILTFF was
increased from Rs.1.5 billion to Rs.5 billion in January 2020. Further, the scope of LTFF / ILTFF has
also been extended to all sectors, which are allowed as per ambit of export policy order issued by the
Ministry of Commerce from time to time. As of June 30, 2020, outstanding finance under LTFF /
ILTFF stood at Rs.209 billion which is 33 percent higher YoY (Rs.157 billion as on June 30, 2019).
4.6.3 Refinance Schemes by SBP to support business community and health sector during
COVID-19 Pandemic:
To support business community and health sector during COVID-19 pandemic, SBP issued the
following time bound refinance schemes along with Shariah compliant versions:
 Temporary Economic Refinance Facility (TERF)

SBP announced TERF in March 2020 to propel investment in the industrial sector. Under this scheme,
SBP provides refinance through participating banks / DFIs at a maximum end-user rate of 5 percent
with SBP refinance rate of 1 percent. Maximum financing limit is Rs.5 billion per establishment. The
refinance is provided for a maximum time period of 10 years inclusive of two years grace period. The
main purpose is for setting up of new industrial units as well as BMR / expansion of existing ones.
Shariah compliant alternate of this facility is also available. As of September 03, 2020, Rs 53.73
billion have been approved for 99 industrial projects under this refinance facility.
 Refinance Facility for Combating COVID-19 (RFCC)

In order to combat the impact of COVID-19, SBP introduced in March 2020 a time bound emergency
support refinance scheme for hospitals/medical centers & manufacturers of protective gears and
equipment, including items such as masks, dresses, testing kits, hospital beds, ventilators etc. Further,
100 percent cost of civil works of isolation wards is also provided under the scheme. SBP provides
refinance at zero percent while the end-user rate is 3 percent for 5 years including grace period of upto
6 months. Further, maximum financing limit to a single hospital / medical center was enhanced to Rs.
500 million from initial level of Rs.200 million. Shariah compliant alternate of this facility is also
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available. As of September 03, 2020, Rs.6.24 billion have been approved for 31
hospitals/manufacturers under this facility
 Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of
Business Concerns
SBP introduced this refinance scheme in April, 2020 with a view to facilitate businesses to retain their
employees and prevent layoffs. The end user rate is 5 percent under the scheme while SBP rate of
refinance is 2 percent for corporate / commercial and 1percent for SME borrowers. Further, additional
rebate of 1 percent by SBP is provided to borrowers who are on active tax payers list. With budgetary
allocation from Government of Pakistan, risk sharing facility was also introduced under the scheme,
wherein risk sharing of 40 percent is being provided against first loss on disbursed portfolio (principal
portion only) of eligible borrowers with sales turnover upto Rs.2 billion while for loans to SMEs with
turnover up to Rs.800 million, 60 percent risk coverage is being provided. Shariah compliant alternate
of this scheme is also available. As of August 21, 2020, Rs.183.43 billion had been approved under
this facility to pay off salaries and wages of approximately 1.43 million jobs.
 Relaxations on financing under SBP’s Refinance Schemes

 In case of deferral of principal or restructuring / rescheduling of financing of borrowers under
SBP’s long term refinance Schemes, SBP has allowed banks/ DFIs to extend repayment period
for an additional period of one year over the maximum tenor available under these schemes.
 Export Finance Scheme (EFS): SBP reduced the performance requirement under EFS Part-II
from twice to one-and-a-half times that is not only effective for FY20 but also for FY21. SBP
also extended existing export performance period under EFS Part-II of one year by another 6
months for FY20. The export performance of extended period will also be accounted for
exporters’ limits under EFS Part-II for FY 21, thereby allowing higher limits to exporters.
Further, the shipment period under EFS Part-I has also been extended by 06 months for
shipment falling due from January 2020 till June 2020.
 Long term Financing Facility: The eligibility requirement for availing financing has been
reduced from exports upto 50 percent, or USD 5 million to 40 percent or USD 4 million,
whichever is lower, for all the borrowings during the period January 01, 2020 to September 30,
2020. In case of exporters opting for projected exports criteria, SBP has extended export
performance period by one year for each stage of meeting minimum exports, thereby extending
the maximum period of existing 4 years to 5 years.
4.7 Infrastructure Project Finance

The financing to infrastructure projects from banks and DFIs witnessed 5.43 percent increase during
FY20. As of June, 2020, the outstanding financing for infrastructure projects reached Rs.767.7 billion
as compared to Rs.728.1 billion in June 2019.
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4.7.1 SBP Financing Scheme for Renewable Energy

SBP Financing Scheme for Renewable Energy was issued in June 2016 with the aim to address dual
challenge of energy shortage and climate change. The scheme comprised of two categories: Category
1 allowed financing for setting up of renewable energy power projects with capacity ranging from 1
MW to 50 MW while category II allowed financing for installing renewable energy based solutions
for generation of electricity up-to 1 MW. On July 26, 2019, SBP, based on feedback of stakeholders,
introduced revised Financing Scheme for Renewable Energy (RE Scheme) along with offering its
Shariah complaint version. This revised scheme introduced a new Category III for facilitating
financing to vendors / suppliers for installation of wind and solar systems/ solutions of up-to 1 MW.
The validity of the scheme has also been extended until June 30, 2022.
Since the issuance of the scheme, total outstanding financing under the scheme, as of June 30, 2020,
reached to Rs.15.56 billion for 217 projects having combined potential of adding 292 MW to national
grid. The current revision in the scheme is expected to not only attract fresh investment in the sector
but also facilitate production of clean energy in the country, which will help in mitigating effect of
climate change.
4.7.2 Green Banking Guidelines (GBGs):

The primary objective of GBGs is to motivate banks / DFIs for Green / Sustainable banking practices
and reduce vulnerability of financial system from risks arising from the environmental hazards. SBP
formulated a plan to implement the GBGs in all banks and DFIs. Under the plan, SBP seeks the
implementation status of GBGs from all banks and DFIs, as and when required, through prescribed
format.
4.8 Housing Finance Division
4.8.1 Pakistan Mortgage Refinance Company (PMRC)

PMRC has been incorporated to provide long term funding to Primary Mortgage Lenders (PMLs).
Keeping in view the distinctive mode of PMRC operations, its low risk profile and mono-line
business activity, SBP granted regulatory relaxations to PMRC in capital and reserve requirements.
PMRC has also been allowed to avail preferential risk weights for its refinance portfolio and securities
issued, owing to its low risk profile. It commenced business on June 12, 2018 and has an outstanding
refinance portfolio of over Rs.10.7 billion as of June 30, 2020.
4.8.2 Capacity Building

In order to promote bank’s outreach to borrowers in the area of Housing Finance, SBP in
collaboration with NIBAF initiated capacity development programs for banks. Nine iterations of the
housing finance capacity building programs have been conducted during FY20.
4.8.3 Mandatory Targets to banks to increase housing & construction financing

To promote housing and construction of buildings activities in the country, as envisaged by the GoP,
SBP issued instructions for mandatory targets of financing for banks to extend mortgage loans and
financing for developers and builders. Banks will be required to increase their housing and
construction of building loan portfolios to at least 5 percent of their private sector credit by the end of
December 2021.
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4.8.4 Regulatory Relief to Dampen the Effects of COVID-19

Banks have been allowed to release and use the general provision maintained in terms of Regulation
HF-9 of Prudential Regulations for Housing Finance, against the specific provision requirement of the
housing finance portfolio until December 31, 2021.
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5 Islamic Banking
5.1 Overview
Islamic banking industry has Table 5.1: Industry Progress and Market Share*
Rs. in billion
registered substantial growth during Islamic Banking Share in Overall
Industry Progress Growth (YoY) Banking Industry
the last few years. Parallel to Jun-19 June-20 Jun -19 June-20 Jun-19 June-20
increase in number of branches, Total
2,992 3,633 20.6% 21.4% 14.4% 15.3%
Assets
windows and diversity of Islamic Deposits 2,415 2,946 18.8% 22% 15.9% 16.9%
banking products and services, the Total IBIs 22 22 _ _ _ _
size of Islamic banking industry’s Total
2,913 3,274 8.5% 12.4% _ _
Branches**
balance sheet has significantly Source: Data/information submitted by banks under quarterly Reporting Charts of
improved. The industry continued Accounts (RCOA)
**Number includes sub-branches
its growth trend during FY20, as the
assets & deposits of the Islamic
banking industry grew by 21.4 percent and 22 percent, respectively. Due to substantial growth,
Islamic banking industry has become systemically important13 as it presently constitutes share of 15.3
percent and 16.9 percent of the overall banking industry’s assets and deposits, respectively (at end
June 30, 2020) (Table 5.1)14. Financing to Deposit Ratio (FDR) of Islamic banking industry was
recorded at 57.6 percent comparatively higher than the overall banking industry’s advances to
deposits ratio of 46.3 percent (at end June 2020). Moreover, the Return on Equity (ROE) and Return
on Assets (ROA) after tax of Islamic banking industry, recorded at 29.6 percent and 2 percent,
respectively, were better than overall banking industry’s averages (at end June 2020).
In terms of market infrastructure, Islamic banking industry has sustained a positive growth over the
years. Presently, there are 22 Islamic Banking Institutions (IBIs) including 5 full-fledged Islamic
banks, one specialized bank and 16 conventional banks having Islamic banking branches. The IBIs
are providing Shariah-compliant products and services through their network of 3,274 branches in 122
districts. To enhance outreach of Islamic banking products and services, IBIs added 361 branches to
their branch network during FY20. To cater the needs of lower income strata of the populace, Islamic
Microfinance services are also being provided by two IBIs: NRSP Bank and MCB-Islamic.
5.2 Initiatives for Promotion of Islamic Banking during FY20

SBP continued its efforts for sustainable growth of Islamic banking industry in the country. In this
regard, following measures were taken by SBP:
13
The Islamic Financial Services Board (IFSB) considers the Islamic financial industry to be systemically important when
the total Islamic banking assets in a country encompass more than 15 percent of its total domestic banking sector assets.
(IFSB – Islamic Financial Services Industry Stability Report 2019).
14
The latest figures available are for June 30, 2020.
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5.2.1 Measures related to COVID-19

As a result of the global pandemic, central banks across the globe have swiftly acted with measures
including easing monetary policy, regulatory relaxations and providing liquidity support to the
banking sector. In line with global measures, SBP also played its key role to support the banking
sector, to revive economic & business activities and to tackle the adverse effects of the COVID-19.
These activities can be broadly divided into Regulatory Measures and Market Development. Brief
detail with respect to both categories for Islamic banking is as follows:
 Regulatory Measures: The policy measures mainly include reduction in policy rate, reduction in
Capital Conservation Buffer (CCB) from its existing level of 2.50 percent to 1.50 percent to
increase loanable funds with banks, deferment of principal or rescheduling & restructuring of
financing facilities, increase in the existing regulatory retail loan limit from Rs.125 million to
Rs.180 million for capital adequacy calculations, relaxation in Debt Burden ratio (DBR) for
consumer loans from 50 percent to 60 percent, reduction in margin call requirement of 30 percent
vis-a-vis banks' financing against listed shares to 10 percent, promoting digital payments and
relaxing credit requirement for exporters and importers. These measures are equally applicable on
IBIs. However, especially for IBIs, SBP issued Shariah guidelines (i.e. Guidelines for
Implementation of Regulatory Relief to Dampen the Effects of COVID-19) in April 2020 with a
view to facilitate the customers of IBIs for smooth implementation of relaxation provided by SBP
regarding deferment of principal or rescheduling & restructuring of financing facilities. It is
expected that it will provide necessary relief to customers of Islamic banking industry which has
been adversely impacted by the COVID-19 pandemic and are unable to meet their due
obligations.
 Market Development: SBP has introduced some refinance schemes along with their Shariah
compliant alternates to address economic challenges. These schemes mainly include ‘Islamic
Temporary Economic Refinance Facility (ITERF), Islamic Refinance Facility for Combating
COVID-19 (IRFCC) and Islamic Refinance Scheme for Payment of Wages & Salaries to the
Workers and Employees of Business Concerns.
- ITERF provides concessionary refinance for setting up of new industrial units.

- IRFCC provides refinance support to hospitals & medical centers to develop & enhance their
capacities to deal with prevalent health emergency owing to COVID-19. It is also available
for entities planning to engage in manufacturing of masks/protective gears, dresses/testing
kits, hospital beds, ventilators and other items to combat COVID-19.
- ‘Islamic Refinance Scheme for Payment of Wages & Salaries to the Workers and Employees
of Business Concerns’ commonly known as ‘SBP Rozgar Scheme’ is expected to ease cash
flow constraints of the employers and to avoid layoff. The Scheme provides refinance for
payment of wages and salaries of permanent, contractual, daily wagers and outsourced
employees of existing and new customers of banks and Development Finance Institutions.
78
Islamic Banking
5.2.2 Islamic Financing Facilities

SBP issued Shariah-compliant alternatives of its major conventional refinance facilities during the
FY20 which mainly include ‘Islamic Refinance Scheme for Working Capital Financing of Small
Enterprises and Low-End Medium Enterprises’, ‘Islamic Financing Facility for Renewable Energy
(IFRE) and ‘Islamic Long Term Financing Facility (ILTFF) for Plant & Machinery’.
5.2.3 Adoption/Adaption of AAOIFI Shariah Standards

With the purpose of standardization and to align the practices of the domestic Islamic banking
industry with internationally recognized standards, SBP notified adoption of three Shariah Standards
of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) i.e. Shariah
Standards No. 19 (Loan (Qard)), No. 23 (Agency and the Act of an Un-commissioned Agent
(Fodooli)) and No. 28 (Banking Services in Islamic Banks) in FY20. With adoption of the
aforementioned Standards, SBP adopted fifteen AAOIFI Shariah Standards while further Shariah
Standards are in pipeline for adoption.
5.2.4 Awareness and Capacity Building Programs for Islamic Banking Industry
One of the key focus of SBP pertains to capacity building of the industry and raising awareness
among masses regarding Islamic banking and finance. SBP has been playing its key role as a regulator
and facilitator.
As a regulator: SBP issued instructions in January 2020 requiring banks to arrange training sessions
for branch level staff of IBIs.
As a facilitator: Following a multipronged strategy, SBP is not only supporting stakeholders for their
capacity building & awareness initiatives, but also remained actively involved in conducting programs
on its own and through its training subsidiary, NIBAF. COVID-19 pandemic has affected the
frequency of awareness and capacity building programs for the Islamic banking industry during
FY20. Nonetheless, the following initiatives were taken during the FY20:
Box 5.1: Initiatives for Awareness and Capacity Building Programs for Islamic Banking Industry
 SBP, in collaboration with the NIBAF, offered nine iterations of a training program titled ‘Fundamentals of Islamic
Banking Operations (FIBO)’. The customized training program is designed to target branch managers, operation
managers and relationship managers of banks, academia and Shariah scholars. The program was offered at various
geographical locations of the country including Bahawalpur, Quetta, Peshawar, Faisalabad, Lahore, Sukkur, Sialkot,
Hyderabad, and Multan.
 To promote better awareness about Islamic finance amongst the Shariah community, short certification programs of
one/two day(s) each were also conducted in collaboration with IBA-CEIF, COMSATS, and religious educational
institutions during FY20.
 In pursuit of up-scaling capacity levels of Shariah scholars serving the Islamic banking industry, SBP, in
collaboration with NIBAF, launched a comprehensive training program exclusively for Shariah scholars. The second
iteration of the certification program was successfully concluded during the FY20.
 SBP, in collaboration with NIBAF, organized a dedicated two-day program for officials of Federal Board of
Revenue (FBR) in FY20. The objective of the program was to provide them an overview of Islamic banking
products and services and to clarify their queries and misconceptions about Islamic banking.
79
 On the recommendation of SBP, Focus Group on Islamic Finance at Ministry of Finance is serving as a center point
to deal with the matters related to Islamic banking and finance. During FY20, two day capacity building program
was organized for the focal persons at MoF and other government departments/ministries. The program was attended
by the officials of the Federal Board of Revenue, Securities and Exchange Commission of Pakistan, Ministry of
Religious Affairs, and Ministry of Finance.
 During FY20, SBP continued to provide patronage to Islamic banking industry for Islamic Finance Media
Campaign. In FY20, the media campaign was rolled out through television, newspapers, radio and digital media.
 Islamic Finance News (IFN), in collaboration with SBP, organized the ‘IFN Pakistan Forum’ during FY20. The
Forum served as a platform to identify critical issues surrounding the Islamic financial industry and objectively
explored potential solutions to overcome the challenges. Participants from the local Islamic financial industry,
regulatory bodies, academia and Shariah scholars attended this forum.
 SBP organized AAOIFI’s Public Hearing Session on two Exposure Drafts, i.e. i) Code of Ethics for Islamic Finance
Professionals and ii) Waqf Governance during FY20. The session was attended by leading Shariah scholars and
senior Islamic bankers from Pakistan. Secretary General AAOIFI also attended the session.
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6 Institutional Strengthening
6.1 Strategic Planning at SBP
The third 5-year Strategic Plan namely SBP Vision 2020 was launched in August 2015 to
seamlessly achieve SBP’s broader objectives as mandated under SBP Act, 1956. The plan has been
actively pursued across the bank to enhance SBP’s role as a dynamic and forward looking
organization to cater the emerging national and global economic challenges.
At SBP, the strategic plan is operationalized through annual business planning exercises, chaired by
the Governor, wherein strategic goals are cascaded down at departmental level as their development
projects and initiatives. The five year plan ended in FY20. Significant achievements have been
made to accomplish the strategic goals. During the currency of SBP Vision 2020, more than 1200
development projects linked with strategic goals/ tactical objectives of SBP Vision 2020 have been
undertaken. Effective implementation of the strategic plan has been ensured through a regular
monitoring mechanism.
Further, as a forward looking approach, strategic plans of selected centrals banks were reviewed to
explore global trends, emerging technological challenges and strategic direction which were shared
with the internal stakeholders.
6.2 HR Developments
SBP, in its capacity as the central bank of the country, performs both traditional and non-traditional
functions to achieve macro-economic goals. Institutional capacity in the form of optimal
professional talent is critical for SBP in undertaking its unique role in the economic development of
the country. SBP strives to promote a performance-oriented culture and create an enabling
environment for employees to contribute towards achievement of organizational objectives.
The year FY20 witnessed major initiatives in

Table 6.1: HR Profile of SBP
the areas of workforce rationalization, talent
Position/Grade FY20 FY19
resourcing, career growth, capacity building and
Governor/Deputy
automation. Consistent efforts were made for Governor
3 2
skill upgradation of employees to maintain and OG-8 15 17
enhance the delivery of effective and efficient OG-7 35 30
outcomes at every level. OG-6 43 52
OG-5 133 120
OG-4 267 262
6.2.1 HR Profile
OG-3 242 279
HR strength across grades is reflected in Table
OG-2 339 319
6.1. The employee turnover against a total OG-1 11 13
strength of 1,178 was 5.43 percent which is Support Staff 62 74
mainly attributed by the Officers Grade 2-5. Contractual
32 10
Employees
During FY20, 22 employees retired on
Total 1182 1178
superannuation whereas 49 proceeded for early
81
retirement. However, the gap created was successfully managed by induction of new employees,
particularly through batch hiring.
Talent Resourcing
Table 6.2: Recruitments during FY20
SBP operates on the basis of a competitive,
Grade/ Designation Number
transparent and meritorious recruitment
OG-3
process. During FY20 a number of fresh Deputy Director 3
graduates and experienced personnel having Law Officer 4
diverse backgrounds from local / OG-2
international universities and experience in Assistant Director (SBOTS) 46
various disciplines such as Business Assistant Director (non SBOTS) 12
Administration, Economics, Finance, IT, Legal Officer 4
Assistant Librarian 5
Law, etc. were hired on lateral basis to meet
Contractual Employees
the HR needs of the bank. (Table 6.2)
IT Operations Officer 16
SBP is an equal opportunity employer and Exhibition Developer 1
facilitates the evolving role of women and Software Developer 3
the strategic significance of their inclusion in ECM Specialist 1
the workforce to achieve organizational Professor of Economics 1
Total 96
objectives. Against a national requirement of
10 percent, SBP’s workforce consists of 11 percent of female employees in diverse roles at each
level of hierarchy ranging from entry level to senior management.
6.2.2 Restructuring and Consolidation of Functions
In pursuance of Finance Division’s Notification, Dr. Murtaza Syed assumed charge as Deputy
Governor of SBP on January 27, 2020. Accordingly, the Board of Directors revised the portfolio of
Deputy Governor (Policy). The revision entailed changes in the reporting lines of the Monetary
Policy and Research Group and Human Resources Department to Deputy Governor (Policy).
During FY20, the following measures were taken to meet the organizational needs:
Organization Development (OD) Interventions
Workload Analysis
In order to increase organizational effectiveness, optimize the potential and contribution of the
personnel, SBP planned various Board approved OD interventions in a phased manner. After
successful completion of comprehensive review of SBP’s Performance Management System vis-à-
vis market practices of both local and international organizations in Phase I, the project on
Workload Analysis and Job Evaluation for SBP was initiated in November, 2019 as part of Phase II
of OD interventions. Funding for the said project was arranged from the Department for
International Development (DFID) under FIP.
HR Policy Measures
The unprecedented global crisis due to COVID-19 pandemic has led organizations to develop and
implement various policy measures. SBP has been at the forefront with the government, both at
national as well as organizational level, to take necessary measures and combat the effects of the
82
Institutional Strengthening
pandemic. Apart from implementing the measures announced through the government notifications
and Standard Operating Procedures (SOPs) to prevent the spread of the pandemic, additional policy
measures were undertaken by SBP for the safety and wellbeing of its employees by introducing
work from home arrangements. The situation was closely monitored by a Committee chaired by DG
(B & FMRM) which met at regular intervals and implemented timely measures to minimize the
disruption in delivering SBP’s responsibilities amid testing times.
As part of SBP’s efforts to make necessary revisions in the policies in response to changing
organizational needs, instructions related to Rest and Recreation (R&R) Leave under Leave Policy
2015 were revisited and splitting of R&R was allowed for improving organizational efficiency.
Furthermore, compendium of Medical Attendance Rules was updated and was made available on
the Electronic Notice Board (ENB) for easy access to all stakeholders.
Compensation and Benefits

In line with SBP’s compensation philosophy of market alignment, an across the board 8.0 percent
increase in pension was allowed to self and family pensioners who retired/expired up to June 30,
2019 and the limit of monthly minimum pension/family pension was also enhanced.
Employer Branding
As an initiative to create awareness among the recent and upcoming graduates, SBP participated in
career fairs organized at Lahore University of Management Sciences (LUMS) and the Institute of
Business Administration (IBA). An overwhelming response and great interest from the students
were witnessed. An orientation session was also conducted for graduating students at LUMS which
received a positive and encouraging feedback. SBP intends to continue to follow this practice and
expand it to other universities gradually.
Career Development
Table 6.3: Promotions during FY20
SBP believes that enhancement of organizational
Promotion No. of Officers
efficiency and effectiveness is directly linked with
Senior Management Level (OG- 6
the overall morale and motivation of employees. 7)
Providing career development opportunities plays Middle Management Level 24
a pivotal role for this purpose. Accordingly, (OG-5 & 6)
Junior Level (OG-1 to OG- 4) 59
keeping in view the organizational requirements,
Total 89
89 officers were promoted in various grades
during FY20 (Table 6.3).
Capacity Building
SBP being a knowledge-based organization has placed extensive focus on training and development
to ensure that the skills mix of HR remains compatible and responsive to organizational needs. SBP
also strives to ensure leadership development and effective grooming of line managers to facilitate
capacity building.
83
In-House Trainings
During FY20, new in-house training programs specially focusing on the soft skills areas were
introduced which included diversity and Table 6.4: In-House Trainings (OG-1 to OG-4)
inclusion, happiness at workplace and
Title No. of officers
corporate dressing and etiquettes. Three-
Workplace Harassment 162
days team building and development
Embracing Diversity 155
program was also introduced which
Cyber Security 99
included one day of outdoor experiential
Team Building and Personal Development 77
learning whereby do's and don’ts of team Program
building were demonstrated. Major Happiness at Work 76
highlight of the year was a seminar on ‘The Risk based Supervision (RBS) 73
Professional Women’ exclusively arranged Presentation Skills. 59
for all female officers of the Bank to Corporate Dressing and Dining Etiquettes 55
celebrate the International Women's Day. A Advanced MS Excel. 51
list of grade-wise in-house trainings offered Stress Management. 50
during the year is mentioned in the tables Anti-Money Laundering. 46
below (Table 6.4 and 6.5). The Professional Woman 46
After the onset of the pandemic, programs such as ‘Impact of COVID-19 on Islamic Finance’,
‘Financial Market post COVID-19’ and ‘Economics Policy Response of COVID-19’ were also
offered in-house.
Table 6.5: In-House Trainings (OG-5 & above)
The in-house and domestic training
Title No. of officers
programs were supplemented with foreign Coaching for Managers 26
training. As a central bank, SBP has access Managing and Rewarding Performance 16
to international training programs offered for Middle Managers
by multilateral agencies and other central Negotiation for Middle Managers 25
banks. SBP officers are regularly sent on Diversity for Middle Managers 15
such training programs and seminars to Training of Trainers (TOT) 13
reputed supervisory agencies and central Executive Presence 11
banks around the world to enhance their Leadership Boot Camp for Decision 11
knowledge base on global developments. Making
Advanced Communication Skills for 7
Most of the foreign trainings were Managers
fully/partially funded by the host Leader as a Coach 5
institutions. (Table 6.6):
In March 2020, the COVID-19 pandemic emerged and countries around the globe faced various
challenges. In-house training programs were halted and foreign training programs were cancelled
by the host institutions. In response to the need of time, the mode of training was changed from
physical classroom learning to Virtual Instructor Led Trainings (VILTs), webinars and
conferences. Since April 2020, all available platforms were provided to facilitate the
84
officers to complete their Table 6.6: Foreign Trainings/ Seminars

mandatory training hours based on Organization No. of Officers
International Monetary Fund 20
their training needs. In-house
Deutsche Bundesbank 5
VILTs were attended by officers
with utmost zeal and interest. With Federal Reserve Bank of New York 2
the flexibility of working from Bank Negara Malaysia 3
home and with reduced working Bank of England - CCBS 5
hours, officers accessed the Financial Stability Institute - Bank of International 1

Settlements
platform of IMF, EdX, Udemy and Asian Development Bank 2
Coursera on a frequent basis to
World Bank Group 9
avail and learn through Massive
Banque de France 5
Open Online Courses (MOOCs)
Central Bank of Turkey 10
such as Financial Programming
Others 43
and Policies, Financial Market
Analysis, Foundations of Central Bank Law, Financial Development and Financial Inclusion,
Energy Subsidy Reforms and many more. Programs related to virtual leadership, managing virtual
teams and similar topics were also availed by employees as offered by central banks and other
financial institutions. Despite the COVID-19 pandemic, employees were able to meet 59 percent
of the annual training hours requirement.
HR Automation Initiatives
Technological upgradation is of paramount importance to SBP to remain cognizant of the rapid
developments taking place in information management and communication. Technology has
been used as a means to improve service delivery standards and enhance efficiency by
automating various functions of HR modules including recruitment, advances, retirement
benefits, discipline, audit with HRMS interface and transport management record. Another major
milestone in the HR automation initiative is the implementation of foreign training nomination
process through Knowledge Management (KM) Portal which is a major step towards paperless
environment. After the COVID-19 pandemic, the ‘Internal Case Management System’ (ICMS)
has been introduced by SBP wherein work is initiated and processed online through Business
Process Management (BPM).
To facilitate this, SBP has also developed Enterprise Content Management (ECM) for data
storage. Access of BPM and ECM to employees working from home during COVID-19 days has
facilitated the continuity of business processes in an efficient and effective manner. SBP has also
started using BPM and ECM and going forward, many other areas will also be automated. The
initiative of E-recruitment will facilitate and speed up the recruitment process in SBP. This
application will be extensively used in all recruitment processes, once its effectiveness is
established.
85
6.2.3 Future HR Strategy

SBP would continue to sustain a work environment where employees are provided with
opportunities for professional growth and are recognized and rewarded for the contribution made
towards achievement of organizational objectives.
Further, to facilitate employees across the bank, SBP has planned to review various HR policies
during FY21 through a consultative approach by seeking active involvement and feedback of the
internal stakeholders. While SBP has witnessed the success of ‘work from home’ arrangements
with the onslaught of COVID-19 pandemic, SBP also intends to introduce the concept of flexible
working hours. SBP also intends to capitalize on technological advancements to optimize the time
taken in completing numerous initiatives such as recruitment at various stages.
6.3 Strengthening IT Systems

The IT Strategy aligned with the SBP Vision 2020 is being implemented to provide key services to
SBP and its subsidiaries in the areas of national level initiatives, IT Strategy, business process
automation and IT infrastructure and service continuity.
6.3.1 SBP Knowledge Management Program

The Strategic Goal under SBP Vision 2020 required implementation of a Knowledge Management
(KM) Program for the Bank. The following are the major milestones of FY20:
 “Office Anywhere” Portal with enhanced security feature of Two Factor Authentication (2FA)
has been implemented, which enabled SBP employees to work from home. Amid COVID-19
outbreak, there was a dire need of accessing ECM system to access corporate data file store and
BPM System to process work flows of different business domains from home. There are two
important components of this development:
- Internal Case Management System (ICMS) through which all the departments are now
able to process paperless case initiation and approvals at all levels with a powerful text
based search engine.
- Enterprise Content Management (ECM) through which users can perform efficient
document collaboration, record informal reviews of matters, feedback and comments,
work on projects and task using Team Space feature on the model of social network and
manage organizational record in digital form.
 External Case Processing portal for SBP’s Exchange Policy Department and Foreign Exchange
Operations Department of SBP-BSC provides an online platform of interaction between SBP
and banking sector for submission of cases from banks for approvals and return digitally signed
regulatory decisions through the same.
 The pilot launch of “Inspection Management System” with selected banks provides a central
platform to transform the entire Inspection function to paperless covering not only the internal
part but also of the banks.
86
 A “Knowledge Transfer Framework” for capturing and storing the Tacit and Implicit
knowledge has been developed. This framework will provide strategic grounds in devising a
new structure of human resource functioning.
6.3.2 Enterprise IT Governance Framework

 The Phase II of the Enterprise IT Governance Program was completed in FY20 which included
development of IT Policy Framework in line with international standards and best practices:
a. IT Policies:
i. IT Service Management Policy

ii. Change Management Policy
iii. ICT Availability & Continuity Policy
iv. IT Portfolio Management Policy
v. IT Quality Management Policy
vi. Information Systems Lifecycle Management Policy
b. Standard Operating Procedures (SOPs) of above policies

c. IT User Guidelines
 The implementation of IT Policy Framework will strengthen IT Governance, which is integral

part of Corporate Governance. It will provide strategic guidance to the management in
managing SBP’s IT Portfolio by aligning IT function with organizational priorities, optimal
resource management, complement its oversight function and strengthen informed decision
making to achieve value delivery. Moreover, IT Policy framework will establish a control
environment to streamline the processes, service delivery and usability of IT resources
according to relevant applicable policies and SOPs.
6.3.3 Banking and Currency Systems Initiatives

SBP’s IT Systems have continued to contribute in sustainable IT enabled business operations.
Multiple business development projects were also implemented in Banking and Currency systems to
cater business requirements. Some of the projects undertaken for this purpose are as follows:
 The automation of reporting CTR to FMU through GoAML portal that optimized the transaction
processing time and reduced manual intervention. T24 System was updated to generate complete
XML formatted report for each office.
 For the payment digitization, T24 Team has integrated the encashment of National Prize bonds
prize money claims and payment for encashment of Prize Bonds through RTGS.
 To enhance the effectiveness of 1-Link payments, a revised settlement mechanism for ADC (1-
Link) is implemented for consolidated entry against each account to reduce system overhead and
data storage.
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 T24 team performed the reporting mechanism of investment for the donor-funded programs. The
Investment Management System (IMS) encompasses features like effective record management,
projected profit earnings against each investment, timely intimation of investment upon maturity
and cash availability in respective accounts.
During the COVID-19 pandemic, multiple schemes were successfully implemented to avert the
financial impacts of business activities:
 Conventional and Islamic Refinance Facility for Combating COVID-19.

 Conventional and Islamic Temporary Economic Refinance Facility (TERF) for Combating
COVID-19
 Conventional and Islamic Refinance Scheme for Payment of Wages and Salaries to the Workers
and Employees of Business Concerns
6.3.4 New Projects in Data Warehouse

During COVID-19, the Data Warehouse team developed a multi-factor (MFA) based Single Sign-
On (SSO) service. This service enabled access of data warehouse application from home. It was
launched in June, 2020 and access was provided to a limited number of users. With passage of time,
access to all the end users of data warehouse will be provided. In addition, remote access of web
applications in other areas will also be made available through this service.
On business side, a system for compilation of risk profiles of individual Banks, DFIs and MFBs
based on CAELS (capital adequacy, asset quality, earnings, liquidity and sensitivity) and Cash
Reserve and Statutory Liquidity Requirements (CRR and SLR) has been developed for OSED.
Automation of this system has made the work process efficient and has also reduced the risk of
errors.
Besides, a system for efficient monitoring on National Financial Literacy Program (NFLP) has been
developed. This program requires substantial reporting from banks on multiple parameters for
ensuring project deliverable in a timely manner. Automation of this system has significantly
reduced the HR requirements for data compilation and has also reduced the risk of errors.
6.3.5 Automation Efforts in Oracle Custom Applications

A plethora of projects was undertaken in Oracle in FY20 to cater the growing business requirements
of SBP. Many projects have been undertaken and accomplished.
Other outstanding achievements cover “E-Recruitment Phase -2” that provides interview panel
setup, domicile-wise quota management, allocation for recruitment posts, final merit list generation
and other detailed MIS reports along with email and picture uploads features. It also include
“Revamping of Fit and Proper Analysis System” that manages the data, MIS reports and processes
related to Board of Directors (BODs), Key Executives of the Banks, DFIs and Microfinance Banks.
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Similarly, the assignment, monitoring and MIS reporting of “MMCRS Upgradation Phase-2” that
handles sensitive data of banks and DFIs through DAP portal and “Complaint Management System
for BC&CPD” that caters complaints from different sources, have been completed.
External Online Library System has also been launched for general public to access books, generals
and articles from the pool of SBP Library.
6.3.6 Oracle ERP Systems

One of the largest and most challenging projects is the Oracle EBS Upgrade for 300 plus reports, 50
plus external interfaces and 2 customized applications and facilitated 2000 plus users across the
bank and field offices. The key accomplishments in automation include payroll application upgrade,
Oracle EBS reporting through DWH, vendor payment of BSC offices through RTGS,
implementation of Oracle general ledger at DPC, development of arrear generation in payroll for
NCPFS category employees for BSC Offices, development of annual pension increase and
integration of Oracle EBS with SITM Qradar solution.
6.3.7 Cyber Security at SBP

The year witnessed major developments in the area of cyber security at SBP. The key focus areas
for FY20 included adopting new technologies to build and bolster cyber defenses, addressing
critical gaps for effective risk management and building cyber resilience. Developing and maturing
processes and procedures to boost efficiency, as well as capacity building of IT and cyber security
teams were also priority areas.
Cyber Risk Management

The Bank completed multiple risk-assessment exercises during FY20 to identify and address critical
gap areas. These engagements included collaboration with the World Bank, Microsoft Professional
Services, as well as SWIFT Belgium Cyber Resilience and Operational Excellence Teams. Control
capacity has been enhanced multiple folds by deploying new technologies and fine-tuning existing
key controls.
The Bank’s security operations have enhanced its real-time IT security controls’ monitoring
capabilities. This advancement has provided risk management teams an ability to monitor and
analyze cyber risks by providing them a holistic view of overall threat surface. Enhancement in the
monitoring function and threat detection at early stages has improved effectiveness and response-
time of security teams. SBP’s attack surface has also been reduced by blocking multiple attack
vectors.
Cyber Security Governance

SBP has strong realization that evolving cyber threat landscape as well as implementation of a
successful Cyber Security Program demands a well-defined Information Security Governance
structure. Based on well-known international ISO27001 standard and NIST Cyber Security
Framework, the bank has rolled out a new set of policies that will further strengthen Cyber Security
Governance at SBP. This development will lead to a consistent and formalized deployment of
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security controls in the bank and provide support to other cyber security functions in setting up
baseline specifications.
The bank has further re-enforced its cyber resilience capacity by improving its incident response
capabilities through formalized plans and mock exercises.
Cyber Security Awareness

SBP also continued its efforts to bring about cultural shift by arranging user awareness sessions on
cyber security and using other automated tools to enhance its workforce capacity against cyber risks
and threats. In the wake of COVID-19 pandemic and teleworking, the bank adopted virtual
channels for its cyber security trainings. In addition, with changing modalities and work
environment, SBP’s Cyber Security teams kept afoot with the technologies and not only informed
the management and IT teams informed, but also engaged the employees to stay vigilant in
identifying emerging cyber threats.
Continual improvement and adapting to the dynamic cyber landscape have been the key success
factors for SBP’s Cyber Security team, which has led to much improved cyber security posture,
maturity and resilience.
6.4 Business Continuity Management

The management of SBP instructed all departments to ensure working with minimum staff and
avoid unnecessary gathering to ensure social distancing in order to minimize the impact of COVID-
19. The Critical Time Sensitive and Critical Support Function Departments utilized the BCP Back
up Site facility efficiently and effectively during the pandemic to achieve this objective.
6.4.1 Annual Test Plan FY20:

In order to validate the Business Continuity Program (BCP) lifecycle, regular BCP exercises and
testing are done throughout the year as per the Annual Test Plan (ATP). During FY20, more than
175 BCP exercises were performed by the Critical Time Sensitive Departments, Critical Support
Function Departments and SBP-BSC Offices at their respective Back-up Sites. To further assess the
preparedness level, Combined Staff Relocation Exercises (CSRE) were also conducted with
participation of all stakeholders at the same time which evaluated systems and backup facilities
against maximum work load. Three such CSREs were carried out during FY20.
6.4.2 Joint Industry Wide BCP Exercise

The first Joint Industry Wide Business Continuity Planning (BCP) Drill (mock exercise) was
conducted on December 07, 2019. The Critical Time Sensitive Departments and Critical Support
Function Departments of SBP and SBP-BSC, 31 banks and 1-Link participated in the drill. The said
exercise was carried out at BCP Back up site by SBP team whereas the commercial banks
participated from their respective back up sites.
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6.5 SBP Tech Club

SBP Tech club was established to provide a platform to all technophile employees of the Bank. The
objective was to explore out of the box and technology based solutions, which can potentially have
an impact on, and shape, SBP Vision. During FY20, the following Tech talks were arranged:-
 Micro Payment Gateway (MPG)

 Cryptocurrencies
 Artificial Intelligence: Intro and Myth busting
 IT Governance, Risk and Controls in Era of Disruption
6.6 Enterprise Risk Management (ERM)

Enterprise wide risk management framework has been implemented at SBP in line with SBP Vision
2020. ERM framework is designed to holistically identify, assess and mitigate various types of
organizational risks.
In FY20, the Bank has issued its ‘Risk Policy Statement’ under the Enterprise Risk Management
framework which is applicable to all departments of SBP and its subsidiaries. The risk policy
statement resolves to successfully implement ERM framework, which is critical for the bank in
achieving its objectives such as monetary and financial stability and inclusive financial system. The
risk policy statement underpins the three lines of defense model to ensure that the risks are
effectively managed at the entity level.
Risks identified in the bottom-up approach through Risk & Control Self Assessments (RCSAs) are
now being monitored through ensuing mitigation plans and Key Risk Indicators. While in parallel,
mitigation plans for risks identified through top-down approach are also going through development
phase. RCSAs of SBP-BSC have already been presented to the Management Committee on ERM
for review. RCSAs of DPC, NIBAF and PSPC have also been developed.
6.6.1 Investment Risk Management

SBP also undertakes and developed risk management policies and procedures for the assessment,
quantification and monitoring of market, credit and operational risks emanating from reserve
management activities.
In FY20, the Bank has taken steps to build internal credit scoring and probability of default models.
While these initiatives will reduce reliance on external rating agencies, the development of these
models would build reliable in-house capacity to monitor the credit risk. The bank has arranged
focused training courses on risk modelling and monitoring to develop human resources. These
training sessions have facilitated in developing these internal scoring models. Furthermore, the
approach used in development of these models is comparable with reputed rating agencies such as
Moody’s, Fitch and S&P.
During the development of these models, availability of authentic and accurate historical data is
essentially required in efficiently estimating the parameters used in these models. The bank has
subscribed S&P Credit Pro and Capital IQ databases to overcome these limitations
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The Bank has also designed a report for monitoring and independent reporting of risk adjusted
performance. The report is meant for the Investment Committee of the Management and the
Investment Committee of the Board. This will bring transparency in reporting in line with the best
international practices. It would also highlight critical risks in time for better management of
risk/return profile of investment portfolios.
6.7 Risk Based Audit Function

Internal Audit acts as a function of corporate governance deriving its mandate from Internal Audit
Charter duly approved by the SBP Board. It is providing independent, objective assurance and
consulting services to the SBP Board and senior management.
SBP has adopted the risk-based auditing methodology to provide assurance on the effectiveness of
the bank’s governance, risk management and control processes by conducting financial, operational
and IT audits, which conform to the mandatory requirements of International Professional Practices
Framework (IPPF) of the Institute of Internal Auditors (IIA) and consistent with SBP Enterprise
Risk Management (ERM) Framework. Further, the technology based audit engagements are
conducted in alignment with guidelines by the Information Systems Audit and Control Association
(ISACA).
Major initiatives and achievements during FY20 include the following:
 A centralized assurance mechanism has been implemented with the approval of SBP Board
Audit Committee duly endorsed by the SBP Board, which provides a holistic assurance over
governance, risk management and control processes across SBP and its subsidiaries.
 SBP attained the “Generally Conforms” assessment scale in conformance with the mandatory
requirements of IPPF of the IIA during the internal as well as the external quality assessments
of its audit function.
 An Assurance and Follow-up Rating Framework has been implemented for rating the auditable
areas based on the results of their audit engagements and status of the outstanding Audit
recommendations.
 A customer stratification survey was carried out in order to improve the image as a Trusted
Business Partner. Focused group discussions were held to better understand the
feedback/concerns reported by the departments and their effective resolution accordingly.
 Knowledge Management (KM) based Audit Workflow module has been implemented in IACD
for further improving the audit processes in a paperless environment including coordination
with auditee departments.
 To gauge performance of Internal Audit, a balanced scorecard has been prepared through
identification and incorporation of various KPIs (quantitative as well as qualitative in nature)
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along with target measures under four perspectives i.e., financial, customer, internal processes
and learning and growth.
 Following a carefully chalked out Training Need Assessment of officers working in Internal
Audit, officers were encouraged to obtain international certifications in areas related to internal
audit as well IS audit in addition to attending various domestic and foreign training programs.
Resultantly, most of the auditors have obtained certifications e.g. CIA, CISA, CFSA, CISM,
FRM, etc.
6.8 Legal Services Department

To further strengthen the role of SBP as a regulator in line with best international practices,
amendments have been proposed in the existing laws. The Chief Legal Adviser and Director, LSD
are co-opted members on the Financial Law Review Committee (FLRC) that is tasked with
reviewing the existing laws in order to meet the emerging needs.
Under the Right of Access to Information Act, 2017 (Act), the bank receives queries, regarding
sharing of official records and information, which are then examined in light of the provisions of the
Act. In this respect, an interactive session was arranged on the request of Information Commission
of Pakistan (PIC), which was attended by the Chief Information Commissioner and 2 other
members, from PIC and officers from SBP and its subsidiaries.
During FY20, legal advice was given on 2780 references forwarded by various departments of SBP
and its subsidiaries to ensure that legal risks associated with business decisions are addressed
appropriately. Currently 461 cases of various nature are pending in different courts of Pakistan
where either SBP or its subsidiary is a direct party.
6.9 Effective External Relations

SBP achieved several milestones in its pursuit of enhancing communication in a structured and
phased manner for all external stakeholders. Dedicated pages pertaining to COVID-19 and
measures taken by SBP were launched which were regularly updated. A Complaint Handling
Mechanism for COVID-19 related schemes was also designed and developed. The print media
outreach extended to 14 other cities having BSC offices which increased readership of SBP related
stories to an estimated one million people. Many media campaigns were successfully executed
through print, electronic and social media. A number of BSC employees were trained to enable
them to use MS Office in Urdu.
Due to timely and consistent information sharing on social media in the form of videos, images,
slideshows and webinars, the traffic increased manifold on Facebook and Twitter since March 2020
while the post outreach crossed one million on Twitter.
A newly adopted practice of issuing press releases alongside Circulars, Guidelines and Data made it
easier for journalists to file stories almost on daily basis and as a result, SBP related stories
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increased manifold especially in print media. Earlier, a large segment of journalists was reluctant to
go through technical language of Circulars and Data etc. and come out with stories of their own.
SBP designed and executed several media campaigns during the year including awareness
campaign on Anti-Money Laundering & Prohibition of Hawala / Hundi, Alert on Fraudulent
Calls/SMS, digital campaign on International Museum Day 2020 and an awareness campaign on
‘Safe Donations during COVID-19 Pandemic’. SBP developed HTML based e-versions of its
publications which are now available on the SBP website.
Keeping with past traditions, SBP organized events of national importance and arranged for their
print and electronic media coverage. Events organized and covered on the website and social media
include: Independence Day August 14, Pink Ribbon awareness session, unveiling of
commemorative coin at 550th birth anniversary of Guru Nanak, launch of National Payment
Systems Strategy for safe, efficient and inclusive payment systems in Pakistan, Photographic
Exhibition titled, ’Life of Jinnah’ in collaboration with Directorate of Electronic Media and
Publications’ and ‘Seminar on Managing Crises in Emerging Markets’.
SBP continued to play an important role in raising awareness about central bank’s policies through
disseminating of communications in the national language. Nine monetary policy statements
including three unscheduled announcements due to COVID-19 situation, State of Pakistan’s
economy and other flagship publications were released in Urdu along with English. SBP’s newly
created “Countering COVID-19: measures taken by SBP” webpage was timely updated in Urdu.
SBP produced a pictorial Urdu booklet on its financing schemes that is aimed at increasing
awareness of the general public about these schemes. This booklet is nearly complete and will soon
be published.
SBP has developed a blog website ‘Off the Record’ to share ideas and promote constructive
discussion among the SBP staff. The blog will feature articles on economy, banking, monetary
policy, financial sector, technology and more which will soon be available for SBP staff.
SBP also produced a documentary on Roles and Functions of SBP mainly for students and children
that depicted evolution of money, banking and central banking through dramatization. The feedback
received from school students suggests almost 80 percent children termed the documentary
extremely useful. This documentary will soon be made public.
6.10 SBP Library

The SBP Library caters the information needs of SBP employees, the banking community and the
general public through provision of high quality information resources and services. Ranked
amongst the most-referred libraries of the country, it serves over 5,000 registered members
representing the SBP, commercial banks, public and private firms, insurance companies, brokerage
houses, media and numerous business schools.
Major accomplishments of the library during FY20 are listed below:
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6.10.1 Collection Development

In order to support the fresh and on-going research at SBP, a number of new resources were added
to the library collections in both print and electronic formats. The print holdings were enriched by
1,781 new books and 1,221 periodical issues. Additionally, latest updates of the federal/provincial
budgets/gazettes and annual reports of numerous companies listed on the Pakistan Stock Exchange
were also acquired. Further, the electronic resources were augmented with Oxford Economics,
Finance, Social Sciences, and Law Journals Collection comprising of 125 e-journals with its
complete archives dating back to 1996.
6.10.2 Bibliographic Management and Reference Services

For promoting effective usage of library resources, posting of monthly bulletins of Fresh Arrivals
and Content Alerts on SBP website and electronic board as well as their bank-wide broadcast
through email remained a regular feature of Library. All items acquired were properly catalogued
and made available for browsing through library portal in real time.
Officials at the reference desk responded to countless reference queries and proactively provided
personal assistance in literature search and library usage. Orientation tours for the new inductees,
internees and occasional visitors were arranged throughout the year. Around 3,179 requisitions for
articles were entertained through library’s Online Document Delivery Service. Usage of the online
library resources during FY20 is depicted in (Table 6.7):
Table 6.7: Full-Text Article/Chapter Downloads by Database during FY20

(Numbers)
Database Name Full-Text Article/Chapter Downloads
Total FY20
Business Source Complete 815
Cambridge Journals 72
EconLit with Full-Text 294
Emerald Business eBooks 13
Emerald Management e-Journals 917

JSTOR eBooks 62
JSTOR eJournals 3,600
Oxford English Dictionary 735

OUP Journals 494
Sage Journals 226
ScienceDirect 4,446
Springer eJournals 740
Taylor and Francis Journals 686
Wiley Journals 1,599
World Bank eLibrary 113
Total 14,812
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6.10.3 Visitation, Membership & Lending

During the period under review, around 14,820 users visited the library, 125 new members were
registered and 23,930 books were loaned to the registered members. The members were also kept
posted with the renewal reminders / overdue notices on a daily basis. Book reservation / hold
services also remained available for members throughout the year. All out efforts were made to
meet members’ demand through inter-library loan with local libraries.
6.10.4 Development Projects:

Library completed the following development projects during FY20:
 Revamping of Library’s Physical Infrastructure

 Launching Library Website for the General Public
 Developing eBooks Repository of Professional Publications
 Reclassification of Special Sections on IMF, World Bank and United Nations
Overall, the FY20 ended up successfully for the library in terms of its goals attainment laid down in
the annual business plan. A comparative summary of library progress during the last 2 years is
presented in (Table 6.8).
Table 6.8: SBP Library Services (FY19-FY20)

(numbers)
Operational Areas FY19 FY20
Procurement Books Purchased 2,329 1,742
Complimentarily acquired 96 39
Periodical issues 1,687 1,221
Technical processing Books catalogued 2,425 1,780
Articles indexed 2,655 2,122
Circulation The SBP employees (active and retired) 23,459 23,061
(Books loaned)
General public 925 869
Membership The SBP employees (active and retired) 83 58
General public 84 67
Visitation The SBP employees (active and retired) 15,654 11,274
General public 5,839 3,546
Documents Downloads Downloaded documents delivery through email 2,599 3,179
Bank-wide article downloads through subscribed resources 17,215 14,812
Note: The decline in usage is primarily attributed to the closure of library since 20-Mar-2020 as a preventive measure against COVID-19.
6.11 Museum, Art Gallery & Archives

The State Bank Museum is the only money museum in Pakistan; it has the largest collection of
coins and banknotes as well as other objects that have served as money in different times and
different places.
To define the significance of money and banking, State Bank Museum constitutes eight galleries,
Coin Galleries I & II, Stamp Gallery, Currency Gallery, History of State Bank Gallery, Governors’
Gallery, Sadequain Gallery and the Contemporary Art Gallery. The two coin galleries show
evolution of coins from 600 BC to the present times. The Stamps Gallery shows evolution of stamps
from 3,000 BC to the present period, with a special focus on Pakistani stamps and the Currency
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Gallery focuses on Pakistani notes while also giving information about the very early paper notes
and the present days Polymer notes.
History of SBP gallery shows history of SBP from 1948, while the Governors’ Gallery shows brief
profiles of the Former Governors with their portraits. The Art Gallery is one of the most attractive
part of the Museum, displaying Sadequain’s four huge paintings and collages of metal and wood. A
restored large triptych by Zahoor ul-Akhlaq, donated by philanthropist Ava Cawasjee is displayed
in the Contemporary Art Gallery, where temporary exhibitions of young artists are also held on
nonprofit basis. The Replica/Modeling Section is unique as it is responsible for preparing
replicas/models as souvenirs for the visitors.
Archives Division of the department has been established and started working from June 2018.
Archives Division deals with all departments of SBP and SBP-BSC for the guidance and assistance
relating to Record Management and Archives. For saving the important documents/ records,
Archives Division is functioning in following sections.
 Preservation and Treatment section

 Fumigation of the records
 Binding
 Paper Treatment & Conservation
 Proper and ideal storages for the records of SBP and SBP-BSC.
6.11.1 Visitors’ Flow
As per available data, around 10,670 visitors (2784 Male, 2547 Female and 5339 children) were
recorded in FY20. Special occasions also provided a chance to a large numbers of visitors to visit
the SBP Museum. SBP Museum showed good visitors’ flow, in spite of the closure of Museum
since March 2020, as COVID-19 precautionary measure.
6.11.2 Souvenir Shop

The souvenir is an integral part of the travel experience and most tourists return home with souvenirs to
preserve and commemorate such experiences. The State Bank Museum Souvenir Shop has become one of the
best Souvenir Shops in Pakistan. A total sale of Rs.2,512,050/- was recorded on non-profit basis in FY20.
Souvenir Shop showed good sales, in spite of the closure of Museum since March 2020, as COVID-19
precautionary measure.
6.11.3 Other Activities Sale of Souvenir Shop FY20

To support the Museum's mission of the enhancement of
education for youth and common person, different 500,000
workshops/activities were arranged in SBP Museum, 400,000
some of which are as under: 300,000
200,000
1. Independence Day Celebrations 100,000
2. Special Exhibition To Celebrate The 144th Birth 0
Anniversary Of Quaid-I-Azam
3. International Women’s Day
4. Children Literature Festival (Lahore)
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The SBP Museum Officials actively participated with an informative outreach work plan in the
Children Literature festival during FY20 at listed below stations:
1. Muzaffargarh: 03rd & 04th October 2019

2. Islamabad: 23rd & 24th October 2019
3. Peshawar: 10th & 11th December 2019
4. Lahore: 15th & 16th January 2020
5. Karachi 12 & 13 February 2020.
6.11.4 Publications
To digitize and preserve the collection of SBP Museum, following publications were designed in
FY20:
1. Catalogue of British Indian Coins in the SBP Museum

2. Conservation of Carpet
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7 SBP Subsidiaries
7.1 SBP Banking Services Corporation (SBP BSC)
SBP-BSC is a wholly owned subsidiary and operational arm of SBP. Established under the SBP-BSC
Ordinance 2001, it is mandated to provide banking services to the Federal and Provincial
Governments as well as Financial Institutions. Through its network of 16 field offices across Pakistan,
SBP-BSC is entrusted with management of currency, credit management, facilitating the inter-bank
settlement system, sale/purchase of savings instruments of the Government on behalf of Central
Directorate of National Savings and to play an active role in expanding the outreach of SBP’s devised
development finance schemes. Further, it performs operational and monitoring functions related to
Foreign Exchange (FE) and also conducts FE adjudication process as per relevant laws and
regulations. SBP-BSC also ensures delivery of support services to internal stakeholders and SBP in
the areas of procurement, engineering, medical and internal bank security.
7.1.1 Banker to the Government

SBP BSC is entrusted with the responsibility of collecting revenues and making payments on behalf
of Federal and Provincial Governments. The total number of Government transactions increased from
9.43 million in FY19 to 13 million in FY20, showing an increase of 38 percent.
In line with the National Payment Systems Strategy (NPSS), SBP-BSC placed enhanced focus on
digitization of payment systems. Dedicated efforts were made to increase the usage of Alternate
Delivery Channels (ADCs) such as internet / mobile banking, ATMs and Over the Counter (OTC)
facilities for collection of Federal and Provincial taxes for Public to Government (P2G) and Business
to Government (B2G) transactions. During FY20, SBP-BSC Field Offices carried out 2.84 million
transactions for Government collections as compared to 4.05 million transactions in the preceding
year showing a decrease of 30 percent. This decrease is attributed to significant increase in ADC
transactions which increased from 0.46 million to 5.27 million transactions, recording a growth of
1,046 percent, whereas collections through ADCs increased from Rs.171 billion in FY19 to Rs.439
billion in FY20.
For ensuring transparency, integrity and efficiency in Government to Public (G2P) payments, a
proposal was floated to FBR in January 2020 for remodeling of income tax refund payments from
paper-based instruments to direct credits into the taxpayer accounts. The proposal was endorsed by
FBR and was also announced by the Federal Government in its FY21 Budget.
Additionally, vigorous coordination for consolidation of salary / pension cheques resulted in 82

percent reduction of CNA (Controller of Naval Accounts) salary cheques and 84 percent reduction in
pension payments of CAAF (Controller Accounts Air Force). This initiative resulted in a more
efficient Government’s payments process with lesser HR requirement. Also, as a response arising due
to COVID-19 pandemic, SBP BSC swiftly adapted its operations management strategy to ensure
timely disbursement of salaries and pensions to the public servants.
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7.1.2 Digitization of Bank’s Internal Payments

Besides enhancing implementation of digitization of payments for external stakeholders, SBP-BSC
also revamped its internal payment infrastructure and processes to closely align it with the NPSS. As
a result, instrument-based payments (cheques / payment orders) made to vendors, suppliers and
employees of the bank were discontinued and instead directly credited into bank accounts of the
recipients.
7.1.3 Automation in Currency Management

Pakistan has one of the highest cash centric economies in the world, despite increasing usage of online
and point-of-sale banking and alternative payment channels. Compared to the GDP, the consistent
increasing trend of Notes-in-Circulation (NIC) is presented in Table 7.1.2.
Table 7.1.2: Comparison of GDP and NIC in FY20

(Rupees in million)
Year Nominal GDP15 Notes in Circulation (NIC)16 NIC as percent of GDP NIC Change over previous year
FY19 37,972,310 5,319,186 14.0% 13.4%
FY20 41,726,683 6,492,272 15.6% 22.0%
In pursuance of SBP’s strategic goal to maintain good quality banknotes in circulation as well as to
ensure effective implementation of SBP’s Currency Management Strategy (CMS), SBP-BSC is
gradually transforming its currency operations from manual to an automated environment. During
FY20, four Banknote Destruction Systems (BDS) were installed at Lahore, Faisalabad, Peshawar and
North Nazimabad offices. These facilities will be added in three more SBP BSC offices. Further, a
contract for nine Banknote Processing and Authentication Systems (BPAS) was awarded in October,
2019 and their phased installation is expected to be completed by December, 2021.
The BPAS machines are capable of high-speed processing17, authentication and online destruction of
banknotes providing 100 percent counterfeit detection, processing accuracy, standardization and
significant HR savings in comparison to the manual environment. SBP BSC pursued multiple
engagements during FY20 including vigilant surveillance of commercial banks for issuance of good
quality banknotes.
Gearing towards digitization of Government to Public (G2P) payments, SBP BSC implemented the
facility for payment of prize money and face value on National Prize Bonds (NPBs) through
Branchless Banking Accounts as well as through RTGS to ensure instant credit of funds to the
claimant’s bank account. During FY20, it also effectively managed withdrawal of Rs.235.5 billion
out of Rs.238.6 billion worth of Rs.40,000/- NPBs from circulation. Further, risk management
framework was formulated to ensure compliance with local and international regulations.
15 Pakistan’s GDP http://www.sbp.org.pk/ecodata/GDP_table.pdf

16 Statement of Affairs- 26 June 2020 http://www.sbp.org.pk/publications/statements/2020/26-Jun-2020-issue.pdf
17
Approx.30 banknotes per second
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SBP Subsidiaries
In the wake of COVID-19 pandemic crisis, SBP BSC issued fresh notes worth Rs.760 billion
including Rs.89.08 billion for ‘Ehsaas Emergency Cash Program’ to ensure adequate supply of fresh
and disinfected re-issuable notes to commercial banks in lieu of quarantined cash. Moreover, balance
sheet relief of Rs.9.1 billion was also given to banks, facilitating them with regards to quarantined
cash received from hospitals and pharmacies.
7.1.4 Supporting Financial Inclusion & Development Finance

In line with SBP’s strategic goal to increase Financial Inclusion, SBP-BSC facilitated in monitoring of
agriculture credit disbursement target of Rs.1,350 billion allocated to 50 Participating Financial
Institutions (PFIs) for FY20. During FY20, PFIs disbursed Rs.1,215 billion, with credit expansion of
approximately 3.5 percent as compared to Rs.1,174 billion in corresponding period of previous year.
Under National Financial Literacy Program (NFLP), despite the restrictions due to COVID-19
pandemic, more than 254,000 participants were given financial education during FY20 against a
target of 226,000 beneficiaries, through approximately 10,000 classroom sessions and 300 street
theatre programs. This comprised of 70 percent participants from the rural areas as well as a
significant improvement in female participation (57 percent in FY20 compared to 42 percent in
FY19). The number of participants who opened a bank or mobile account at the end of the sessions
also showed remarkable improvement from 53 percent in FY19 to 83 percent in FY20. Since the
initiation of NFLP in August 2017, more than 600,000 adults have been imparted financial education.
As a measure to promote SME Finance, “Sectoral Development” initiative was devised which
encouraged SBP-BSC field offices to focus on sectors of regional importance such as wooden
furniture, marble products etc. and proposed viable measures for enhancing their access to finance.
Under the refinance schemes for SMEs, more than 700 loans were refinanced amounting to Rs.1.828
billion up to June 30, 2020. Moreover, SBP BSC issued guarantees amounting to Rs.2.08 billion
under credit guarantee schemes. Refinance Scheme Units (RSUs) disbursed Rs.1,096.24 billion under
the Export Refinance Schemes and Rs.70.20 billion under Long Term Financing Facility. Further,
subsidy and credit loss subsidy amounting to Rs.1.29 billion were processed under Prime Minister
Youth Business Loan (PMYBL) scheme till Q3-FY20. Moreover, Refinance Scheme for Payment of
Wages & Salaries to the workers and employees was launched to prevent layoffs of employees by
business concerns impacted by the COVID-19 lockdown and Rs.37.39 billion were disbursed under
the said scheme.
7.1.5 Monitoring of FE Operations and Realization of Export Proceeds

SBP BSC took various developmental initiatives to bring efficiency and improvements in its existing
foreign exchange related operational processes. In this respect, SBP’s online portal, Regulatory
Approval System (RAS), was successfully launched for submission of FE related cases under
Knowledge Management (KM) project. Through SBP-RAS, bank’s customers receive system‐
generated updated status reports, at their email address provided by bank, from the time of case
submission till its completion. In addition, customers also have the option to check the updated status
of their cases on SBP’s website anytime.
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SBP-BSC also implemented IMF’s BPM-6 (Balance of Payments Manual 6) in coordination with
SBP, which enabled electronic reporting of Export Advance Payment (EAP) and discontinuation of
manual paper-based submissions. SBP-BSC continued to actively pursue establishment of an ‘Online
Portal for Government Subsidies on Export’ with Ministry of Commerce (MoC) as well as
development of an ‘Electronic Data Interchange’ (EDI) with Pakistan Customs for effective
monitoring of trade transactions.
SBP BSC, under powers delegated by SBP, imposed penalties on Authorized Dealers (ADs) for FE
violations.
In addition, 12,439 complaints were lodged in FEA Courts against delinquent exporters who failed to
repatriate export proceeds within stipulated time, while 12,334 cases were decided through effective
prosecution resulting in a realization of US Dollars 213.8 million as compared to repatriation of US
Dollars 179.5 million against 7,682 cases in FY19. SBP BSC also successfully defended and pleaded
27 out of 36 appeals in Foreign Exchange Regulation Appellate Board (FERAB) without hiring
external legal counsel that resulted in recovery of Rs.6.9 million fine, whereas the judgments on
remaining 9 appeals are pending.
In addition, a total of 376 fake E-forms valuing US Dollars 5.23 million were also identified and
referred to Collector of Customs (Adjudication) as compared to 26 fake E-Forms valuing USD 6.4
Million during last year. Further, genuineness of more than 19,800 manual E-Forms, forwarded by
Customs, was also verified as compared to 37,205 E-Forms in FY19.
During the year, SBP BSC administered 19 Government subsidy schemes disbursing a total of Rs.
54.7 billion to exporters against 470,071 claims under Textile and Non-Textile subsidy schemes as
compared to disbursement of Rs.49.7 billion in FY19. Further, penalties amounting to Rs.55.18
million were recovered from non-performing exporters against sugar export quota allocation.
To address the new evolving risks in the FE regime, a fresh approach was adopted to monitor money
laundering and terrorist financing. In this regard, inward and outward FX transactions were
scrutinized with a broader perspective of money laundering and terrorist financing. Further, a ‘Money
Laundering Risk Assessment Model’ for risk profiling of FE related cases and a ‘Name Search
Engine’ (containing names of approximately 22,700 blacklisted individuals and entities) for name
screening were developed.
7.1.6 Human Resource Management
During FY20, SBP-BSC concentrated on improving its HR Management, including manpower
planning, career development, performance management, distribution of workload, review of
compensation and benefits structure in accordance with market-based remuneration. SBP-BSC also
actively pursued workforce rationalization for achieving optimum HR strength especially in the wake
of automation and BPR initiatives being undertaken by the Bank. The total staff strength in various
grades by June, 2020 was 2,346 as compared to previous 2,545. SBP-BSC undertook various capacity
building initiatives for strengthening the organization’s talent pool. A number of local, institutional,
and foreign trainings as well as e-learning sessions were organized for various participants.
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7.1.7 Support Services to SBP and its Subsidiaries

SBP BSC also ensures delivery of support services to internal stakeholders and SBP in the areas of
procurement, engineering, medical and internal bank security. During FY20, under strict compliance
with PPRA and applicable World Bank’s Procurement Regulations, a total of 177 procurement
projects worth more than Rs.3.258 billion were carried out including the notable procurements of
BPAS and SWIFT System upgradation. It is noteworthy to mention that SBP-BSC through its
Medical Services Division remained at the forefront in implementing SBP’s strategy to combat
COVID-19.
7.1.8 Corporate Governance and Internal Audit Framework

In order to provide effective support to the Corporate Governance Framework of SBP-BSC, 16
meetings of the SBP-BSC Board and its Committees on Audit, HR, Security Review and Publications
Review were conducted during FY20 and decisions were subsequently disseminated to the relevant
stakeholders.
Internal audit of SBP-BSC assisted the Board’s Audit Committee in its oversight responsibilities on
internal controls, governance and business practices through provision of summarized audit results.
During the year under review, 20 full scope annual audits were conducted including annual audits of
15 field offices and functional departments at SBP-BSC Head Office, Karachi. In addition, short-
duration audits, aimed at reviewing critical business processes, were also conducted by Audit Hubs
across the country. Two thematic audits were also carried out with respect to functioning of Internal
Monitoring Units and User Access Management across SBP-BSC. During FY20, first-ever external
quality assessment review of Internal Audit Department (IAD) of SBP-BSC was carried out by one of
the big four audit firms.
7.2 National Institute of Banking & Finance (NIBAF)

NIBAF, being training arm of SBP, has been proactively expanding its work for capacity
development of the financial industry to enable them to meet the emerging challenges of recent times.
During FY20, NIBAF managed to deliver 371 training programs, translating into 30,457 person days
of training despite the fact that the class room training activities had to be suspended in mid-March
2020 due to COVID-19. NIBAF, however, arranged 28 Virtual Instructor Led Training (VILT)
sessions both for SBP and commercial banks.
7.2.1 Programs for SBP and allied subsidiaries

During FY20, NIBAF successfully completed around 20 weeks training for 46 participants of 23rd
batch of Officers inducted by SBP. This training program comprised of 20 different modules aiming
to develop understanding on various functions of the central bank. NIBAF also arranged 174
programs for existing employees of SBP. These training programs included various function specific
programs, such as risk management, cyber security, AML/CFT, Blockchain technology, use of
artificial intelligence in financial markets, risk-based supervision and soft skill development trainings.
Similarly, NIBAF for the first time arranged a one-day workshop which was exclusive for female
officers of SBP as part of Women Day.
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During FY20, NIBAF arranged around 61 training programs for SBP-BSC including two long
duration pre-induction training programs, i.e., 6 weeks training program for 82 new inductees of
Officer Training Programs (OTP-10) and 12 weeks training program on ‘Young Professionals
Induction Program -(YPIP-8)’ wherein 72 trainees participated. NIBAF also arranged around 60 short
duration programs for SBP BSC to improve knowledge and enhance understanding of their existing
workforce.
7.2.2 International Training Programs

During FY20, NIBAF organized three international training programs viz. 50th International Central
Banking Course, 47th International Commercial Banking Course and 4th English Language Course for
Central Asian Republics (CARs). These programs were held under Pakistan Technical Assistance
Program (PTAP) with joint support of SBP and Economic Affairs Division (EAD), Ministry of Finance.
Foreign delegates from central/commercial banks and Ministry of Finance of 15 developing countries
attended these programs.
NIBAF also hosted SAARC Finance seminar on “Emerging Trends in Good Governance of Banking
Sector in SAARC Region”. The seminar was attended by more than 40 senior level officials/delegates
from the central banks of SAARC member countries including Afghanistan, Bangladesh, Nepal, Sri
Lanka and Pakistan.
7.2.3 Training Programs in Priority Sector

In line with strategic vision of SBP, NIBAF in close collaboration with SBP has launched several
capacity development programs for the banking industry with a focus to promote financing to the
priority sectors (e.g., SME, Agricultural and Housing finance and Micro-finance).
Islamic Banking
NIBAF actively conducted training programs on Islamic banking to meet increased demand of trained
professionals in Islamic banking industry. This includes one iteration of Islamic Banking Certification
Course and nine training programs of 5-days each on Fundamentals of Islamic Banking Operation
(FIBO). These programs were held at Bahawalpur, Quetta, Peshawar, Faisalabad, Lahore, Sukkur,
Sialkot, Hyderabad and Multan. Other training initiatives during FY20 are as under:
 Awareness program on Islamic Banking and finance for Chamber of Commerce and academia.
 Three capacity building programs exclusively for incumbent Islamic Banks’ Shariah scholars.
 Two specialized training programs of 2-days duration on Islamic Banking & Finance for the
officials of Ministry of Finance and Federal Board of Revenue.
 Several advance-level short duration courses for senior officers of Islamic bank and one program
exclusively for the benefit of Shariah Board members and key executives of Islamic Banks.
Programs to Promote Development Finance

During FY20, NIBAF arranged 34 programs on different aspects of SME banking across Pakistan.
NIBAF also initiated extensive capacity building programs for banks in the area of housing finance
and agricultural finance. During FY20, NIBAF introduced 5-day comprehensive training program for
fresh ACOS/AFOs on various aspects of agricultural finance.
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7.2.4 Training Programs for Other Stakeholders

During FY20, NIBAF managed to deliver 65 programs for commercial banks covering trainings on
operational aspects of commercial banks as well as areas important from regulatory perspective for
the central bank. NIBAF provided support to Pakistan Post in the area of AML/CFT.
7.2.5 National Financial Literacy Programs for Youth (NFLP-Y)

NIBAF has launched National Financial Literacy Program for Youth (NFLP-Y) with an aim to
impart essential financial education to Pakistani youth and school going children for strengthening
their money management skills and understanding of financial matters. By the end of June, 2020,
NFLP-Y project has conducted 6,338 training sessions in ten districts through which 284,023
students were trained. In addition, NFLP-Y launched its eLearning Portal and Mobile Game
(PomPak-Learn To Earn) on March 25, 2020. In a duration of just three months, it crossed 70,000
app downloads. So far, more than 78,000 have learners registered on NFLP-Y portal and over
30,000 have become financial literate through eLearning portal.
7.3 Deposit Protection Corporation (DPC)

During FY20, Deposit Protection Corporation (DPC) further introduced new measures to accomplish
a comprehensive and reliable Deposit Protection Framework in Pakistan. This framework is crucial to
ensure a swift and seamless payment mechanism to the depositors of a failed member institution. A
sound process of reimbursement to depositor will ensure public trust in financial system and would
further enhance the financial stability. Following is a brief of measures that have been taken during
FY20.
7.3.1 Major Contributions and Achievements during FY20

 Establishment of Single Depositor View database or MIS in the banking systems of member
institutions is very crucial to assess the total deposit of each depositor or the total liability of each
institution towards its depositors. This would not only enable DPC to assess its own liability
towards protected depositors at the time of payout, but would also provide the details of accounts
of each depositor and the outstanding balance therein.
 Maintenance of pool of funds continued as DPC invested its funds in Islamic and Conventional
treasury securities issued or guaranteed by the Federal Government.
 Website of DPC is being developed to provide information to general public, depositors as well as
member institutions which will be launched soon. The core idea behind the website is to enhance
public awareness on the concept and framework of deposit protection.
7.4 Pakistan Security Printing Corporation (PSPC)

FY20 was a difficult year for businesses in general and for industry in particular due to COVID-19
pandemic. Managing industrial units under strict lockdown imposed by the Government and ensuring
availability and safety of required workforce was an uphill task compounded by supply chain
disruptions. Most of the industrial units were compelled to close down due to unmanageable situation.
PSPC being essential service industry had to operate under these difficult circumstances and meet
requirement for enhanced delivery of fresh banknotes. With dedication and team spirit, PSPC was able
to manage continuation of its normal operations and produce and deliver highest ever number of fresh
banknote pieces to SBP.
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The untiring efforts put in by the employees ensured delivery of more than 4,000 million pieces of fresh
banknotes to SBP as compared to previous 3,722 million pieces, which is 8 percent higher than last year
and highest ever in the history of PSPC.
7.4.1. Enhancement of the Production Capacity

An important aspect for growth of every business is the review and re-engineering of its business
processes and by moving towards automation. PSPC has opted to balance its production line to bring
in efficiency and cost-effectiveness in its core operations. During FY20, the corporation, as part of its
capacity enhancement program, managed to acquire, install and commission new machines in its
Intaglio printing and Finishing departments.
Commissioning of new Intaglio Machine was a major breakthrough in the Production Division, which
has increased the production capacity of Intaglio printing of the Corporation by 30 percent. Similarly,
the successful commissioning of UNO Machine in Finishing Department was crucial for completion of
the indent for FY20. With the addition of new finishing machine, the capacity of Finishing department
has increased by approximately 35 percent.
The Corporation has embarked on various other initiatives that would further enhance its capacities in
different areas, which are at different stages of completion and would yield results in the next few years.
7.4.2. Efficiency improvement and waste reduction

During the year under review, the corporation initiated several projects for efficiency improvement and
waste reduction. One of such improvement project was implementation of Lean Manufacturing in
Intaglio department, which was started under the guidance and support of our associate company, M/s
SICPA Inks Pakistan (Pvt.) Ltd and SICPA International of Switzerland. The project has resulted in
substantial saving of expensive intaglio inks. The Corporation was able to improve its production
capacity while reducing wastage at the same time. Encouraged with outcome of the project, the
management has decided to extend the scope of the project to other production departments.
7.4.3. Countrywide deliveries of banknotes

In spite of the severe and stringent countrywide lockdown due to COVID-19 pandemic, the corporation
managed the smooth and uninterrupted supply of banknotes across the country. The highest ever
delivery of 829 million pieces was recorded in the month of June 2020.
7.4.4. Maintaining Quality of Banknotes

PSPC aims to continue reforming its policies and to adopt best market practices. PSPC has a fully
equipped laboratory that forensically analyzes any suspected counterfeit product in the market as
reported by SBP and law enforcement agencies. The laboratory is capable of running advance tests.
During FY20, it benchmarked its operations with internationally acclaimed forensic laboratory at
SICPA International, Switzerland. Additionally, to make sure that no counterfeit products are
circulated, PSPC in collaboration with SBP-BSC has undertaken a project to establish a Document
Analytical Paper Laboratory in Lahore. This will provide additional assistance in the fight against
counterfeit products.
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SBP Subsidiaries
7.4.5. Upholding Health, Safety and Environment

Various support departments at PSPC provided extraordinary support and assistance during the
pandemic and ensured that entire corporation remains functional while safeguarding the health and
wellbeing of its workforce. The management at PSPC is committed to provide healthy, safe and clean
workplace to its employees, visitors, internal and external stakeholders. Although, Health, Safety and
Environment is a new department with limited resources but it has proven to be a vital one. To further
strengthen the role of HSE, a Health, Safety and Environment GAP analysis study was conducted for
benchmarking purpose.
During the COVID-19 pandemic, all safety measures proposed by international and national health
institutes along with the government guidelines for the industrial workplace were implemented.
7.4.6. Security Enhancement at PSPC

PSPC, being a critical and strategic organization of the country is categorized as a KPID Alpha-1
facility. Due to its nature of business, PSPC has significant security risks which need to be managed
effectively. For this purpose, latest technological advancements have been made to strengthen the
security of the corporation and its employees. Further, supplementary physical measures and
enhancements have been taken as well to increase the area coverage and create an additional layer of
security.
7.4.7. Developments in Information Technology

Upgrading the information management is co-related to the overall performance of an organization. A
strong and self-evolving information management system ensures and improves the productivity of the
entire corporation.
The corporation was able to migrate File Storage Service, Email Service, Internet Proxy and Active
Directory to a virtual environment to reduce their dependability on the server hardware and ensure their
timely availability through rapid migrations in case of server hardware malfunctions or maintenance.
Furthermore, a Disaster Recovery Site was established for an active backup environment where backups
of domain controller, database and email are being maintained to ensure availability of IT related
services in the event of a crisis or emergency situation. In collaboration with SBP, IT security
assessment of IT infrastructure at PSPC was conducted to mitigate the potential cyber-security threats
at PSPC.
7.4.8. HR Developments
PSPC continued to play a dynamic role to enhance and develop a performance-oriented culture and
focused on improving knowledge, ability, skills and capability building of employees. To further
promote the performance-oriented culture, all monetary benefits of the employees are linked to their
yearly performance evaluation score. Major initiatives in the areas of workforce rationalization and
automation has been taken to boost the effectiveness and efficiency of the business and its processes.
The existing HR policies are also being revised.
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The strategic partnership between PSPC and NIBAF has resulted in some critical programs, having
huge impact on capacity building of PSPC’s human resource were planned and organized. In total, 500+
hours have been spent on training and development of human resource, primarily focusing on
managerial and leadership skills, communication skills, information technology, cyber security and core
technical skills.
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8 Financial Performance
8.1 Overview
The stability in the exchange rate allowed SBP to return to profitability after incurring loss in the
preceding year. The profit so earned by the Bank in the year ended June 30, 2020 is highest in its
history. The high interest rate prevalent in the first three quarters of the year allowed the Bank to
accrue significant amount of interest income from the interest sensitive assets, particularly lending to
the Government and income from the Bank’s open market operations. Further, during the year, the
liquidity mopping up operations were relatively on reduced scale and hence the interest expense
registered a substantial decline. The total expenses registered 17 percent increase during the year due
to increased volume of banknote printing and general & administrative expenses.
Table 8.1 gives a comparative summary of Bank’s annual profit and loss account for FY20 and FY19.
Table 8.1: Summary Statement of Profit and Loss

(rupees in million)
Description
FY 20 FY 19
Income
Discount / interest /markup and/or return earned 1,218,680 656,953
Less: Interest/mark-up expense 73,346 110,763
Net interest /markup and/or return income 1,145,334 546,190
Loss on fair valuation of COVID relief loans and advances (4,194) -
Commission income 4,648 4,136
Exchange loss – net 66,402 (506,131)
Dividend Income
461 390
Share of profit from associates
580 702
Other operating income/(loss) – net
8,604 4,347
Other income – net
1,425 319
Total income net of interest expenses
1,223,260 49,953
Expenditure
Banknotes’ printing charges

13,325 11,419
Agency commission
10,669 10,643
General administrative and other expenses
35,168 27,909
(Reversal of Provisions) / Provisions - net
(73) 496
Less: Total expenditure- net of reversal of provisions
59,089 50,467
Profit / (Loss) for the year
1,164,171 (514)
Taxation
738 529
Net Profit / (Loss) for the year after tax
1,163,433 (1,043)
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Details of major heads of income and expenses are appended below:
8.2 Income
8.2.1 Net Discount / Interest / Markup Table 8.2: Interest/Discount/Return Income on Foreign and
The interest / markup income increased by Rs. Domestic Assets (Rupees in million)
562,612 million to Rs.1,208,621 million, Description FY20 FY19
Discount, interest / mark-up on:
registering an increase of 87 percent. The
- Government Securities 1,048,157 568,489
lending to the Government of Pakistan (GoP)
-Securities purchased under agreement to 128,764 43,833
by SBP remained the major source of income resell
of the Bank during the year. Although, there Income from loans to financial institutions 12,837 11,945
was no further lending to the GoP after June Foreign currency deposits 13,603 16,085
30, 2019, however, the income on lending to Others 5,260 5,657
the GoP increased by 84 percent due to Total 1,208,621 646,009
increase in average volume of lending as well Table 8.3: Lending to Government, Banks and Financial
as increase in average interest rate during the Institutions
year. The income earned on lending to (Rupees in million)
Description FY20 FY19
commercial banks through OMO injections
Government securities 7,276,174 7,762,812
increased by 194 percent due to increase in
Overdraft /loans to Governments 30,157 28,200
average interest rate and larger volumes of
monetary injections during the year. Securities purchased under agreement to 917,540 782,918
resell
The interest earned on refinance facilities to Banks and financial institutions 785,897 577,872
priority sectors increased to Rs.12,837 million Total 9,009,768 9,151,802
in FY20 from Rs.11,945 million in FY19 8.23% 6.83%
primarily due to increase in lending to banks Yield on Government Securities to to
under various refinance schemes. 14.02% 13.88%
Mark-up on Loans to Banks and FIs 0% 0% to
The income on FCY deposits registered 15 to 14.49% 12%
percent decrease during the year. Although,
foreign exchange reserves increased Table 8.4: Interest/mark-up expense (Rupees in million)
significantly during the year; however, the Description FY20 FY19
return on the reserves decreased due to lower Deposits 29,582 15,446
interest rates in the international market. Interest on bilateral currency swap 20,560 21,818
(Table 8.2 and 8.3). Interest on special drawing rights of IMF 13,718 18,813
Securities sold under agreement to repurchase 1,500 47,978
The Bank incurred interest/ markup expense Expense on sukuks purchased under Bai-
on FCY and domestic liabilities. FCY muajjal agreement
6,728
4,636
liabilities include deposits of international Charges on allocation of special drawing rights
organizations and central banks, borrowings 1,255
2,070
of IMF
from International Monetary Fund and Others 3 3
currency swap arrangements. The domestic Total 73,346 110,764
interest/markup bearing liabilities include
repurchase transactions and sukuks purchased under Bai-muajjal agreement. The interest/ markup
expense witnessed a decline of Rs. 37,418 million primarily due to decrease in expense on repurchase
transactions by Rs. 46,478 million. Further expense on FCY deposits increased during the year, which
resulted in additional interest expense of Rs.14,136 million. (Table 8.4)
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Financial Performance
8.2.2 Fair valuation adjustment of COVID loans

In order to neutralize the adverse impacts of COVID-19 pandemic on economy, SBP introduced
certain interest free/subsidized refinancing schemes. As per the requirements of IFRS-9, the
subsidized loans are required to be recorded at fair value. Accordingly, an amount of Rs.4,194 million
has been recognized as fair valuation adjustment against these loans. This fair valuation adjustment
will be amortized and recorded as income over the
period of loans. Table 8.5 Breakup of the Exchange Account
(Rupees in million)
8.2.3 Exchange Gain – Net Description FY20 FY19
The exchange gains/ (losses) arise on FCY assets Gain / (loss) on:
and liabilities of the Bank. Major part of the foreign Foreign currency placements,
currency assets of the Bank are USD denominated 83,567 (233,065)
deposits and other accounts - net
whereas the foreign currency liability exposure is
mainly SDR and USD denominated. Accordingly, IMF Fund facilities (10,475) (232,360)
the movement in the PKR/SDR and PKR/USD Special Drawing Rights of the
(6,683) (40,486)
exchange rates directly affects the exchange IMF
account. Others (7) (220)
Total 66,402 (506,131)
The bank earned a net exchange gain of Rs.66,402
million during FY20 as against exchange loss of Rs. 506,131 million during FY19 (Table 8.5). The
PKR depreciated against USD and SDR during the period however, exchange gain arose due to
improvement in net FCY liability exposure as compared to previous year. The details of FCY assets
and liabilities are given in the Table 8.6.
8.2.4 Other Operating Income – net Table 8.6 FCY Assets and Liabilities
(Rupees in million)
Other operating income include penalties levied on
Description FY20 FY19
banks/financial institutions, licenses and e-CIB fee,
gains/(losses) on sale and remeasurement of FCY Assets
investments and other income. The other operating Investments 501,176 205,337
income increased to Rs.8,604 million in FY20 from Deposit / Current Accounts 595,729 387,089
Rs.4,347 million in last year. The increase is
Securities purchased under
primarily attributed to increase in income on agreement to resale
891,609 336,209
penalties levied on banks and financial institutions, Money market placements 218,466 447,219
licenses fee, e-CIB fee and gain on disposal of
Earmarked FCY balances 62,010 72,703
foreign investments classified as “fair value through
profit or loss”. SDR of IMF 29,537 55,461
Reserve tranche position
28 27
with IMF
8.3 Operating Expenditure
Others 8,637 6,068
The total expenditure during the year was Rs.59,089
Total FCY assets 2,307,192 1,510,113
million as against Rs.50,467 million in FY19. The
increase was due to 26 percent increase in general FCY Liabilities
administrative & other expenses and 17 percent Deposits of banks/FIs 236,979 282,453
increase in banknote printing charges. An analysis Other deposits and accounts 983,607 1,033,757
of major components of Bank’s expenditure is given Bilateral currency swap
476,723 469,398
as under: agreement
Payable to IMF 1,045,944 1,150,064
8.3.1 Banknotes Printing Charges Total FCY liabilities 2,743,253 2,935,672
The banknote printing charges increased to Net FCY Liabilities (436,061) (1,425,559)
Rs.13,325 million in FY20 from Rs.11,419 million
111
in FY19, thereby registering an increase of 17 percent mainly due to larger volumes of printing and
increase in printing rates.
8.3.2 Agency Commission

The Agency commission paid to National Bank of Pakistan and Bank of Punjab increased by only
0.24 percent during the year to Rs.10,668 million from Rs.10,643 million in FY19. The marginal
increase in the agency commission is due to gradual shifting of collection of duties and taxes to
Alternate Delivery Channels (ADC), which entails nominal cost for SBP. The agency commission is
likely to show declining trends due to shifting of larger volumes of tax collection to ADC mechanism.
8.3.3 General Administrative and Other Expenses

The general administrative expenses include Table 8.7: General, Administrative and other expenses
employees’ salaries and other benefits, retirement (Rupees in million)
benefits, fund managers and custodians’ expenses, Description FY20 FY19
training expenses, legal and professional expenses, Salaries & other benefits 11,448 10,996
depreciation, repair and maintenance, etc. The Retirement benefits 16,939 9,796
overall general and administrative expenses Repair and maintenance 852 867
increased to Rs. 35,168 million in FY20 from Fund managers’ and custodian expenses 298 346
Rs.27,909 million in FY19, thus registering an
Training 83 101
increase of Rs. 7,259 million. The major increase
Depreciation 2,069 2,482
was witnessed in retirement benefits, which is
attributable to higher interest cost during the year Legal & professional 240 93
due to increase in interest rate. A summary of the Others 3,239 3,228
general, administrative and other expenses is given Total 35,168 27,909
in Table 8.7.
8.4 Balance Sheet Summary

The total assets stood at Rs.12,273 billion as at June 30, 2020 as compared to Rs.11,467 billion on
June 30, 2019, registering an increase of Rs.806 billion primarily due to increase in foreign currency
accounts and investments. The increase in total assets is also contributed by the increase in value of
gold, increase in loans and advances to banks and financial institutions to promote the economic
activities in the priority sectors, and increase in securities purchased under agreement to resell.
The total liabilities of the bank stood at Rs.11,219 billion as at June 30, 2020 as compared to
Rs.10,761 billion as at June 30, 2019, registering an increase of Rs.458 billion. This rise was
primarily led by increase in currency in circulation. A comparative analysis of SBP assets and
liabilities for FY20 and FY19 are given in the Figure 8.1 to 8.4.
112
Financial Performance
Figure 8.2: SBP Assets 2019

Figure 8.1: SBP Assets 2020
Gold Foreign Gold
Reserves Foreign
Reserves Currency
held by the Accounts held by the Currency
Bank Accounts Securities
Bank and
Others 4% and Purchased
Others 5% Investment Securities
8% Investments under
9% s… Purchased 12% Agreement
under to Resell
Agreement 7%
to Resell
8%
Investment
Local Investment
60% Local
69%
Figure 8.3: SBP Liabilities 2020 Figure 8.4: SBP Liabilities 2019
Deposits of Deposits of
Banks and Others Banks and Others
Financial 16% Financial 18%
Institutions… Institutions
12% Banknotes in
Payable to the Banknotes Circulation
Current
International Accounts of in 49%
Monetary Circulation Payable to the
Government International
Fund… 58%
s Monetary
7% Fund Current
11% Accounts of
Governments
10%
113
9 Consolidated Financial Statements of SBP
A. F. FERGUSON & CO. KPMG TASEER HADI & CO.
Chartered Accountants Chartered Accountants
State Life Building No. 1-C Sheikh Sultan Trust Building No.
I.I Chundrigar Road 2
P.O. Box 4716 Beaumont Road
Karachi - 7400 Karachi-75530
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of the State Bank of Pakistan
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of the State Bank of Pakistan (the Bank) and its
subsidiaries, SBP Banking Services Corporation, National Institute of Banking and Finance (Guarantee)
Limited and Pakistan Security Printing Corporation (Private) Limited (together ‘the Group’), which
comprise the consolidated balance sheet as at June 30, 2020, and the consolidated profit and loss
account, consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at June 30, 2020, and of its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the ‘Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements’ section of our report. We are independent of the Group
in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code),
and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
115

Key Audit Matter How the matter was addressed in our audit
1 Foreign currency accounts and investments

(Refer note 10 of the annexed consolidated financial statements)
The Group maintained certain foreign Our audit procedures, among others, included the
currency accounts and investments which following:
aggregated to Rs 2,207 billion as at June 30,
2020. This includes balances aggregating to  We obtained understanding of the processes,
Rs 173.698 billion which were placed assessed the design and implementation and
through appointed fund managers by the tested operating effectiveness of key controls
Group under the supervision of a custodian. throughout the year over recognition,
derecognition and valuation of investments and
The existence and valuation of these were related revenue;
assessed by us as a significant risk area and
therefore we considered this as a key audit  Sent direct confirmations to counterparties to
matter. confirm the balances of investment holdings;
and
 We compared the prices to independent sources
where quoted market prices were used;
Further, in respect of the investment made through
fund managers:
 We obtained Type-2 report from Custodian to
assess that controls were suitably designed by
custodian and operated effectively in respect of
its activities.
 We obtained the monthly statement of changes
in net assets provided by the Custodian used by
management for recognising income in respect
of foreign currency securities and reconciled
them with the accounting records of the Group
to assess that they are accurately recorded.
 We performed substantive audit procedures on
year-end balance of portfolio including
evaluation of Fund Managers’ and Custodian’s
statements, and re-performance of valuations
on the basis of observable data at the year end.
We also evaluated the adequacy of the overall
disclosures in the consolidated financial statements
in respect of the investment portfolio in accordance
with the requirements of applicable financial
reporting framework.
116
Consolidated Financial Statements of SBP & its Subsidiaries

2 Impact of COVID-19
(Refer note 17.6 of the annexed consolidated financial statements)
During the year, the Group in response to Our audit procedures, among others, included the
COVID-19 pandemic has launched three following:
new interest free financing facility schemes
and disbursed Rs 38,244 million. These  Obtained understanding, evaluated the design
facilities have been recorded at their fair and tested the operating effectiveness of
value resulting in a fair valuation adjustment controls related to process for disbursements of
of Rs 4,194 million. these loans;
The disbursement of these loans was a  Sent direct confirmations, on a sample basis, to
significant event for the Group during the the counterparties to confirm the balances of
year. Further, the measurement at the fair loans so disbursed;
value involved management judgement with  With respect to the fair valuation of these loans,
respect to the use of market rate. evaluated the appropriateness of the valuation
Accordingly, this was considered as a key methodology used and assessed the
audit matter. reasonableness of the assumptions and inputs
used to determine the fair value; and
 Evaluated the adequacy of the disclosures in the
financial statements in respect of the impact of
fair valuation adjustment and related balances
of these loans.
Information Other than the Consolidated and Unconsolidated Financial Statements and
Auditor's Reports Thereon
Management is responsible for the other information. The other information comprises the information
included in the Annual Report, but does not include the consolidated and unconsolidated financial
statements and our auditor's reports thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in
this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
117

Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRSs, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Group
or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
 Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
 Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
 Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
118

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Matter
The consolidated financial statements of the Group for the year ended June 30, 2019 were audited by
EY Ford Rhodes and KPMG Taseer Hadi & Co. who had expressed an unmodified opinion thereon
vide their report dated October 24, 2019.
The engagement partners on the audit resulting in this independent auditor’s report are Salman
Hussain (A. F. FERGUSON & CO.) and Mohammad Mahmood Hussain (KPMG TASEER HADI
& CO.).

Dated: October 27, 2020
Karachi
119

CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 2020
Note 2020 2019
--------------------(Rupees in '000)--------------------
ASSETS
Cash and bank balances held by subsidiaries 7 212,825 304,957
Gold reserves held by the Bank 8 617,495,037 468,625,002
Local currency - coins 9 1,028,584 1,039,138
Foreign currency accounts and investments 10 2,206,980,030 1,375,854,388
Earmarked foreign currency balances 11 62,010,317 72,702,673
Special drawing rights of the International Monetary Fund 12 29,537,127 55,461,054
Reserve tranche with the International Monetary Fund
under quota arrangements 13 27,555 26,999
Securities purchased under agreement to resell 14 917,539,647 782,918,155
Current accounts of governments 26.2 30,157,106 28,200,405
Investments - local 15 7,412,323,127 7,906,282,006
Investment in associates 16 6,488,078 2,487,053
Loans, advances and bills of exchange 17 804,752,686 597,478,668
Taxation - net 1,045,957 1,048,075
Assets held with the Reserve Bank of India 18 11,943,164 9,580,097
Balances due from the Governments of India and Bangladesh 19 13,141,164 12,266,548
Property, plant and equipment 20 137,165,046 137,891,773
Investment property 21 978,608 -
Intangible assets 22 106,344 198,758
Deferred taxation 23 - 367,566
Other assets 24 20,111,313 14,199,144
Total assets 12,273,043,715 11,466,932,459
LIABILITIES
Banknotes in circulation 25 6,458,763,106 5,285,025,504
Bills payable 1,726,348 1,146,660
Current accounts of governments 26.1 748,790,102 1,101,513,930
Payable to Islamic banking institutions against Bai Muajjal transactions 27 19,512,958 124,410,232
Payable under bilateral currency swap agreement 28 476,722,596 469,397,756
Deposits of banks and financial institutions 29 1,171,103,559 1,246,238,770
Other deposits and accounts 30 1,093,994,030 1,116,324,484
Payable to the International Monetary Fund 31 1,045,944,378 1,150,064,353
Other liabilities 32 105,218,885 182,539,239
Deferred liability - staff retirement benefits 33 96,370,511 83,989,607
Deferred taxation 23 560,356 -
Endowment fund 120,984 109,600
Total liabilities 11,218,827,813 10,760,760,135
Net assets 1,054,215,902 706,172,324
REPRESENTED BY
Share capital 34 100,000 100,000
Reserves 35 124,134,119 69,451,210
Unappropriated profit 159,739,454 10,259,308
Unrealised appreciation on gold reserves held by the Bank 36 613,003,558 464,180,641
Unrealised appreciation on remeasurement of investments - local 15.7 61,416,969 68,490,606
Surplus on revaluation of property, plant and equipment 95,821,802 93,690,559
Total equity 1,054,215,902 706,172,324
CONTINGENCIES AND COMMITMENTS 37
Pursuant to the requirements of section 26 (1) of the SBP Act, 1956, the assets of the Group specifically earmarked against
the liabilities of the Issue department have been detailed in note 25.1 to these consolidated financial statements.
The annexed notes from 1 to 59 form an integral part of these consolidated financial statements.
_______________________ _______________________ _______________________

Dr. Reza Baqir Jameel Ahmad Saleemullah
Governor Deputy Governor Executive Director
120

CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 2020
Note 2020 2019

--------------------(Rupees in '000)--------------------
Discount, interest / mark-up and / or profit earned

on financial assets measured at;
- amortised cost 38 1,208,621,301 646,009,384
- fair value through profit or loss 38 10,058,650 10,943,995
Less: Interest / mark-up expense 39 (73,346,285) (110,763,556)
1,145,333,666 546,189,823
Fair valuation adjustment on COVID loans 17.6 (4,193,815) -
Commission income 40 4,647,788 4,136,396

Exchange gain / (loss) - net 41 66,402,530 (506,131,054)
Dividend income 460,688 390,000
Share of profit from associates 42 579,908 702,297
Other operating income - net 43 8,603,985 4,346,933
Other income - net 44 1,424,801 318,414
1,223,259,551 49,952,809
Less: Operating expenses

- banknotes' and prize bonds printing charges 45 13,325,213 11,419,149
- agency commission 46 10,668,548 10,642,735
- general administrative and other expenses 47 35,168,241 27,909,418
(reversal of provision against) / provision for:

- other doubtful assets 32.3.1.1 (42,143) 456,042
- others 117 (76)
(reversal) / charge for credit loss allowance on
financial instruments - net 48 (30,875) 39,622
(72,901) 495,588
59,089,101 50,466,890
Profit / (loss) before taxation 1,164,170,450 (514,081)
Taxation 49 737,860 529,222
Profit / (loss) after taxation 1,163,432,590 (1,043,303)
_______________________ _______________________ _______________________

121

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 2020 2019

--------------------(Rupees in '000)--------------------
Profit / (loss) after taxation 1,163,432,590 (1,043,303)
Other comprehensive income
Items that may be reclassified subsequently to the consolidated

profit and loss account:

148,822,917 152,866,872
Items that will not be reclassified subsequently to the consolidated

profit and loss account:
Unrealised diminution on remeasurement of investments - local 15.7 (7,073,637) (21,618,750)
Remeasurements of property, plant and equipment - 28,206,379
Impact of reclassification of property, plant and equipment to

investment property - net of deferred tax 3.3 (946,293) -
Impact of adjustment in remesurement of property, plant and

equipment of associate - net of deferred tax 3.3 3,310,469 -
Impact of adjustment surplus of property, plant and equipment

relating to deferred tax 3.3 (232,933) -
Remeasurements of staff retirement defined benefit plans 47.3.3.1 (10,740,799) 8,880,378

& 47.4.7
(15,683,193) 15,468,007
Total comprehensive income for the year 1,296,572,314 167,291,576
_______________________ _______________________ _______________________

122

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
-------------------------------------------------------------------------Reserves----------------------------------------------------------------------------------
Unrealised
Unrealised appreciation/ Surplus on
Reserve
Reserve for appreciation (diminution) revaluation
Share Reserve for Loans created as a
building up Rural Industrial Export Housing Unappropriated on gold on remea- of property Total
capital Reserve fund acquisition guarantee result of Subtotal
share credit fund credit fund credit fund credit fund profit reserves held surement of and
of PSPC fund acquisition
capital by the Bank investments - equipment
of PSPC
local
-------------------------------------------------------------------------------------------------------------------------(Rupees in '000)----------------------------------------------------------------------------------------------------------------------
Balance as at July 1, 2018 100,000 33,951,023 - 65,464,000 2,600,000 1,600,000 1,500,000 900,000 4,700,000 (41,279,353) 69,435,670 14,954,600 311,313,769 90,109,356 65,484,180 551,397,575
Loss after taxation - - - - - - - - - - - (1,043,303) - - - (1,043,303)

Unrealised diminution on remeasurement
of investments - local (note 15.7) - - - - - - - - - - - - - (21,618,750) - (21,618,750)
Unrealised appreciation on gold reserves
held by the Bank (note 36) - - - - - - - - - - - - 152,866,872 - - 152,866,872
Surplus on revaluation of property,
plant and equipment - - - - - - - - - - - - - - 28,206,379 28,206,379
Remeasurements of staff
retirement defined benefit
plans (note 47.3.3.1 & 47.4.7) - - - - - - - - - - - 8,880,378 - - - 8,880,378
- - - - - - - - - - - 8,880,378 152,866,872 (21,618,750) 28,206,379 168,334,879
Total comprehensive income

for the year - - - - - - - - - - - 7,837,075 152,866,872 (21,618,750) 28,206,379 167,291,576
Appropriations
Transfer to the reserve fund - 15,540 - - - - - - - - 15,540 (15,540) - - - -
- 15,540 - - - - - - - - 15,540 (15,540) - - - -
Transactions with owners
Profit transferred to the Government of
Pakistan - - - - - - - - - - (12,516,827) - - - (12,516,827)
- - - - - - - - - - (12,516,827) - - - (12,516,827)
Balance as at June 30, 2019 100,000 33,966,563 - 65,464,000 2,600,000 1,600,000 1,500,000 900,000 4,700,000 (41,279,353) 69,451,210 10,259,308 464,180,641 68,490,606 93,690,559 706,172,324
Profit after taxation - - - - - - - - - - - 1,163,432,590 - - - 1,163,432,590

Unrealised diminution on remeasurement
of investments - local (note 15.7) - - - - - - - - - - - - - (7,073,637) - (7,073,637)
Impact of reclassification of property,
plant and equipment to investment
property - net of deferred tax - - - - - - - - - - - - - - (946,293) (946,293)
Impact of adjustment in remeasurement
of property, plant and equipment
of associate - net of deferred tax - - - - - - - - - - - - - - 3,310,469 3,310,469
Impact of adjustment surplus of property,
plant and equipment of associate
- net of deferred tax - - - - - - - - - - - - - - (232,933) (232,933)
Unrealised appreciation on gold reserves
held by the Bank (note 36) - - - - - - - - - - - - 148,822,917 - - 148,822,917
Remeasurements of staff retirement
defined benefit plans (note 47.3.3.1
& 47.4.7) - - - - - - - - - - - (10,740,799) - - - (10,740,799)
- - - - - - - - - - (10,740,799) 148,822,917 (7,073,637) 2,131,243 133,139,724

for the year - - - - - - - - - - - 1,152,691,791 148,822,917 (7,073,637) 2,131,243 1,296,572,314
Appropriations
Transfer to the reserve fund (note 35.3) - 9,566 67,673,343 - - - - - - - 67,682,909 (67,682,909) - - - -
Transfer to unappropriated profit against
IDBL loan - (13,000,000) - - - - - - - - (13,000,000) 13,000,000 - - - -
Adjustment to recover loan of
IDBL (note 17.3.1) - - - - - - - - - - - (13,000,000) - - - (13,000,000)
- (12,990,434) 67,673,343 - - - - - - - 54,682,909 (67,682,909) - - - (13,000,000)
Dividend - - - - - - - - - - - (10,000) - - - (10,000)
Pakistan - - - - - - - - - - - (935,518,736) - - - (935,518,736)
- - - - - - - - - - - (935,528,736) - - - (935,528,736)
Balance as at June 30, 2020 100,000 20,976,129 67,673,343 65,464,000 2,600,000 1,600,000 1,500,000 900,000 4,700,000 (41,279,353) 124,134,119 159,739,454 613,003,558 61,416,969 95,821,802 1,054,215,902
_______________________ _______________________ _______________________

123

CONSOLIDATED STATEMENT OF CASH FLOWS
Note 2020 2019

------ (Rupees in '000) -------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year after non-cash and other items 50 1,043,589,818 195,978,797
Taxes refunded / (paid) 192,178 (1,009,459)
(Increase) / decrease in assets:
Foreign currency investments and placements (286,135,346) 340,817,132
Gold reserves held by the Bank (47,118) -
Reserve tranche with the International Monetary Fund under
quota arrangements - (6,637)
Securities purchased under agreement to resell (134,621,472) 779,391,608
Investments - local 484,849,258 (4,087,108,240)
Loans, advances and bills of exchange (211,449,885) (144,051,789)
Assets held with the Reserve Bank of India and balances due from
Governments of India and Bangladesh (874,616) (4,519,664)
Other assets (5,900,031) (7,681,894)
(154,179,210) (3,123,159,484)
889,602,786 (2,928,190,146)
Increase / (decrease) in liabilities:
Banknotes issued - net 1,173,737,602 649,878,793
Bills payable 579,688 502,208
Current accounts of Governments (354,680,529) 1,016,441,648
Payable to Islamic Banking Institutions against Bai Muajjal transactions (104,897,274) 124,410,232
Payable under bilateral currency swap agreement (1,766,789) 98,988,685
Deposits of banks and financial institutions (75,135,211) 432,289,855
Payment of retirement benefits and employees' compensated absences 1,640,105 (7,033,995)
Other deposits and accounts (22,330,454) 915,896,284
Other liabilities (76,683,055) 98,112,716
Endowment fund 11,384 6,811
540,475,467 3,329,493,237
Net cash generated from operating activities 1,430,078,253 401,303,091
CASH FLOWS FROM INVESTING ACTIVITIES

Dividend received 1,913,514 950,704
Capital expenditure (798,024) (3,003,938)
Proceeds from disposal of property, plant and equipment 57,057 16,881
Contribution of initial capital in Deposit Protection Corporation - (500,000)
Net cash generated from / (used in) investing activities 1,172,547 (2,536,353)
CASH FLOWS FROM FINANCING ACTIVITIES

Profit paid to the Federal Government of Pakistan (935,518,736) (12,516,827)
Net change in balances pertaining to IMF (114,594,748) 237,479,321
Dividend paid (10,000) -
Net cash (used in) / generated from financing activities (1,050,123,484) 224,962,494
Increase in cash and cash equivalents during the year 381,127,316 623,729,232
Cash and cash equivalents at the beginning of the year 1,504,301,033 1,065,068,622
Effect of exchange gain / (loss) on cash and cash equivalents 50,758,771 (184,496,821)
Cash and cash equivalents at the end of the year 51 1,936,187,120 1,504,301,033
_______________________ _______________________ _______________________

124

NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
1 STATUS AND NATURE OF OPERATIONS
1.1 The Group comprises of State Bank of Pakistan (the Bank) as the parent entity and following subsidiaries:
- SBP Banking Services Corporation (BSC)

- National Institute of Banking and Finance (Guarantee) Limited (NIBAF)
- Pakistan Security Printing Corporation (Private) Limited (PSPC)
1.1.1 State Bank of Pakistan is the central bank of Pakistan and is incorporated under the State Bank of Pakistan Act, 1956.
The Bank is primarily responsible for monitoring of credit and foreign exchange, management of currency and also acts as
the banker to the Government. The activities of the Bank include:
- formulating and implementing the monetary policy;

- facilitating free competition and stability in the financial system;
- licensing and supervision of banks including micro finance banks, development financial institutions and exchange
companies;
- organising and managing the inter-bank settlement system and promoting smooth functioning of payment systems;
- providing of loans and advances to governments, banks, financial institutions and local authorities under various
facilities;
- purchasing, holding and selling of shares of banks and financial institutions on the directives of the Federal
Government; and
- acting as a depository of governments under specific arrangements between governments and certain institutions.
1.1.2 The head office of the Bank is situated at I. I. Chundrigar Road, Karachi, in the province of Sindh, Pakistan.
1.1.3 The subsidiaries and associates of the Bank and the nature of their respective activities are as follows:
a) SBP Banking Services Corporation - wholly owned subsidiary:
SBP Banking Services Corporation was established in Pakistan under the SBP Banking Services Corporation
Ordinance, 2001 (the Ordinance) and commenced its operations with effect from January 2, 2002. It is responsible for
carrying out certain statutory and administrative functions and activities on behalf of the Bank, as transferred or
delegated by the Bank under the provisions of the Ordinance.
The head office is situated at I. I. Chundrigar Road, Karachi, in the province of Sindh, Pakistan.
b) National Institute of Banking and Finance (Guarantee) Limited - wholly owned subsidiary:
National Institute of Banking and Finance (Guarantee) Limited was incorporated in Pakistan under the repealed
Companies Ordinance, 1984 (now Companies Act, 2017) as a company limited by guarantee having share capital. It
is engaged in providing education and training in the field of banking, finance and allied areas.
The head office is situated at NIBAF Building, Street 4, Pitras Bukhari Road, H-8/1, Islamabad, Pakistan.
c) Pakistan Security Printing Corporation (Private) Limited - wholly owned subsidiary
Pakistan Security Printing Corporation (Private) Limited was incorporated in Pakistan under the repealed Companies
Ordinance, 1984 (now Companies Act, 2017) and is a wholly owned subsidiary of the Bank. PSPC is principally
engaged in the printing of currency notes and national prize bonds on behalf of the Bank.
The registered office and the factory of the PSPC are located at Jinnah Avenue, Malir Halt Karachi, in the province of
Sindh, Pakistan.
d) SICPA Inks Pakistan (Private) Limited (SICPA) - associate
SICPA is a joint venture of SICPA SA, Switzerland and PSPC, incorporated in 1995. The company operates a facility
in Karachi for manufacturing security inks for printing of all denominations of currency notes and other value
documents, such as, passports, postage stamps and stamp papers, etc.
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e) Security Papers Limited (SPL) - associate
SPL is an associated company of PSPC. It was established in 1965. It became a joint venture company of Iran,
Turkey and Pakistan in 1967, under the protocol of regional PSPC of development (now economic PSPC
organisation) in 1967. SPL is engaged in manufacturing of paper required by PSPC for printing banknotes, prize
bonds, non-judicial stamp paper, share certificates and watermarked certificate / degree papers for various
educational institutions of Pakistan.
2 STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with the requirements of the International
Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).
3 BASIS OF MEASUREMENT
3.1 These consolidated financial statements have been prepared under the historical cost convention, except that gold
reserves, certain foreign currency accounts and investments, certain local investments, investment property and certain
items of property as referred to in their respective notes have been included at revalued amounts and certain staff
retirement benefits and provision for employee's compensated absences have been carried at present value of defined
benefit obligations.
3.2 These consolidated financial statements are presented in Pakistani Rupees (PKR), which is the Group's functional and
presentation currency.
3.3 Adjustments related to PSPC’s standalone financial statements
The financial statements of PSPC have been restated during the year due to correction of certain errors and change in
accounting policy related to investment property. The amount of restatement is considered as immaterial from the
perspective of the consolidated financial statements of the Group, therefore the impact of the errors and change in
accounting policy has been incorporated in these consolidated financial statements in the current year figures without
restating comparative figures. The impact can be summarised as follows:
Consolidated statement of comprehensive income Note June 30, 2020

Rupees in '000'
- Recognition of surplus relating to property, plant and equipment of
SPL - net of deferred tax 16.1 3,310,469
- Reversal of surplus recognised on property, plant and equipment upon
reclassification of these assets to investment property 20.1 (946,293)
- Reversal of surplus recognised on property, plant and equipment upon
recognition of related deferred tax liability (232,933)
Consolidated profit and loss account
- Adjustment arising on account of alingment of reporting period of the associate

to the year end of the parent company 16.1 & 16.2 (217,967)
- Recognition of surplus against investment property on account of change in
accounting policy 21 978,608
- Others 135,480
3.4 Standards, interpretations of and amendments to the IFRSs that are effective in the current year
3.4.1 Effective from July 1, 2019, the Group has adopted IFRS 16, 'Leases' which replaces IAS 17, 'Leases' and various other
interpretations. For the effects of adoption of IFRS 16 on these consolidated financial statements, refer note 4.1 below.
3.4.2 There are certain other new and amended standards and interpretations that became effective during the current year,
but are considered not to be relevant or did not have any significant effect on the Group's operations and are, therefore,
not detailed in these consolidated financial statements.
3.5 Standards, interpretations of and amendments to the IFRSs that are not yet effective
3.5.1 The following standards, interpretations and amendments of the IFRSs would be effective from the dates mentioned
below against the respective standards on or interpretations:
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Effective date (annual periods

beginning on or after)
Standards
- IAS 1, 'Presentation of financial statements' (amendments) January 1, 2020 and July 1, 2022
- IAS 8, 'Accounting policies, changes in accounting estimates
and errors' (amendments) July 1, 2020
- IAS 16, 'Property, plant and equipment' (amendments) July 1, 2022
- IAS 37, 'Provisions, contingent liabilities and contingent assets' (amendments) July 1, 2022
- IFRS 3, 'Business combination' (amendments) January 1, 2020
- IFRS 16, 'leases' (amendments) June 1, 2020
The management is in the process of assessing the impact of the above amendments on these consolidated financial
statements.
3.5.2 There are certain other new or amended standards and interpretations that are mandatory for the accounting period
beginning on or after July 1, 2020, but are considered not to be relevant or will not have any significant effect on the
Group's operations and are, therefore, not detailed in these consolidated financial statements.
4 CHANGES IN ACCOUNTING POLICIES
4.1 IFRS 16, 'Leases'
Effective from July 1, 2019, the Group has adopted IFRS 16, 'Leases' which replaces IAS 17, 'Leases', IFRIC 4,
'Determining whether an arrangement contains a lease', SIC 15, 'Operating leases - incentives' and SIC 27, 'Evaluating
the substance of transactions involving the legal form of lease.' The standard addresses recognition and measurement of
leases for both lessor and lessee.
IFRS 16 introduces a single, on consolidated balance sheet lease accounting model for lessees. A lessee recognises a
right-of-use asset representing the underlying asset and a lease liability representing its obligations to make lease
payments. There are recognition exception for short term leases and leases of low value items. Lessor accounting
remains similar to the previous standard i.e. lessor continues to classify leases as finance or operating leases.
The Group has various lease arrangements relating to guest houses for its employees and branches of BSC and PSPC.
All these lease arrangements have termination clause which gives a right to both the lessor and the lessee to terminate
each of these lease arrangements, by giving the other party, a prior notice of one to three months. On adoption of IFRS
16, the Group has applied judgment to determine the lease term for aforementioned lease arrangements and has elected
to apply the practical expedient of not to recognise right-of-use assets and lease liabilities for short term leases that have
a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases are
recognised as an expense on a straight line basis over the lease term.
The adoption of IFRS 16, therefore , does not have any impact on the Group's consolidated financial statements except
reclassification of leased assets held by PSPC as right-of-use assets. The impacts of reclassifications due to the
adoption of IFRS 16 on the opening balances in the statement of financial position are as follows:
July 1,
2019
Impact on the statement of financial position: (Rupees in '000)
- Increase in fixed assets - right of use assets 25,497

- Decrease in fixed assets - motor vehicles (25,497)
- Increase in lease liabilities against right of use assets 18,580
- Decrease in liabilities against asset subject to finance lease (18,580)
The new accounting policy, consequent to adoption of the standard, is disclosed in note 5.8.1 to these consolidated
financial statements.
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4.2 IAS 40, ‘Investment property’
During the year ended June 30, 2020, the Group has changed its accounting policy for subsequent recognition of
investment properties from cost less accumulated depreciation and accumulated impairment to fair value. This change
has been made as the management of the Group considers that the change will result in the better presentation of the
consolidated financial statements.
The cumulative impact of this change as at June 30, 2019, being not material to the consolidated financial statements of
the Group, has been taken to the consolidated profit and loss account for the year ended June 30, 2020 and comparative
figures have not been restated.
The new accounting policy has been disclosed in note 5.9 to these consolidated financial statements.
5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURES
The significant accounting policies applied in the preparation of these consolidated financial statements are set out
below. These policies are consistently applied from year to year, except as stated in note 4 above.
5.1 Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls an entity if it is exposed to, or has rights to, variable
returns from its involvement with the investee and has the ability to effect these returns through its power over the
investee. The financial statements of subsidiaries are included in the consolidated balance sheet from the date on
which control commences until the date when control ceases.
The consolidated financial statements include collectively the financial statements of the Bank and its subsidiaries.
Financial statements of the subsidiaries have been consolidated on a line-by-line basis. All intra-group assets and
liabilities, equity, income, expenses and cash flow relating to transaction between members of the group are eliminated
on consolidation.
5.2 Banknotes in circulation and local currency coins
The liability of the Group towards banknotes issued as a legal tender under the State Bank of Pakistan Act, 1956, is
stated at face value and is represented by the specified assets of the Issue department of the Bank as per the
requirements stipulated in the State Bank of Pakistan Act, 1956. The cost of printing of notes is charged to the profit and
loss account as and when incurred. Any un-issued fresh banknotes lying with the Bank and previously issued notes held
by the Bank are not reflected in the consolidated balance sheet.
The Group also issues coins of various denominations on behalf of the Government of Pakistan (GoP). These coins are
purchased from the GoP at their respective face values. The coins held by the Bank form part of the assets of the Issue
department.
5.3 Financial assets and financial liabilities
Financial instruments carried on the consolidated balance sheet include cash and bank balances held by subsidiaries,
local currency - coins, foreign currency accounts and investments, earmarked foreign currency balances, investments -
local, loans, advances and bills of exchange, assets held with Reserve Bank of India (other than gold held by Reserve
Bank of India), balances due from the governments of India and Bangladesh, certain other assets, banknotes in
circulation, bills payable, deposits of banks and financial institutions, balances and securities under repurchase and
reverse repurchase transactions, payable to Islamic banking Institutions against Bai Muajjal transactions, current
accounts of governments, balances with the International Monetary Fund (IMF), amount payable under bilateral currency
swap agreement, other deposits and accounts and certain other liabilities. The particular recognition and measurement
methods adopted are disclosed in the individual policy statements associated with each financial instrument.
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5.3.1 Financial instruments – initial recognition
All financial assets are initially recognised on the trade date, i.e. the date at which the Group becomes a party to the
contractual provisions of the instruments. This includes purchases or sale of financial assets that require delivery of asset
within the time frame generally established by regulations in market conventions.
All financial assets and financial liabilities are measured initially at their fair value plus transaction costs, except in the
case of financial assets and financial liabilities recorded at fair value through profit or loss where transaction cost is taken
directly to the consolidated profit and loss account. Any difference between the fair value of consideration given and the
amount determined using the valuation techniques detailed in note 6.1 is recognised in the consolidated profit and loss
account.
5.3.2 Classification and subsequent measurement of financial assets and liabilities
The Group classifies all of its financial assets based on two criteria: a) the Group’s business model for managing the
assets; and b) whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on
the principal amount outstanding (the ‘SPPI test’), The financial assets are measured at either:
- amortised cost, as explained in note 5.3.3;

- fair value through other comprehensive income (FVOCI), as explained in notes 5.3.4 and 5.3.5; or
- fair value through profit or loss (FVPL), as explained in note 5.3.6.
a) Business model assessment
The Group determines its business model at the level that best reflects how it manages groups of financial assets to
achieve its business objective.
The Group's business model is not assessed on an instrument-by-instrument basis, but at a higher level of
aggregated portfolios and is based on observable factors such as:
- how the performance of the business model and the financial assets held within that business model are
evaluated and reported to the Group's board / board committees;
- the risks that affect the performance of the business model (and the financial assets held within that business
model) and, in particular, the way those risks are managed; and
- the expected frequency, value and timing of sales are also important aspects of the Group’s assessment.
The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress
case’ scenarios into account. If cash flows after initial recognition are realised in a way that is different from the
Group's original expectations, the Group does not change the classification of the remaining financial assets held in
that business model, but incorporates such information when assessing newly originated or newly purchased
financial assets going forward.
b) The SPPI test
As a second step of its classification process, the Group assesses the contractual terms of financial assets to identify
whether they meet the SPPI test.
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may
change over the life of the financial asset. The most significant elements of 'interest' within a lending arrangement are
typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Group
applies judgement and considers relevant factors such as the currency in which the financial asset is denominated
and the period for which the interest rate is set.
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The Group classifies and measures its derivative and trading portfolio at FVPL as explained in note 5.3.8. The Group
may designate financial instruments at FVPL, if doing so eliminates or significantly reduces measurement or recognition
inconsistencies, as explained in note 5.3.6.
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVPL
when they are held for trading and derivative instruments or the fair value designation is applied, as explained in notes
5.3.6 and 5.3.7.
5.3.3 Financial assets at amortised cost
The Group classifies its financial assets at amortised cost only if both of the following conditions are met:
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount outstanding; and
- the financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows.
After initial measurement, these financial instruments are subsequently measured at amortised cost using the effective
interest rate (EIR), less impairment (if any).
5.3.4 Debt instruments at FVOCI
The Group classifies it's financial instruments at FVOCI when both of the following conditions are met:
- the instrument is held within a business model, the objective of which is achieved by both collecting contractual cash
flows and selling financial assets; and
- the contractual terms of the financial asset meet the SPPI test.
FVOCI debt instruments are subsequently measured at fair value with gains and losses arising due to changes in fair
value recognised in other comprehensive income (OCI). Interest income and foreign exchange gains and losses are
recognised in the consolidated profit and loss account in the same manner as for financial assets measured at amortised
cost as explained in note 5.3.3.
The ECLs for debt instruments measured at FVOCI do not reduce the carrying amount of these financial assets in the
consolidated balance sheet, which remains at fair value. Instead, an amount equal to the allowance that would arise if the
assets were measured at amortised cost is recognised in OCI as an accumulated impairment amount, with a
corresponding charge to consolidated comprehensive income. The accumulated loss recognised in OCI is recycled to
the consolidated profit and loss account upon derecognition of the assets.
On derecognition, cumulative gains or losses previously recognised in OCI are reclassified from OCI to consolidated
profit and loss account.
5.3.5 Equity instruments at FVOCI
At initial recognition, the Group elects to classify irrevocably some of its equity investments as equity instruments at
FVOCI when they meet the definition of 'equity' under IAS 32 'financial instruments: presentation' and are not held for
trading. Such classification is determined on an instrument-by-instrument basis.
Gains and losses on these equity instruments are never recycled to the consolidated profit and loss account. Dividends
are recognised in consolidated profit and loss account as other operating income when the right of the payment has been
established, (except when the Group benefits from such proceeds as a recovery of part of the cost of the instrument, in
which case, such gains are recorded in OCI). Equity instruments at FVOCI are not subject to an impairment assessment.
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5.3.6 Financial assets and financial liabilities at fair value through profit or loss
Financial assets and financial liabilities in this category are those that are held for trading and have been either
designated by management upon initial recognition or are mandatorily required to be measured at fair value under IFRS
9. Management only designates an instrument at FVPL upon initial recognition when one of the following criteria are met.
Such designation is determined on an instrument-by-instrument basis:
- the designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from
measuring the assets or liabilities or recognising gains or losses on them on a different basis, or
- the liabilities are part of a group of financial liabilities, which are managed and their performance evaluated on a fair
value basis, in accordance with a documented risk management or investment strategy, or
- the liabilities containing one or more embedded derivatives, unless they do not significantly modify the cash flows
that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is
first considered that separation of the embedded derivative(s) is prohibited.
Financial assets and financial liabilities at FVPL are recorded in the consolidated balance sheet at fair value. Changes in
fair value are recorded in the consolidated profit and loss account. Interest earned or incurred on instruments designated
at FVPL is accrued in interest income or interest expense, respectively, using the EIR, taking into account any discount /
premium and qualifying transaction costs being an integral part of instrument. Interest earned on assets mandatorily
required to be measured at FVPL is recorded using contractual interest rate.
5.3.7 Financial liabilities at amortised cost
Financial liabilities with a fixed maturity are measured at amortised cost using the effective interest rate. These include
deposits of banks and financial institutions, other deposits and accounts, securities sold under agreement to repurchase,
payable under bilateral currency swap agreement, current accounts of governments, payable to Islamic banking
institutions against Bai Muajjal transactions, payable to the IMF, banknotes in circulation, bills payable and certain other
liabilities.
5.3.8 Derivative financial instruments
The Group uses derivative financial instruments which include forwards, futures and swaps. Derivatives are initially
recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is
negative. Derivatives are re-measured to fair value on subsequent reporting dates. The resultant gains or losses from
derivatives are included in the consolidated profit and loss account. Forwards, futures and swaps are shown under
commitments in note 37.2.
5.3.9 Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional
circumstances in which the Group acquires, disposes of, or terminates a business line. Financial liabilities are never
reclassified.
5.3.10 Derecognition of financial asset and financial liabilities
a) Financial assets
The Group derecognises a financial asset, such as a loan, when the terms and conditions have been renegotiated to
the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss,
to the extent that an impairment loss has not already been recorded. The newly recognised loans are classified as
stage 1 for ECL measurement purposes, unless the new loan is deemed to be purchased or originated credit
impaired. If the modification does not result in cash flows that are substantially different, the modification does not
result in derecognition. Based on the change in cash flows discounted at the original EIR, the Group records a
modification gain or loss, to the extent that an impairment loss has not already been recorded.
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A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
derecognised when the rights to receive cash flows from the financial asset have expired. The Group also
derecognises the financial asset if it has both transferred the financial asset and the transfer qualifies for
derecognition.
b) Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of new liability, and the difference in the respective carrying
amount is recognised in the consolidated profit and loss account.
5.3.11 Impairment of financial assets
5.3.11.1 Overview of the expected credit losses (ECL) principles
The Group is recording the allowance for expected credit losses for all loans and other debt financial assets not held at
FVPL, together with loan commitments and financial guarantee contracts, in this section all referred to as ‘financial
instruments’. Equity instruments are not subject to ECL.
The ECL allowance is based on the credit losses expected to arise over the life of the asset, [the lifetime expected credit
loss (LTECL)], unless there has been no significant increase in credit risk since origination, in which case, the allowance
is based on the 12 months’ expected credit loss (12mECL) as outlined in note 5.3.11.2. The Group’s policies for
determining if there has been a significant increase in credit risk are set out in note 53.1.7.
The 12mECL is the portion of LTECL that represent the ECL that result from default events on a financial instrument that
are probable within the 12 months after the reporting date.
The Group has established a policy to perform an assessment, at the end of each reporting period, of whether a financial
instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default
occurring over the remaining life of the financial instrument. This is further explained in note 53.1.7.
Based on the above process, the loans are grouped into stage 1, stage 2 and stage 3 as described below:
- stage 1: when loans are first recognised, the Group recognises an allowance based on 12mECL. Stage 1 loans
also include facilities where the credit risk has improved and the loan has been reclassified from stage 2.
- stage 2: when a loan has shown a significant increase in credit risk since origination, the Group records an
allowance for the LTECL. Stage 2 loans also include facilities, where the credit risk has improved and the
loan has been reclassified from stage 3.
- stage 3: loans considered credit-impaired (as outlined in Note 53.1.3). The Group records an allowance for the
LTECL.
For financial assets for which the Group has no reasonable expectations of recovering either the entire outstanding
amount, or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial)
derecognition of the financial asset.
5.3.11.2 The calculation of ECL
The Group calculates ECL based on three probability-weighted scenarios to measure the expected cash shortfalls,
discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an
entity in accordance with the contract and the cash flows that the entity expects to receive.
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The mechanics of the ECL calculations are outlined below and the key elements are, as follows:
- EAD The Exposure at default (EAD) is an estimate of the exposure at a future default date, taking into account
expected changes in the exposure after the reporting date, including repayments of principal and interest,
whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued
interest from missed payments. The EAD is further explained in note 53.1.5.
- PD The Probability of default (PD) is an estimate of the likelihood of default over a given time horizon. A
default may only happen at a certain time over the assessed period, if the facility has not been previously
derecognised and is still in the portfolio. The concept of PDs is further explained in note 53.1.4.
- LGD The Loss given default (LGD) is an estimate of the loss arising in the case where a default occurs at a
given time. It is based on the difference between the contractual cash flows due and those that the lender
would expect to receive, including from the realisation of any collateral. It is usually expressed as a
percentage of the EAD. The LGD is further explained in note 53.1.6.
When estimating the ECL, the Group considers three scenarios (a base case, a best case and a worse case). Each of
these is associated with different PD. When relevant, the assessment of multiple scenarios also incorporates how
defaulted loans are expected to be recovered, including the probability that the loans will cure and the value of collateral
or the amount that might be received for selling the asset.
The maximum period for which the credit losses are determined is the contractual life of a financial instrument unless the
Group has the legal right to call it earlier.
The mechanics of the ECL method are summarised below:
- stage 1: the 12mECL is calculated as the portion of LTECL that represent the ECL that result from
default events on a financial instrument that are probable within the 12 months after the
reporting date. The Group calculates the 12mECL allowance based on the expectation of a
default occurring in the 12 months following the reporting date. These expected 12-month
default probabilities are applied to a forecast EAD and multiplied by the expected LGD and
discounted by an approximation to the original EIR. This calculation is made for each of the
three scenarios, as explained above.
- stage 2: when a loan has shown a significant increase in credit risk since origination, the Group
records an allowance for the LTECL. The mechanics are similar to those explained above,
including the use of multiple scenarios, but PDs estimated over the lifetime of the instrument.
The expected cash shortfalls are discounted by an approximation to the original EIR.
- stage 3: for loans considered credit-impaired (as defined in note 53.1.3), the Group recognises the
lifetime expected credit losses for these loans. The method is similar to that for stage 2
assets, with the PD set at 100%.
- financial guarantee the Group’s liability under each guarantee is measured at the higher of the amount initially
contracts: recognised less cumulative amortisation recognised in the consolidated profit and loss
account, and the ECL provision. For this purpose, the Group estimates ECL based on the
present value of the expected payments to reimburse the holder for a credit loss that it
incurs. The shortfalls are discounted by the risk-adjusted interest rate relevant to the
exposure. The calculation is made using a probability-weighting of the three scenarios.
5.3.11.3 Forward looking information
The Group formulates a base case view of the future direction of relevant economic variables and a representative range
of other possible forecast scenarios and consideration of a variety of external actual and forecast information. This
process involves developing three different economic scenarios, which represent a range of scenarios linked to various
macro-economic factors.
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5.3.11.4 Credit enhancements: collateral valuation and financial guarantees
To mitigate its credit risks on financial assets, the Group seeks to use collateral. The collateral comes in various forms,
such as cash, securities, letters of credit / guarantees and demand promissory notes. To the extent possible, the Group
uses active market data for valuing financial assets held as collateral.
5.3.12 Offsetting of financial assets and financial liabilities
A financial asset and a financial liability are offset and the net amount is reported in the consolidated financial statements
when the Group currently has a legally enforceable right to set off the recognised amount and it intends either to settle on
a net basis or to realise the asset and to settle the liability simultaneously.
5.4 Collateralised borrowings / lending
5.4.1 Repurchase and reverse repurchase agreements
Securities sold subject to a commitment to repurchase them at a pre-determined price, are retained on the consolidated
balance sheet and a liability is recorded in respect of the consideration received as securities sold under agreement to
repurchase. Conversely, securities purchased under analogous commitment to resell are not recognised on the
consolidated balance sheet and an asset is recorded in respect of the consideration paid as securities purchased under
agreement to resell. The difference between the sale and repurchase price in the repurchase transaction and the
purchase price and resell price in reverse repurchase transaction represents expense and income respectively, and is
recognised in the consolidated profit and loss account on time proportion basis. Both repurchase and reverse repurchase
transactions are reported at transaction value inclusive of any accrued expense / income.
5.4.2 Payable under bilateral currency swap agreement
Bilateral currency swap agreements with counterpart central banks involve the purchase / sale and subsequent resale /
repurchase of local currencies of counterpart central banks against PKR at the applicable exchange rate (determined in
accordance with the terms of the agreement). The actual use of facility by the Group / counterpart central bank in the
agreement is recorded as borrowing / lending in books of the Group and interest is charged / earned at agreed rates to
the consolidated profit and loss account on a time proportion basis from the date of actual use. Any unutilised limit of the
counterpart's drawing is reported as commitments in note 37.2.7.
5.4.3 Payable to Islamic banking institutions against Bai Muajjal transactions
The Group purchases Government of Pakistan (GoP) Ijara sukuks on deferred payment basis (Bai Muajjal) from Islamic
banks. The deferred price is agreed at the time of purchase and such proceeds are paid to the Islamic banks at the end
of the agreed period. The difference between the fair value and deferred price represents financing cost and is
recognised in the consolidated profit and loss account on a time proportion basis as mark-up expense. Amount payable
to Islamic banking institutions under deferred payment basis on purchase of sukuks is reported at transaction value plus
profit payable thereon (i.e. at amortised cost).
5.5 Gold reserves held by the Bank
Gold is recorded at cost, which is the prevailing market rate, at initial recognition. Subsequent to initial measurement, it is
revalued at the closing market rate fixed by the London Bullion Market Association on the last working day of the year
which is also the requirement of State Bank of Pakistan Act, 1956 and State Bank of Pakistan General Regulation
No.42(vi). Appreciation or diminution, if any, on revaluation is taken to equity under the head “unrealised appreciation on
gold reserves”. Appreciation / diminution realised on disposal of gold is taken to the consolidated profit and loss account.
Unrealised appreciation / diminution on gold reserves held with the Reserve Bank of India is not recognised in the
consolidated statement of changes in equity pending transfer of these assets to the Group subject to final settlement
between the Governments of Pakistan and India. Instead it is shown in other liabilities as provision for other doubtful
assets.
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5.6 Fair value measurement principles
The fair value of financial instruments traded in active markets at the reporting date is based on their quoted market
prices or dealer price quotation without any deduction for transaction costs. If there is no active market for a financial
asset, the Group establishes fair value using valuation techniques. These include the use of recent arms length
transaction, discounted cash flow analysis and other revaluation techniques commonly used by market participants.
Investments in securities for which the fair value cannot be determined reliably are carried at cost.
5.7 Cash and cash equivalents
Cash and cash equivalents include cash and bank balances of subsidiaries, foreign currency accounts and investments
(other than deposit held with IMF), local currency coins, earmarked foreign currency balances, SDRs, balances in the
current and deposit accounts and securities that are realisable in known amounts of cash within three months from the
date of original investments and which are subject to insignificant changes in value.
5.8 Property, plant and equipment
Property, plant and equipment except land, buildings and capital work-in-progress (CWIP) are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. Freehold land is stated at revalued amount.
Leasehold land and buildings are stated at revalued amount less accumulated depreciation and accumulated impairment
losses, if any. CWIP is stated at cost less accumulated impairment losses, if any and consists of expenditure incurred
and advances made in respect of fixed assets in the course of their acquisition, construction and installation. CWIP
assets are capitalised to relevant asset category as and when work is completed.
Depreciation on property, plant and equipment is charged to the consolidated profit and loss account using the straight-
line method whereby the cost / revalued amount of an asset is written off over its estimated useful life at the rates
specified in note 20.1 to these consolidated financial statements. The useful life of assets is reviewed and adjusted, if
appropriate, at each reporting date.
Estimates of useful life and residual value of property, plant and equipment are based on the management's best
estimate. The assets' residual value, depreciation method and useful life are reviewed, and adjusted, if appropriate, at
each reporting date.
Increase in carrying amount arising on revaluation of land and buildings is recognised in other comprehensive income
and credited to surplus on revaluation of property, plant and equipment. Decreases that offset previous increases of the
same assets are charged against surplus on revaluation of property, plant and equipment in equity, while all other
decreases are charged to the consolidated profit and loss account. The surplus on revaluation realised on sale of
property, plant and equipment is transferred to un-appropriated profit to the extent reflected in the surplus on revaluation
of property, plant and equipment account. The amount of sale proceeds exceeding the balance in surplus on revaluation
of property, plant and equipment account is taken to the consolidated profit and loss account.
5.8.1 Leasing arrangements
At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to
exercise an extension option or not exercise a termination option. Extension options (or periods after termination options)
are only included in the lease term if the lease is reasonably certain to be extended (or not to be terminated).
The lease liability is initially measured at the present value of the lease payments over the period of lease term and that
are not paid at the commencement date, discounted using the interest rate implicit in the lease, or if that rate cannot be
readily determined, the Group's incremental borrowing rate.
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Lease payments include fixed payments less any lease incentive receivable, variable lease payment that are based on
an index or a rate which are initially measured using the index or rate as at the commencement date, amounts expected
to be payable by the Group under residual value guarantees, the exercise price of a purchase option (if the Group is
reasonably certain to exercise that option) and payments of penalties for terminating the lease (if the lease term reflects
that the lessee will exercise that option). The extension and termination options are incorporated in determination of
lease term only when the Group is reasonably certain to exercise these options.
The lease liability is subsequently measured at amortised cost using the effective interest rate method. The lease liability
is also remeasured to reflect any reassessment or lease modification, or to reflect revised in-substance fixed lease
payment.
The lease liability is remeasured when the Group reassesses the reasonable certainty to exercise extension or
termination option upon occurrence of either a significant event or a significant change in circumstances, or when there is
a change in assessment of an option to purchase underlying asset, or when there is a change in amount expected to be
payable under a residual value guarantee, or when there is a change in future lease payments resulting from a change in
an index or rate used to determine those payments. The corresponding adjustment is made to the carrying amount of the
right of use asset, or is recorded in the consolidated profit and loss if the carrying amount of right of use asset has been
reduced to zero.
When there is a change in scope of a lease, or the consideration for a lease, that was not part of the original terms and
conditions, the same is accounted for as a lease modification. The lease modification is accounted for as a separate
lease if modification increases the scope of lease by adding the right to use one or more underlying assets and the
consideration for lease increases by an amount that commensurate with the standalone price for the increase in scope
adjusted to reflect the circumstances of the particular contract, if any. When the lease modification is not accounted for
as a separate lease, the lease liability is remeasured and corresponding adjustment is made to right of use asset.
The right of use asset is initially measured at an amount equal to the initial measurement of lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of
the costs to be incurred to dismantle and remove the underlying asset or to restore the underlying asset or the site on
which the asset is located.
The right of use asset is subsequently measured at cost less accumulated depreciation and accumulated impairment
losses, if any. The right of use asset is depreciated on a straight line method over the lease term as this method most
closely reflects the expected pattern of consumption of the future economic benefits. The carrying amount of the right of
use asset is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
5.9 Investment property
Investment property is the property which is held either to earn rental income or for capital appreciation or for both, but
not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative
purposes. Investment property is initially measured at cost and subsequently at fair value with any change therein
recognised in the consolidated profit and loss account.
Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-
constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to
bringing the investment property to a working condition for their intended use and capitalized borrowing costs, if any.
Where an entity determines that the fair value of an investment property under construction is not reliably measurable but
expects the fair value of the property to be reliably measurable when construction is complete, it shall measure that
investment property under construction at cost until either its fair value becomes reliably measurable or construction is
completed (whichever is earlier).
The fair value of investment property, at each year end, is determined by external, independent property valuer having
appropriate recognised professional qualifications and recent experience in the location and category of the property
being valued.
A gain or loss arising from a change in the fair value of investment property shall be recognised in the consolidated profit
and loss account for the period in which it arises.
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When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of
reclassification becomes its cost for subsequent accounting.
The Group assesses at each reporting date whether there is any indication that investment property may be impaired .If
such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess
of their recoverable amount. Where carrying values exceed the respective recoverable amounts, assets are written down
to their recoverable amounts and the resulting impairment loss is recognized in consolidated profit and loss account. The
recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
The gain or loss on disposal of investment property, represented by the difference between the sale proceeds and the
carrying amount of the asset is recognised as income or expense in the consolidated profit and loss account.
5.10 Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
Intangible assets are amortised using the straight-line method over the period of three years. Where the carrying amount
of an asset exceeds its estimated recoverable amount, it is written down immediately to its recoverable amount.
5.11 Impairment of non-financial assets
The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any
indication of impairment of any asset or a group of assets. If such indication exists, the recoverable amount of such
assets is estimated. The recoverable amount is higher of an asset's fair value less cost to sell and value in use. In
assessing the value in use, future cash flows are estimated which are discounted to present value using a discount rate
that reflects the current market assessments of the time value of money and the risk specific to the asset. In determining
fair value less cost to sell, an appropriate valuation model is used. An impairment loss is recognised in the consolidated
profit and loss account whenever the carrying amount of an asset or a group of assets exceeds its recoverable amount.
Impairment loss on revalued assets is adjusted against the related revaluation surplus to the extent that the impairment
loss does not exceed the surplus on revaluation of that asset.
5.12 Stores and spares
Stores and spares held by the Group are valued at the lower of cost determined on weighted average method and net
realisable value. Stores and spares in transit are valued at cost incurred up to the reporting date. Local purchases of
engineering stores are charged to the consolidated profit and loss account at the time of purchase.
The Group reviews the carrying amount of stores and spares on a regular basis and provision is made for obsolescence
if there is any change in usage pattern and physical form.
5.13 Stock-in-trade
Raw materials are valued at lower of cost determined on weighted average basis and net realisable value except for
items in transit which are stated at cost incurred up to the reporting date.
Work-in-process and finished goods are valued at lower of cost determined on weighted average basis and net realisable
value. Cost in relation to work-in-process and finished goods represents direct cost of materials, direct wages and an
appropriate portion of production overheads.
Net realisable value signifies the estimated selling price in the ordinary course of business less the estimated cost of
completion and the costs necessary to be incurred to make the sale.
5.14 Stock of stationery and consumables
Stock of stationery and consumables are valued at the lower of cost and net realizable value. Cost comprises cost of
purchases and other directly attributable costs incurred in bringing the items to their present location and condition.
Replacement cost of the items is used to measure the net realisable value. The valuation is done on moving average
basis. Provision is made for stocks which are not used for a considerable period of time or stocks which are not expected
to be used in future.
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5.15 Medical and stationery consumables
Medical and stationery consumables are valued at weighted average cost. Provision for obsolete items is determined
based on the management's assessment regarding their future usability. Net realisable value represents estimated
selling price in the ordinary course of business less the estimated cost necessary to make the sale.
5.16 Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of economic resources will be required to settle the obligation and a reliable estimate of the
amount can be made. Provisions are reviewed at each reporting date and are adjusted to reflect the current best
estimates.
Contingent assets are disclosed when there is a possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control
of the Group. Contingent assets are not recognised until their realisation become virtually certain.
Contingent liability is disclosed when:
- there is a possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or
- there is a present obligation that arises from past events but it is not probable that an outflow of resources
embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be
measured with sufficient reliability.
5.17 Transactions and balances with the International Monetary Fund
Transactions and balances with the International Monetary Fund (IMF) are recorded on following basis:
- the Government’s contribution for quota with the IMF is recorded by the Group as depository of the Government.
Exchange differences arising on these balances are transferred to the Government of Pakistan account.
- exchange gains or losses arising on revaluation of borrowings from the IMF are recognised in the consolidated profit
and loss account.
- the cumulative allocation of Special Drawing Rights (SDRs) by the IMF is recorded as a liability and is translated at
closing exchange rate for SDRs prevailing at the balance sheet date. Exchange differences on translation of SDRs is
recognised in the consolidated profit and loss account.
- service charge is recognised in the consolidated profit and loss account at the time of receipt of the IMF tranches.
All other income or charges pertaining to balances with the IMF are taken to the consolidated profit and loss account,
including the following:
- charges on borrowings under credit schemes and fund facilities;

- charges on net cumulative allocation of SDRs;
- exchange gain or loss: and
- return on holdings of SDRs.
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5.18 Staff retirement benefits
5.18.1 The Bank operates:
a) an unfunded contributory provident fund (old scheme) for those employees who joined the Bank between July 1,
2005 to May 31, 2007 and opted to remain under the old scheme. Under this scheme, contribution is made both by
the Bank and employee at the rate of 6% of the monetised salary. The Bank provided an option to employees
covered under old scheme to join the Employer Contributory Provident Fund Scheme - ECPF (new scheme) effective
from June 1, 2007. Employees joining the Bank service after June 1, 2007 are covered under the new scheme.
Under ECPF (new scheme), contribution is made both by the Bank and employee at the rate of 6% of the monetised
salary.
b) an unfunded General Provident Fund (GPF) scheme for all those employees who joined the Bank between May 1,
1977 to June 30, 2005 and opted to remain under this scheme after introduction of the new scheme (ECPF). Under
GPF contribution is made by the employee only at the rate of 5% of the monetised salary.
c) following are other staff retirement benefit schemes:
- an unfunded gratuity scheme (old scheme) for those employees who joined the Bank between July 1, 2005 to
May 31, 2007 and opted to remain under the old scheme.
- a funded Employees Gratuity Fund (EGF) was introduced by the Bank effective from June 1, 2007 for all its
employees other than those who opted to remain in pension scheme or unfunded gratuity scheme (old scheme).
- an unfunded pension scheme for those employees who joined the Bank between May 1, 1977 to June 30, 2005
and opted to remain under this scheme after introduction of the new scheme (NCBS);
- an unfunded benevolent fund scheme;
- an unfunded post retirement medical benefit scheme; and
- six months post retirement benefit facility.
Obligations for contributions to defined contribution provident plans are recognised as an expense in the consolidated
profit and loss account as and when incurred.
Annual provisions are made by the Bank to cover the obligations arising under defined benefit schemes based on
actuarial recommendations. The actuarial valuations are carried out under the projected unit credit method. The amount
arising as a result of remeasurements are recognised in the consolidated balance sheet immediately, with a charge or
credit to other comprehensive income in the periods in which they occur.
The above staff retirement benefits are payable on completion of prescribed qualifying period of service.
5.18.2 The BSC operates the following staff retirement benefit schemes for employees:
The Corporation operates the following staff retirement benefit schemes for employees transferred from SBP (transferred
employees) and other employees:
a) an un-funded contributory provident fund (the old scheme) for transferred employees who joined the SBP prior to
1975 and opted to remain under the old scheme. The Corporation provided an option to employees covered under
the old scheme to join the funded new contributory provident fund scheme - NCPF (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
monetised salary. Moreover, employees joining the Corporation service after July 1, 2010 are covered under the new
scheme.
139
b) an un-funded general contributory provident fund (new scheme) for transferred employees who joined SBP after
1975 or who had joined the SBP prior to 1975 but have opted for this new scheme. Under this scheme, contribution
is made only by the employee at the rate of 5% of the monetised salary.
c) the following other staff retirement benefit schemes:
- an un-funded gratuity scheme (old scheme) for all employees other than the employees who opted for the new
general contributory provident fund scheme or transferred employees who joined SBP after 1975 and are entitled
only to pension scheme benefits;
- a funded New Gratuity Fund (NGF) which was introduced by the Corporation effective from July 1, 2010 for all its
employees other than those who opted for pension scheme or unfunded gratuity scheme (old scheme);
- an un-funded pension scheme for those employees who joined the SBP after 1975 and before the introduction of
NGF which is effective from July 1, 2010;
- an un-funded contributory benevolent fund scheme;
- an un-funded post retirement medical benefit scheme; and
Obligations for contributions to defined contribution provident fund plans are recognised as an expense in the
consolidated profit and loss account as and when incurred.
Annual provisions are made by the Corporation to cover the obligations arising under defined benefits schemes based on
actuarial recommendations. The actuarial valuations are carried out under the "Projected unit credit method". The most
recent valuation in this regard has been carried out as at June 30, 2020. The amount arising as a result of
remeasurements are recognised in the consolidated balance sheet immediately, with a charge or credit to other
comprehensive income in the period in which they occur.
5.18.3 The PSPC operates following staff retirement benefits scheme for employees:
The Corporation operates an approved defined benefit funded pension scheme for all its permanent employees under
the Pakistan Security Printing Corporation (Private) Limited - Employees (Pension and Gratuity) Regulations, 1993 (the
Regulations). During the year ended 30 June 2017, as a result of business reorganisation, employees relating to National
Security Printing Company (Private) Limited (NSPC) were transferred to NSPC and as per the business transfer
agreement dated May 19, 2017, the costs of gratuity or pension are to be borne by transferee company i.e. NSPC,
accordingly, the pension fund has become a multi-employer fund. Contribution to the pension fund is made based on the
actuarial valuation carried out on annual basis using Projected Unit Credit method. All actuarial gains and losses are
recognised in other comprehensive income as they occur. Under the scheme, the employees who have completed the
prescribed qualifying period of more than ten years of service and opt for the scheme are entitled to post retirement
pension benefit.
5.18.4 Obligations for contributions to defined contribution provident plans are recognised as an expense in the consolidated
5.18.5 Annual provisions are made by the Group to cover the obligations arising under defined benefit schemes based on
actuarial recommendations. The actuarial valuations are carried out under the "Projected Unit Credit Method". The most
recent valuation in this regard was carried out as at June 30, 2020. The amount arising as a result of remeasurements
are recognised in the consolidated balance sheet immediately, with a charge or credit to the consolidated other
comprehensive income in the periods in which they occur.
5.18.6 The above staff retirement benefits are payable on completion of prescribed qualifying period of service.
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5.19 Compensated absences
The Group makes annual provision in respect of liability for employees’ compensated absences based on actuarial
estimates. The liability is estimated using the projected unit credit method.
5.20 Endowment Fund - Deferred grant
The Group has established an Endowment fund effective from July 1, 2011 for utilisation of the amount received. The
terms of references / rules and regulations of the Endowment fund have been formulated. The aims and objective of
NIBAF Endowment Fund are as under:
a) Capacity building of the Group as well as other banking professionals in realms of Rural Finance, Microfinance,
Agriculture and SMEs etc.
b) To encourage, promote, support and undertake academic and scientific investigations, innovative research,
inventions and developments in various Banking and Finance related areas.
c) To provide assistance in such activities as field surveys, experiments, collection and dissemination of information,
seminars, conferences and trainings etc. aimed at increasing awareness, introducing improvements and enhancing
efficiency in areas related to Banking and Finance in general and Rural Finance in particular.
d) To conduct research and trainings to increase awareness of commercial banks regarding possibilities, prospects and
risks, to develop demand driven products and services, instituting enhanced portfolio management capability and
installing systems and procedures for reducing costs etc.
e) To promote gathering of information on rural finance by collecting and analysing data, conducting survey thereby
working as a main training hub.
f) To create linkages with national and international organisations for the strengthening of Rural finance related
activities.
g) For any other purpose which the NIBAF's Board of Directors may consider fit for the overall benefit of the NIBAF and
its stakeholders.
5.21 Trade and other payables
Liabilities for trade and other amounts payable are carried at amortised cost, which is the fair value of the consideration
to be paid in future for goods and services received, whether or not billed.
5.22 Mark-up bearing borrowings and borrowing costs
Borrowing costs relating to the acquisition, construction or production of a qualifying asset are recognised as part of the
cost of that asset. All other borrowing costs are recognised as an expense in the period in which these are incurred.
Mark-up bearing borrowings are recognised initially at fair value, less attributable transaction cost. Subsequent to initial
recognition, mark-up bearing borrowings are stated at amortized cost with any difference between cost and redemption
value being recognised in consolidated profit and loss account over the period of borrowings on an effective interest
method basis.
Borrowing costs are recognised as an expense in the period in which these are incurred, except to the extent that they
are directly attributable to the acquisition or construction of a qualifying asset (i.e. an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale) in which case these are capitalised as part of cost of
that asset.
141
5.23 Deferred income - Grant
Grants received on account of capital expenditure are recorded as deferred income and are amortised over the useful life
of the relevant asset. The grants received on account of revenue expenditures are recorded as and when the expenditure
is incurred.
5.24 Revenue recognition
- Discount, interest / mark-up and / or return on loans and advances and investments are recorded on time proportion
basis that takes into account the effective yield on the asset. However, income on balances with Bangladesh (former
East Pakistan), doubtful loans and advances and overdue return on investments are recognised as income on
receipt basis.
- Revenue from sale of goods is recognised when or as performance obligations are satisfied by transferring control
(i.e. at the time of transfer of physical possession) of promised goods, and control either transfers over time or at a
point in time. Revenue is measured at fair value of the consideration received or receivable, excluding discounts,
rebates and government levies.
- Commission income is recognised when related services are rendered.
- Dividend income is recognised when the Group’s right to receive dividend is established.
- Gains / losses on disposal of securities are recognised in the consolidated profit and loss account at trade date.
- Unrealised gains and losses arising on revaluation of securities designated at fair value through profit or loss are
included in consolidated profit and loss account in the period in which they arise.
- Unrealised gains and losses arising on revaluation of securities classified as fair value through other comprehensive
income are included in consolidated other comprehensive income in the period in which they arise.
- Training, education and hostel services are recognised on accrual basis.
- Rental income from property is accrued on time proportion basis at agreed rates.
- Return on Group's deposits are recognised on accrual basis taking into account the effective yield.
- Scrap sales and miscellaneous income are recognised on receipt basis.
- All other revenues are recognised on a time proportion basis.
5.25 Finances under profit and loss sharing arrangements
The Group provides various finances to financial institutions under profit and loss sharing arrangements. Share of profit /
loss under these arrangements is recognised on an accrual basis.
5.26 Foreign currency translation
Transactions denominated in foreign currencies are translated to Pak Rupees at the foreign exchange rate prevailing at
the date of transaction. Monetary assets and liabilities in foreign currencies are translated into rupees at the closing rate
of exchange prevailing at the reporting date.
Exchange gains and losses are taken to the consolidated profit and loss account except for certain exchange differences
on balances with the International Monetary Fund, referred to in note 5.17, which are transferred to the Government of
Pakistan account.
Commitments for outstanding foreign exchange forward and swap contracts disclosed in note 37.2 to these consolidated
financial statements are translated at forward rates applicable to their respective maturities. Contingent liabilities /
commitments for letters of credit and letters of guarantee denominated in foreign currencies are expressed in PKR terms
at the closing rate of exchange prevailing at the reporting date.
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5.27 Investment in associates
Entities in which the Group has significant influence but not control and which are neither its subsidiaries nor joint
ventures are classified as associates and are accounted for by using the equity method of accounting.
These investments are initially recognised at cost, thereafter the carrying amount is increased or decreased to recognise
the Group share of profit and loss of associates. Share of post acquisition profit and loss of associates is accounted for in
the consolidated profit and loss account. Distribution received from investee reduces the carrying amount of investment.
The Group's share of associates' other comprehensive income is recognised in consolidated other comprehensive
income of the Group.
The carrying amount of the investment is tested for impairment, by comparing its recoverable amount (higher of value in
use and fair value less costs to sell) with its carrying amount and loss, if any is recognised in the consolidated profit and
loss account.
Unrealised gains / losses arising from transactions with associated companies are eliminated against the investment in
the associates to the extent of Group's interest in the associates. Unrealised losses are eliminated in the same way as
unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.
The Group accounts for its share of comprehensive income from associates as at year end on the basis of latest
available financial statement of associates but not older than three months.
5.28 Taxation
The income of the Bank and the SBP Banking Services Corporation is exempt from tax under section 49 of the State
Bank of Pakistan Act, 1956 and clause 66(xx) of Part I of second schedule to the Income Tax Ordinance, 2001. However,
in case of NIBAF, NIBAF is eligible for hundred percent (100%) tax credit on taxes payable by the NIBAF under clause
(d) of sub-section 2 of section 100C of the Income Tax Ordinance, 2001, introduced under the Finance Act, 2015.The
income of PSPC is subject to tax at applicable rates.
Income tax expense comprises of current and deferred tax. Income tax expense is recognised in the consolidated profit
and loss account or consolidated statement of comprehensive income to which it relates. Income tax expense is
recognised based on management’s estimate of the weighted average effective annual income tax rate expected for the
full financial year.
5.27.1 Current
The charge for current taxation is based on expected taxable income for the year at the current rates of taxation, after
taking into consideration available tax credits, rebates, tax losses, etc. The charge for current tax also includes
adjustments to tax payable in respect of previous years including those arising from assessments finalised during the
year and are separately disclosed.
5.27.2 Deferred
Deferred tax is recognised using the consolidated balance sheet method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse,
based on the laws that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the assets can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefits will be realised.
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6 USE OF ESTIMATES AND JUDGMENTS

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and
expenses that are not readily available from other sources. The estimates and associated assumptions are based on
historical experiences and various other factors that are believed to be reasonable under the circumstances, the result of
which form the basis of making judgments about the carrying values of assets and liabilities and income and expenses.
Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing
basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only
that period, or in the period of revision and future periods if the revision affects both current and future periods.
Judgments made by the management in the application of IFRS and estimates that have a significant risk of material
adjustment to the carrying amounts of assets and liabilities are as follows:
6.1 Fair value of financial instruments

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction in the principal (or most advantageous) market at the measurement date under current market
conditions (i.e., an exit price) regardless of whether that price is directly observable or estimated using another valuation
technique. When the fair values of financial assets and financial liabilities recorded in the consolidated balance sheet
cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use
of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not
feasible, estimation is required in establishing fair values. Judgements and estimates may include items like
considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding
value adjustments, correlation and volatility. For further details about determination of fair value please see note 5.6 to
these consolidated financial statements.
6.2 Effective interest rate (EIR) method
The Group’s EIR methodology recognises interest income using a rate of return that represents the best estimate of a
constant rate of return over the expected behavioural life of financial instruments. This estimation, by nature, requires an
element of judgement regarding the expected behaviour and life-cycle of the instruments, as well as clubbing of and
other determinable fee income / expense to the cost of acquisition of financial instruments that are integral parts of the
instrument.
6.3 Impairment losses on financial assets
The measurement of impairment losses across all categories of financial assets in scope requires judgement, in
particular, the estimation of the amount and timing of future cash flows and collateral values when determining
impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of
factors, changes in which can result in different levels of allowances. Assumptions regarding the impairment of financial
assets are presented in the note 53.1.2 to these consolidated financial statements.
6.4 Retirement benefits

The key actuarial assumptions concerning the valuation of defined benefit plans and the sources of estimation are
disclosed in note 47.3.1 to these consolidated financial statements.
6.5 Useful life and residual value of property, plant and equipment
Estimates of useful life and residual value of property and equipment are based on the management’s best estimate.
Note 2020 2019
7 CASH AND BANK BALANCES HELD BY SUBSIDIARIES ---------(Rupees in '000)--------
With banks in current accounts 7.1 200,285 294,916

Cash in hand 12,540 10,041
212,825 304,957
7.1 This includes remunerative accounts carrying mark-up ranging from 3.74% to 7.08% (2019: 5.85% to 11%) per annum.
8 GOLD RESERVES HELD BY THE BANK
Note 2020 2019 2020 2019
Net content in troy ounces --------------(Rupees in '000)--------------
Opening balance 2,078,037 2,077,397 468,625,002 315,610,772

Additions during the year 160 640 47,118 147,358
Appreciation for the year due to
revaluation 36 - - 148,822,917 152,866,872
Closing Balance 25.1 2,078,197 2,078,037 617,495,037 468,625,002
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Note 2020 2019

9 LOCAL CURRENCY - COINS --------------(Rupees in '000)--------------
Banknotes held by the Banking department 172,707 159,748

Coins held as an asset of the Issue department 9.1 & 25.1 1,028,584 1,039,138
1,201,291 1,198,886
Less: banknotes held by the Banking department 25 (172,707) (159,748)
1,028,584 1,039,138
9.1 As mentioned in note 5.2, the Bank is responsible for issuing coins of various denominations on behalf of the GoP. This
balance represents the face value of coins held by the Bank at the year end.
10 FOREIGN CURRENCY ACCOUNTS AND INVESTMENTS
These essentially represent foreign currency reserves held by the Group, the details of which are as follows:
Note 2020 2019

--------------(Rupees in '000)--------------
At fair value through profit and loss:
- investments 10.3 500,826,405 202,587,281
- unrealised gain on derivative financial instruments 499,147 2,803,510
- unrealised (loss) on derivative financial instruments (149,270) (40,225)
10.4 349,877 2,763,285
501,176,282 205,350,566
At amortised cost:
- deposit accounts 594,390,455 383,088,658
- current accounts 1,338,337 4,000,054
- securities purchased under agreement to resell 10.5 891,609,264 336,209,469
- money market placements 10.6 218,465,780 447,218,637
1,705,803,836 1,170,516,818
Less: Credit loss allowance 10.2 (88) (12,996)
2,206,980,030 1,375,854,388
The above foreign currency accounts and investments are held as follows:
Issue department 25.1 218,465,780 447,218,637

Banking department 1,988,514,250 928,635,751
2,206,980,030 1,375,854,388
10.1 The following table sets out information about the credit quality of foreign currency accounts and investments of the Group
measured at amortised cost and maximum exposure to credit risk as at reporting date. Details of the Group's internal
grading system are explained in note 53.1.4.
Note Stage 1 2020 2019

-----------------------------(Rupees in '000)-----------------------------
Deposit accounts
High rating 594,390,455 594,390,455 383,088,658
594,390,455 594,390,455 383,088,658
Current accounts
High rating 1,329,030 1,329,030 3,990,941
Standard rating 9,307 9,307 9,113
1,338,337 1,338,337 4,000,054
Securities purchased under agreement to resell
High rating 10.5 891,609,264 891,609,264 336,209,469
891,609,264 891,609,264 336,209,469
Money market placements
High rating 10.6 218,465,780 218,465,780 447,218,637
218,465,780 218,465,780 447,218,637
1,705,803,836 1,705,803,836 1,170,516,818
145
10.2 An analysis of changes in the ECL in relation to foreign currency accounts and investments of the Group measured at
amortised cost is as follows:
2020
ECL Money market
Nostros Total
placements
Stage 1 ----------------------- (Rupees in '000) -----------------------
Opening balance as of June 30, 2019 32 12,964 12,996

Charge / (reversal) of allowance 56 (12,964) (12,908)
Balance as of June 30, 2020 88 - 88
2019
Money market
Nostros Total
placements
Stage 1 ----------------------- (Rupees in '000) -----------------------
Opening balance as of June 30, 2018 - - -

Adjustments on initial recognition of IFRS 9 9 57 66
Restated balance as of July 1, 2018 9 57 66
Charge of allowance 23 12,906 12,929
Balance as of June 30, 2019 32 12,964 12,996
10.3 This includes investments made by the Group in international markets and balances maintained, on behalf of the Group,
through reputable fund managers. The activities of these fund managers are being monitored through a custodian. The
market value of the investments as on June 30, 2020 amounts to Rs. 173,698 million (USD 1033.60 million [2019: Rs.
161,158 million (USD 1006.91 million). These carry interest ranging from 0.175% to 0.5% per annum in USD (2019: 0.12%
per annum), and 0% to 3.56% per annum in CNY (2019: 2.23% to 2.28% per annum).
10.4 This represents unrealised gain / (loss) on foreign currency swaps, futures and forward contracts (including transactions
executed by the fund managers on behalf of the Group) entered into with various counterparties.
10.5 These represent lending under repurchase agreements and carry mark-up in USD at the rate of 0.00% per annum (2019:
2.51% per annum) and these are due to mature on July 1, 2020 (2019: July 01, 2019).
10.6 These represent money market placements carrying interest ranging from 0.10% to 0.16% per annum in USD (2019:
2.39% to 2.55% per annum) and having maturities ranging from July 3, 2020 to August 7, 2020 (2019: July 2, 2019 to
August 22, 2019).
11 EARMARKED FOREIGN CURRENCY BALANCES
These represent foreign currency cash balances held by the Group to meet foreign currency commitments of the Group.
12 SPECIAL DRAWING RIGHTS OF THE INTERNATIONAL MONETARY FUND
Special drawing rights (SDRs) are the foreign reserve assets which are allocated by the International Monetary Fund (IMF)
to its member countries in proportion to their quota in the IMF. In addition, the member countries can purchase the SDRs
from the IMF and other member countries in order to settle their obligations. The figures given below represent the rupee
value of the SDRs held by the Group as at the reporting date. Interest is credited by the IMF on the SDR holding of the
Group at weekly interest rates on daily products of SDRs held during each quarter.
SDR Holding Note 2020 2019

SDRs are held as follows: --------------(Rupees in '000)--------------
- by the Issue department 25.1 11,601,465 34,152,690

- by the Banking department 17,935,662 21,308,364
29,537,127 55,461,054
13 RESERVE TRANCHE WITH THE INTERNATIONAL

MONETARY FUND UNDER QUOTA ARRANGEMENTS
Quota allocated by the International Monetary Fund 469,862,627 460,387,623

Liability under quota arrangements (469,835,072) (460,360,624)
27,555 26,999
146
14 SECURITIES PURCHASED UNDER AGREEMENT TO RESELL
This represents collateralised lending made to various financial institutions under resell arrangement carrying mark-
up ranging from 7.03% to 12.33% per annum (2019: 12.33% to 12.45% per annum) and are due to mature on July 3,
2020 (2019: July 05, 2019). The fair value of securities collateralised as on June 30, 2020 amounts to Rs. 1,001,208
million (2019: Rs. 782,504 million). The collaterals held by the Group consist of Pakistan Investment Bonds and Market
Treasury Bills.
14.1 The following table sets out information about the credit quality of securities purchased under agreement to resell of the
Bank measured at amortised cost:
Stage 1 2020 Stage 1 2019

--------------(Rupees in '000)--------------
High rating 917,539,654 917,539,654 777,680,180 777,680,180

Standard rating - - 5,238,002 5,238,002
Less: Credit loss allowance (7) (7) (27) (27)
Reverse Repo Outstanding 917,539,647 917,539,647 782,918,155 782,918,155
14.2 An analysis of changes in the ECL in relation to securities purchased under agreement to resell of the Group measured at
amortised cost is, as follows:
ECL R.Repo Stage 1 2020

--------------(Rupees in '000)--------------
Opening balance as of July 01, 2019 27 27

Reversal during the year (20) (20)
Balance as of June 30, 2020 7 7

--------------(Rupees in '000)--------------
Opening balance as of July 01, 2018 - -

Adjustments on initial recognition of IFRS 9 15 15
Balance as of July 1, 2018 15 15
Charge during the year 12 12
Note 2020 2019

--------------(Rupees in '000)--------------
15 INVESTMENTS - LOCAL
At amortised cost
Government securities
Market related treasury bills (MRTBs) - 569,202,498
Pakistan investment bonds (PIBs) 7,270,563,969 7,189,706,100
Federal government scrips 2,740,000 2,740,000
Market Treasury Bills 2,869,963 1,163,007
15.2 7,276,173,932 7,762,811,605
Term Deposit Receipts 15.3 1,072,000 1,522,000
Zarai Taraqiati Bank Limited (ZTBL) preference shares - unlisted 15.4 54,539,302 54,399,134
Term finance certificates 56,483 56,483

Certificates of deposits 22,470 22,470
78,953 78,953
Less: Credit loss allowance 15.5 (78,953) (78,953)

7,331,785,234 7,818,732,739
147
Note 2020 2019

--------------(Rupees in '000)--------------
At fair value through other comprehensive income
Investments in banks and other financial institutions

Ordinary shares
- Listed 44,235,735 53,850,807
- Unlisted 35,101,670 32,560,301
15.6 79,337,405 86,411,108
At fair value through profit and loss

Units of open - ended mutual funds 15.8 1,200,488 1,138,159
7,412,323,127 7,906,282,006
The above investments are held as follows:
Issue department 25.1 5,598,401,783 4,324,569,688
Banking department / subsidiaries 1,813,921,344 3,581,712,318
7,412,323,127 7,906,282,006
15.1 The following table sets out information about the credit quality of Government securities of the Group measured at
amortised cost as at June 30, 2020.
2020
Stage 1 Stage 2 Stage 3 Total
-------------------------------------------- (Rupees in '000) --------------------------------------------
High rating 7,331,785,234 - - 7,331,785,234

Rating below standard - - 78,953 78,953
7,331,785,234 - 78,953 7,331,864,187
Less: Credit loss allowance - - (78,953) (78,953)
7,331,785,234 - - 7,331,785,234
2019
-------------------------------------------- (Rupees in '000) --------------------------------------------
High rating 7,818,732,739 - - 7,818,732,739

7,818,732,739 - 78,953 7,818,811,692
7,818,732,739 - - 7,818,732,739
15.2 These represent investments guaranteed / issued by the Government. The profile of return on securities is as follows:
2020 2019
% per annum
Market Related Treasury Bills - 6.83 to 13.13

Pakistan investment bonds 8.23 to 14.02 13.72 to 13.88
Federal Government scrips 3 3
Market Treasury Bills 7.48 to 12.82 10.96 to 12.68
PIBs are created for one to ten years under the instructions of the Federal Government while Federal Government scrips
are of perpetual nature.
148
The Federal Government issued PIBs on June 30, 2019 with maturity of one year to ten years amounting to Rs. 7,187,000
million.
Market Treasury Bills have maturities ranging from September 25, 2020 to March 11, 2021 (2019: August 1, 2019 to
August 15, 2019).
15.3 These represent Term Deposit Receipts maturing upto 12 months with various banks bearing mark-up ranging from 6.50%
to 14.00% (2019: 5.35% to 14.00%) per annum. Term Deposit Receipt of Rs 22 million (2019: Rs 22 million) with Faysal
Bank Limited is marked under lien against bank guarantee (note 37.2.6).
15.4 This represents 5,446.153 million preference shares of Rs. 10 each carrying mark-up at the rate of 7.5% per annum
payable semi-annually, issued by Zarai Taraqiati Bank Limited. These preference shares are redeemable on March 7,
2027.
2020 2019
---------------- (Rupees in '000) ---------------
15.5 Credit loss allowance
Opening balance 78,953 817,388

Impact on opening balances on initial recognition of IFRS 9 - (738,435)
Closing balance 78,953 78,953
15.6 Investments in banks and other financial institutions
2020
Unrealised
Percentage
Note Cost (diminution) / Total
holding
appreciation
%---------------------------------- (Rupees in '000) ----------------------------------
Listed
- National Bank of Pakistan 75.20 1,100,805 43,134,930 44,235,735
Unlisted
More than 50% Shareholding
- Zarai Taraqiati Bank Limited 76.23 10,199,621 (3,082,178) 7,117,443
- House Building Finance Company Limited 90.31 1,482,304 606,150 2,088,454
- Deposit Protection Corporation 15.6.2 100 500,000 (500,000) -
Less than or equal to 50% Shareholding

Other investments 4,637,706 21,258,067 25,895,773
16,819,631 18,282,039 35,101,670
17,920,436 61,416,969 79,337,405
2019
Unrealised
Percentage
holding
appreciation
%---------------------------------- (Rupees in '000) ----------------------------------
Listed
Unlisted
- House Building Finance Company Limited 90.31 1,482,304 273,413 1,755,717
Less than or equal to 50% Shareholding

16,819,631 15,740,670 32,560,301
17,920,436 68,490,671 86,411,108
149
15.6.1 Investments in above entities have been made under the specific directives of the Government of Pakistan in accordance
with the provisions of the State Bank of Pakistan Act, 1956 and other relevant statutes. The Group neither exercises
significant influence nor has control over these entities except for any regulatory purposes or control arising as a
consequence of any statute which applies to the entire sector to which these entities belong. Accordingly, these entities
have not been consolidated as subsidiaries or accounted for as investments in associates or joint ventures.
15.6.2 During the year 2018-19, in accordance with section 9 of the Deposit Protection Corporation Act, 2016 (DPC Act), the
Bank has made an initial capital contribution of Rs. 500 million in Deposit Protection Corporation (DPC). This represents
100% of the paid-up portion of the capital of DPC, which was established for the protection of small depositors in order to
ensure the financial stability of and maintain public interest in, the financial system, and for matters connected therewith or
ancillary thereto. The shareholders of DPC are not entitled to receive any dividend in terms of section 9(5) of DPC Act.
The Bank is not exposed, or has rights, to variable returns from its involvement with the DPC and does not have the ability
to affect its returns. Consequently, DPC is not treated as a subsidiary in these consolidated financial statements.
Considering the substance of this transaction, the capital injection in the DPC was fully provided.
2020 2019
---------------- (Rupees in '000) ---------------
15.7 Unrealised appreciation on remeasurement of investments
Opening balance 68,490,606 74,622,824

Impact on opening balances on initial recognition of IFRS 9 - 15,486,532
68,490,606 90,109,356
Diminution during the year - net (7,073,637) (21,618,750)
Others -
Closing balance 61,416,969 68,490,606
15.8 Investments in mutual funds designated at fair value through profit or loss:
2020 2019 Name of investee 2020 2019

Number of units ---------------- (Rupees in '000) ---------------
827,202 748,554 MCB Cash Management Optimizer Fund 83,407 75,263

7,065,637 6,758,035 Meezan Islamic Fund 329,869 323,913
812,392 741,447 MCB DCF Income Fund 86,897 78,958
6,175,498 6,168,107 ABL Islamic Stock Fund 75,344 74,846
143,453 129,909 Atlas Money Market Fund 72,480 65,317
7,902,935 7,571,877 NAFA Islamic Asset Allocation Fund 112,104 104,045
17,735,243 17,735,243 NAFA Islamic Stock Fund 167,834 161,527
1,716 1,550 NAFA Money Market Fund 17 15
421,152 417,331 Al-Ameen Shariah Stock Fund 50,353 45,702
2,752,499 2,602,512 MSAF Meezan Strategic Allocation Plan I 101,491 94,605
2,217,429 2,217,429 Al Hamra Islamic Stock Fund 19,445 19,092
2,752,039 2,645,091 MSAF Meezan Strategic Allocation Plan II 101,247 94,876
48,807,195 47,737,085 1,200,488 1,138,159
Note 2020 2019 2020 2019

Percentage holding --------------- (Rupees in '000) --------------
% %
16 INVESTMENTS IN ASSOCIATES
Investments in associates are accounted

for using equity method of accounting:
Security Papers Limited (SPL) 16.1 40.03 40.03 5,996,873 1,790,164
SICPA Inks Pakistan (Private) Limited (SICPA) 16.2 47 47 491,205 696,889
6,488,078 2,487,053
150
Note 2020 2019

--------------- (Rupees in '000) --------------
16.1 Security Papers Limited - SPL
Cost 1,613,357 1,613,357

Share of post acquisition after tax profits 16.1.1 1,133,111 648,961
Effect of restatement on after tax profits 3.3 (2,099) -
Effect of first time application of IFRS 9 on after tax profits (100,561) (100,561)
Share in after tax other comprehensive income 16.1.2 (66,912) (68,884)
Effect of restatement due revaluation of land and Building of SPL 3,894,669 -
Effect of first time application of IFRS 9 on other
comprehensive income 100,561 100,561
Dividend received (575,253) (403,270)
5,996,873 1,790,164
16.1.1 The movement in share of post acquisition after tax profit for SPL is as follows:

Share of after tax profit from associate
for the year ended June 30 16.1.2 510,882 309,045
Effect of restatement on after tax profits (996) -
Unrealised (gain) / loss on transactions 16.1.3 (25,736) (44,208)
484,150 264,837
Closing balance 1,133,111 648,961
16.1.2 These amounts are based on audited annual financial statements of SPL as at and for the year ended June 30, 2020
except for the impacts of restatements, if any, as disclosed in note 3.3 to these consolidated financial statements.
16.1.3 This represents the effect of elimination of unrealised gain / loss on transactions between the associate i.e. SPL and the
Corporation to the extent of its interest in the associate (40.03%).
Note 2020 2019

--------------- (Rupees in '000) --------------
16.2 SICPA Inks Pakistan (Private) Limited - (SICPA)
Cost 497,655 497,655

Share of post acquisition after tax profits 16.2.1 1,083,999 770,274
Effect of restatement on after tax profits 3.3 (219,049) -
Effect of first time application of IFRS 9 on after tax profits 3,554 3,554
Share in after tax other comprehensive income 16.2.2 2,992 1,114
Effect of restatement on other comprehensive income 3.3 3,181 -
Effect of first time application of IFRS 9 on
other comprehensive income (3,554) (3,554)
Dividend received (877,573) (572,154)
491,205 696,889
16.2.1 The movement in share of post acquisition after tax profit for SICPA is as follows:

Share of after tax profit from associate for
the year ended June 30 16.2.2 419,080 437,460
Effect of restatement on after tax profits 79,710 -
Unrealised (gain) / loss on transactions (185,065) -
313,725 437,460
Closing balance 1,083,999 770,274
16.2.2 These amounts are based on annual audited financial statements of SICPA as at and for the year ended December 31,
2019 which have been adjusted using the unaudited interim financial information for the six months periods ended June
30, 2019 and June 30, 2020, except for the impacts of restatements, if any, as disclosed in note 3.3 to these consolidated
151
16.3 The following is the summarised financial information of the associated companies as at June 30, 2020 based on their
financial information prepared in accordance with the accounting and reporting standards as applicable in Pakistan,
modified for fair value and other adjustments and differences in the accounting policies as stated in note 3.3 to these
consolidated financial statements:
Security Papers SICPA Inks Pakistan

June 30, June 30, June 30, March 31,
2020 2019 2020 2019
--------------------------------------------------------------------------------------------------------------------------------------------Rupees '000--------------------------------------------------
Assets 16,175,255 6,084,434 2,289,684 2,539,949

Liabilities 1,194,308 1,146,338 1,244,567 937,043
Year ended Year ended Year ended Year ended

June 30, June 30, June 30, March 31,
2020 2019 2020 2019
--------------------------------------------------------------------------------------------------------------------------------------------Rupees '000--------------------------------------------------
Revenue 4,901,284 4,001,591 6,383,381 5,345,618

Profit after tax 1,276,249 772,034 891,660 930,505
Total other comprehensive (loss) / income 4,926 (6,185) 3,966 (2,106)
16.4 The market value of SPL as at June 30, 2020 is Rs 141.95 per share (2019: Rs 92.79 per share) i.e. an aggregate amount
of Rs 3,367.301 million (2019: Rs 2,201.140 million). The breakup value based on net assets of SICPA as per latest
unaudited financial statements as on June 30, 2020 is Rs 350.84 per share (March 31, 2019: Rs 277.97 per share) i.e. an
aggregate amount of Rs 1,045.117 million (March 31, 2019: Rs 1,602.906 million).
Note 2020 2019

------------- (Rupees in '000) -------------
17 LOANS, ADVANCES AND BILLS OF EXCHANGE
Government owned / controlled financial institutions 17.3 85,114,788 72,896,028

Private sector financial institutions 17.4 700,781,998 504,975,653
785,896,786 577,871,681
Employees 21,048,761 21,817,796
806,945,547 599,689,477
Less: Credit loss allowance 17.7 (2,192,861) (2,210,809)
804,752,686 597,478,668
17.1 The following table sets out information about the credit quality of loans advances and bills of exchange of the Group
measured at amortised cost:
2020
--------------------------------- (Rupees in '000) ---------------------------------
Government owned / controlled financial institutions
High rating 83,334,487 - - 83,334,487
Rating below standard - - 1,780,301 1,780,301
83,334,487 - 1,780,301 85,114,788
Private sector financial institutions
High rating 690,302,476 - - 690,302,476
Standard rating 141,068 - - 141,068
Rating below standard 9,271,257 - 1,067,197 10,338,454
699,714,801 - 1,067,197 700,781,998
Employees
Performing loans 21,041,999 - - 21,041,999
Non performing loans - - 6,762 6,762
21,041,999 - 6,762 21,048,761
804,091,287 - 2,854,260 806,945,547
Less: Credit loss allowance (55,892) - (2,136,969) (2,192,861)
804,035,395 - 717,291 804,752,686
152
2019
--------------------------------- (Rupees in '000) ---------------------------------
High rating 58,099,146 - - 58,099,146
Rating below standard 17,567 - 14,779,315 14,796,882
58,116,713 - 14,779,315 72,896,028
High rating 494,433,694 - - 494,433,694
503,908,456 - 1,067,197 504,975,653
Employees
Non performing loans - - 6,762 6,762
21,811,034 - 6,762 21,817,796
583,836,203 - 15,853,274 599,689,477
583,762,392 - 13,716,276 597,478,668
17.2 An analysis of changes in the ECL in relation to loans and advances of the Group measured at amortised cost is, as
follows:
2020
Government
owned / Private sector
controlled financial Employees Total
financial institutions
institutions
--------------------------------- (Rupees in '000) ---------------------------------
Stage 1
Opening balance as of July 01, 2019 46,061 26,987 763 73,811
Reversal of allowance - (17,892) (27) (17,919)
Balance as of June 30, 2020 46,061 9,095 736 55,892
Stage 3
Opening balance as of July 01, 2019 1,066,606 1,063,630 6,762 2,136,998
Charge / (reversal) of allowance - - (29) (29)
Balance as of June 30, 2020 1,066,606 1,063,630 6,733 2,136,969
1,112,667 1,072,725 7,469 2,192,861
2019
Government
institutions
--------------------------------- (Rupees in '000) ---------------------------------
Stage 1
Opening balance as of July 01, 2018 - - - -
Adjustments on initial recognition of IFRS 9 46,061 284 664 47,009
Balance as of July 1, 2018 46,061 284 664 47,009
Charge / (reversal) of allowance - 26,703 (22) 26,681
Other charges - - 121 121
Stage 3
Opening balance as of July 01, 2018 1,066,606 1,063,630 7,715 2,137,951
Adjustments on initial recognition of IFRS 9 - - - -
Balance as of July 1, 2018 1,066,606 1,063,630 7,715 2,137,951
Charge/(reversal) of allowance - - - -
Other recoveries - - (953) (953)
Balance as of June 30, 2019 1,066,606 1,063,630 6,762 2,136,998
1,112,667 1,090,617 7,525 2,210,809
153
17.3 Loans and advances to government owned / controlled financial institutions
Note Scheduled banks Other financial institutions Total

2020 2019 2020 2019 2020 2019
---------------------------------------------------- (Rupees in '000) ----------------------------------------------------
Agricultural sector 435,707 456,870 - - 435,707 456,870
Industrial sector 17.3.1 28,071,472 17,552,496 - - 28,071,472 17,552,496
Export sector 54,060,479 40,393,590 - - 54,060,479 40,393,590
Housing sector - - - - - -
Others 17.3.2 1,748,668 13,734,148 798,462 758,924 2,547,130 14,493,072
84,316,326 72,137,104 798,462 758,924 85,114,788 72,896,028
17.3.1 This includes exposure to Industrial Development Bank Limited (IDBL) under locally manufactured machinery (LMM) credit
line amounting to Rs. 1,054 million (2019: Rs. 1,054 million). Furthermore, loans and advances also include loans
amounting to Rs. 340.78 million (2019: Rs 340.78 million) to IDBL which are secured by government securities. The
Federal Government vide its vesting order dated November 13, 2012 had transferred and vested all assets and liabilities of
Industrial Development Bank of Pakistan (IDBP) into the IDBL with effect from November 13, 2012. The Cabinet Committee
on Privatisation, in its meeting held on May 07, 2016 approved the inclusion of IDBL in the 'privatisation program for early
implementation'. Further, the Cabinet Committee on Privatisation in its meeting held on October 31, 2018 approved to delist
IDBL from privatization programme. The Federal Cabinet also ratified the decision of the Cabinet Committee on
Privatization. Accordingly, the process of winding up of IDBL is under process. During the year ended June 30, 2020, a loan
amounting to Rs. 13 billion, has been settled by utilising the appropriation held in the reserve fund for said purpose.
17.3.2 These balances include Rs. 327.949 million (2019: Rs. 327.949 million) which are recoverable from various financial
institutions operating in Bangladesh (former East Pakistan). The realisability of these balances is subject to final settlement
between the Governments of Pakistan and Bangladesh.
17.4 Loans and advances to private sector financial institutions

2020 2019 2020 2019 2020 2019
----------------------------------------------------- (Rupees in '000) -----------------------------------------------------
Agricultural sector 1,548,967 834,426 214,819 279,970 1,763,786 1,114,396

Industrial sector 185,912,309 139,665,544 14,477,862 12,525,578 200,390,171 152,191,122
Export sector 17.4.1 452,884,058 340,315,670 - - 452,884,058 340,315,670
Others 17.4.2 &
17.4.3 36,581,037 2,970,994 9,162,946 8,383,471 45,743,983 11,354,465
676,926,371 483,786,634 23,855,627 21,189,019 700,781,998 504,975,653
17.4.1 Export sector loans of scheduled banks are fully secured against demand promissory notes.
17.4.2 In the year 2015, the Group in continuation of a scheme of amalgamation of two commercial banks duly sanctioned by the
Federal Government under section 47 of the Banking Companies Ordinance, 1962 and under section 17 of the State Bank
of Pakistan Act, 1956, extended a 10 year financing facility of Rs.5,000 million with a bullet payment of mark-up and
principal at maturity to an Islamic commercial bank (ICB) which is secured against Government of Pakistan Ijara Sukuk.
The 10 year facility was provided on the basis of Mudaraba to be remunerated at profit sharing ratio declared by the ICB on
its remunerative current accounts on monthly basis (the last declared rate in this respect is 0.01% per annum). In
accordance with the requirements of accounting framework of the Group the 10 year financing facility had been recognised
at fair value on initial recognition. The amortised cost as of June 30, 2020 is Rs. 3,220 million (2019: Rs. 2,946 million).
17.4.3 Loans to other financial institutions include advances made to microfinance banks under financial inclusion and
infrastructure project (FIIP). These loans are fully secured against demand promissory notes.
17.5 The interest / mark-up rate profile of the interest / mark-up bearing loans and advances is as follows:
Note 2020 2019

(% per annum)
Government owned / controlled and private sector financial institutions 0 to 14.49 0 to 12.00
Employees loans (where applicable) 0 to 10.00 0 to 10.00
17.6 During the year ended June 30, 2020, the Bank in response to the COVID-19 pandemic has launched several new
financing facility schemes in line with its mission to maintain financial and monetary stability. The following facilities were
introduced via IH&SMEFD circular no. 01 and 03 of 2020 dated March 17, 2020 and IH&SMEFD circular no. 06 of 2020
dated April 10, 2020:
154
i) temporary economic refinance facility

ii) refinance facility for combating COVID-19 (RFCC)
iii) refinance scheme for payments of wages and salaries to workers and employees of business concerns
Facilities disbursed to banks under the above mentioned schemes aggregated to Rs 38,244 million and were interest free.
These facilities have been recorded at fair value and a loss for fair valuation amounting to Rs 4,194 million has been
recorded in these consolidated financial statements.
Note 2020 2019

17.7 Credit loss allowance --------------- (Rupees in '000) --------------
Opening balance 2,210,809 2,137,951

Impact on opening balances due to initial application of IFRS 9 - 47,009
2,210,809 2,184,960
(Reversal of) / charge during the year (17,948) 26,681
Other recoveries - net - (832)
Closing balance 2,192,861 2,210,809
18 ASSETS HELD WITH THE RESERVE BANK OF INDIA
Gold reserves
- opening balance 7,573,743 5,102,356
- appreciation for the year due to revaluation 32.3.1.1 2,405,211 2,471,387
Closing Balance 9,978,954 7,573,743
Sterling securities 682,421 670,887

Government of India securities 318,125 331,449
Rupee coins 6,464 6,726
18.1 10,985,964 8,582,805
Indian notes representing assets receivable
from the Reserve Bank of India 18.2 957,200 997,292
25.1 11,943,164 9,580,097
18.1 These assets were allocated to the Government of Pakistan as its share of the assets of the Reserve Bank of India under
the provisions of Pakistan (Monetary System and Reserve Bank) Order, 1947. The transfer of these assets to the Group is
subject to final settlement between the Governments of Pakistan and India (also refer note 32.3.1).
18.2 These represent Pak Rupee equivalent of Indian rupee notes which were in circulation in Pakistan until retirement from
circulation under the Pakistan (Monetary System and Reserve Bank) Order, 1947. Realisability of these assets are subject
to final settlement between the Governments of Pakistan and India (also refer note 32.3.1).
19 BALANCES DUE FROM THE GOVERNMENTS Note 2020 2019

OF INDIA AND BANGLADESH --------------- (Rupees in '000) --------------
India
Advance against printing of notes 39,616 39,616
Receivable from the Reserve Bank of India 837 837
40,453 40,453
Bangladesh
Inter office balances 819,924 819,924
Loans, advances and commercial papers 19.1 12,280,787 11,406,171
13,100,711 12,226,095
19.2 13,141,164 12,266,548
19.1 These represent interest bearing loans and advances (including commercial papers) provided to the Government of
Bangladesh.
19.2 The realisability of the above balances is subject to final settlement between the Government of Pakistan and Government
of Bangladesh and India (also refer notes 32.1 and 32.3.1).
Note 2020 2019

20 PROPERTY, PLANT AND EQUIPMENT --------------- (Rupees in '000) --------------
Operating fixed assets 20.1 135,278,631 135,921,588

Capital work-in-progress 20.4 1,886,415 1,970,185
137,165,046 137,891,773
155
20.1 Operating fixed assets
2020
Buildings Buildings Electronic
Furniture Right-of-
Freehold Leasehold on on Plant and Office data Motor
and use- Total
land* land* freehold leasehold Machinery equipment processing vehicles
fixtures assets
land* land* equipment
----------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------

As at July 01, 2019 / initial
application of IFRS 16
Cost / revalued amount 71,154,434 54,121,144 3,070,398 4,620,726 8,792,692 244,162 2,424,128 2,682,786 992,379 56,769 148,159,618
Accumulated depreciation - - - - 7,231,776 148,042 1,741,394 2,470,747 589,300 31,272 12,212,531
Net book value 71,154,434 54,121,144 3,070,398 4,620,726 1,560,916 96,120 682,734 212,039 403,079 25,497 135,947,087
Year ended June 30, 2020

Opening net book value 71,154,434 54,121,144 3,070,398 4,620,726 1,560,916 96,120 682,734 212,039 403,079 25,497 135,947,087
Transfer to Right of use asset - - - - - - - - (25,497) - (25,497)
Additions 606 - 17,486 - 13,956 31,132 136,039 332,702 266,059 44 798,024

Transfers from capital work in
progress - 8,593 16,833 133,041 1,478,233 - 201,685 - - - 1,838,385
606 8,593 34,319 133,041 1,492,189 31,132 337,724 332,702 266,059 44 2,636,409
Disposals
Cost - - (723) - (67,286) (1,925) (67,316) (73,423) (179,484) - (390,157)
Accumulated Depreciation - - - - 52,039 923 62,989 52,858 167,002 - 335,811
- - (723) - (15,247) (1,002) (4,327) (20,565) (12,482) - (54,346)
Reversal on reclassification of freehold

land to investment property (946,293) - - - - - - - - - (946,293)
Adjustments ** (1,668,215) 1,587,900 (273,973) 354,288 - - - - - - -
Depreciation charge - 954,871 160,845 288,740 271,425 19,079 201,443 210,782 161,729 9,815 2,278,729
Net book value 68,540,532 54,762,766 2,669,176 4,819,315 2,766,433 107,171 814,688 313,394 469,430 15,726 135,278,631
As at June 30, 2020

Cost / revalued amount 68,540,532 55,717,637 2,830,021 5,108,055 10,217,595 273,369 2,694,536 2,942,065 1,053,457 56,813 149,434,080
Accumulated depreciation - 954,871 160,845 288,740 7,451,162 166,198 1,879,848 2,628,671 584,027 41,087 14,155,449
Net book value 68,540,532 54,762,766 2,669,176 4,819,315 2,766,433 107,171 814,688 313,394 469,430 15,726 135,278,631
Useful life / rate of depreciation - 90-99 years 20 years 20 years 10% - 20% 10% - 20% 10% - 33% 33.33% 20% 20%
2019
Buildings Electronic
Buildings Furniture
Freehold Leasehold on Plant and Office data Motor Right of
on freehold and Total
land* land* leasehold Machinery equipment processing vehicles Use Asset
land* fixtures
land* equipment
----------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------

---------------
As at July 01, 2018
Cost / revalued amount 64,107,959 38,505,682 2,973,420 4,328,303 7,910,525 270,522 2,259,325 2,692,340 885,814 - 123,933,890
Accumulated depreciation - 2,590,461 271,789 501,326 7,081,063 191,852 1,524,601 2,258,928 505,761 - 14,925,781
Net book value 64,107,959 35,915,221 2,701,631 3,826,977 829,462 78,670 734,724 433,412 380,053 - 109,008,109

Opening net book value 64,107,959 35,915,221 2,701,631 3,826,977 829,462 78,670 734,724 433,412 380,053 - 109,008,109
Additions - - 73,642 142,690 873,676 40,890 202,000 173,509 204,288 - 1,710,695

Transfers from capital work in
progress - - - - - - - - - - -
73,642 142,690 873,676 40,890 202,000 173,509 204,288 -
Revaluation during the year 7,046,475 15,610,795 53,891 272,330 - - - - - - 22,983,491

Reversal due to revaluation - (3,954,813) (392,053) (690,516) - - - - - - (5,037,382)
7,046,475 19,565,608 445,944 962,846 28,020,873
Disposals
Cost - - - (123,993) - (67,250) (37,197) (183,063) (100,978) - (512,481)
Accumulated Depreciation - - - 23,750 - 60,027 19,296 83,497 78,231 - 264,801
(100,243) - (7,223) (17,901) (99,566) (22,747) - (247,680)
Adjustments ** - 4,667 (30,555) 1,396 8,491 - - - 3,255 - (12,746)

- - (1,696) - 4,853 - - 470 1,600 - 5,227
- 4,667 (28,859) 1,396 3,638 - - (470) 1,655 - (17,973)
Depreciation charge 1,364,352 121,960 212,940 145,860 16,217 236,089 294,845 160,169 - 2,552,432
Net book value 71,154,434 54,121,144 3,070,398 4,620,726 1,560,916 96,120 682,733 212,039 403,078 - 135,921,588
As at June 30, 2019

Cost / revalued amount 71,154,434 54,121,144 3,070,398 4,620,726 8,792,692 244,162 2,424,128 2,682,786 992,379 - 148,102,849
Accumulated depreciation - - - - 7,231,776 148,042 1,741,394 2,470,747 589,300 - 12,181,259
Net book value 71,154,434 54,121,144 3,070,398 4,620,726 1,560,916 96,120 682,733 212,039 403,078 - 135,921,588
Useful life / Rate of depreciation - 30-99 years 20 years 20 years 10% 10% 20% 33.33% 20%
* These represents revalued assets

** Adjustments include reclassification within different categories of assets
156
20.2 Land and buildings of the Group are carried at revalued amount. The latest revaluation was carried out on June 30, 2019
by an external expert which resulted in a surplus of Rs. 28,021 million. The revaluation was carried out based on the
market value assessment being the fair value of the land and buildings. Had there been no revaluation, the carrying value
of the revalued assets would have been as follows:
Note 2020 2019

--------------- (Rupees in '000) --------------
Freehold land 42,446 42,446

Leasehold land 179,380 194,626
Buildings on freehold land 408,076 550,608
Buildings on leasehold land 736,022 869,918
1,365,924 1,657,598
20.3 Depreciation charge for the year has been allocated as follows:
General administrative and other expenses 47 2,069,415 2,481,655

Cost of printing banknotes and Prize Bonds 45 197,596 64,857
Charged to NSPC 11,718 5,920
2,278,729 2,552,432
20.4 Capital work-in-progress

Office equipment 321,299 61,570
Electronic data processing equipment 195 195
Plant and machinery 1,071,848 1,629,062
1,886,415 1,970,185
20.5 During the year, the management of the Group has revised the estimate of the useful life of the following assets:
- leasehold land on the basis of extension clause of the lease agreements;
- lifts, chillers, generators, transformers, fire suppression system and banknotes processing and authentication system
(BPAS) under the category of office equipment and machinery. Previously, assets under the above categories were
depreciated over 5 years and now these are depreciated over the useful life of 10 years.
The revision has been accounted for as a change in accounting estimate in accordance with the requirements of
International Accounting Standards (IAS) 8 'Accounting policies, changes in accounting estimates and errors'. Had the
revision in useful lives of these assets not been made, the depreciation expense for the year would have been higher by
Rs. 1,832.111 million and consequently profit before tax would have been lower by the same amount.
Note 2020 2019

21 INVESTMENT PROPERTY --------------- (Rupees in '000) --------------
Balance as at 1 July - -
Revaluation gain recognised during the year 3.3 978,608 -
Balance as at 30 June 978,608 -
Note 2020 2019

22 INTANGIBLE ASSETS --------------- (Rupees in '000) --------------
Software
Intangible Balances 22.1 103,280 198,758
Capital work-in-progress 3,064 -
106,344 198,758
157
Additions Accumulated Accumulated Net book Annual rate of

Cost at Cost at Amortisation
during the amortisation amortisation value at June amortisation
July 1 June 30 for the year
year at July 1 at June 30 30 %
--------------------------------------------------------------- (Rupees in '000) --------------------------------------------------
Software 2020 995,000 23,108 1,018,108 796,242 118,586 914,828 103,280 20 - 33.33
Software 2019 810,596 184,404 995,000 668,896 127,346 796,242 198,758 20 - 33.33
Note 2020 2019

22.2 Amortisation charge for the year has been allocated to: --------------- (Rupees in '000) --------------
General, administrative and other expenses 47 118,586 127,346
23 DEFERRED TAXATION
Deductible temporary differences

Stores and spares 19,139 10,710
Stock-in-trade 15,514 14,856
Trade debts - -
Loans and advances 1,611 1,611
Investments- local 34,700 36,311
Other receivables 8,552 8,702
Other liabilities - 8,169
Lease liabilities 826 -
Deferred liabilities - pension payable 743,863 724,173
824,205 804,532
Taxable temporary differences
Property, plant and equipment (205,875) (68,681)
Investment in associates (978,718) (368,285)
Surplus on revaluation of property, plant and equipment (199,968) -
(1,384,561) (436,966)
Deferred taxation (liability) / asset (560,356) 367,566
24 OTHER ASSETS
Commission receivable and others 4,426,491 3,788,268

Stock-in-trade 4,102,386 2,951,232
Unrealised gain on local currency derivatives 467,045 -
Other advances, deposits and prepayments 9,900,893 6,588,027
Medical, stationery consumables and stamps on hand 311,241 248,902
20,111,313 14,199,144
25 BANKNOTES IN CIRCULATION
Total banknotes issued 25.1 6,458,935,813 5,285,185,252

Banknotes held with the Banking department 9 (172,707) (159,748)
Notes in circulation 6,458,763,106 5,285,025,504
25.1 The liability for banknotes issued by the Issue department is recorded at its face value in the consolidated balance sheet.
In accordance with section 26 (1) of the SBP Act 1956, this liability is supported by the following assets of the Issue
department.
Note 2020 2019

--------------- (Rupees in '000) --------------

Foreign currency accounts and investments 10 218,465,780 447,218,637
6,458,935,813 5,285,185,252
158
Note 2020 2019

26 CURRENT ACCOUNTS OF GOVERNMENTS --------------- (Rupees in '000) --------------
26.1 Current accounts of governments - payable balances
Federal Government 26.3 530,892,360 953,723,619

Provincial governments
- Punjab 26.4 81,724,341 71,904,587
- Sindh 26.5 65,497,762 22,340,295
- Khyber Pakhtunkhwa 26.6 11,159,840 18,825,192
- Baluchistan 26.7 40,926,370 20,449,672
Government of Azad Jammu and Kashmir 26.8 5,046,863 97,061
Gilgit - Baltistan Administration Authority 26.9 13,542,566 14,173,504
217,897,742 147,790,311
748,790,102 1,101,513,930
26.2 Current accounts of governments - receivable balance
Railways account 26.10 30,157,106 28,200,405
26.3 Federal Government
Non-food account 508,391,267 929,325,959

Zakat fund accounts 7,929,167 9,256,663
Other accounts 14,571,926 15,140,997
530,892,360 953,723,619
26.4 Provincial Government - Punjab
Non-food account 76,274,341 42,007,486

Zakat fund account 154,335 1,565,166
Other accounts 5,295,665 28,331,935
81,724,341 71,904,587
26.5 Provincial Government - Sindh
Non-food account 59,101,115 20,279,182

Zakat fund account 1,757,082 1,599,775
Other accounts 4,639,565 461,338
65,497,762 22,340,295
26.6 Provincial Government - Khyber Pakhtunkhwa
Non-food account 97,619 9,396,814

Other accounts 2,838,479 1,842,538
11,159,840 18,825,192
26.7 Provincial Government - Baluchistan
Non-food account 38,330,273 17,067,872

Other accounts 775,021 2,004,263
40,926,370 20,449,672
26.8 Government of Azad Jammu and Kashmir 5,046,863 97,061
26.9 Gilgit - Baltistan Administration Authority 13,542,566 14,173,504
26.10 These balances carry mark-up from 8.41% to 13.80% per annum (2019: 6.83% to 13.13% per annum).
159
27 PAYABLE TO ISLAMIC BANKING INSTITUTIONS AGAINST BAI MUAJJAL TRANSACTIONS
This represents amount payable to various Islamic Banking Institutions against purchases of Government of Pakistan
(GoP) Ijara Sukuks by the Bank on Bai Muajjal basis (deferred payment basis).
28 PAYABLE UNDER BILATERAL CURRENCY SWAP AGREEMENT
28.1 Payable under bilateral currency swap agreement with the People's Bank of China (PBoC)
A bilateral currency swap agreement (CSA) was entered between the Bank and the PBoC on December 23, 2011 in order
to promote bilateral trade, finance direct investment, provide short term liquidity support and for any other purpose mutually
agreed between the two central banks. The original agreement was renewed on December 23, 2014 for a period of three
years with overall limit of CNY 10,000 million and equivalent PKR. The bilateral CSA has been further extended on May 23,
2018 for a period of three years, with amount increased from CNY 10,000 million to CNY 20,000 million and equivalent
PKR. The Bank has purchased and utilized CNY 20,000 million (Rs. 475.138 billion) against PKR during the year with the
maturity buckets of three months to 1 year (2019: CNY 20,000 million (Rs. 466.280 billion) with maturity bucket of three
months to 1 year). These purchases have been fully utilised as at June 30, 2020 and the same amounts are outstanding
as on June 30, 2020. Interest is charged on outstanding balance at agreed rates.
Note 2020 2019

29 DEPOSITS OF BANKS AND FINANCIAL INSTITUTIONS --------------- (Rupees in '000) --------------
Foreign currency
Scheduled banks 39,655,440 37,854,192
Held under cash reserve requirement 29.1 197,323,325 244,598,533
236,978,765 282,452,725
Local currency
Scheduled banks 29.1 919,385,365 950,672,620
Financial institutions 14,653,730 13,031,466
Others DBFI - Others 85,699 81,959
934,124,794 963,786,045
1,171,103,559 1,246,238,770
29.1 This includes cash deposited with the Bank by scheduled banks under regulatory requirements.
Note 2020 2019

30 OTHER DEPOSITS AND ACCOUNTS --------------- (Rupees in '000) --------------
Foreign currency
Foreign central banks 75,676,791 152,341,810
International organisations 382,488,753 364,429,695
Foreign government 512,412,169 487,918,827
Others 13,029,732 29,067,136
30.1 & 30.2 983,607,445 1,033,757,468
Local currency
Special debt repayment 30.3 24,243,841 24,243,841
Government 30.4 17,850,348 17,850,348
Foreign central banks 2,226 2,172
Others ODA - Others 61,946,224 34,682,484
110,386,585 82,567,016
1,093,994,030 1,116,324,484
30.1 This includes FCY deposits equivalent to Rs.504,152 million (based on exchange rate as of June 30, 2020) (2019: Rs
480,156 million (based on exchange rate of June 30, 2019)), carrying interest at twelve month LIBOR + 1.00% (2019:
LIBOR + 1.75%), payable semi-annually. These deposits have been set off against the Rupee counterpart receivable from
the Federal Government and have been covered under Ministry of Finance (MoF) Guarantee whereby the MoF has agreed
to assume all liabilities and risks arising from these deposits.
160
2020 2019
30.2 The interest rate profile of the interest bearing deposits is as follows: (% per annum)
Foreign central banks 0.51 to 2.61 2.03 to 3.00

International organisations 3.00 to 4.53 3.00 to 4.53
Foreign government 3.00 3.00
Others 0.17 to 2.40 1.98 to 2.51
30.3 These are interest free and represent amounts kept in separate special accounts to meet forthcoming foreign currency
debt repayment obligations of the Government of Pakistan.
30.4 These represent rupee counterpart of the foreign currency loan disbursements received from various international financial
institutions on behalf of the Government and credited to separate deposit accounts in accordance with the instructions of
the GoP.
Note 2020 2019

31 PAYABLE TO THE INTERNATIONAL MONETARY FUND --------------- (Rupees in '000) --------------
Borrowings under:
- fund facilities 31.1 & 31.3 816,542,992 924,568,518
- allocation of SDRs 31.2 229,401,334 225,495,788
1,045,944,326 1,150,064,306
Current account for administrative charges 52 47
1,045,944,378 1,150,064,353
31.1 The IMF provides financing to its member countries from general resources account (GRA) held in its general department.
GRA credit is normally governed by the IMF’s general lending policies (also known as credit tranche policies), which
provide financing for balance of payments (BoP) and budgetary support needs.
Under GRA financing, the IMF granted Extended fund facility (EFF) amounting to SDR 4,393 million in FY 2013-14, having
repayment period of 4½ – 10 years, with repayments in twelve equal semi-annual instalments. A total amount of SDR
4,393 million has been disbursed under twelve tranches of EFF. The repayment under this facility started from March 2018
and will continue till September 2026. Repayments made during the year amounted to SDR 540 million (2019: SDR 270
million) in 16 different tranches (2019: 8 tranches).
31.2 This represents amount payable against allocation of SDRs. A charge is levied by the IMF on SDR allocation of the Bank
at weekly interest rate applicable on daily product of SDR.
Note 2020 2019
31.3 Interest profile of amount payable to the IMF is as under: (% per annum)
Fund facilities 31.3.1 1.05 to 2.03 1.89 to 2.16
31.3.1 The IMF levies a basic rate of interest (charges) on loans based on SDR interest rate and imposes surcharges depending
on the amount and maturity of the loan and the level of credit outstanding. Interest rates are determined by the IMF on
weekly basis. Charges are, however, payable on quarterly basis.
Note 2020 2019

32 OTHER LIABILITIES --------------- (Rupees in '000) --------------
Local Currency
Provision against overdue mark-up 32.1 11,886,685 11,012,018
Special reserve provision under FIIP 10,245,290 9,140,395
Remittance clearance account 4,096,502 1,591,851
Exchange loss payable under exchange risk coverage scheme 477,713 563,869
Dividend payable 32.2 10,000 -
Unrealised loss on derivative financial instruments - net 22,298,736 112,862,311
Other accruals and provisions 32.3 47,489,287 38,279,113
Payable to National Security Printing Company (NSPC) - 240,306
Others 32.4 8,714,672 8,849,376
105,218,885 182,539,239
161
32.1 This represents suspended mark-up which is recoverable from the Government of Bangladesh (former East Pakistan)
subject to the final settlement between the governments of Pakistan and Bangladesh.
32.2 This represent dividend payable on shares held by the Government of Pakistan and government controlled entities
amounting to Rs. 10 million (2019: NIL).
Note 2020 2019

--------------- (Rupees in '000) --------------
32.3 Other accruals and provisions
Agency commission 15,505,814 14,538,592

Provision for employees' compensated absences 47.3.9 9,862,249 6,946,372
Provision for other doubtful assets 32.3.1 13,525,632 11,162,564
Trade and other payables 3,215,376 2,020,441
Other provisions 32.3.2 2,845,378 2,850,288
Others 2,534,838 760,856
47,489,287 38,279,113
32.3.1 Provision for other doubtful assets
Provision against assets held with / receivable from the Government of

India and the Reserve Bank of India
- Issue department 11,943,175 9,580,107
- Banking department 40,483 40,483
11,983,658 9,620,590
Provision against assets receivable from the Government of Bangladesh
- Issue department - -
- Banking department 1,541,974 1,541,974
1,541,974 1,541,974
32.3.1.1 13,525,632 11,162,564
32.3.1.1 Movement of provisions for other doubtful assets
Opening balance 11,162,564 8,235,135

(Reversal) / charge during the year (42,143) 456,042
Appreciation relating to gold reserves held by
the Reserve Bank of India 2,405,211 2,471,387
Closing balance 13,525,632 11,162,564
32.3.2 This represent provision against Home Remittance amounting to Rs. 260.363 million (2019: Rs. 260.363 million), specific
claims pertaining to provision made against claims under arbitration amounting to Rs. 1,600 million (2019: Rs. 1,600
million) and other provision made in respect of various litigations and claims against the Group amounting to Rs. 985.02
million (2019: Rs. 989.92 million).
32.4 This includes liability maintained against balances due from the Government of Bangladesh amounting to Rs. 778.399
million (2019: Rs. 778.399 million).
Note 2020 2019

33 DEFERRED LIABILITY - STAFF RETIREMENT BENEFITS --------------- (Rupees in '000) --------------
Unfunded staff retirement benefits

Pension 58,584,132 49,924,084
Gratuity scheme 97,912 65,700
Post retirement medical benefits 29,879,378 18,386,278
Benevolent fund scheme 1,273,383 9,797,597
Six months post retirement facility 821,779 678,200
47.3.3 90,656,584 78,851,859
Provident fund scheme 738,111 825,904
91,394,695 79,677,763
Funded staff retirement benefits
Pension 47.4.3 4,975,816 4,311,844
96,370,511 83,989,607
162
34 SHARE CAPITAL
2020 2019 2020 2019

--------------- (Number of shares) -------------- --------------- (Rupees in '000) --------------
Issued, subscribed and

paid-up capital
1,000,000 1,000,000 Fully paid-up ordinary shares of Rs. 100 each 100,000 100,000
Authorised share capital
1,000,000 1,000,000 Ordinary shares of Rs. 100 each 100,000 100,000
The shares of the Bank are held by the Government of Pakistan and certain Government controlled entities except for 200
shares held by the Central Bank of India (held by Deputy Custodian Enemy Property, Banking Policy and Regulations
Department, State Bank of Pakistan) and 500 shares held by the State of Hyderabad.
35 RESERVES
35.1 Reserve fund
This represents appropriations made out of the annual profits of the Bank in accordance with the provisions of the State
Bank of Pakistan Act, 1956.
35.2 The reserves for acquisition of PSPC
This represents reserves against the Group's exposure in PSPC.
35.3 Reserve for building up share capital
The Board of Directors has approved appropriation of Rs. 67.673 billion for building up of share capital.
35.4 Other funds
These represent appropriations made out of the surplus profits of the State Bank of Pakistan for certain specified purposes
in accordance with the provisions of the State Bank of Pakistan Act, 1956.
Note 2020 2019

--------------- (Rupees in '000) --------------
36 UNREALISED APPRECIATION ON GOLD
RESERVES HELD BY THE BANK
Opening balance 464,180,641 311,313,769

Appreciation for the year due to revaluation 8 148,822,917 152,866,872
613,003,558 464,180,641
37 CONTINGENCIES AND COMMITMENTS
37.1 Contingencies
37.1.1 State Bank of Pakistan ( the Bank)
a) Contingent liability in respect of guarantees given on behalf of:

Federal Government 37.1.1.1 13,459,912 16,387,061
Federal Government owned / controlled bodies and authorities 8,150,080 9,094,341
21,609,992 25,481,402
b) Other claims against the Bank not acknowledged as debts 37.1.1.2 181,583 89,690
163
c) In addition to the above these claims, there are several other lawsuits / investigation filed by various parties as a result
of the regulatory actions / investigations taken by the Bank in its capacity as regulator and banker to the government,
which the Bank is currently contesting in various courts of laws / forum. The management of the Bank believes that the
Bank has reasonable position in respect of these litigations and accordingly no provision for any liability may be
needed in these consolidated financial statements.
37.1.1.1 Above guarantees are secured by counter guarantees from the Government of Pakistan.
37.1.1.2 These represent various claims filed against the Bank's role as a regulator and certain other cases.
37.1.2 National Institute of Banking and Finance (Guarantee) Limited (NIBAF)
37.1.2.1 During the year 2016, NIBAF received a notice from the tax department dated January 20, 2016 claiming that the services
provided by NIBAF fall within the purview of serial numbers 13, 19 and 38 of schedule to the ICTO and accordingly the
NIBAF should get itself registered for sales tax, obtain Sales Tax Registration number (STRN), file returns for six months
from July 2015 to December 2015 and settle the outstanding liability in respect of sales tax for those six months. The
management believes that NIBAF does not fall under the purview of serial numbers 13, 19 and 38 of schedule to the ICTO
mainly on the ground that NIBAF is a training institution and is not liable to be registered under sales tax on training
services. A reply was sent from the NIBAF’s management to the Assistant Commissioner Inland Revenue (ACIR) justifying
the non-applicability of serial numbers 13, 19 and 38 of schedule to the ICTO to the NIBAF. However, the ACIR maintained
the tax department’s view and ordered the compulsory registration of NIBAF with immediate effect through its order dated
February 19, 2016.
Moreover, NIBAF received a show cause notice on 10 March 2016 for filing the tax returns for the period from July 2015 to
December 2015 and payment of the due amount of sales tax on services. Subsequently, the department passed the
following order on 11 April 2016, with following details:
a) Imposition of sales tax amounting to Rs.13,675,649; and
b) Imposition of a penalty under section 33(1) of the Sales Tax Act, 1990 for non-filing amounting to Rs.35,000 along with
default surcharge and penalty under section 33(5) of the Sales Tax Act, 1990.
During the year 2017, NIBAF filed an appeal before the Commissioner Inland Revenue Appeals II (CIRA) challenging the
compulsory registration of the NIBAF done by the department vide its order dated 19 February 2016. This appeal was
disposed off by the CIRA on 9 February 2017 because it was not maintainable under the law (as it was outside its
jurisdiction) and the case could now be taken to the Honourable Islamabad High Court. Consequently, NIBAF filed writ
petition against the above orders before the Honourable Islamabad High Court (IHC).
IHC passed an order dated 29 January 2018 and directed CIRA to decide the representation of NIBAF expeditiously
(preferably within 7 days) after affording an opportunity of being heard. NIBAF filed applications to CIRA for compliance
with IHC order. On 12 March 2018, representatives of NIBAF attended a hearing before the tax department and made oral
and written submission. On 02 April 2018, Deputy commissioner Inland Revenue passed an order rejecting NIBAF’s
application for de-registration and passed an order for compulsory registration of NIBAF.
On 06 June 2020, NIBAF received notice from "Office of the Commissioner Inland Revenue, Zone-III, Corporate Regional
Tax office, Karachi " for payment of penalty for non / late filing of monthly sales tax returns. NIBAF submitted its response
on 26 June 2020 in which the suspension of NIBAF without any legal notice and imposition of penalty was contested; thus
citing non-filing of returns beyond the reasonable control of NIBAF. Further, it was requested for activation of NIBAF's
account with taxation authorities for submission of sales tax returns.
NIBAF is also in contact with tax authorities on above matter through State Bank of Pakistan, the Parent entity, and no
further notices have been received in this regard from tax authorities. Therefore, no provision has been recognised in
37.1.2.2 In year 2018, NIBAF received a show cause notice for Rs. 8 million from the tax authorities against alleged non-deduction
of tax on various payments relating to tax year 2017. NIBAF has submitted the necessary information and thereafter, tax
authorities have not proceeded to pass any order. The management is confident of favourable outcome and accordingly
no provision has been recognised in these consolidated financial statements.
37.1.2.3 During the year, NIBAF received notice under section 177(1) of the Income Tax Ordinance, 2001 for provision of
information / documentation relating to tax year 2017 for the purposes of the tax audit of the said year under section 214(C)
of the Income Tax Ordinance, 2001. NIBAF submitted its response and no further notice and / or assessment / order to this
effect has been received so far from the taxation authorities.
164
37.1.3 Pakistan Security Printing Corporation (Private) Limited- (PSPC)
a) PSPC is defending certain cases filed by its ex-employees on account of their reinstatement in the PSPC and
compensation for loss of their jobs. Management considers that the probability of any significant liability arising from
such cases is remote.
b) In the previous years, certain income tax demands were raised for amount of Rs 34.9 million. PSPC, having paid the
aforesaid demand of Rs 34.9 million, had filed appeals before the Commissioner of Inland Revenue (Appeals) [CIR(A)]
which were decided against PSPC. PSPC further filed appeal before the Appellate Tribunal Inland Revenue [ATIR]
which vide order dated June 29, 2015 partially upheld the action of the Additional Commissioner Inland Revenue
[ACIR] for amending the aforesaid assessments. PSPC, being aggrieved of the matters decided in favour of the tax
authorities, filed miscellaneous application before ATIR, which were dismissed by the ATIR. A reference before the
High Court of Sindh has been filed by PSPC, the adjudication of which is pending to date.
The management is continuing with its view that the demand will eventually be revoked and the amount paid will be
refunded / adjusted in favour of PSPC. Therefore no provision has been made in the consolidated financial
c) In the previous year, the tax demands aggregating Rs 515.487 million relating to PSPC’s tax years 2013 to 2018 were
raised. In relation to the tax year 2017 a rectification application was filed as a result of which the aggregate tax
demand was reduced to Rs 343.240 million. Simultaneously, appeals before the CIR(A) were filed which were partially
decided in favour of PSPC vide orders dated 28 January 2019 (for tax years 2013 to 2017) and 6 August 2019 (for tax
year 2018) thus further reducing the tax demand to Rs 206.772 million mainly on account of apportionment of
expenses and disallowance of credit claimed on sales.
Being aggrieved, PSPC has filed appeals before the ATIR for tax years 2013 to 2017 which are pending for
adjudication, while appeal for tax year 2018 shall be filed in due course. PSPC has also filed application to the Deputy
Commissioner Inland Revenue (DCIR) for giving appeal effect of the aforementioned CIR(A) order.
The management, based on the advice of tax experts, expects a favourable outcome of the aforementioned matters
and therefore no provision has been made in the consolidated financial statements.
37.1.4 Contingencies of the associated Company - Security Papers Limited
The aggregate tax contingencies as at 30 June 2020 amounting to Rs 8.903 million in respect of various matters of
sales tax and income tax whereby SPL is contesting before various authorities and associated company, expects a
favourable outcome of the matters and therefore no provision has been made in the financial statements.
Note 2020 2019

--------------- (Rupees in '000) --------------
37.2 Commitments
37.2.1 Foreign currency forward and swap contracts - sale 1,134,906,714 1,724,182,418
37.2.2 Foreign currency forward and swap contracts - purchase 177,598,187 524,896,291
37.2.3 Futures - sale 9,323,533 6,478,867
37.2.4 Futures - purchase 9,056,126 8,000,504
37.2.5 Capital commitments 37.2.5.1 2,685,478 589,437
37.2.5.1 This represent amounts committed by the Group to purchase assets from successful bidders.
37.2.6 Letter of guarantee / credit 465,549 1,555,645
37.2.7 The Bank has a commitment to extend equivalent PKR of CNY 20,000 million (Rs.475.138 million) (2019: CNY 20,000
million (Rs. 466.280 million)) to Peoples Bank of China under bilateral currency swap agreement as disclosed in note 27.1
to these consolidated financial statements.
165
37.2.8 The Bank has made commitments to extend advance under ways and means limits to the provincial governments of
Pakistan, Government of Azad Jammu and Kashmir and Gilgit-Baltistan Administration Authority in the normal course of its
operations. The unutilised limits as on June 30, 2020 amounted to Rs. 7,500 million (2019: Rs. 76,900 million).
Effective from June 29, 2020, the extension of direct credit by the Bank to provincial governments has been taken over by
the Federal Government and the Bank's commitment to provide ways and means advance to provincial governments is
withdrawn.
In case the Government of Azad Jammu and Kashmir and Gilgit-Baltistan Administration Authority exceed their respective
ways and means limits, the Bank charges a penal rate of 4% over and above the normal rate of return on the amount
exceeding the ways and means limit.
37.2.9 Commitment of the associated Company - Security Papers Limited
The associated Company has car ijarah facility from the Meezan Bank Limited amounting to Rs. 50 million (2019: Rs. 50
million) out of which Rs. 1.131 million (2019: Rs. 1.7 million) were utilised. The ownership of the cars are with Meezan
bank Limited during the tenor of the facility of each vehicle. As per requirement of IFAS-2 ljarah financing has been treated
as an operating lease.
37.2.10 Import letter of credit (sight / usance)
The associated Company has facilities from the National Bank of Pakistan relating to import letters of credit (sight/ usance)
amounting to Rs. 100 million (2019: Rs. 100 million). The arrangement from National Bank of Pakistan is secured by lien
on documents of title of goods drawn under letter of credit. The Company has utilised Rs. 57.576 million as at June 30,
2020.
The associated Company has facilities from the Bank Al Habib Limited (BAHL) relating to import letters of credit (sight /
usance) amounting to Rs. 100 million (2019: Rs. 100 million). The arrangement from BAHL is secured by lien over T-Bills
and PIBs of Rs: 400 million, import documents consigned in favour of BAHL and counter guarantees.
The associated Company has utilised Rs. 68.494 million as at 30 June 2020. The Musharka facility from Meezan Bank
Limited would also be used for import letter of credit (sight/ usance) amounting to Rs. 200 million. This arrangement is
secured by lien over import documents. The Company has utilised Rs. 12.847 million as at June 30, 2020.
37.2.11 Letter of Guarantee Facility
As at June 30, 2020. the associated Company has facilities from commercial banks amounting to Rs. 120 million out of
which 52.09 million was utilized by the associated company. relating to letters of guarantee.
Note 2020 2019

Amortised cost --------------- (Rupees in '000) --------------
38 DISCOUNT, INTEREST / MARK-UP AND /
OR PROFIT EARNED ON FINANCIAL ASSETS
At amortised cost
Discount, interest / mark-up on government transactions:

- Government securities 38.1 1,048,156,785 568,488,867
- Federal Government scrips 82,200 82,200
- Loans and advances to and current accounts of governments 38.2 534,618 358,435
Securities purchased under agreement to resale 128,764,269 43,833,298
Interest income on preference shares 4,224,784 4,209,078
Return on loans and advances to financial institutions 12,837,164 11,944,817
Foreign currency deposits 13,603,153 16,084,959
Profit on Sukuks purchased under Bai Muajjal agreement 14,398 142,202
Others 403,930 865,528
1,208,621,301 646,009,384
Fair value through profit or loss
Foreign currency securities 10,058,650 10,943,995
38.1 This represents income earned on Market Related Treasury Bills, Market Treasury Bills and Pakistan Investment Bonds.
166
2020 2019
(% per annum)
38.2 Interest profile on loans and advances to facilities are as under:
Mark-up on facility 8.41 to 13.80 6.83 to 13.13

Additional mark-up (where ways and means facility limit is exceeded) 4 4
Note 2020 2019

--------------- (Rupees in '000) --------------
39 INTEREST / MARK-UP EXPENSE
Deposits 29,581,779 15,445,340

Interest on bilateral currency swap 20,560,492 21,817,682
Interest on special drawing rights 13,718,133 18,812,906
Securities sold under agreement to repurchase 1,499,607 47,978,340
Profit on Sukuks purchased under Bai Muajjal agreement 6,728,246 4,636,357
Charges on allocation of special drawing rights of the IMF 1,255,045 2,070,227
Others 2,983 2,704
73,346,285 110,763,556
40 COMMISSION INCOME
Market Treasury Bills 40.1 2,503,164 2,870,683

Management of public debts 40.1 1,594,705 731,831
Prize bonds and national saving certificates 40.1 543,056 526,374
Draft / payment orders 6,793 7,456
Others 70 52
4,647,788 4,136,396
40.1 These represent commission income earned from services provided to the Federal Government.
2020 2019
--------------- (Rupees in '000) --------------
41 EXCHANGE GAIN / (LOSS) - NET
Gain / (loss) on:

- foreign currency placements, deposits, securities and
other accounts - net 83,567,128 (233,065,048)
- IMF fund facilities (10,474,773) (232,359,891)
- Special drawing rights of the IMF (6,682,595) (40,486,086)
Others (7,230) (220,029)
66,402,530 (506,131,054)
42 SHARE OF PROFIT FROM ASSOCIATES
Security Papers Limited 482,051 264,837

SICPA Inks Pakistan (Private) Limited 97,857 437,460
579,908 702,297
43 OTHER OPERATING INCOME - NET
Penalties levied on banks and financial institutions 3,933,387 2,033,174

License / Credit Information Bureau fee recovered 1,682,274 951,784
Gain / (loss) on disposal of investment - net:
- local - at fair value through profit and loss 246,596 186,113
- foreign - at fair value through profit and loss 673,692 (2,552,143)
920,288 (2,366,030)
Gain on remeasurement of securities
at fair value through profit and loss 1,233,884 3,511,526
Revenue from sale of Prize Bonds to Government of Pakistan 530,652 192,138
Others 303,500 24,341
8,603,985 4,346,933
167
Note 2020 2019

--------------- (Rupees in '000) --------------
44 OTHER INCOME - NET
Gain / loss on disposal of property, plant and equipment 2,711 (132,139)

Liabilities and provisions written back - net 208,967 7,493
Grant income under foreign assistance program 173,726 189,271
Revaluation gain on investment property 978,607 -
Others 44.1 60,790 253,789
1,424,801 318,414
44.1 These include service charges at the rate of 0.12% of the total value of re-issuable cash deposited by various banks with
BSC field offices and National Bank of Pakistan's chest branches.
Note 2020 2019

--------------- (Rupees in '000) --------------
45 BANKNOTES' AND PRIZE BOND PRINTING CHARGES
Raw material
Opening stock 660,010 1,025,080
Purchases including in transit 11,705,655 9,585,440
Closing stock (1,548,374) (660,010)
10,817,291 9,950,510
Salaries, wages and other benefits 820,376 1,567,076

Pension 419,733 -
Outsourced services 287,835 -
Training 1,395 -
Fuel and power 135,611 122,001
Insurance 20,799 10,329
Rent, rates and taxes 40,511 33,001
Provision for obsolete stores and spares - net 29,062 5,286
Provision for slow moving and obsolete stock-in-trade - net 2,269 -
Amortisation of packing boxes 35,635 -
Repairs and maintenance 26,263 56,513
Others 3,571 -
2,772,981 2,462,585
Manufacturing cost 13,590,272 12,413,095
Opening work-in-process 2,328,955 1,344,144

Closing work-in-process (2,604,545) (2,328,955)
(275,590) (984,811)
Cost of goods manufactured 13,314,682 11,428,284
Opening stock of finished goods 13,494 4,359

Closing stock of finished goods (2,963) (13,494)
10,531 (9,135)
Raw material 13,325,213 11,419,149
46 AGENCY COMMISSION
Agency commission is mainly payable to National Bank of Pakistan (NBP) under an agreement for providing banking
services to Federal and Provincial Governments as an agent of the Group. Furthermore, certain portion of the agency
commission also pertains to Bank of Punjab (BOP), which was appointed as agent of the Bank in March 2016, to collect
Government of Punjab's taxes and receipts.
168
Note 2020 2019

47 GENERAL ADMINISTRATIVE AND OTHER EXPENSES --------------- (Rupees in '000) --------------
Salaries and other benefits 11,447,819 10,995,879

Retirement benefits and employees' compensated absences 47.1 16,938,583 9,796,160
Contribution to Employee Staff Welfare Fund 177,970 75,606
Rent and taxes 98,559 95,518
Insurance 83,646 76,215
Electricity, gas and water 510,507 472,969
Depreciation 20.3 2,069,415 2,481,655
Amortisation of intangible assets 22.1 118,586 127,346
Directors' fee 2,141 2,190
Auditors' remuneration 47.2 23,408 17,860
Legal and professional 239,616 92,563
Fund managers / custodian expenses 298,246 346,315
Travelling expenses 157,137 457,053
Daily expenses 99,845 137,885
Fuel 44,634 34,698
Conveyance 337,346 21,127
Postages, telegram / telex and telephone 262,914 229,521
Training 82,851 101,121
Stationery 41,928 54,895
Remittance of treasure 180,119 174,077
Books and newspapers 45,317 48,185
Advertisement 25,134 36,532
Uniforms 35,086 34,436
Board / Board committee expenses 11,541 11,000
Recruitment charges 4,924 10,525
Others 979,290 1,111,556
35,168,241 27,909,418
47.1 This includes an amount relating to defined contribution plan aggregating Rs. 409.02 million (2019: Rs. 352.266 million)
and employee compensated absences amounting to Rs. 4,986.563 million (2019: Rs. 570.086 million).
47.2 Auditors' remuneration

2020 2019
A. F. EY Ford A. F.
KPMG Total KPMG Total
Ferguson Rhodes Ferguson
-------------------------------- (Rupees in '000) ----------------------------------
State Bank of Pakistan
Audit fee 4,285 4,285 8,570 3,241 3,241 - 6,482
Out of pocket expenses 715 715 1,430 537 537 - 1,074
Sindh Sales Tax on services 400 400 800 302 302 - 604
5,400 5,400 10,800 4,080 4,080 - 8,160
SBP Banking Services Corporation
Audit fee 3,570 3,570 7,141 2,699 2,699 - 5,398
Out of pocket expenses 1,430 1,430 2,859 1,079 1,079 - 2,158
Sindh Sales Tax on services 400 400 800 302 302 - 604
5,400 5,400 10,800 4,080 4,080 - 8,160
National Institute of Banking and Finance
Audit fee 431 - 431 - 278 - 278
Out of pocket expenses 46 - 46 - 40 - 40
ICT Sales Tax on services 38 - 38 - 25 - 25
515 - 515 - 343 - 343
Pakistan Security Printing Corporation
Audit fee 980 - 980 - - 940 940
Out of pocket expenses 217 - 217 - - 169 169
Sindh Sales Tax on services 96 - 96 - - 88 88
1,293 0 1,293 - 0 1,197 1,197
12,608 10,800 23,408 8,160 8,503 1,197 17,860
169
47.3 Staff retirement benefits-unfunded (Bank and BSC)
47.3.1 During the year the actuarial valuations of the defined benefit obligations were carried out under the projected unit credit
method using the following significant assumptions:
2020 2019
- discount rate for year end obligation 9.25% p.a 14.25% p.a
- salary increase rate (where applicable) 14.00% p.a 15.00% p.a
- pension indexation rate (where applicable) 7.25% p.a 8.50% p.a
- medical cost increase rate 9.25% p.a 14.25% p.a
- petrol price increase rate (where applicable) 25.00% p.a 15.00% p.a
- personnel turnover
SBP 6.51% p.a 6.40% p.a
SBP-BSC 6.81 p.a 6.70% p.a
- normal retirement age 60 Years 60 Years
Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and
experience in Pakistan. The rates assumed are based on the adjusted SLIC 2001 - 2005 mortality tables with 1 year
setback.
47.3.2 Through its unfunded defined benefit plan, the Group is exposed to a number of risks, the most significant of which are
detailed below:
Discount rate risk
The risk of changes in discount rate, since discount rate is based on corporate / government bonds, any decrease in bond
yields will increase plan liabilities.
Salary increase / inflation risk
The risk that the actual salary increase is higher than the expected salary increase, where benefits are linked with final
salary at the time of cessation of service, is likely to have an impact on liability.
Pension Increase
The risk that the actual pension increase is higher than the expected, where benefits are being paid in form of monthly
pension, is likely to have an impact on liability.
Mortality risk
The risk that the actual mortality experience is lighter than that of expected i.e. the actual life expectancy is longer from
assumed.
Withdrawal risk
The risk of actual withdrawals experience may differ from that assumed in the circulation.
47.3.3 Change in present value of defined benefit obligation
2020
Post Six months
Benevolent
Gratuity retirement post
Pension fund Total
scheme medical retirement
scheme
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
Present value of defined benefit obligation July 01, 2019 49,924,084 65,700 27,152,937 1,030,938 678,200 78,851,859
Current service cost 842,543 9,137 633,542 3,037 48,373 1,536,632
Interest cost on defined benefit obligation 6,445,351 9,136 3,779,496 136,744 89,829 10,460,556
7,287,894 18,273 4,413,038 139,781 138,202 11,997,188
Benefits paid (9,387,103) (3,168) (1,260,328) (142,656) (95,637) (10,888,892)

Remeasurements:
actuarial (gains) / losses from changes in financial
assumptions - - - - - -
experience adjustments 10,759,257 17,107 (426,269) 245,320 101,014 10,696,429
10,759,257 17,107 (426,269) 245,320 101,014 10,696,429
Present value of defined benefit obligation as on June 30, 2020 58,584,132 97,912 29,879,378 1,273,383 821,779 90,656,584
170
2019
Post Six months
Gratuity retirement Benevolent post
Pension Total
scheme medical fund scheme retirement
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
Present value of defined benefit obligation July 01, 2018 59,531,106 56,885 23,604,207 1,325,941 616,609 85,134,748
6,035,350 11,104 2,628,709 119,107 98,106 8,892,376
Benefits paid (5,452,453) (1,856) (875,611) (140,298) (15,970) (6,486,188)
Remeasurements: -
assumptions (11,254,507) (2,333) 766,751 (279,064) (10,705) (10,779,858)
experience adjustments 1,064,588 1,900 1,028,881 5,252 (9,840) 2,090,781
(10,189,919) (433) 1,795,632 (273,812) (20,545) (8,689,077)
Present value of defined benefit obligation as on June 30, 2019 49,924,084 65,700 27,152,937 1,030,938 678,200 78,851,859
47.3.3.1 The break-up of remeasurements recognised during the year in the other comprehensive income are as follows:
Remeasurements recognised in the other comprehensive income
2020
Post Six months
Benevolent
Pension fund Total
scheme
benefits benefits
\------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
- Actuarial gains / (losses) from changes in financial

- Experience adjustments 10,759,257 17,107 (426,269) 245,320 101,014 10,696,429
10,759,257 17,107 (426,269) 245,320 101,014 10,696,429
2019
Post Six months
Pension Total
benefits benefits
\------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
assumptions 11,254,507 2,333 (766,751) 279,064 10,705 10,779,858
- Experience adjustments (1,064,588) (1,900) (1,028,881) (5,252) 9,840 (2,090,781)
10,189,919 433 (1,795,632) 273,812 20,545 8,689,077
47.3.4 Amount recognised in the consolidated profit and loss account
2020
Post Six months
Benevolent
Pension fund Total
scheme
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------

7,287,894 18,273 4,413,038 139,781 138,202 11,997,188
2019
Post Six months
Pension Total
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------

Contribution made by employees - - - (13,222) - (13,222)
6,035,350 11,104 2,628,709 105,885 98,106 8,879,154
171
47.3.5 Movement of present value of defined benefit obligation
2020
Post retirement
Benevolent fund Six months post
Pension Gratuity scheme medical Total
scheme retirement facility
benefits
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
Net recognised liabilities at July 1, 2019 49,924,084 65,700 27,152,937 1,030,938 678,200 78,851,859
Amount recognised in the consolidated
profit and loss account 7,287,894 18,273 4,413,038 139,781 138,202 11,997,188
Remeasurements 10,759,257 17,107 (426,269) 245,320 101,014 10,696,429
Benefits paid during the year (9,387,103) (3,168) (1,260,328) (142,656) (95,637) (10,888,892)
Net recognised liabilities at June 30, 2020 58,584,132 97,912 29,879,378 1,273,383 821,779 90,656,584
2019
Post retirement Benevolent fund Six months post

Pension Gratuity scheme Total
medical benefits scheme retirement facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
Net recognised liabilities at July 1, 2018 59,531,106 56,885 23,604,207 1,325,941 616,609 85,134,748
Amount recognised in the consolidated
Remeasurements (10,189,919) (433) 1,795,632 (273,812) (20,545) (8,689,077)
Benefits paid during the year (5,452,453) (1,856) (875,611) (140,298) (15,970) (6,486,188)
Employees contribution / amount transferred - - - - - -
Net recognised liabilities at June 30, 2019 49,924,084 65,700 27,152,937 1,030,938 678,200 78,851,859
47.3.6 The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Impact on defined benefit obligation -

increase / (decrease)
Change in Increase in Decrease in
assumption assumption assumption
------(Rupees in '000)------
Pension
Discount rate 1% (4,278,405) 4,949,837
Future salary increase 1% 1,622,641 (1,374,066)
Future pension increase 1% 4,143,661 (2,074,995)
Expected mortality rates 1 Year 826,719 (747,688)
Gratuity
Discount rate 1% (8,420) 9,612
Future salary increase 1% 9,603 (8,577)
Post retirement medical benefit scheme

Discount rate 1% (3,329,539) 4,108,405
Future post-retirement medical cost increase 1% 4,066,164 (3,328,014)
Benevolent
Discount rate 1% (55,700) 61,716
Six months post retirement facility

Discount rate 1% (56,142) 62,992
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. When calculating
the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined
benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when
calculating the liability of all schemes recognised within the consolidated balance sheet.
172
47.3.7 Duration of defined benefit obligation

Post Six months
Pension
benefit facility
Weighted average duration of the defined
benefit obligation 8-9 Years 2-10 Years 12-13 Years 4-6 Years 4-8 Years
47.3.8 Estimated expenses to be charged to the consolidated profit and loss account for the year ending June 30, 2021
Based on the actuarial advice, the management estimates that charge in respect of defined benefit plans for the year ending June 30,
2021 would be as follows:
Post
Six months post
retirement Benevolent fund
Pension Gratuity scheme retirement Total
medical scheme
facility
benefit
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------

Amount chargeable to the consolidated
47.3.9 Employees' compensated absences
The Group's liability for employees' compensated absences determined through an actuarial valuation carried out under the Projected
unit credit method amounted to Rs. 9,862.249 million (2019: Rs. 6,946.372 million). An amount of Rs. 4,339.457 million (2019: Rs.
570.086 million) has been charged to the consolidated profit and loss account in the current period based on the actuarial advice.
Expected charge in respect of the scheme for the year ending June 30, 2021 would be Rs 1,401.240 million. The benefits paid during
the year amounted to Rs. 1,423.58 million (2019: Rs 613.73 million). In case of 1% increase / decrease in discount rate the net charge
for the year would decrease / increase by Rs. 478.074 million and Rs. 531.727 million respectively and the net liability would also be
affected by the same amount. In case of 1% increase / decrease in salary rate the net charge for the year would increase / decrease
by Rs. 601.742 million and Rs. 622.156 million respectively and the net liability would also be affected by the same amount. The
weighted average duration for the liability against employee's compensated absences is 4-7 years.
47.4 Staff retirement benefits-funded (PSPC)
47.4.1 During the year, the actuarial valuations of the defined benefit obligations were carried out under the Projected Unit Credit Method
using the following significant assumptions:
2020 2019
- Discount rate 9.25% p.a 14.50 % p.a
- Salary increase rate 8.25% p.a 12.50% p.a
- Pension increase rate 4.75% p.a 10.00% p.a
Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and experience in
Pakistan. The rates assumed are based on the adjusted SLIC 2001 - 2005 mortality tables with 1 year setback.
47.4.2 Through its funded defined benefit plan, the Group is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this
yield, this will create a deficit. The fund believes that due to long-term nature of the plan liabilities and the strength of the PSPC's
support, the current investment strategy manages this risk adequately.
Inflation risk
The majority of the plan's benefit obligations are linked to inflation and higher inflation will lead to higher liabilities. However, the fund
manages plan assets to off set inflationary impacts.
Life expectancy / withdrawal rate

The majority of the plan's obligations are to provide benefits on severance with the PSPC or on achieving retirement. Any change in
life expectancy / withdrawal rate would impact plan liabilities.
173
2020 2019
47.4.3 Amounts recognised in the consolidated balance sheet are determined as follows: ----------------(Rupees in '000)----------------
Present value of defined benefit obligation 6,262,360 5,785,717

Fair value of plan assets (1,286,544) (1,473,873)
4,975,816 4,311,844
47.4.4 Movement of present value of defined benefit obligation and fair value of plan assets
Movement in defined benefit obligation

Present value at reporting date 5,785,717 5,788,238
Current service cost 56,393 69,371
Interest cost of defined benefit obligation 816,214 564,011
Benefits paid during the year (313,314) (296,263)
Past service cost - 88,194
Actuarial remeasurement loss / (gain) (82,650) (427,834)
Present value as at June 30, 2020 6,262,360 5,785,717
Movement in fair value of plan assets

Fair value as reporting date 1,473,873 1,689,861
Expected return on plan assets 196,778 157,956
Contribution made by employer 79,753 75,658
Benefits paid during the year (313,314) (296,263)
Actuarial remeasurement (loss) / gain (150,546) (153,339)
Fair value as reporting date 1,286,544 1,473,873
2020 2019
47.4.5 Plan assets consist of the following: (Rupees in '000) % (Rupees in '000) %
Equity instruments 73,853 4.41 89,092 4.62

Debt instruments 1,144,487 68.41 1,083,083 56.19
Cash and cash equivalent 454,666 27.18 755,540 39.19
1,673,006 100.00 1,927,715 100.00
Less: Pertaining to NSPC (being the multi employer fund) (386,462) 443,842
1,286,544 1,483,873
2020 2019
47.4.6 Amount recognised in the consolidated profit and loss account ----------------(Rupees in '000)----------------
Current service cost 56,393 69,371

Past service cost - 88,194
Net interest cost on defined benefit obligation 619,436 406,055
675,829 563,620
47.4.7 Amount recognised in consolidated other comprehensive income
Remeasurement gain on obligation

Actuarial gains from changes in financial assumptions (82,650) 427,834
Remeasurement loss on plan assets

Actual net loss on plan assets 150,546 (153,339)
67,896 274,495
Share of other comprehensive income of associate (3,836) (3,590)

----------(Rupees in '000)----------
Pension
Discount rate 1% (5,643,672) 7,008,124
Salary growth rate 1% 6,436,422 (6,101,326)
Pension indexation rate 1% 6,857,719 (5,754,734)
174
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. When
calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the
defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when
calculating the liability of all schemes recognised within the consolidated balance sheet.
47.4.9 Duration of defined benefit obligation Pension
Weighted average duration of defined benefit obligation 11 Years
47.4.10 Estimated expenses to be charged to consolidated profit and loss account for the year ending June 30, 2021
Based on the actuarial advice, the management estimates that charge in respect of defined benefit plans for the year ending June 30,
2021 would be Rs. 519.094 million.
48 (REVERSAL) / CHARGE FOR CREDIT LOSS ALLOWANCE ON FINANCIAL INSTRUMENTS - NET
The following table reconciles the expected credit losses allowance for the year ended June 30, 2020 by classes of financial
instruments:
2020
Foreign Securities
Loans,
currency Current purchased
advances
accounts Investments - Local accounts of under Total
and bills of
and governments agreement to
exchange
investments resell
------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------
As at June 30, 2019 12,996 78,953 2,210,809 - 27 2,302,785

Reversals during the year (12,908) - (17,948) - (20) (30,876)
As at June 30, 2020 88 78,953 2,192,861 - 7 2,271,909
2019
Securities
Foreign Loans,
Current purchased
currency advances and
Investments - Local accounts of under Total
accounts and bills of
governments agreement to
investments exchange
resell
------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------
As of June 30, 2018 (under IAS 39) - 817,388 2,137,951 - - 2,955,339

Adjustments on initial recognition
of IFRS 9 66 (738,435) 47,009 - 15 (691,345)
As of July 1, 2018 (under IFRS 9) 66 78,953 2,184,960 - 15 2,263,994
Charge during the year 12,929 - 26,681 - 12 39,622
Other recoveries - net - - (832) - - (832)
As at June 30, 2019 12,996 78,953 2,210,809 - 27 2,302,784
2020 2019
-----------(Rupees in '000)---------
49 TAXATION
Current - for the year 653,406 545,432

Current - prior year (42,794) 1,455
Deferred 127,248 (17,665)
737,860 529,222
175
50 PROFIT FOR THE YEAR AFTER NON-CASH ITEMS Note 2020 2019
AND OTHER ITEMS --------------- (Rupees in '000) --------------
Profit / (loss) before taxation 1,164,170,450 (514,081)
Adjustments for:
Depreciation 20.3 2,278,729 2,550,050
(Reversal) / charge of credit loss on financial instruments (30,875) 26,693
Provision / (reversal) for / write-off:
- retirement benefits and employees' compensated absences 16,938,583 9,796,160
- others - (76)
(Gain) / loss on disposal of property, plant and equipment 44 (2,711) 132,139
(Gain) / loss on disposal of financial assets 43 (920,288) -
Dividend income (460,688) (390,000)
Effect of exchange (gain) / loss on assets and liabilities (137,879,917) 184,496,821
Profit from associate and other non-cash adjustments (579,908) (702,297)
1,043,589,818 195,978,797
51 CASH AND CASH EQUIVALENTS
Cash and bank balances held by subsidiaries 7 212,825 304,957

Foreign currency accounts and investments 1,843,398,267 1,374,793,211
Special Drawing Rights of the International Monetary Fund 12 29,537,127 55,461,054
1,936,187,120 1,504,301,033
52 RELATED PARTY TRANSACTIONS
The Group enters into transactions with related parties in its normal course of business. Related parties include the Federal
Government as major shareholder of the Group, Provincial Governments, Government of Azad Jammu and Kashmir, Gilgit-
Baltistan Administration Authority, government controlled enterprises / entities, other related entities, retirement benefit plans,
directors and key management personnel of the Group.
52.1 Governments and related entities
The Bank is acting as an agent of the Federal Government and is responsible for functions conferred upon as disclosed in
note 1 to these consolidated financial statements. Balances outstanding from and transactions with the Federal and
Provincial Governments and related entities not disclosed elsewhere in the consolidated financial statements are given
below:
2020 2019
Transactions during the year --------------------- Rupees in '000 ---------------------
- Creation of MRTBs - 19,225,370,000
- Creation of PIBs - 7,187,000,000
- Retirement / rollover of MRTBs 569,000,000 22,250,040,000
- Commission income from sale of Market Treasury Bills, issuance of prize bonds, National Saving Certificates and
management of public debt (refer note 40.1)
52.2 Remuneration to key management personnel
Key management personnel of the Group include members of the Board of Directors of the Bank, Governor of the Bank,
Deputy Governors of the Group and other executives of the Group who have responsibility for planning, directing and
controlling the activities of the Bank. Fee of the non-executive members of the Board of Directors is determined by the Board.
According to section 10 of the State Bank of Pakistan Act, 1956, the remuneration of the Governor is determined by the
President of Pakistan. Deputy governors are appointed and their salaries are fixed by the Federal Government. Details of
remuneration of key management personnel of the Group are as follows:
176
2020 2019
--------------- (Rupees in '000) --------------
Short-term employee benefit 1,259,810 887,962

Post-employment benefit 108,307 78,032
Loans disbursed during the year 44,174 123,765
Loans repaid during the year 120,645 109,194
Directors' fees 13,857 12,280
Number of key management personnel 104 103
This includes 84 key management personnel pertaining to other subsidiaries of the group
Short-term benefits include salary and benefits, medical benefits and free use of the Group maintained cars in accordance
with their entitlements. Post employment benefits include gratuity, pension, benevolent fund, post retirement medical benefits,
six months post retirement facility and contributory provident funds.
52.3 Associates of the Group
52.3.1 SICPA Inks Pakistan (Private) Limited (SICPA) - associate
SICPA is a joint venture of SICPA SA, Switzerland and PSPC, incorporated in 1995. The company operates a facility in
Karachi for manufacturing security inks for printing of all denominations of currency notes and other value documents, such
as, passports, postage stamps and stamp papers, etc.
52.3.2 Security Papers Limited (SPL) - associate
SPL is an associated company of PSPC. It was established in 1965. It became a joint venture company of Iran, Turkey and
Pakistan in 1967, under the protocol of regional PSPC of development (now economic PSPC organisation) in 1967. SPL is
engaged in manufacturing of paper required by PSPC for printing banknotes, prize bonds, non-judicial stamp paper, share
certificates and watermarked certificate / degree papers for various educational institutions of Pakistan.
53 RISK MANAGEMENT POLICIES
The Group is primarily subject to interest / mark-up rate, credit, currency and liquidity risks. The policies and procedures for
managing these risks are outlined in notes 53.1 to 53.9 to these consolidated financial statements. The Group has designed
and implemented a framework of controls to identify, monitor and manage these risks. The senior management is responsible
for advising the Governor on the monitoring and management of these risks.
53.1 Credit risk management
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to
incur a financial loss. Credit risk in the Group's portfolio is monitored, reviewed and analysed by the appropriate officials and
the exposure is controlled through counterparty and credit limits. Counterparties are allocated to a particular class based
mainly on their credit rating. Foreign currency placements are made in approved currencies and government securities.
Loans and advances to scheduled banks and financial institutions are usually secured either by government guarantees or by
demand promissory notes. Equity exposure based on their nature are not exposed to credit risk. Geographical exposures are
controlled by country limits and are updated as and when necessary with all limits formally reviewed on a periodic basis. The
Group's exposure to credit risk associated with foreign investments is managed by monitoring compliance with investment
limits for counterparties. The Group's credit risk mainly lies with exposure towards government sector and financial
institutions.
Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on
the consolidated balance sheet.
53.1.2 Impairment assessment
The references below show where the Group’s impairment assessment and measurement approach is set out in these
consolidated financial statements. It should be read in conjunction with the summary of significant accounting policies.
53.1.3 Definition of default
The Group defines a financial instrument as in default when the financial asset is credit - impaired and meets one or more of
the following criteria:
177
Quantitative criteria
The borrower is more than 90 days past due on its contractual payments are considered default by the Group.
Qualitative criteria
- a breach of contract, such as default or past due event;

- the lenders of the counterparty have granted a concession to the counterparty for economic or contractual reasons;
- relating to the counterparty’s financial difficulty that the lender would not otherwise consider;
- the likelihood or probability that the counterparty will enter bankruptcy or other financial reorganisation; or
- the dissolution of an active market for that financial asset due to financial difficulties.
53.1.4 Credit rating and PD estimation process
The Group PD estimation process is based on the probability of default assigned to each counterparty according to their
external credit ratings and the related historical credit losses experience, adjusted for forward-looking information.
2020 2019
Internal rating External Rating
12 month PD 12 month PD
Performing
High grade 0.0000% 0.0000% Sovereign
High grade 0.0000%-0.0318% 0.0000%-0.0318% AAA
High grade 0.0318%-0.0751% 0.0318%-0.0751% AA+ to AA-
High grade 0.0751%-0.2334% 0.0751%-0.2334% A+ to A-
Standard grade 0.2334%-0.5574% 0.2334%-0.5574% BBB+ to BBB-
Standard grade 0.5574%-1.3393% 0.5574%-1.3393% BB+ to BB-
Standard grade 1.3393%-3.3597% 1.3393%-3.3597% B+ to B-
Rating below standard 3.3597%-9.6562% 3.3597%-9.6562% CCC+ to CCC-
Rating below standard 9.6562%-100% 9.6562%-100% CC
Non performing
Individually impaired 100% 100%
53.1.5 Exposure at default
The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment
calculation, addressing both the client’s ability to increase its exposure while approaching default and potential early
repayments too. To calculate the EAD for a stage 1 financial instruments, the Group assesses the possible default events
within 12 months for the calculation of the 12mECL. For stage 2 and stage 3 the exposure at default is considered for events
over the lifetime of the instruments. The Group determines EAD by modelling the range of possible exposure outcomes at
various points in time, corresponding the multiple scenarios. PDs are then assigned to each economic scenario based on the
outcome of the Group’s models.
53.1.6 Loss given default
Loss given default represents the Group's expectation of the extent of loss on a defaulted exposure. LGD varies by type of
counterparty, type and seniority of claim and availability of collateral or other credit support.
53.1.7 Significant increase in credit risk
The Group considers a financial asset to have experienced a significant increase in credit risk when:
- credit rating falls below investment grade in case of investments made in financial assets, or
- the contractual payments are 30 days past due.
53.1.8 Collateral and other credit enhancements
To mitigate its credit risks on financial assets, the Group seeks to use collateral, where possible. The collateral comes in
various forms, such as cash, securities, letters of credit / guarantees and demand promissory notes. The collaterals held
against financials assets of the Group have been disclosed in their respective notes, where applicable.
178
53.2 Concentrations of risk
Concentration risk arises when a number of counterparties are engaged in similar business activities or have similar
economic features that would cause their ability to meet contractual obligations to be similarly effected by changes in
economic, political or other conditions. The Bank's significant concentrations arising from financial instruments at the
reporting date without taking any collateral held or other credit enhancements is shown below:
53.2.1 Geographical analysis

2020
Asia (other
Pakistan than America Europe Australia Others Grand total
Pakistan)
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------
Financial assets `
Cash and bank balances held by subsidiaries 212,825 - - - - - 212,825
Local currency - coins 1,028,584 - - - - - 1,028,584
Foreign currency accounts and investments - 771,653,490 991,293,185 420,343,857 9,994,287 13,695,211 2,206,980,030
Earmarked foreign currency balance 62,010,317 - - - - - 62,010,317
Special drawing rights of International
Monetary Fund - - 29,537,127 - - - 29,537,127
Reserve tranche with the International Monetary
Fund under quota arrangements - - 27,555 - - - 27,555
Securities purchased under agreement to resell 917,539,647 - - - - - 917,539,647
Current accounts of governments 30,157,106 - - - - - 30,157,106
Investments - local 7,412,323,127 - - - - - 7,412,323,127
Investment in associates 6,488,078 - - - - - 6,488,078
Loans, advances and bills of exchange 804,424,737 327,949 - - - - 804,752,686
Assets held with the Reserve Bank of India - 1,964,210 - - - - 1,964,210
Balances due from the Governments of India and
Bangladesh - 13,141,164 - - - - 13,141,164
Other assets 7,231,994 7,283,358 3,305 6,225 - - 14,524,882
Total financial assets 9,241,416,415 794,370,171 1,020,861,172 420,350,082 9,994,287 13,695,211 11,500,687,338
2019
Asia (other
Pakistan)
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------
Financial assets
Cash and bank balances held by subsidiaries 304,957 - - - - - 304,957
Foreign currency accounts and investments - 597,212,845 348,408,820 352,875,855 94 77,356,774 1,375,854,388
Monetary Fund - - 55,461,054 - - - 55,461,054
Investment in associates 2,487,053 - - - - - 2,487,053
Bangladesh - 12,266,548 - - - - 12,266,548
Other assets 9,985,168 - 103,253 - - - 10,088,421
Total financial assets 9,401,070,274 611,813,696 404,000,126 352,875,855 94 77,356,774 10,847,116,819
The geographical analysis is based on composition of financial assets in the specific continents other than for Pakistan
which has been disclosed separately. All continents having significant composition have been presented separately while
the remaining have been clubbed under "Others".
179
53.2.2 Industrial analysis
2020
Banks &
Supra- Public sector
Sovereign Corporate financial Others Grand total
national entities
institutions
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------
Financial assets
Cash and bank balances held by subsidiaries 12,540 - - - 200,285 - 212,825
Foreign currency accounts and investments 1,269,465,668 385,876,467 - - 551,637,895 - 2,206,980,030
Special drawing rights of International -
Monetary Fund - 29,537,127 - - - - 29,537,127
Reserve tranche with the International Monetary -
Fund under quota arrangements - 27,555 - - - - 27,555
Securities purchased under agreement to resell - - - - 917,539,647 - 917,539,647
Investments - local 7,276,173,932 - 107,980,934 - 28,168,261 - 7,412,323,127
Investment in associates - 491,205 - - - 5,996,873 6,488,078
181507 Loans, advances and bills of exchange 327,949 - 85,686,655 - 697,696,790 21,041,292 804,752,686
Assets held with the Reserve Bank of India 1,964,210 - - - - - 1,964,210
Balances due from the Governments of India and -
Bangladesh 13,141,164 - - - - - 13,141,164
Other assets 11,471,931 9,531 53,625 - 1,041,808 1,947,987 14,524,882
Total financial assets 8,665,753,401 415,941,885 193,721,214 - 2,196,284,686 28,986,152 11,500,687,338
2019
Banks &
national entities
institutions
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------
Financial assets
Cash and bank balances held by subsidiaries 10,041 - - - 294,916 - 304,957
Foreign currency accounts and investments 425,771,043 242,471,231 - - 707,612,114 - 1,375,854,388
Monetary Fund - 55,461,054 - - - - 55,461,054
Investment in associates - 696,889 - - - 1,790,164 2,487,053
Loans, advances and bills of exchange 327,949 - 68,334,074 - 507,033,361 21,783,284 597,478,668
Bangladesh 12,266,548 - - - - - 12,266,548
Other assets 8,109,341 103,253 126,330 - 448,487 1,301,010 10,088,421
53.3 CREDIT EXPOSURE BY CREDIT RATING
The credit quality of financial assets is managed by the Group using external credit ratings. The table below shows the
credit quality by class of assets for all financial assets that are neither past due nor impaired as at the reporting date and are
exposed to credit risk, based on the rating of external rating agencies. The Group uses lower of the credit rating of Moody's,
Standard & Poor's and Fitch to categorise its financial assets in foreign currency accounts and investments. For domestic
financial assets credit rating of VIS and PACRA are used.
180
2020
Sovereign Lower than
AAA AA A BBB Unrated Grand Total
(52.3.1) BBB
------------------------------------------------------------------------(Rupees in 000')-----------------------------------------------------------------------
Financial assets
Cash and bank balances held by subsidiaries - - - - - - 212,825 212,825
Local currency - coins 1,028,584 - - - - - - 1,028,584
Foreign currency accounts and
investments 1,269,406,931 398,541,244 108,441,477 425,450,285 5,140,093 - - 2,206,980,030
Earmarked foreign currency balance 62,010,317 - - - - - - 62,010,317
Monetary Fund - - - - - - 29,537,127 29,537,127
Reserve tranche with the International
Monetary Fund under quota
arrangements - - - - - - 27,555 27,555
Securities purchased under agreement
to resell - 244,674,800 464,483,712 199,225,964 6,846,463 2,308,708 - 917,539,647
Current accounts of governments 30,157,106 - - - - - - 30,157,106
Investments - local 7,332,985,723 68,120,503 9,128,446 2,088,455 - - - 7,412,323,127
Investment in associates 6,488,078 - - - - - - 6,488,078
Loans, advances and bills of exchange 274,836 310,103,108 431,490,408 31,988,290 141,068 115,223 30,639,753 804,752,686
Assets held with the Reserve Bank of
India - - - - 1,964,210 - - 1,964,210
Balances due from the Governments
of India and Bangladesh - - - - 40,453 13,100,711 - 13,141,164
Other assets 12,392,461 - 467,045 - - - 1,665,376 14,524,882
Total financial assets 8,714,744,036 1,021,439,655 1,014,011,088 658,752,994 14,132,287 15,524,642 62,082,636 11,500,687,338
2019
(52.3.1) BBB
------------------------------------------------------------------------(Rupees in 000')-----------------------------------------------------------------------
Financial assets
Cash and bank balances held by subsidiaries - - - - - - 304,957 304,957
investments 1,177,140 660,969,824 64,310,345 637,190,089 264,911 11,942,079 - 1,375,854,388
Monetary Fund - - - - - - 55,461,054 55,461,054
arrangements - - - - - - 26,999 26,999
to resell - 523,385,265 233,372,228 20,924,775 - 5,235,887 - 782,918,155
Investments - local 7,819,725,002 53,850,807 - - - - 32,706,197 7,906,282,006
Investment in associates 2,487,053 2,487,053
Loans, advances and bills of exchange 211,159 235,255,045 289,604,403 27,647,659 90,608 19,047 44,650,747 597,478,668
India - - - - 2,006,354 - - 2,006,354
Other assets 8,497,137 262,440 495,563 98,658 - - 734,623 10,088,421
Total financial assets 7,934,039,707 1,473,723,381 587,782,539 685,861,181 2,402,326 29,423,108 133,884,577 10,847,116,819
53.3.1 Government securities and balances, pertaining to Pakistan, are rated as sovereign. The international rating of Pakistan is B- (as per
Standards & Poor's).
53.3.2 The collateral held as security against financial assets to cover the credit risk are disclosed in the respective notes.
181
53.4 LIQUIDITY ANALYSIS WITH INTEREST / MARK-UP RATE RISK
53.4.1 Interest / mark-up rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market
interest / mark-up rates. The Group has adopted appropriate policies to minimise its exposure to this risk.
2020
Interest / mark-up bearing Non interest / mark-up bearing
Maturity up to Maturity after Maturity up to Maturity after Grand total

Sub-total Sub-total
one year one year one year one year
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------

Financial assets
Non-derivative assets:
Cash and bank balances held by subsidiaries - - - 212,825 - 212,825 212,825
Local currency - coins 1,028,584 - 1,028,584 1,028,584
Foreign currency accounts and investments 1,509,074,108 130,627,178 1,639,701,286 566,621,706 307,161 566,928,867 2,206,630,153
Earmarked foreign currency balance - - - 62,010,317 - 62,010,317 62,010,317
Monetary Fund 29,537,127 - 29,537,127 - - - 29,537,127
Fund under quota arrangements - - - 27,555 - 27,555 27,555
Securities purchased under agreement to resell 916,654,476 - 916,654,476 885,171 - 885,171 917,539,647
Current accounts of governments 3,574,338 - 3,574,338 26,582,768 - 26,582,768 30,157,106
Investments - local 5,999,580,653 1,331,043,759 7,330,624,412 32,002,965 49,695,750 81,698,715 7,412,323,127
Investment in associates - - - - 6,488,078 6,488,078 6,488,078
Loans, advances and bills of exchange 544,693,616 200,078,470 744,772,086 19,920,863 40,059,737 59,980,600 804,752,686
Assets held with the Reserve Bank of India - - - 1,964,210 - 1,964,210 1,964,210
Bangladesh - - - 13,141,164 - 13,141,164 13,141,164
Other assets - - - 14,056,808 1,029 14,057,837 14,057,837
9,003,114,318 1,661,749,407 10,664,863,725 738,454,936 96,551,755 835,006,691 11,499,870,416
Derivative assets
Foreign currency accounts and investments - 362,728 (12,851) 349,877 349,877
Other assets 467,045 - 467,045 467,045
- - - 829,773 (12,851) 816,922 816,922
Grand total 9,003,114,318 1,661,749,407 10,664,863,725 739,284,709 96,538,904 835,823,613 11,500,687,338
Financial liabilities
Banknotes in circulation - - - 6,458,763,106 - 6,458,763,106 6,458,763,106
Bills payable - - - 1,726,348 - 1,726,348 1,726,348
Current accounts of the governments* - - - 748,790,102 748,790,102 748,790,102
Payable to Islamic banking institutions
against Bai Muajjal transactions 18,533,398 - 18,533,398 979,560 - 979,560 19,512,958
Payable under bilateral currency swaps agreements 475,138,000 - 475,138,000 1,584,596 - 1,584,596 476,722,596
Deposits of banks and financial institutions 125,055,961 - 125,055,961 1,046,047,598 - 1,046,047,598 1,171,103,559
Other deposits and accounts 957,888,420 - 957,888,420 136,105,610 - 136,105,610 1,093,994,030
Payable to the International Monetary Fund 229,375,871 815,030,053 1,044,405,924 1,538,454 - 1,538,454 1,045,944,378
Other liabilities - 10,245,290 10,245,290 27,853,125 - 28,105,496 38,098,415
Endowment Fund - - - - 120,984 120,984 120,984
1,805,991,650 825,275,343 2,631,266,993 8,423,388,499 120,984 8,423,761,854 11,054,776,476
Derivative liabilities
Other liabilities - - 22,298,736 22,298,736 22,298,736
1,805,991,650 825,275,343 2,631,266,993 8,445,687,235 120,984 8,446,060,590 11,077,075,212
On balance sheet gap (a) 7,197,122,668 836,474,064 8,033,596,732 (7,706,402,526) 96,417,920 (7,610,236,977) 423,612,126
Foreign currency forward and swap contracts

- sale - - - 1,134,906,714 - 1,134,906,714 1,134,906,714
Foreign currency forward and swap contracts -
purchase - - - 177,598,187 - 177,598,187 177,598,187
Futures - sale - - - 9,323,533 - 9,323,533 9,323,533
Futures - purchase - - - 9,056,126 - 9,056,126 9,056,126
Capital commitments - - - 2,685,478 - 2,685,478 2,685,478
Contingent liabilities in respect of guarantees given - - - - 465,549 465,549 465,549
Off balance sheet gap (b) - - - 1,333,570,038 465,549 1,334,035,587 1,334,035,587
Total yield / interest risk sensitivity gap (a+b) 7,197,122,668 836,474,064 8,033,596,732 (9,039,972,564) 95,952,371 (8,944,272,564) (910,423,461)
Cumulative yield / interest risk sensitivity gap 7,197,122,668 8,033,596,732 16,067,193,464
(a) On-balance sheet gap represents the net amounts of on-balance sheet items.
* The Group has the contractual right and intention to offset these balances against their respective non-interest bearing deposit balances. Mark-up on these balances is charged only when
these balances are in debit
182
2019

Sub-total Sub-total
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------

Financial assets
Non-derivatives assets:
Cash and bank balances held by subsidiaries - - - 304,957 - 304,957 304,957
Local currency - coins - - - 1,039,138 - 1,039,138 1,039,138
Foreign currency accounts and investments 892,741,689 120,092,725 1,012,834,414 349,170,414 10,218,592 359,389,006 1,372,223,420
Monetary Fund 55,461,054 55,461,054 - 55,461,054
Fund under quota arrangements - - 26,999 - 26,999 26,999
Current accounts of Governments 3,180,892 - 3,180,892 25,019,513 - 25,019,513 28,200,405
Investments - local 3,155,065 7,246,985,402 7,250,140,467 569,711,338 86,430,201 656,141,539 7,906,282,006
Investment in associates - - - - 2,487,053 2,487,053 2,487,053
Assets held with the Reserve Bank of India - - - 2,006,354 2,006,354 2,006,354
Bangladesh - - - 12,266,548 - 12,266,548 12,266,548
Other assets - - - 10,087,392 1,029 10,088,421 10,088,421
2,108,778,015 7,531,122,959 9,639,900,974 1,095,003,986 108,580,891 1,203,584,877 10,843,485,851
Derivatives assets
Foreign currency accounts and investments - - - 3,630,968 - 3,630,968 3,630,968
Grand total 2,108,778,015 7,531,122,959 9,639,900,974 1,098,634,954 108,580,891 1,207,215,845 10,847,116,819
Bills payable - - - 1,146,660 - 1,146,660 1,146,660
Current accounts of the Governments* - - - 1,101,513,930 - 1,101,513,930 1,101,513,930
Payable to Islamic banking institutions against
Bai Muajjal transactions 119,769,544 - 119,769,544 4,640,688 - 4,640,688 124,410,232
Payable to International Monetary Fund 225,080,856 921,001,932 1,146,082,788 3,981,565 - 3,981,565 1,150,064,353
Other liabilities - - - 49,814,323 - 49,814,323 49,814,323
Endowment Fund - - - - 109,600 109,600 109,600
1,977,549,024 921,001,932 2,898,550,956 7,645,385,056 109,600 7,645,494,656 10,544,045,612
1,977,549,024 921,001,932 2,898,550,956 7,758,247,367 109,600 7,758,356,967 10,656,907,923
On balance sheet gap (a) 131,228,991 6,610,121,027 6,741,350,018 (6,659,612,413) 108,471,291 (6,551,141,122) 190,208,896
Foreign currency forward and swap contracts - sale - - - 1,724,182,418 - 1,724,182,418 1,724,182,418
purchase - - - 524,896,291 - 524,896,291 524,896,291
Futures - sale - - - 6,478,867 - 6,478,867 6,478,867
Capital commitments - - - 589,437 - 589,437 589,437
Contingent liabilities in respect of guarantees given - - - - 1,555,645 1,555,645 1,555,645
Off balance sheet gap (b) - - - 2,264,147,517 1,555,645 2,265,703,162 2,265,703,162
Total yield / interest risk sensitivity gap (a+b) 131,228,991 6,610,121,027 6,741,350,018 (8,923,759,930) 106,915,646 (8,816,844,284) (2,075,494,266)
Cumulative yield / interest risk sensitivity gap 131,228,991 6,741,350,018 13,482,700,036
* The Group has the contractual right and intention to offset these balances against their respective non-interest bearing deposit balances. Mark-up on these balances is charged only when
these balances are in debit
53.4.2 The effective interest / mark-up rate for the monetary financial assets and liabilities are mentioned in their respective
notes to the consolidated financial statements.
183
53.5 Interest rate risk
53.5.1 Cash flow interest rate risk
Cash flow interest rate risk is the risk of loss arising from changes in variable interest rates. The sensitivity analysis below
have been determined based on the exposure to interest rates for floating rate assets and liabilities. The analysis is
prepared assuming the amount of average assets and liabilities outstanding at the balance sheet date was outstanding for
the whole year.
If interest rates had been 10 basis points higher / lower and all other variables were held constant, the Bank's profit for the
year ended June 30, 2020 would increase / decrease by Rs 3,344.02 million (2019: Rs 1,749.27 million). This is mainly
attributable to the Group's exposure to interest rates on its variable rate instruments.
53.5.2 Fair value interest rate risk
Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market
interest rates.
The Group is exposed to fair value interest rate risk on its fixed income securities, classified as financial assets at fair
value through profit or loss and financial asset at fair value through other comprehensive income. To manage its fair value
interest rate risk arising from investments in these securities, the management adopts practices mentioned in note 53.9 to
As at June 30, 2020, a 10 basis points shift in market value, mainly as a result of change in interest rates with all other
variables held constant, would result in profit for the year to increase by Rs 397.179 million (2019: Rs 216.677 million) or
decrease by Rs 398.59 million (2019: Rs 218.04 million) mainly as a result of a increase or decrease in the fair value of
fixed rate financial assets classified as financial asset at fair value through consolidated profit and loss.
53.6 Currency risk management
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
Foreign currency activities result mainly from the Group's holding of foreign currency assets under its foreign reserves
management function and the overall level of these assets is determined based on the prevailing extent of credit and
liquidity risks. In order to avoid losses arising from adverse changes in the rates of exchange, the Group's compliance with
the limits established for foreign currency positions is being regularly monitored by the management.
The Group also holds from time to time, foreign currency assets and liabilities that arise from the implementation of
domestic monetary policies. Any foreign currency exposure relating to these implementation activities are hedged through
the use of foreign currency forwards, swaps and other transactions.
The Group also enters into forward foreign exchange contracts with the commercial banks and financial institutions to
hedge against the currency risk on foreign currency transactions.
The sensitivity analysis calculates the effect of reasonably possible movement of the currency rate against Pak Rupee,
with all other variables held constant, on the consolidated profit and loss account and equity. If the Rupee had weakened /
strengthened 1 percent against the principal currencies to which the Bank had significant exposure as at June 30, 2020
with all other variables constant profit for the year would have been Rs. 9,830.59 million higher / lower (2019: Rs.
14,255.59 million). Net foreign currency exposure of the Bank is as follows:
2020 2019
--------------- (Rupees in '000) --------------
US Dollar (295,354,414) (972,112,595)

Pound Sterling (77,327,599) (81,468,161)
Chinese Yuan 279,547,027 49,812,533
Euro (306,242,263) (345,499,790)
Japanese Yen (37,738,016) (83,450,003)
United Arab Emirates Dirham 709,707 3,109,629
Australian Dollar 10,799 16,052
Canadian Dollar 1,805 346,500
Others 332,068 3,686,836
(436,060,886) (1,425,558,999)
184
Net exposure in Special Drawing Rights (SDR) is allocated to its five basket currencies i.e. the US dollar, the Euro, the
Chinese Yuan, the Japanese Yen and the British pound sterling in the ratio of their percentage allocated by IMF for SDR
basket.
The composition of the Group's financial instruments and the correlation thereof to different variables is expected to
change over time. Accordingly, the sensitivity analyses in note 53.6 and 53.7 prepared as of the reporting date are not
necessarily indicative of the effects on the Group's consolidated profit and loss of future movements in different variables.
53.7 Price Risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by
factors specific to the individual financial instrument or its issuer or factors affecting all similar financial instruments traded
in the market.
The Group is exposed to equity securities price risk because of investment in listed equity securities and mutual fund units
by the Group classified as at fair value through other comprehensive income and fair value through profit or loss
respectively. These investments are held as per the specific directives of the Government of Pakistan in accordance with
the provisions of the State Bank of Pakistan Act, 1956 and other relevant statutes. Accordingly, price risk on listed equity
securities and mutual fund units can not be managed by the Group.
In case of 5% increase or decrease in KSE 100 index on June 30, 2020, total comprehensive income would increase or
decrease by Rs. 644.941 million (2019: Rs. 655.904 million) and equity of the Group would increase or decrease by the
same amount as a result of gains / (losses).
The analysis is based on the assumption that the equity index would increase or decrease by 5% with all other variables
held constant and all the Group’s equity instruments move according to the historical correlation with the index. This
represents management's best estimate of a reasonable possible shift in the KSE 100 index. The composition of the
Group's investment portfolio and the correlation thereof to the KSE index is expected to change over time. Accordingly,
the sensitivity analysis prepared as of June 30, 2020 is not necessarily indicative of the effect on the Group's equity
instruments of future movements in the level of KSE 100 index.
53.8 Liquidity risk management
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with the
financial instruments. In order to reduce the level of liquidity risk arising out of the local currency activities, the Group
manages the daily liquidity position of the banking system including advancing and withdrawal of funds from the system
for smoothening out daily peaks and troughs.
The risk arising out of the Group's obligations for foreign currency balances or deposits is managed through available
reserves generated mainly from borrowings and open market operations. The maturity profile of Group's financial assets
and financial liabilities is given in note 53.4.1 to these consolidated financial statements.
53.9 Portfolio risk management
The Group has appointed external managers to invest a part of the foreign exchange reserves in international fixed
income securities. The external managers are selected after conducting a thorough due diligence by the Group and
externally hired investment consultants and appointed after the approval of the Board. The mandates awarded to the
managers require them to outperform the benchmarks which are based on fixed income global aggregate indices. The
benchmarks are customised to exclude certain securities, currencies and maturities to bring it to an acceptable level of
risk and within the Group's approved risk appetite. Managers are provided investment guidelines within which they have to
generate excess returns over the benchmark. Safe custody of the portfolio is provided through carefully selected global
custodian who is independent of the portfolio managers. The custodian also provides valuation, compliance, corporate
actions and recovery and other value added services which are typically provided by such custodian. The valuations
provided by the custodian are reconciled with the portfolio managers and recorded accordingly.
54 FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The following tables summarises the carrying amounts and fair values of
financial assets and liabilities:
185
Carrying value Fair value

2020 2019 2020 2019
---------------------------------------(Rupees in '000)---------------------------------------
Financial assets
Cash and bank balances held by subsidiaries 212,825 304,957 212,825 304,957
Local currency - coins 1,028,584 1,039,138 1,028,584 1,039,138
Foreign currency accounts and investments 2,206,980,030 1,375,854,388 2,206,980,030 1,375,854,388
Earmarked foreign currency balances 62,010,317 72,702,673 62,010,317 72,702,673
Special drawing rights of the International Monetary Fund 29,537,127 55,461,054 29,537,127 55,461,054
under quota arrangements 27,555 26,999 27,555 26,999
Securities purchased under agreement to resell 917,539,647 782,918,155 917,539,647 782,918,155
Current accounts of governments 30,157,106 28,200,405 30,157,106 28,200,405
Investments - local 7,412,323,127 7,906,282,006 7,557,938,734 7,889,120,722
Investment in associates 6,488,078 2,487,053 6,488,078 2,487,053
Loans, advances and bills of exchange 804,752,686 597,478,668 804,752,686 597,478,668
Assets held with the Reserve Bank of India 1,964,210 2,006,354 1,964,210 2,006,354
Bangladesh 13,141,164 12,266,548 13,141,164 12,266,548
Other assets 14,524,882 10,088,421 14,524,882 10,088,421
Financial liability
Banknotes in circulation 6,458,763,106 5,285,025,504 6,458,763,106 5,285,025,504
Bills payable 1,726,348 1,146,660 1,726,348 1,146,660
Current accounts of Governments 748,790,102 1,101,513,930 748,790,102 1,101,513,930
Payable to Islamic banking institutions against - -
Bai Muajjal transactions 19,512,958 124,410,232 19,512,958 124,410,232
Payable under bilateral currency swap agreement 476,722,596 469,397,756 476,722,596 469,397,756
Deposits of banks and financial institutions 1,171,103,559 1,246,238,770 1,171,103,559 1,246,238,770
Other deposits and accounts 1,093,994,030 1,116,324,484 1,093,994,030 1,116,324,484
Payable to the International Monetary Fund 1,045,944,378 1,150,064,353 1,045,944,378 1,150,064,353
Other liabilities 60,397,151 162,676,634 60,397,151 162,676,634
Endowment Fund 120,984 109,600 120,984 109,600
54.1 The table below analyses financial and non-financial assets carried at fair value, by valuation method. The different levels
have been defined as follows:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level 2).
- Inputs for the assets or liabilities that are not based on observable market data (i.e. unobservable inputs e.g. estimated
future cash flows) (Level 3).
2020
Level 1 Level 2 Level 3 Total
Recurring fair value measurements ---------------------------------------(Rupees in '000)---------------------------------------
On balance sheet financial assets
Foreign currency accounts and investments - 501,176,282 - 501,176,282
Investments - local 44,235,735 35,101,670 - 79,337,405
Investment property - - 978,608 978,608
Non - recurring fair value measurements

On balance sheet non-financial assets
Operating fixed assets (land and buildings) - - 130,791,789 130,791,789
Gold reserves held by the Bank 617,495,037 - - 617,495,037
661,730,772 536,277,952 131,770,397 1,329,779,121
Recurring fair value measurements

Off balance sheet financial asset and liabilities
Foreign currency forward and swap contracts - sale - 1,156,814,337 - 1,156,814,337
Foreign currency forward and swap contracts - purchase - 1,135,377,863 - 1,135,377,863
Futures - sale 9,374,673 - - 9,374,673
Futures - purchase 9,061,924 - - 9,061,924
186
2019

Foreign currency accounts and investments -
held for trading - 205,350,566 - 205,350,566
Investment property - - - -

522,475,809 237,910,867 130,791,789 891,178,465
Foreign currency forward and swap contracts - purchase - 524,896,291 - 524,896,291
Futures - sale 6,478,867 - - 6,478,867
The Group's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date when the
event or change in circumstances require the Group to exercise such transfers.
All financial assets and liabilities except the items disclosed above, have fair value equal to the carrying amount.
There were no transfers between levels 1 and 2 during the year.
54.2 Valuation techniques used in determination of fair values within level 2 and level 3
Item Valuation approach and input used

Forward foreign exchange contract The valuation has been determined by interpolating the mid rates
announced by Bank.
Operating fixed assets (land and building) The fair value of land and building are derived using the sale comparison
approach. The sales value is determined by physically analysing the
condition of land and building and by ascertaining the current market value
of similar land, which is selling in near vicinity. Moreover, for buildings, the
valuer has also considered prevailing current cost of construction for
relevant type of civil work carried out thereon, where ever required. Please
refer note 20.1 highlighting the year of valuation.
Foreign currency debt securities These are measured at fair value using the rates published by the valuation
expert portals, such as, Bloomberg, S&P , Reuters etc.
Unquoted equity securities The value of unquoted equity securities are determined by using the market
adjusted price to book ratio of the comparable quoted companies.
Investment Property These are measured at revalued amount based on the highest and best use
concept.
The valuations, mentioned above, are conducted by the valuation experts appointed by the Group which are also on the
panel of the Pakistan Banks' Association (PBA). The valuation experts use a market based approach to arrive at the fair
value of the Group's properties. The market approach uses prices and other relevant information generated by market
transactions involving identical or comparable or similar properties. These values are adjusted to reflect the current
condition of the properties. The effect of changes in the unobservable inputs used in the valuations cannot be determined
with certainty, accordingly a quantitative disclosure of sensitivity has not been presented in these consolidated financial
statements.
187
55 CLASSIFICATION OF FINANCIAL INSTRUMENTS

2020
At fair value
At fair value
through other
through profit Amortised cost Total
comprehensiv
or loss
e income
---------------------------------------(Rupees in '000)---------------------------------------
Financial assets
Cash and bank balances held by subsidiaries - 212,825 - 212,825
Local currency - coins - 1,028,584 - 1,028,584
Foreign currency accounts and investments 501,176,282 1,705,803,748 - 2,206,980,030
Earmarked foreign currency balances - 62,010,317 - 62,010,317
Special drawing rights of the International Monetary Fund - 29,537,127 - 29,537,127
under quota arrangements - 27,555 - 27,555
Securities purchased under agreement to resell - 917,539,647 - 917,539,647
Current accounts of governments - 30,157,106 - 30,157,106
Investments - local 1,200,488 7,331,785,234 79,337,405 7,412,323,127
Long term investment in associates - 6,488,078 - 6,488,078
Loans, advances and bills of exchange - 804,752,686 - 804,752,686
Assets held with the Reserve Bank of India - 1,964,210 - 1,964,210
Bangladesh - 13,141,164 - 13,141,164
Other assets - 14,524,882 - 14,524,882
2019
At fair value
At fair value
through other
through profit or Amortised cost Total
comprehensive
loss
income
---------------------------------------(Rupees in '000)---------------------------------------
Financial assets
Cash and bank balances held by subsidiaries - 304,957 - 304,957
Investments - local 1,138,159 7,818,732,739 86,411,108 7,906,282,006
Long term investment in associates - 2,487,053 - 2,487,053
Bangladesh - 12,266,548 - 12,266,548
Other assets - 10,088,421 - 10,088,421
2020
At fair value
Amortised cost through profit Total
or loss
----------------------------------------------------------(Rupees in '000)--------------------------------------
Banknotes in circulation 6,458,763,106 - 6,458,763,106
Bills payable 1,726,348 - 1,726,348
Current accounts of governments 748,790,102 - 748,790,102
Payable to Islamic banking institutions against Bai Muajjal transactions 19,512,958 - 19,512,958
Payable under bilateral currency swap agreement 476,722,596 - 476,722,596
Deposits of banks and financial institutions 1,171,103,559 - 1,171,103,559
Other deposits and accounts 1,093,994,030 - 1,093,994,030
Payable to the International Monetary Fund 1,045,944,378 - 1,045,944,378
Other liabilities 38,098,415 22,298,736 60,397,151
Endowment Fund 120,984 - 120,984
188
2019
At fair value
Amortised cost through profit Total
or loss
----------------------------------------------------------(Rupees in '000)---------------------------------------
Bills payable 1,146,660 - 1,146,660
Current accounts of Governments 1,101,513,930 - 1,101,513,930
Payable to Islamic banking institutions against Bai Muajjal transactions 124,410,232
Endowment Fund 109,600 - 109,600
56 NON-ADJUSTING EVENT
The Board of Directors of the Bank in their meeting held on October 26, 2020 have appropriated an amount of Rs.
NIL million to "Revenue Reserve". The balance of profit after allocation of such appropriation will be transferred
to the Government of Pakistan. The consolidated financial statements of the Group for the year ended June 30, 2020
do not include the effect of above appropriation and transfer of balance profit to the Government of Pakistan, which will
be accounted for in the consolidated financial statements of the Group for the year ending June 30, 2021.
57 DATE OF AUTHORISATION
These consolidated financial statements were authorised for issue on October 26, 2020 by the Board of Directors.
58 CORRESPONDING FIGURES
Corresponding figures have been rearranged and reclassified, wherever necessary for the purpose of better presentation
and comparison. No significant reclassifications have been made during the current year except for the following:
2019
FROM TO
Rupees in '000
Foreign currency accounts and investments Foreign currency accounts and investments 358,836,324
- current accounts - deposit accounts
Loans, advances and bills of exchange Loans, advances and bills of exchange
- Private sector financial institutions - Government owned / controlled financial
institutions 3,179,720
Other liabilities Other liabilities
- others - other accruals and provisions 778,399
Discount, interest / mark-up and / or profit earned Discount, interest / mark-up and / or profit earned
- foreign currency securities - Profit on Sukuks purchased under
Bai Muajjal agreement 142,202
Discount, interest / mark-up and / or profit Discount, interest / mark-up and / or profit earned
- foreign currency securities - others 588,169
Interest / mark-up expense Interest / mark-up expense
- Deposits - Interest on bilateral currency swap 21,817,682
Exchange gain / (loss) - net Exchange gain / (loss) - net
- forward cover under exchange risk - foreign currency placements, deposits,
coverage scheme securities and 'other accounts - net 4,101
- Exchange risk fee income - foreign currency placements, deposits,
securities and 'other accounts - net 39,672
59 GENERAL
Figures have been rounded off to the nearest thousand rupees, unless otherwise stated.
_______________________ _______________________ _______________________

189
10 Unconsolidated Financial Statements of SBP
State Life Building No. 1-C Sheikh Sultan Trust Building No.
I.I Chundrigar Road 2
P.O. Box 4716 Beaumont Road
Karachi - 7400 Karachi-75530
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors of the State Bank of Pakistan
Report on the Audit of the Unconsolidated Financial Statements
Opinion
We have audited the unconsolidated financial statements of the State Bank of Pakistan (the Bank),
which comprise the unconsolidated balance sheet as at June 30, 2020, and the unconsolidated profit and
loss account, unconsolidated statement of comprehensive income, unconsolidated statement of changes
in equity and unconsolidated statement of cash flows for the year then ended, and notes to the
unconsolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying unconsolidated financial statements give a true and fair view of the
financial position of the Bank as at June 30, 2020, and of its financial performance and its cash flows
for the year then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the ‘Auditor’s Responsibilities for the
Audit of the Unconsolidated Financial Statements’ section of our report. We are independent of the
Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code),
and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the unconsolidated financial statements of the current period. These matters were addressed in
the context of our audit of the unconsolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
191

1 Foreign currency accounts and investments

(Refer note 9 of the annexed unconsolidated financial statements)
The Bank maintained certain foreign Our audit procedures, among others, included the
currency accounts and investments which following:
aggregated to Rs 2,207 billion as at June 30,
2020. This includes balances aggregating to  We obtained understanding of the processes,
Rs 173.698 billion which were placed assessed the design and implementation and
through appointed fund managers by the tested operating effectiveness of key controls
Bank under the supervision of a custodian. throughout the year over recognition,
derecognition and valuation of investments
The existence and valuation of these were and related revenue;
assessed by us as a significant risk area and
therefore we considered this as a key audit  Sent direct confirmations to counterparties to
matter. confirm the balances of investment holdings;
and
 We compared the prices to independent
sources where quoted market prices were used;
Further, in respect of the investment made through
fund managers:
 We obtained Type-2 report from Custodian to
assess that controls were suitably designed by
custodian and operated effectively in respect of
its activities.
 We obtained the monthly statement of changes
in net assets provided by the Custodian used by
management for recognising income in respect
of foreign currency securities and reconciled
them with the accounting records of the Bank
to assess that they are accurately recorded.
 We performed substantive audit procedures on
year-end balance of portfolio including
evaluation of Fund Managers’ and Custodian’s
statements, and re-performance of valuations
on the basis of observable data at the year end.
We also evaluated the adequacy of the overall
disclosures in the unconsolidated financial
statements in respect of the investment portfolio in
accordance with the requirements of applicable
financial reporting framework.
192
Unconsolidated Financial Statements of SBP

2 Impact of COVID-19
(Refer note 15.6 of the annexed unconsolidated financial statements)
During the year, the Bank in response to Our audit procedures, among others, included the
COVID-19 pandemic has launched three following:
new interest free financing facility schemes
and disbursed Rs 38,244 million. These  Obtained understanding, evaluated the design
facilities have been recorded at their fair and tested the operating effectiveness of
value resulting in a fair valuation adjustment controls related to process for disbursements of
of Rs 4,194 million. these loans;
The disbursement of these loans was a  Sent direct confirmations, on a sample basis, to
significant event for the Bank during the the counterparties to confirm the balances of
year. Further, the measurement at the fair loans so disbursed;
value involved management judgement with  With respect to the fair valuation of these
respect to the use of market rate. loans, evaluated the appropriateness of the
Accordingly, this was considered as a key valuation methodology used and assessed the
audit matter. reasonableness of the assumptions and inputs
used to determine the fair value; and
 Evaluated the adequacy of the disclosures in
the financial statements in respect of the
impact of fair valuation adjustment and related
balances of these loans.
Information Other than the Consolidated and Unconsolidated Financial Statements and
Auditor's Reports Thereon
Management is responsible for the other information. The other information comprises the information
included in the Annual Report, but does not include the consolidated and unconsolidated financial
statements and our auditor's reports thereon.
Our opinion on the unconsolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the unconsolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the unconsolidated financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Unconsolidated
Financial Statements
193

Management is responsible for the preparation and fair presentation of the unconsolidated financial
statements in accordance with IFRSs, and for such internal control as management determines is
necessary to enable the preparation of unconsolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the unconsolidated financial statements, management is responsible for assessing the
Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the Bank
or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Unconsolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the unconsolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these unconsolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
 Identify and assess the risks of material misstatement of the unconsolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Bank’s internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
 Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the unconsolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the Bank to
cease to continue as a going concern.
194

 Evaluate the overall presentation, structure and content of the unconsolidated financial statements,
including the disclosures, and whether the unconsolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the unconsolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Matter
The unconsolidated financial statements of the Bank for the year ended June 30, 2019 were audited by
EY Ford Rhodes and KPMG Taseer Hadi & Co. who had expressed an unmodified opinion thereon
vide their report dated October 24, 2019.
The engagement partners on the audit resulting in this independent auditor’s report are Salman
Hussain (A. F. FERGUSON & CO.) and Mohammad Mahmood Hussain (KPMG TASEER HADI
& CO.).

Dated: October 27, 2020
Karachi
195

UNCONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 2020
Note 2020 2019

--------------------(Rupees in '000)--------------------
ASSETS
Foreign currency accounts and investments 9 2,206,980,030 1,375,854,388
under quota arrangements 12 27,555 26,999
Securities purchased under agreement to resell 13 917,539,647 782,918,155
Current accounts of governments 22.2 30,157,106 28,200,405
Loans, advances and bills of exchange 15 795,578,146 587,644,204
Balances due from the Governments of India and Bangladesh 17 13,141,164 12,266,548
Property, plant and equipment 18 79,009,653 79,875,653
Intangible assets 19 106,342 198,754
Other assets 20 14,692,431 10,020,508
Total assets 12,287,605,239 11,488,050,678
LIABILITIES
Banknotes in circulation 21 6,458,763,106 5,285,025,504
Bills payable 1,226,036 1,146,660
Current accounts of governments 22.1 748,790,102 1,101,513,930
Current account with SBP Banking Services Corporation - a subsidiary 52,124,619 44,969,274
Current account with National Institute of Banking
and Finance (Guarantee) Limited - a subsidiary 186,607 105,235
Payable to Islamic banking institutions against Bai Muajjal transactions 23 19,512,958 124,410,232
Payable under bilateral currency swap agreement 24 476,722,596 469,397,756
Deposits of banks and financial institutions 25 1,171,103,559 1,246,238,770
Other deposits and accounts 26 1,093,622,482 1,116,033,768
Payable to the International Monetary Fund 27 1,045,944,378 1,150,064,353
Other liabilities 28 99,530,744 176,874,734
Deferred liability - unfunded staff retirement benefits 29 34,736,075 29,383,383
Total liabilities 11,202,263,262 10,745,163,599
Net assets 1,085,341,977 742,887,079
REPRESENTED BY
Share capital 30 100,000 100,000
Reserves 31 167,389,105 112,706,196
Unappropriated profit 152,541,510 6,518,736
Unrealised appreciation on remeasurement of investments - local 14.6 61,416,969 68,490,671
Surplus on revaluation of property, plant and equipment 90,890,835 90,890,835
Total equity 1,085,341,977 742,887,079
CONTINGENCIES AND COMMITMENTS 33
Pursuant to the requirements of section 26 (1) of the SBP Act, 1956, the assets of the Bank specifically earmarked against the
liabilities of the issue department have been detailed in note 21.1 to these unconsolidated financial statements.
The annexed notes from 1 to 53 form an integral part of these unconsolidated financial statements.
_______________________ _______________________ _______________________

196

UNCONSOLIDATED PROFIT AND LOSS ACCOUNT
Note 2020 2019

--------------------(Rupees in '000)--------------------
Discount, interest / mark-up and / or profit earned

on financial assets measured at;
- amortised cost 34 1,208,313,253 645,524,016
- fair value through profit or loss 34 10,058,650 10,943,995
Less: Interest / mark-up expense 35 (73,343,302) (110,759,499)
1,145,028,601 545,708,512
Fair valuation adjustment on COVID loans 15.6 (4,193,815) -
Commission income 36 4,647,788 4,136,396

Exchange gain / (loss) - net 37 66,409,760 (505,911,025)
Dividend income 400,000 2,390,000
Other operating income - net 38 7,905,169 4,391,840
Other income - net 39 382,194 113,396
79,744,911 (494,879,393)
1,220,579,697 50,829,119
Less: Operating expenses

- banknotes' printing charges 40 15,991,886 13,755,031
- agency commission 41 10,668,548 10,642,735
- general administrative and other expenses 42 34,061,404 26,781,911
(reversal of provision against) / provision for:

- others - (76)
(reversal) / charge for credit loss allowance on
financial instruments - net 43 (30,846) 39,622
(72,989) 495,588
60,648,849 51,675,265
Profit / (loss) for the year 1,159,930,848 (846,146)
_______________________ _______________________ _______________________

197

UNCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 2020 2019

--------------------(Rupees in '000)--------------------
Profit / (loss) for the year 1,159,930,848 (846,146)
Items that may be reclassified subsequently to the profit and

loss account:
Items that will not be reclassified subsequently to the profit

and loss account:
Unrealised diminution on remeasurement of investments - local 14.6 (7,073,702) (21,618,750)
Remeasurements of property, plant and equipment - 25,406,655
Remeasurements of staff retirement defined benefit plans 42.7.3.1 (4,398,637) 2,650,167
Remeasurements of staff retirement defined benefit plans

- allocated by SBP Banking Services Corporation - a subsidiary 42.7.3.1 (6,297,792) 6,038,910
(17,770,131) 12,476,982
Total comprehensive income for the year 1,290,983,634 164,497,708
_______________________ _______________________ _______________________

198

UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITY
-------------------------------------------------------------------------Reserves---------------------------------------------------------------------------------- Unrealised
Unrealised appreciation/
Surplus on
appreciation (diminution)
Reserve for revaluation
Share Reserve for Rural Industrial Export Loans Housing on gold on
Reserve building up Unappropriate of property Total
capital acquisition credit credit credit guarant credit Subtotal reserves remeasuremen
fund share d profit and
of PSPC fund fund fund ee fund fund held by the t of
capital equipment
Bank investments -
local
-------------------------------------------------------------------------------------------------------------------------(Rupees in '000)----------------------------------------------------------------------------------------------------------------------
Balance as at July 1, 2018 100,000 33,926,656 - 65,464,000 2,600,000 1,600,000 1,500,000 900,000 4,700,000 110,690,656 13,208,172 311,313,769 90,109,421 65,484,180 590,906,198
Loss for the year - - - - - - - - - - (846,146) - - - (846,146)

Unrealised diminution on
remeasurement of investments
- local (note 14.6) - - - - - - - - - - - - (21,618,750) - (21,618,750)
Unrealised appreciation on
gold reserves held by the
Bank (note 32) - - - - - - - - - - - 152,866,872 - - 152,866,872
Surplus realised on revaluation of
property, plant and equipment - - - - - - - - - - - - - 25,406,655 25,406,655
defined benefit plans (note 42.7.3.1) - - - - - - - - - - 2,650,167 - - - 2,650,167
defined benefit plans - allocated by
SBP Banking Services Corporation -
a subsidiary (note 42.7.3.1) - - - - - - - - - - 6,038,910 - - - 6,038,910
- - - - - - - - - - 8,689,077 152,866,872 (21,618,750) 25,406,655 165,343,854
for the year - - - - - - - - - - 7,842,931 152,866,872 (21,618,750) 25,406,655 164,497,708
Appropriations
Transfer to the reserve fund - 15,540 - - - - - - - 15,540 (15,540) - - - -
Transfer to the reserve for acquisition
of PSPC - - - 2,000,000 - - - - - 2,000,000 (2,000,000) - - - -
- 15,540 - 2,000,000 - - - - - 2,015,540 (2,015,540) - - - -
Transaction with owners
Dividend - - - - - - - - - - - - - - -
Profit transferred to the Government
of Pakistan - - - - - - - - - - (12,516,827) - - - (12,516,827)
- - - - - - - - - - (12,516,827) - - - (12,516,827)
Balance as at June 30, 2019 100,000 33,942,196 - 67,464,000 2,600,000 1,600,000 1,500,000 900,000 4,700,000 112,706,196 6,518,736 464,180,641 68,490,671 90,890,835 742,887,079
Profit for the year - - - - - - - - - - 1,159,930,848 - - - 1,159,930,848

Unrealised diminution on
remeasurement of investments
- local (note 14.6) - - - - - - - - - - - - (7,073,702) - (7,073,702)
Unrealised appreciation on gold
reserves held by the Bank (note 32) - - - - - - - - - - - 148,822,917 - - 148,822,917
defined benefit plans
- SBP (note 42.7.3.1) - - - - - - - - - - (4,398,637) - - - (4,398,637)
defined benefit plans - allocated by
SBP Banking Services Corporation -
a subsidiary (note 42.7.3.1) - - - - - - - - - - (6,297,792) - - - (6,297,792)
- - - - - - - - - - (10,696,429) 148,822,917 (7,073,702) - 131,052,786
for the year - - - - - - - - - - 1,149,234,419 148,822,917 (7,073,702) - 1,290,983,634
Appropriations
Transfer to the reserve fund (note 31.3) - 9,566 67,673,343 - - - - - - 67,682,909 (67,682,909) - - - -
Transfer to unappropriated profit against
IDBL loan - (13,000,000) - - - - - - - (13,000,000) 13,000,000 - - - -
Adjustment to recover loan of
IDBL (note 15.3.1) - - - - - - - - - - (13,000,000) - - - (13,000,000)
- (12,990,434) 67,673,343 - - - - - - 54,682,909 (67,682,909) - - - (13,000,000)
Dividend - - - - - - - - - - (10,000) - - - (10,000)
Pakistan - - - - - - - - - - (935,518,736) - - - (935,518,736)
- - - - - - - - - - (935,528,736) - - - (935,528,736)
Balance as at June 30, 2020 100,000 20,951,762 67,673,343 67,464,000 2,600,000 1,600,000 1,500,000 900,000 4,700,000 167,389,105 152,541,510 613,003,558 61,416,969 90,890,835 1,085,341,977
_______________________ _______________________ _______________________

199

UNCONSOLIDATED STATEMENT OF CASH FLOWS
Note 2020 2019

--------------------(Rupees in '000)--------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year after non-cash and other items 44 1,042,240,027 194,241,985
Decrease / (increase) in assets:
Foreign currency investments and placements (286,135,672) 340,817,199
Gold reserves held by the Bank (47,118) (147,358)
Reserve tranche with the International Monetary Fund under quota arrangements - (6,637)
Securities purchased under agreement to resell (134,621,472) 779,391,608
Investments - local 488,204,462 (4,091,414,607)
Loans, advances and bills of exchange (212,109,838) (143,451,408)
Assets held with the Reserve Bank of India and balances due from
Governments of India and Bangladesh (874,616) (4,519,664)
Other assets (4,671,923) (5,969,758)
(150,256,177) (3,125,300,625)
891,983,850 (2,931,058,640)
Increase / (decrease) in liabilities:
Banknotes issued - net 1,173,737,602 649,878,793
Bills payable 79,376 502,208
Current accounts of Governments (354,680,529) 1,016,589,006
Current account with SBP Banking Services Corporation - a subsidiary 7,155,345 (11,577,029)
Current account National Institute of Banking and Finance (Guarantee)
Limited - a subsidiary 81,372 (19,852)
Payable to Islamic Banking Institutions against Bai Muajjal transactions (104,897,274) 124,410,232
Payable under bilateral currency swap agreement (1,766,789) 98,988,685
Deposits of banks and financial institutions (75,135,211) 432,289,855
Payment of retirement benefits and employees' compensated absences (5,343,737) 3,370,531
Other deposits and accounts (22,411,286) 915,876,311
Other liabilities (76,706,662) 98,185,887
540,112,207 3,328,494,627
Net cash generated from operating activities 1,432,096,057 397,435,987
CASH FLOWS FROM INVESTING ACTIVITIES

Dividend received 400,000 2,390,000
Capital expenditure (1,186,047) (294,111)
Proceeds from disposal of property, plant and equipment 32,597 16,881
Contribution of initial capital in Deposit Protection Corporation - (500,000)
Net cash (used in) / generated from investing activities (753,450) 1,612,770
CASH FLOWS FROM FINANCING ACTIVITIES

Profit paid to the Federal Government of Pakistan (935,518,736) (12,516,827)
Net change in balances pertaining to IMF (114,594,748) 237,479,321
Dividend paid (10,000) -
Net cash (used in) / generated from financing activities (1,050,123,484) 224,962,494
Increase in cash and cash equivalents during the year 381,219,123 624,011,251
Cash and cash equivalents at the beginning of the year 1,503,996,401 1,064,481,971
Effect of exchange gain / (loss) on cash and cash equivalents 50,758,771 (184,496,821)
Cash and cash equivalents at the end of the year 45 1,935,974,295 1,503,996,401
_______________________ _______________________ _______________________

200

NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS
1 STATUS AND NATURE OF OPERATIONS
1.1 State Bank of Pakistan (the Bank) is the central bank of Pakistan and is incorporated under the State Bank of Pakistan Act,
1956. The Bank is primarily responsible for monitoring of credit and foreign exchange, management of currency and also
acts as the banker to governments. The activities of the Bank include:
- formulating and implementing the monetary policy;
- facilitating free competition and stability in the financial system;
- licensing and supervision of banks including micro finance banks, development financial institutions and exchange
companies;
- organising and managing the inter-bank settlement system and promoting smooth functioning of payment systems;
- providing of loans and advances to governments, banks, financial institutions and local authorities under various facilities;
- purchasing, holding and selling of shares of banks and financial institutions on the directives of the Federal Government;
and
- acting as a depository of governments under specific arrangements between governments and certain institutions.
1.2 The head office of the Bank is situated at I. I. Chundrigar Road, Karachi, in the province of Sindh, Pakistan.
1.3 These financial statements are unconsolidated (separate) financial statements of the Bank in which investments in
subsidiaries are carried at cost. The consolidated financial statements of the Bank and its subsidiaries are presented
separately.
The subsidiaries of the Bank and the nature of their respective activities are as follows:
a) SBP Banking Services Corporation - wholly owned subsidiary:
SBP Banking Services Corporation (the Corporation) was established in Pakistan under the SBP Banking Services
Corporation Ordinance, 2001 (the Ordinance) and commenced its operations with effect from January 2, 2002. It is
responsible for carrying out certain statutory and administrative functions and activities on behalf of the Bank, as
transferred or delegated by the Bank under the provisions of the Ordinance.
The head office of the Corporation is situated at I. I. Chundrigar Road, Karachi, in the province of Sindh, Pakistan.
b) National Institute of Banking and Finance (Guarantee) Limited - wholly owned subsidiary:
National Institute of Banking and Finance (Guarantee) Limited (the Institute) was incorporated in Pakistan under the
repealed Companies Ordinance, 1984 (now Companies Act, 2017) as a company limited by guarantee having share
capital. It is engaged in providing education and training in the field of banking, finance and allied areas.
The head office of the Institute is situated at NIBAF Building, Street 4, Pitras Bukhari Road, H-8/1, Islamabad, Pakistan.
c) Pakistan Security Printing Corporation (Private) Limited - wholly owned subsidiary
Pakistan Security Printing Corporation (Private) Limited (PSPC) was incorporated in Pakistan under the repealed
Companies Act, 1913 (now Companies Act, 2017) and is a wholly owned subsidiary of the Bank. PSPC is principally
engaged in the printing of currency notes and national prize bonds on behalf of the Bank.
The registered office and the factory of the PSPC are located at Jinnah Avenue, Malir Halt Karachi, in the province of
Sindh, Pakistan.
2 STATEMENT OF COMPLIANCE
These unconsolidated financial statements have been prepared in accordance with the requirements of the International
Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).
201
3 BASIS OF MEASUREMENT
3.1 These unconsolidated financial statements have been prepared under the historical cost convention, except that gold
reserves, certain foreign currency accounts and investments, certain local investments and certain items of property as
referred to in their respective notes have been included at revalued amounts and certain staff retirement benefits and
provision for employees' compensated absences have been carried at present value of defined benefit obligations.
3.2 These unconsolidated financial statements are presented in Pakistani Rupees (PKR), which is the Bank's functional and
presentation currency.
3.3 Standards, interpretations of and amendments to the IFRSs that are effective in the current year
3.3.1 Effective from July 1, 2019, the Bank has adopted IFRS 16, 'leases' which has replaced IAS 17, 'Leases' and various other
interpretations. For the effects of adoption of IFRS 16 on these unconsolidated financial statements, refer note 4.1 below.
3.3.2 There are certain other new and amended standards and interpretations that became effective during the current year, but
are considered not to be relevant or did not have any significant effect on the Bank's operations and are, therefore, not
detailed in these unconsolidated financial statements.
3.4 Standards, interpretations of and amendments to the IFRSs that are not yet effective
3.4.1 The following standards, interpretations and amendments of the IFRSs would be effective from the dates mentioned below
against the respective standards or interpretations:
Effective date (annual periods

beginning on or after)
Standards
- IAS 1, 'Presentation of financial statements' (amendments) January 1, 2020 and July 1, 2022
- IAS 8, 'Accounting policies, changes in accounting estimates
and errors' (amendments) July 1, 2020
- IAS 16, 'Property, plant and equipment' (amendments) July 1, 2022
- IAS 37, 'Provisions, contingent liabilities and contingent assets' (amendments) July 1, 2022
- IFRS 3, 'Business combination' January 1, 2020
- IFRS 16, 'Leases' (amendments) June 1, 2020
The management is in the process of assessing the impact of the above amendments on these unconsolidated financial
statements.
3.4.2 There are certain other new or amended standards and interpretations that are mandatory for the accounting period
beginning on or after July 1, 2020, but are considered not to be relevant or will not have any significant effect on the Bank's
operations and are, therefore, not detailed in these unconsolidated financial statements.
4 CHANGES IN ACCOUNTING POLICY
4.1 IFRS 16 Leases
Effective from July 1, 2019, the Bank has adopted IFRS 16, 'Leases' which replaces IAS 17, 'Leases', IFRIC 4, 'Determining
whether an arrangement contains a lease', SIC 15, 'Operating leases - incentives' and SIC 27, 'Evaluating the substance of
transactions involving the legal form of lease.' The standard addresses recognition and measurement of leases for both
lessor and lessee.
IFRS 16 introduces a single, on balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset
representing the underlying asset and a lease liability representing its obligations to make lease payments. There are
recognition exception for short term leases and leases of low value items. Lessor accounting remains similar to the previous
standard i.e. lessor continues to classify leases as finance or operating leases.
The Bank has various lease arrangements relating to guest houses for its employees and branches of the Corporation. All
these lease arrangements have termination clause which gives a right to both the lessor and the lessee to terminate each of
these lease arrangements, by giving the other party, a prior notice of one to three months. On adoption of IFRS 16, the Bank
has applied judgment to determine the lease term for aforementioned lease arrangements and has elected to apply the
practical expedient of not to recognise right-of-use assets and lease liabilities for short term leases that have a lease term of
12 months or less and leases of low-value assets. The lease payments associated with these leases are recognised as an
expense on a straight line basis over the lease term.
202
The adoption of IFRS 16, therefore, does not have any impact on the Bank’s unconsolidated financial statements.
The new accounting policy, consequent to adoption of the standard, is disclosed in note 5.5.1 to these unconsolidated
5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DISCLOSURES
The significant accounting policies applied in the preparation of these unconsolidated financial statements are set out below.
These policies are consistently applied from year to year, except as stated otherwise.
5.1 Banknotes in circulation and local currency coins
The liability of the Bank towards banknotes issued as a legal tender under the State Bank of Pakistan Act, 1956, is stated at
face value and is represented by the specified assets of the issue department of the Bank as per the requirements stipulated
in the State Bank of Pakistan Act, 1956. The cost of printing of notes is charged to the profit and loss account as and when
incurred. Any un-issued fresh banknotes lying with the Bank and previously issued notes held by the Bank are not reflected
in the unconsolidated balance sheet.
The Bank also issues coins of various denominations on behalf of the Government of Pakistan (GoP). These coins are
purchased from the GoP at their respective face values. The coins held by the Bank form part of the assets of the issue
department.
5.2 Financial assets and financial liabilities
Financial instruments carried on the unconsolidated balance sheet include local currency coins, foreign currency accounts
and investments, earmarked foreign currency balances, investments - local, loans, advances and bills of exchange, current
account with SBP Banking Services Corporation - a subsidiary, current account with National Institute of Banking and
Finance (Guarantee) Limited - a subsidiary, assets held with Reserve Bank of India (other than gold held by Reserve Bank of
India), balances due from the governments of India and Bangladesh, certain other assets, banknotes in circulation, bills
payable, deposits of banks and financial institutions, balances and securities under repurchase and reverse repurchase
transactions, payable to Islamic banking institutions against Bai Muajjal transactions, current accounts of governments,
balances with the International Monetary Fund (IMF), amount payable under bilateral currency swap agreement, other
deposits and accounts and certain other liabilities. The particular recognition and measurement methods adopted are
disclosed in the individual policy statements associated with each financial instrument.
5.2.1 Financial instruments – initial recognition
All financial assets are initially recognised on the trade date, i.e. the date at which the Bank becomes a party to the
contractual provisions of the instruments. This includes purchases or sale of financial assets that require delivery of asset
within the time frame generally established by regulations in market conventions.
All financial assets and financial liabilities are measured initially at their fair value plus transaction costs, except in the case
of financial assets and financial liabilities recorded at fair value through profit or loss where transaction cost is taken directly
to the unconsolidated profit and loss account.
5.2.2 Classification and subsequent measurement of financial assets and liabilities
The Bank classifies all of its financial assets other than equity instruments based on two criteria: a) the Bank’s business
model for managing the assets; and b) whether the instruments’ contractual cash flows represent ‘solely payments of
principal and interest’ on the principal amount outstanding (the ‘SPPI test’), The financial assets are measured at either:
- amortised cost, as explained in note 5.2.3;

- fair value through other comprehensive income (FVOCI), as explained in note 5.2.4; or
- fair value through profit and loss (FVPL), as explained in note 5.2.6.
a) Business model assessment
The Bank determines its business model at the level that best reflects how it manages groups of financial assets to
achieve its business objective.
203
The Bank's business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated
portfolios and is based on observable factors such as:
- how the performance of the business model and the financial assets held within that business model are evaluated
and reported to the Bank's board / board committees;
- the risks that affect the performance of the business model (and the financial assets held within that business model)
and, in particular, the way those risks are managed; and
- the expected frequency, value and timing of sale which also form important aspects of the Bank’s assessment.
The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case’
scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Bank's original
expectations, the Bank does not change the classification of the remaining financial assets held in that business model,
but incorporates such information when assessing newly originated or newly purchased financial assets going forward.
b) The SPPI test
As a second step of its classification process, the Bank assesses the contractual terms of financial assets to identify
whether they meet the SPPI test.
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may
change over the life of the financial asset. The most significant elements of 'interest' within a lending arrangement are
typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Bank applies
judgement and considers relevant factors such as the currency in which the financial asset is denominated and the
period for which the interest rate is set.
The Bank classifies and measures its derivative and trading portfolio at FVPL as explained in note 5.2.8. The Bank may
designate financial instruments at FVPL, if doing so eliminates or significantly reduces measurement or recognition
inconsistencies, as explained in note 5.2.6.
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVPL when
they are held for trading and derivative instruments or the fair value designation is applied, as explained in notes 5.2.6 and
5.2.7.
5.2.3 Financial assets at amortised cost
The Bank classifies its financial assets at amortised cost only if both of the following conditions are met:
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest (SPPI) on the principal amount outstanding; and
- the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows.
After initial measurement, these financial instruments are subsequently measured at amortised cost using the effective
interest rate (EIR), less impairment (if any).
5.2.4 Debt instruments at FVOCI
The Bank classifies it's financial instruments at FVOCI when both of the following conditions are met:
- the instrument is held within a business model, the objective of which is achieved by both collecting contractual cash
flows and selling financial assets; and
- the contractual terms of the financial asset meet the SPPI test.
FVOCI debt instruments are subsequently measured at fair value with gains and losses arising due to changes in fair value
recognised in other comprehensive income (OCI). Interest income and foreign exchange gains and losses are recognised in
the unconsolidated profit or loss account in the same manner as for financial assets measured at amortised cost as
explained in note 5.11.
The ECL for debt instruments measured at FVOCI do not reduce the carrying amount of these financial assets in the
unconsolidated balance sheet, which remains at fair value. Instead, an amount equal to the allowance that would arise if the
assets were measured at amortised cost is recognised in OCI as an accumulated impairment amount, with a corresponding
charge to unconsolidated comprehensive income. The accumulated loss recognised in OCI is recycled to the
unconsolidated profit and loss upon derecognition of the assets.
On derecognition, cumulative gains or losses previously recognised in OCI are reclassified from OCI to unconsolidated profit
and loss account.
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5.2.5 Equity instruments at FVOCI
At initial recognition, the Bank elects to classify irrevocably some of its equity investments as equity instruments at FVOCI
when they meet the definition of 'equity' under IAS 32 'financial instruments: presentation' and are not held for trading. Such
classification is determined on an instrument-by-instrument basis.
Gains and losses on these equity instruments are never recycled to the unconsolidated profit and loss account. Dividends
are recognised in profit or loss as other operating income when the right of the payment has been established, (except when
the Bank benefits from such proceeds as a recovery of part of the cost of the instrument, in which case, such gains are
recorded in OCI). Equity instruments at FVOCI are not subject to an impairment assessment.
5.2.6 Financial assets and financial liabilities at fair value through profit or loss
Financial assets and financial liabilities in this category are those that are held for trading and have been either designated by
management upon initial recognition or are mandatorily required to be measured at fair value under IFRS 9. Management
only designates an instrument at FVPL upon initial recognition when one of the following criteria are met. Such designation is
determined on an instrument-by-instrument basis:
- the designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring
the assets or liabilities or recognising gains or losses on them on a different basis, or
- the liabilities are part of a group of financial liabilities, which are managed and their performance is evaluated on a fair
value basis, in accordance with a documented risk management or investment strategy, or
- the liabilities containing one or more embedded derivatives, unless they do not significantly modify the cash flows that
would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first
considered that separation of the embedded derivative(s) is prohibited.
Financial assets and financial liabilities at FVPL are recorded in the unconsolidated balance sheet at fair value. Changes in
fair value are recorded in the unconsolidated profit and loss account. Interest earned or incurred on instruments designated
at FVPL is accrued in interest income or interest expense, respectively, using the EIR, taking into account any
discount/premium and qualifying transaction costs being an integral part of instrument. Interest earned on assets
mandatorily required to be measured at FVPL is recorded using contractual interest rate.
5.2.7 Financial liabilities at amortised cost
Financial liabilities with a fixed maturity are measured at amortised cost using the effective interest rate. These include
deposits of banks and financial institutions, other deposits and accounts, securities sold under agreement to repurchase,
payable under bilateral currency swap agreement, current accounts of governments, current account with SBP - Banking
Services Corporation - a subsidiary, current account with National Institute of Banking and Finance (Guarantee) Limited - a
subsidiary, payable to Islamic banking institutions against Bai Muajjal transactions, payable to the IMF, banknotes in
circulation, bills payable and certain other liabilities.
The Bank uses derivative financial instruments which include forwards, futures and swaps. Derivatives are initially recorded
at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative.
Derivatives are re-measured to fair value on subsequent reporting dates. The resultant gains or losses from derivatives are
included in the unconsolidated profit and loss account. Forwards, futures and swaps are shown under commitments in note
33.2.
5.2.9 Reclassification of financial assets and liabilities
The Bank does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional
circumstances in which the Bank acquires, disposes of, or terminates a business line. Financial liabilities are never
reclassified.
5.2.10 Derecognition of financial asset and financial liabilities
a) Financial assets
The Bank derecognises a financial asset, such as a loan, when the terms and conditions have been renegotiated to the
extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss, to the
extent that an impairment loss has not already been recorded. The newly recognised loans are classified as stage 1 for
ECL measurement purposes, unless the new loan is deemed to be purchased or originated credit impaired. If the
modification does not result in cash flows that are substantially different, the modification does not result in
derecognition. Based on the change in cash flows discounted at the original EIR, the Bank records a modification gain or
loss, to the extent that an impairment loss has not already been recorded.
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b) Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. Where an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of new liability, and the difference in the respective carrying amount is recognised in the
unconsolidated profit and loss account.
5.2.11 Impairment of financial assets
5.2.11.1 Overview of the expected credit losses (ECL) principles
The Bank is recording the allowance for expected credit losses for all loans and other debt financial assets not held at FVPL,
together with loan commitments and financial guarantee contracts, in this section all referred to as ‘financial instruments’.
Equity instruments are not subject to ECL.
The ECL allowance is based on the credit losses expected to arise over the life of the asset, [the lifetime expected credit loss
(LTECL)], unless there has been no significant increase in credit risk since origination, in which case, the allowance is
based on the 12 months’ expected credit loss (12mECL) as outlined in note 5.2.11.2. The Bank’s policies for determining if
there has been a significant increase in credit risk are set out in note 47.1.7.
The 12mECL is the portion of LTECL that represent the ECL that result from default events on a financial instrument that
are probable within the 12 months after the reporting date.
The Bank has established a policy to perform an assessment, at the end of each reporting period, of whether a financial
instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default
occurring over the remaining life of the financial instrument.
Based on the above process, the Bank groups its loans into stage 1, stage 2 and stage 3 as described below:
- stage 1: when loans are first recognised, the Bank recognises an allowance based on 12mECL. Stage 1
loans also include facilities where the credit risk has improved and the loan has been
reclassified from stage 2.
- stage 2: when a loan has shown a significant increase in credit risk since origination, the Bank records
an allowance for the LTECL. Stage 2 loans also include facilities, where the credit risk has
improved and the loan has been reclassified from stage 3.
- stage 3: loans considered credit-impaired (as outlined in note 47.1.3). The bank records an allowance
for the LTECL.
For financial assets for which the Bank has no reasonable expectations of recovering either the entire outstanding amount,
or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial)
derecognition of the financial asset.
5.2.11.2 The calculation of ECL
The Bank calculates ECL based on three probability-weighted scenarios to measure the expected cash shortfalls,
discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity
in accordance with the contract and the cash flows that the entity expects to receive.
The mechanics of the ECL calculations are outlined below and the key elements are, as follows:
- EAD Exposure at default (EAD) is an estimate of the exposure at a future default date, taking into
account expected changes in the exposure after the reporting date, including repayments of
principal and interest, whether scheduled by contract or otherwise, expected drawdowns on
committed facilities, and accrued interest from missed payments. The EAD is further explained
in note 47.1.5.
- PD Probability of default (PD) is an estimate of the likelihood of default over a given time horizon. A
default may only happen at a certain time over the assessed period, if the facility has not been
previously derecognised and is still in the portfolio. The concept of PDs is further explained in
note 47.1.4.
- LGD Loss given default (LGD) is an estimate of the loss arising in the case where a default occurs at
a given time. It is based on the difference between the contractual cash flows due and those
that the lender would expect to receive, including from the realisation of any collateral. It is
usually expressed as a percentage of the EAD. The LGD is further explained in note 47.1.6.
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When estimating the ECL, the Bank considers three scenarios (a base case, a best case and a worse case). Each of these
is associated with different PD. When relevant, the assessment of multiple scenarios also incorporates how defaulted loans
are expected to be recovered, including the probability that the loans will cure and the value of collateral or the amount that
might be received for selling the asset.
The maximum period for which the credit losses are determined is the contractual life of a financial instrument unless the
Bank has the legal right to call it earlier.
The mechanics of the ECL method are summarised below:
- stage 1: the 12mECL is calculated as the portion of LTECL that represent the ECL that result from
default events on a financial instrument that are probable within the 12 months after the
reporting date. The Bank calculates the 12mECL allowance based on the expectation of a
default occurring in the 12 months following the reporting date. These expected 12-month
default probabilities are applied to a forecast EAD and multiplied by the expected LGD and
discounted by an approximation to the original EIR. This calculation is made for each of the
three scenarios, as explained above.
- stage 2: when a loan has shown a significant increase in credit risk since origination, the Bank records
an allowance for the LTECL. The mechanics are similar to those explained above, including the
use of multiple scenarios, but PDs are estimated over the lifetime of the instrument. The
expected cash shortfalls are discounted by an approximation to the original EIR.
- stage 3: for loans considered credit-impaired (as defined in note 47.1.3), the Bank recognises the
lifetime expected credit losses for these loans. The method is similar to that for stage 2 assets,
with the PD set at 100%.
- financial guarantee the Bank’s liability under each guarantee is measured at the higher of the amount initially
contracts: recognised less cumulative amortisation recognised in the unconsolidated profit and loss
account, and the ECL provision. For this purpose, the Bank estimates ECL based on the
present value of the expected payments to reimburse the holder for a credit loss that it incurs.
The shortfalls are discounted by the risk-adjusted interest rate relevant to the exposure. The
calculation is made using a probability-weighting of the three scenarios.
5.2.11.3 Forward looking information
The Bank formulates a base case view of the future direction of relevant economic variables and a representative range of
other possible forecast scenarios and consideration of a variety of external actual and forecast information. This process
involves developing three different economic scenarios, which represent a range of scenarios linked to various macro-
economic factors.
5.2.11.4 Credit enhancements: collateral valuation and financial guarantees
To mitigate its credit risks on financial assets, the Bank seeks to use collateral. The collateral comes in various forms, such
as cash, securities, letters of credit / guarantees and demand promissory notes. To the extent possible, the Bank uses active
market data for valuing financial assets held as collateral.
5.2.12 Offsetting of financial assets and financial liabilities
A financial asset and a financial liability are offset and the net amount is reported in the unconsolidated financial statements
when the Bank currently has a legally enforceable right to set off the recognised amount and it intends either to settle on a
net basis or to realise the asset and to settle the liability simultaneously.
5.3 Collateralised borrowings / lending
5.3.1 Repurchase and reverse repurchase agreements
Securities sold subject to a commitment to repurchase them at a pre-determined price, are retained on the unconsolidated
balance sheet and a liability is recorded in respect of the consideration received as securities sold under agreement to
repurchase. Conversely, securities purchased under analogous commitment to resell are not recognised on the
unconsolidated balance sheet and an asset is recorded in respect of the consideration paid as securities purchased under
agreement to resell. The difference between the sale and repurchase price in the repurchase transaction and the purchase
price and resell price in reverse repurchase transaction represents expense and income respectively, and is recognised in
the unconsolidated profit and loss account on time proportion basis. Both repurchase and reverse repurchase transactions
are reported at transaction value inclusive of any accrued expense / income.
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5.3.2 Payable under bilateral currency swap agreement
Bilateral currency swap agreements with counterpart central banks involve the purchase / sale and subsequent resale /
repurchase of local currencies of counterpart central banks against PKR at the applicable exchange rate (determined in
accordance with the terms of the agreement). The actual use of facility by the Bank / counterpart central bank in the
agreement is recorded as borrowing / lending in books of the Bank and interest is charged / earned at agreed rates to the
unconsolidated profit and loss account on a time proportion basis from the date of actual use. Any unutilised limit of the
counterpart's drawing is reported as commitments in note 33.2.6.
5.3.3 Payable to Islamic banking institutions against Bai Muajjal transactions
The Bank purchases Government of Pakistan (GoP) Ijara sukuks on deferred payment basis (Bai Muajjal) from Islamic
banks. The deferred price is agreed at the time of purchase and such proceeds are paid to the Islamic banks at the end of
the agreed period. The difference between the fair value and deferred price represents financing cost and is recognised in
unconsolidated profit and loss account on a time proportion basis as mark-up expense. Amount payable to Islamic banking
institutions under deferred payment basis on purchase of sukuks is reported at transaction value plus profit payable thereon
(i.e. at amortised cost).
5.4 Gold reserves held by the Bank
Gold is recorded at cost, which is the prevailing market rate, at initial recognition. Subsequent to initial measurement, it is
revalued at the closing market rate fixed by the London Bullion Market Association on the last working day of the year which
is also the requirement of the State Bank of Pakistan Act, 1956 and the State Bank of Pakistan General Regulation
No.42(vi). Appreciation or diminution, if any, on revaluation is taken to equity under the head 'unrealised appreciation on gold
reserves'. Appreciation / diminution realised on disposal of gold is taken to the unconsolidated profit and loss account.
Unrealised appreciation / diminution on gold reserves held with the Reserve Bank of India is not recognised in the
unconsolidated statement of changes in equity pending transfer of these assets to the Bank subject to final settlement
between the Governments of Pakistan and India. Instead it is shown in other liabilities as provision for other doubtful assets.
5.5 Property, plant and equipment
Property, plant and equipment except land, buildings and capital work-in-progress (CWIP) are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. Freehold land is stated at revalued amount. Leasehold
land and buildings are stated at revalued amount less accumulated depreciation and accumulated impairment losses, if any.
CWIP is stated at cost less accumulated impairment losses, if any and consists of expenditure incurred and advances made
in respect of fixed assets in the course of their acquisition, construction and installation. CWIP assets are capitalised to
relevant asset category as and when work is completed.
Depreciation on property, plant and equipment is charged to the unconsolidated profit and loss account using the straight-
line method whereby the cost / revalued amount of an asset is written off over its estimated useful life at the rates specified
in note 18.1 to these unconsolidated financial statements. The useful life of assets is reviewed and adjusted, if appropriate,
at each reporting date.
Estimates of useful life and residual value of property, plant and equipment are based on the management's best estimate.
The assets' residual value, depreciation method and useful life are reviewed, and adjusted, if appropriate, at each reporting
date.
Depreciation on additions is charged to the unconsolidated profit and loss account from the month in which the asset is
available for use while no depreciation is charged in the month in which the assets are deleted / disposed off. Normal repairs
and maintenance are charged to the unconsolidated profit and loss account as and when incurred. Major renewals and
improvements are capitalised and the assets so replaced, if any, are retired. Gains and losses on disposal of fixed assets
are included in the unconsolidated profit and loss account.
Increase in carrying amount arising on revaluation of land and buildings is recognised in other comprehensive income and
credited to surplus on revaluation of property, plant and equipment. Decreases that offset previous increases of the same
assets are charged against surplus on revaluation of property, plant and equipment in equity, while all other decreases are
charged to the unconsolidated profit and loss account. The surplus on revaluation realised on sale of property, plant and
equipment is transferred to un-appropriated profit to the extent reflected in the surplus on revaluation of property, plant and
equipment account. The amount of sale proceeds exceeding the balance in surplus on revaluation of property, plant and
equipment account is taken to the unconsolidated profit and loss account.
5.5.1 Leasing arrangements
At inception of a contract, the Bank assesses whether a contract is, or contains, a lease based on whether the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
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In determining the lease term, management considers all facts and circumstances that create an economic incentive to
exercise an extension option or not exercise a termination option. Extension options (or periods after termination options) are
only included in the lease term if the lease is reasonably certain to be extended (or not to be terminated).
The lease liability is initially measured at the present value of the lease payments over the period of lease term and that are
not paid at the commencement date, discounted using the interest rate implicit in the lease, or if that rate cannot be readily
determined, the Bank's incremental borrowing rate.
Lease payments include fixed payments less any lease incentive receivable, variable lease payment that are based on an
index or a rate which are initially measured using the index or rate as at the commencement date, amounts expected to be
payable by the Bank under residual value guarantees, the exercise price of a purchase option (if the Bank is reasonably
certain to exercise that option) and payments of penalties for terminating the lease (if the lease term reflects that the lessee
will exercise that option). The extension and termination options are incorporated in determination of lease term only when
the Bank is reasonably certain to exercise these options.
The lease liability is subsequently measured at amortised cost using the effective interest rate method. The lease liability is
also remeasured to reflect any reassessment or lease modification, or to reflect revised in-substance fixed lease payment.
The lease liability is remeasured when the Bank reassesses the reasonable certainty to exercise extension or termination
option upon occurrence of either a significant event or a significant change in circumstances, or when there is a change in
assessment of an option to purchase underlying asset, or when there is a change in amount expected to be payable under a
residual value guarantee, or when there is a change in future lease payments resulting from a change in an index or rate
used to determine those payments. The corresponding adjustment is made to the carrying amount of the right of use asset,
or is recorded in the unconsolidated profit and loss account if the carrying amount of right of use asset has been reduced to
zero.
When there is a change in scope of a lease, or the consideration for a lease, that was not part of the original terms and
conditions, the same is accounted for as a lease modification. The lease modification is accounted for as a separate lease if
modification increases the scope of lease by adding the right to use one or more underlying assets and the consideration for
lease increases by an amount that commensurate with the standalone price for the increase in scope adjusted to reflect the
circumstances of the particular contract, if any. When the lease modification is not accounted for as a separate lease, the
lease liability is remeasured and corresponding adjustment is made to right of use asset.
The right of use asset is initially measured at an amount equal to the initial measurement of lease liability adjusted for any
lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of the
costs to be incurred to dismantle and remove the underlying asset or to restore the underlying asset or the site on which the
asset is located.
The right of use asset is subsequently measured at cost less accumulated depreciation and accumulated impairment
losses, if any. The right of use asset is depreciated on a straight line method over the lease term as this method most closely
reflects the expected pattern of consumption of the future economic benefits. The carrying amount of the right of use asset
is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
5.6 Intangibles
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
Intangible assets are amortised using the straight-line method over the period of three years. Where the carrying amount of
an asset exceeds its estimated recoverable amount, it is written down immediately to its recoverable amount.
5.7 Impairment of non-financial assets
The carrying amounts of the Bank’s assets are reviewed at each reporting date to determine whether there is any indication
of impairment of any asset or a group of assets. If such an indication exists, the recoverable amount of such assets is
estimated. The recoverable amount is higher of an asset's fair value less cost to sell and value in use. In assessing the value
in use, future cash flows are estimated which are discounted to present value using a discount rate that reflects the current
market assessments of the time value of money and the risk specific to the asset. In determining fair value less cost to sell,
an appropriate valuation model is used. An impairment loss is recognised in the unconsolidated profit and loss account
whenever the carrying amount of an asset or a group of assets exceeds its recoverable amount. Impairment loss on revalued
assets is adjusted against the related revaluation surplus to the extent that the impairment loss does not exceed the surplus
on revaluation of that asset.
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5.8 Compensated absences
The Bank makes annual provision in respect of liability for employees’ compensated absences based on actuarial estimates.
The liability is estimated using the projected unit credit method.
The Bank operates:
a) an unfunded contributory provident fund (old scheme) for those employees who joined the Bank between July 1, 2005 to
May 31, 2007 and opted to remain under the old scheme. Under this scheme, contribution is made both by the Bank and
employee at the rate of 6% of the monetised salary. The Bank provided an option to employees covered under old
scheme to join the Employer Contributory Provident Fund Scheme - ECPF (new scheme) effective from June 1, 2007.
Employees joining the Bank service after June 1, 2007 are covered under the new scheme. Under ECPF (new scheme),
contribution is made both by the Bank and employee at the rate of 6% of the monetised salary.
b) an unfunded General Provident Fund (GPF) scheme for all those employees who joined the Bank between May 1, 1977
to June 30, 2005 and opted to remain under this scheme after introduction of the new scheme (ECPF). Under
GPF,C766 contribution is made by the employee only at the rate of 5% of the monetised salary.
c) following are other staff retirement benefit schemes:
- an unfunded gratuity scheme (old scheme) for those employees who joined the Bank between July 1, 2005 to May
31, 2007 and opted to remain under the old scheme;
- a funded Employees Gratuity Fund (EGF) was introduced by the Bank effective from June 1, 2007 for all its
employees other than those who opted to remain in pension scheme or unfunded gratuity scheme (old scheme);
- an unfunded pension scheme for those employees who joined the Bank between May 1, 1977 to June 30, 2005 and
opted to remain under this scheme after introduction of the new scheme (NCBS);
- an unfunded benevolent fund scheme;
- an unfunded post retirement medical benefit scheme; and
Obligations for contributions to defined contribution provident plans are recognised as an expense in the unconsolidated
Annual provisions are made by the Bank to cover the obligations arising under defined benefit schemes based on actuarial
recommendations. The actuarial valuations are carried out under the projected unit credit method. The amount arising as a
result of remeasurements are recognised in the unconsolidated balance sheet immediately, with a charge or credit to other
comprehensive income in the periods in which they occur.
The above staff retirement benefits are payable on completion of prescribed qualifying period of service.
5.10 Deferred income
Grants received on account of capital expenditure are recorded as deferred income. These are amortised over the useful life
of the relevant asset.
5.11 Revenue recognition
- Discount, interest / mark-up and / or return on loans and advances and investments are recorded on time proportion
basis that takes into account the effective yield on the asset. However, income on balances with Bangladesh (former
East Pakistan), doubtful loans and advances and overdue return on investments are recognised as income on receipt
basis.
- Commission income is recognised when related services are rendered.
- Dividend income is recognised when the Bank’s right to receive dividend is established.
- Gains / losses on disposal of securities are recognised in the unconsolidated profit and loss account at trade date.
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5.12 Finances under profit and loss sharing arrangements
The Bank provides various finances to financial institutions under profit and loss sharing arrangements. Share of profit / loss
under these arrangements is recognised on an accrual basis.
5.13 Taxation
The income of the Bank is exempt from tax under section 49 of the State Bank of Pakistan Act, 1956 and clause 66(xiii) of
Part I of second schedule to the Income Tax Ordinance, 2001.
5.14 Foreign currency translation
Transactions denominated in foreign currencies are translated to Pak Rupees at the foreign exchange rate prevailing at the
date of transaction. Monetary assets and liabilities in foreign currencies are translated into rupees at the closing rate of
exchange prevailing at the reporting date.
Exchange gains and losses are taken to the unconsolidated profit and loss account except for certain exchange differences
on balances with the International Monetary Fund, referred to in note 5.15, which are transferred to the Government of
Pakistan account.
Commitments for outstanding foreign exchange forward and swap contracts disclosed in note 33.2 to these unconsolidated
financial statements are translated at forward rates applicable to their respective maturities. Contingent liabilities /
commitments for letters of credit and letters of guarantee denominated in foreign currencies are expressed in PKR terms at
the closing rate of exchange prevailing at the reporting date.
5.15 Transactions and balances with the International Monetary Fund
Transactions and balances with the International Monetary Fund (IMF) are recorded on following basis:
- the GoP's contribution for quota with the IMF is recorded by the Bank as depository of the GoP. Exchange differences
arising on these balances are transferred to the Government of Pakistan account.
- exchange gains or losses arising on revaluation of borrowings from the IMF are recognised in the unconsolidated profit
and loss account.
- the cumulative allocation of special drawing rights (SDRs) by the IMF is recorded as a liability and is translated at the
closing exchange rate for SDRs prevailing at the reporting date. Exchange differences on translation of SDRs is
recognised in the unconsolidated profit and loss account.
- service charge is recognised in the unconsolidated profit and loss account at the time of receipt of the IMF tranches.
All other income or charges pertaining to balances with the IMF are taken to the unconsolidated profit and loss account,
including the following:
- charges on borrowings under credit schemes and fund facilities;

- charges on net cumulative allocation of SDRs;
- exchange gain or loss; and
- return on holdings of SDRs.
5.16 Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current
best estimate.
Contingent assets are disclosed when there is a possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of
the Group. Contingent assets are not recognised until their realisation become virtually certain.
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Contingent liability is disclosed when:
- there is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or
- there is a present obligation that arises from past events but it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with
sufficient reliability.
5.17 Cash and Cash Equivalents
Cash and cash equivalents include foreign currency accounts and investments (other than deposits held with IMF), local
currency coins, earmarked foreign currency balances, SDRs, balances in the current and deposit accounts and securities
that are realisable in known amounts of cash within three months from the date of original investments and which are subject
to insignificant changes in value.
5.18 Fair value measurement principles
The fair value of financial instruments traded in active markets at the reporting date is based on their quoted market prices or
dealer price quotation without any deduction for transaction costs. If there is no active market for a financial asset, the Bank
establishes fair value using valuation techniques. These include the use of recent arms length transaction, discounted cash
flow analysis and other revaluation techniques commonly used by market participants.
6 USE OF ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses that are
not readily available from other sources. The estimates and associated assumptions are based on historical experiences and
various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of
making judgments about the carrying values of assets and liabilities and income and expenses. Actual results may differ
from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only
that period, or in the period of revision and future periods if the revision affects both current and future periods. Judgments
made by the management in the application of IFRSs and estimates that have a significant risk of material adjustment to the
carrying amounts of assets and liabilities are as follows:
6.1 Fair value of financial instruments
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions
(i.e., an exit price) regardless of whether that price is directly observable or estimated using another valuation technique.
When the fair values of financial assets and financial liabilities recorded in the unconsolidated balance sheet cannot be
derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation
models. The inputs to these models are taken from observable markets where possible, but where this is not feasible,
estimation is required in establishing fair values. Judgements and estimates may include items like considerations of liquidity
and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation
and volatility. For further details about determination of fair value please see note 5.18 to these unconsolidated financial
statements.
6.2 Effective interest rate (EIR) method
The Bank’s EIR methodology recognises interest income using a rate of return that represents the best estimate of a
constant rate of return over the expected behavioural life of financial instruments. This estimation, by nature, requires an
element of judgement regarding the expected behaviour and life-cycle of the instruments, as well as clubbing of and other
determinable fee income / expense to the cost of acquisition of financial instruments that are integral parts of the instrument.
6.3 Impairment losses on financial assets
The measurement of impairment losses across all categories of financial assets in scope requires judgement, in particular,
the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and
the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which
can result in different levels of allowances. Assumptions regarding the impairment of financial assets are presented in the
note 47.1.2 to these unconsolidated financial statements.
212
6.4 Retirement benefits
The key actuarial assumptions concerning the valuation of defined benefit plans and the sources of estimation are disclosed
in note 42.7.1 to these unconsolidated financial statements.
6.5 Useful life and residual value of property, plant and equipment
Estimates of useful life and residual value of property and equipment are based on the management’s best estimate.
7 GOLD RESERVES HELD BY THE BANK
Note 2020 2019 2020 2019

Net content in troy ounces --------------(Rupees in '000)--------------
Opening balance 2,078,037 2,077,397 468,625,002 315,610,772

Additions during the year 160 640 47,118 147,358
Appreciation for the year
due to revaluation 32 - - 148,822,917 152,866,872
Closing Balance 21.1 2,078,197 2,078,037 617,495,037 468,625,002
Note 2020 2019

8 LOCAL CURRENCY - COINS --------------(Rupees in '000)--------------
Banknotes held by the banking department 172,707 159,748

Coins held as an asset of the issue department 8.1 & 21.1 1,028,584 1,039,138
1,201,291 1,198,886
Less: banknotes held by the banking department 21 (172,707) (159,748)
1,028,584 1,039,138
8.1 As mentioned in note 5.1, the Bank is responsible for issuing coins of various denominations on behalf of the GoP. This
balance represents the face value of coins held by the Bank at the year end.
9 FOREIGN CURRENCY ACCOUNTS AND INVESTMENTS
These essentially represent foreign currency reserves held by the Bank, the details of which are as follows:
Note 2020 2019

--------------(Rupees in '000)--------------
At fair value through profit or loss:
- investments 9.3 500,826,405 202,587,281
- unrealised gain on derivative financial instruments 499,147 2,803,510
- unrealised (loss) on derivative financial instruments (149,270) (40,225)
9.4 349,877 2,763,285
501,176,282 205,350,566
At amortised cost:
- deposit accounts 594,390,455 383,088,658
- current accounts 1,338,337 4,000,054
- securities purchased under agreement to resell 9.5 891,609,264 336,209,469
- money market placements 9.6 218,465,780 447,218,637
1,705,803,836 1,170,516,818
Credit loss allowance 9.2 (88) (12,996)
2,206,980,030 1,375,854,388
The above foreign currency accounts and investments are held as follows:
issue department 21.1 218,465,780 447,218,637

banking department 1,988,514,250 928,635,751
2,206,980,030 1,375,854,388
213
9.1 The following table sets out information about the credit quality of foreign currency accounts and investments of the bank
measured at amortised cost and maximum exposure to credit risk as at reporting date. Details of the Bank's internal grading
system are explained in note 47.1.4.
Stage 1 2020 2019

Note -----------------------------(Rupees in '000)-----------------------------
Deposit accounts
High rating 594,390,455 594,390,455 383,088,658
594,390,455 594,390,455 383,088,658
Current accounts
High rating 1,329,030 1,329,030 3,990,941
Standard rating 9,307 9,307 9,113
1,338,337 1,338,337 4,000,054
Securities purchased under agreement to resell
High rating 9.5 891,609,264 891,609,264 336,209,469
891,609,264 891,609,264 336,209,469
Money market placements
High rating 9.6 218,465,780 218,465,780 447,218,637
218,465,780 218,465,780 447,218,637
1,705,803,836 1,705,803,836 1,170,516,818
9.2 An analysis of changes in the ECL in relation to foreign currency accounts and investments of the Bank measured at
amortised cost is as follows:
2020
ECL Money market
Nostros Total
placements
Stage 1 ----------------------- (Rupees in '000) -----------------------
Opening balance as of June 30, 2019 32 12,963 12,995

Charge / (reversal) of allowance 56 (12,963) (12,907)
Balance as of June 30, 2020 88 - 88
2019
Money market
Nostros Total
placements
Stage 1 ----------------------- (Rupees in '000) -----------------------
Opening balance as of June 30, 2018 - - -

Adjustments on initial recognition of IFRS 9 9 57 66
Restated balance as of July 1, 2018 9 57 66
Charge of allowance 23 12,906 12,929
Balance as of June 30, 2019 32 12,963 12,996
9.3 This includes investments made by the Bank in international markets and balances maintained, on behalf of the Bank,
through reputable fund managers. The activities of these fund managers are being monitored through a custodian. The
market value of the investments as on June 30, 2020 amounts to Rs. 173,698 million (USD 1033.60 million [2019: Rs.
161,158 million (USD 1006.91 million). These carry interest ranging from 0.175% to 0.5% per annum in USD (2019: 0.12%
per annum), and 0% to 3.56% per annum in CNY (2019: 2.23% to 2.28% per annum).
9.4 This represents unrealised gain / (loss) on foreign currency swaps, futures and forward contracts (including transactions
executed by the fund managers on behalf of the Bank) entered into with various counterparties.
9.5 These represent lending under repurchase agreements and carry mark-up in USD at the rate of 0.00% per annum (2019:
2.51% per annum) and these are due to mature on July 1, 2020 (2019: July 01, 2019).
9.6 These represent money market placements carrying interest ranging from 0.10% to 0.16% per annum in USD (2019: 2.39%
to 2.55% per annum) and having maturities ranging from July 3, 2020 to August 7, 2020 (2019: July 2, 2019 to August 22,
2019).
214
10 EARMARKED FOREIGN CURRENCY BALANCES
These represent foreign currency cash balances held by the Bank to meet foreign currency commitments of the Bank.
11 SPECIAL DRAWING RIGHTS OF THE INTERNATIONAL MONETARY FUND
Special drawing rights (SDRs) are the foreign reserve assets which are allocated by the International Monetary Fund (IMF)
to its member countries in proportion to their quota in the IMF. In addition, the member countries can purchase the SDRs
from the IMF and other member countries in order to settle their obligations. The figures given below represent the rupee
value of the SDRs held by the Bank as at the reporting date. Interest is credited by the IMF on the SDR holding of the Bank
at weekly interest rates on daily products of SDRs held during each quarter.
SDR Holding Note 2020 2019

SDRs are held as follows: --------------(Rupees in '000)--------------
- by the issue department 21.1 11,601,465 34,152,690

- by the banking department 17,935,662 21,308,364
29,537,127 55,461,054
12 RESERVE TRANCHE WITH THE INTERNATIONAL

MONETARY FUND UNDER QUOTA ARRANGEMENTS
Quota allocated by the International Monetary Fund 469,862,627 460,387,623

Liability under quota arrangements (469,835,072) (460,360,624)
27,555 26,999
13 SECURITIES PURCHASED UNDER AGREEMENT TO RESELL
This represents collateralized lending made to various financial institutions under resell arrangement carrying mark-up
ranging from 7.03% to 12.33% per annum (2019: 12.33% to 12.45% per annum) and are due to mature on July 3, 2020
(2019: July 05, 2019). The fair value of securities collateralised as on June 30, 2020 amounts to Rs. 1,001,208 million
(2019: Rs. 782,504 million). The collaterals held by the Bank consist of Pakistan investment bonds and market treasury bills.
13.1 The following table sets out information about the credit quality of securities purchased under agreement to resell of the bank
Stage 1 2020 Stage 1 2019

--------------(Rupees in '000)--------------
--------------(Rupees in '000)--------------
High rating 917,539,654 917,539,654 777,680,180 777,680,180

Standard rating - - 5,238,002 5,238,002
Less: Credit loss allowance (7) (7) (27) (27)
Reverse Repo Outstanding 917,539,647 917,539,647 782,918,155 782,918,155
13.2 An analysis of changes in the ECL in relation to securities purchased under agreement to resell of the Bank measured at
amortised cost is, as follows:

--------------(Rupees in '000)--------------
Opening balance as of June 30, 2019 27 27

Reversal during the year (20) (20)

--------------(Rupees in '000)--------------
Opening balance as of June 30, 2018 - -

Adjustments on initial recognition of IFRS 9 15 15
Restated balance as of July 1, 2018 15 15
Charge during the year 12 12
215
Note 2020 2019

14 INVESTMENTS - LOCAL --------------(Rupees in '000)--------------
At amortised cost
Government securities
Market related treasury bills (MRTBs) - 569,202,498
Pakistan investment bonds (PIBs) 7,270,563,969 7,189,706,100
Federal government scrips 2,740,000 2,740,000
14.2 7,273,303,969 7,761,648,598
Zarai Taraqiati Bank Limited (ZTBL) preference shares - unlisted 14.3 54,539,302 54,399,134
Term finance certificates 56,483 56,483

Certificates of deposits 22,470 22,470
78,953 78,953
Credit loss allowance 14.5 (78,953) (78,953)

7,327,843,271 7,816,047,732
At fair value through other comprehensive income
Investments in banks and other financial institutions

Ordinary shares
- Listed 44,235,735 53,850,807
- Unlisted 35,101,670 32,560,301
14.4 79,337,405 86,411,108
7,407,180,676 7,902,458,840
Investments in wholly owned subsidiaries - at cost
Pakistan Security Printing Corporation (Private) Limited 100,149,000 100,149,000

SBP Banking Services Corporation 1,000,000 1,000,000
National Institute of Banking and Finance (Guarantee) Limited 29,260 29,260
101,178,260 101,178,260
7,508,358,936 8,003,637,100
The above investments are held as follows:
issue department 21.1 5,598,401,783 4,324,569,688
banking department 1,909,957,153 3,679,067,412
7,508,358,936 8,003,637,100
14.1 The following table sets out information about the credit quality of Government securities of the Bank measured at amortised
cost.
2020
-------------------------------------------- (Rupees in '000) --------------------------------------------
High rating 7,327,843,271 - - 7,327,843,271

7,327,843,271 - 78,953 7,327,922,224
7,327,843,271 - - 7,327,843,271
2019
-------------------------------------------- (Rupees in '000) --------------------------------------------
High rating 7,816,047,732 - - 7,816,047,732

7,816,047,732 - 78,953 7,816,126,685
7,816,047,732 - - 7,816,047,732
216
14.2 These represent investments guaranteed / issued by the Government. The profile of return on securities is as follows:
2020 2019
% per annum
Market related treasury bills - 6.83 to 13.13

Pakistan investment bonds 8.23 to 14.02 13.72 to 13.88
Federal government scrips 3 3
PIBs are created for one to ten years under the instructions of the Federal Government while Federal Government scrips are
of perpetual nature.
The Federal Government issued PIBs on June 30, 2019 with maturity of one year to ten years amounting to Rs. 7,187,000
million.
14.3 This represents 5,446.153 million preference shares of Rs. 10 each carrying mark-up at the rate of 7.5% per annum payable
semi-annually, issued by Zarai Taraqiati Bank Limited. These preference shares are redeemable on March 7, 2027.
14.4 Investments in shares of banks and other financial institutions
2020
Unrealised
Percentage
holding
appreciation
---------------------------------- (Rupees in '000) ----------------------------------
%
Listed
Unlisted
- House Building Finance
Company Limited 90.31 1,482,304 606,150 2,088,454
Less than or equal to 50%

Shareholding
16,819,631 18,282,039 35,101,670
17,920,436 61,416,969 79,337,405
2019
Unrealised
Percentage
Cost (diminution) / Total
holding
appreciation
%---------------------------------- (Rupees in '000) ----------------------------------
Listed
Unlisted
- House Building Finance
Company Limited 90.31 1,482,304 273,413 1,755,717
Less than or equal to 50%

Shareholding
16,819,631 15,740,670 32,560,301
17,920,436 68,490,671 86,411,108
217
14.4.1 Investments in above entities have been made under the specific directives of the Government of Pakistan in accordance
with the provisions of the State Bank of Pakistan Act, 1956 and other relevant statutes. The Bank neither exercises
significant influence nor has control over these entities except for any regulatory purposes or control arising as a
consequence of any statute which applies to the entire sector to which these entities belong. Accordingly, these entities have
not been consolidated as subsidiaries or accounted for as investments in associates or joint ventures.
14.4.2 During the year 2018-19, in accordance with section 9 of the Deposit Protection Corporation Act, 2016 (DPC Act), the Bank
has made an initial capital contribution of Rs. 500 million in Deposit Protection Corporation (DPC). This represents 100% of
the paid-up portion of the capital of DPC, which was established for the protection of small depositors in order to ensure the
financial stability of and maintain public interest in, the financial system, and for matters connected therewith or ancillary
thereto. The shareholders of DPC are not entitled to receive any dividend in terms of section 9(5) of DPC Act. The Bank is
not exposed, or has rights, to variable returns from its involvement with the DPC and does not have the ability to affect its
returns. Consequently, DPC is not treated as a subsidiary in these unconsolidated financial statements. Considering the
substance of this transaction, the capital injection in the DPC was fully provided.
Note 2020 2019

14.5 Credit loss allowance ---------------- (Rupees in '000) ---------------

Impact on opening balances on initial recognition of IFRS 9 - (738,435)
Closing balance 78,953 78,953
14.6 Unrealised diminution on remeasurement of investments
Opening balance 68,490,671 74,683,886

Impact on opening balances on initial recognition of IFRS 9 - 15,425,535
68,490,671 90,109,421
Diminution during the year - net (7,073,702) (21,618,750)
Closing balance 61,416,969 68,490,671
15 LOANS, ADVANCES AND BILLS OF EXCHANGE
Government owned / controlled financial institutions 15.3 85,114,788 72,896,028

Private sector financial institutions 15.4 700,781,998 504,975,653
785,896,786 577,871,681
Employees 11,867,119 11,976,201
797,763,905 589,847,882
Credit loss allowance 15.7 (2,185,759) (2,203,678)
795,578,146 587,644,204
15.1 The following table sets out information about the credit quality of loans, advances and bills of exchange of the Bank
2020
--------------------------------- (Rupees in '000) ---------------------------------
High rating 83,334,487 - - 83,334,487
Rating below standard - - 1,780,301 1,780,301
83,334,487 - 1,780,301 85,114,788
High rating 690,302,476 - - 690,302,476
699,714,801 - 1,067,197 700,781,998
Employees
11,867,119 - - 11,867,119
794,916,407 - 2,847,498 797,763,905
794,860,885 - 717,261 795,578,146
218
2019
--------------------------------- (Rupees in '000) ---------------------------------
High rating 58,099,146 - - 58,099,146
Rating below standard 17,567 - 14,779,315 14,796,882
58,116,713 - 14,779,315 72,896,028
High rating 494,433,694 - - 494,433,694
503,908,456 - 1,067,197 504,975,653
Employees
11,976,201 - - 11,976,201
574,001,370 - 15,846,512 589,847,882
573,973,989 - 13,670,215 587,644,204
15.2 An analysis of changes in the ECL in relation to loans and advances of the Bank measured at amortised cost is, as follows:
2020
Government
institutions
--------------------------------- (Rupees in '000) ---------------------------------
Stage 1
Opening balance as of June 30, 2019 46,061 26,987 394 73,442
Reversal of allowance - (17,892) (27) (17,919)
Stage 3
Opening balance as of June 30, 2019 1,066,606 1,063,630 - 2,130,236
Charge / (reversal) of allowance - - - -
Balance as of June 30, 2020 1,066,606 1,063,630 - 2,130,236
1,112,667 1,072,725 367 2,185,759
2019
Government
institutions
--------------------------------- (Rupees in '000) ---------------------------------
Stage 1
Opening balance as of June 30, 2018 - - - -
Adjustments on initial recognition of IFRS 9 46,061 284 416 46,761
Balance as of July 1, 2018 46,061 284 416 46,761
Charge / (reversal) of allowance - 26,703 (22) 26,681
Stage 3
Opening balance as of June 30, 2018 1,066,606 1,063,630 - 2,130,236
Adjustments on initial recognition of IFRS 9 - - - -
Balance as of July 1, 2018 1,066,606 1,063,630 - 2,130,236
Charge/(reversal) of allowance - - - -
Balance as of June 30, 2019 1,066,606 1,063,630 - 2,130,236
1,112,667 1,090,617 394 2,203,678
219
15.3 Loans and advances to government owned / controlled financial institutions

2020 2019 2020 2019 2020 2019
---------------------------------------------------- (Rupees in '000) ----------------------------------------------------
Agricultural sector 435,707 456,870 - - 435,707 456,870

Industrial sector 15.3.1 28,071,472 17,552,496 - - 28,071,472 17,552,496
Export sector 54,060,479 40,393,590 - - 54,060,479 40,393,590
Others 15.3.2 1,748,668 13,734,148 798,462 758,924 2,547,130 14,493,072
84,316,326 72,137,104 798,462 758,924 85,114,788 72,896,028
15.3.1 This includes exposure to Industrial Development Bank Limited (IDBL) under locally manufactured machinery (LMM) credit line
amounting to Rs. 1,054 million (2019: Rs. 1,054 million). Furthermore, loans and advances also include loans amounting to
Rs. 340.78 million (2019: Rs 340.78 million) to IDBL which are secured by government securities. The Federal Government
vide its vesting order dated November 13, 2012 had transferred and vested all assets and liabilities of Industrial Development
Bank of Pakistan (IDBP) into the IDBL with effect from November 13, 2012. The Cabinet Committee on Privatisation, in its
meeting held on May 07, 2016 approved the inclusion of IDBL in the 'privatisation program for early implementation'. Further,
the Cabinet Committee on Privatisation in its meeting held on October 31, 2018 approved to delist IDBL from privatization
programme. The Federal Cabinet also ratified the decision of the Cabinet Committee on Privatization. Accordingly, the process
of winding up of IDBL is under process. During the year ended June 30, 2020, a loan amounting to Rs. 13 billion has been
settled by utilizing the appropriation held in the Reserve Fund for said purpose.
15.3.2 These balances include Rs. 327.949 million (2019: Rs. 327.949 million) which are recoverable from various financial
institutions operating in Bangladesh (former East Pakistan). The realisability of these balances is subject to final settlement
between the Governments of Pakistan and Bangladesh.
15.4 Loans and advances to private sector financial institutions

2020 2019 2020 2019 2020 2019
----------------------------------------------------- (Rupees in '000) -----------------------------------------------------
Agricultural sector 1,548,967 834,426 214,819 279,970 1,763,786 1,114,396

Industrial sector 185,912,309 139,665,544 14,477,862 12,525,578 200,390,171 152,191,122
Export sector 15.4.1 452,884,058 340,315,670 - - 452,884,058 340,315,670
Others 15.4.2 &
15.4.3 36,581,037 2,970,994 9,162,946 8,383,471 45,743,983 11,354,465
676,926,371 483,786,634 23,855,627 21,189,019 700,781,998 504,975,653
15.4.1 Export sector loans of scheduled banks are fully secured against demand promissory notes.
15.4.2 In the year 2015, the Bank in continuation of a scheme of amalgamation of two commercial banks duly sanctioned by the
Federal Government under section 47 of the Banking Companies Ordinance, 1962 and under section 17 of the State Bank of
Pakistan Act, 1956, extended a 10 year financing facility of Rs.5,000 million with a bullet payment of mark-up and principal at
maturity to an Islamic commercial bank (ICB) which is secured against Government of Pakistan Ijara Sukuk. The 10 year
facility was provided on the basis of Mudaraba to be remunerated at profit sharing ratio declared by the ICB on its remunerative
current accounts on monthly basis (the last declared rate in this respect is 0.01% per annum). In accordance with the
requirements of accounting framework of the Bank, the 10 year financing facility had been recognized at fair value on initial
recognition. The amortized cost as of June 30, 2020 is Rs. 3,220 million (2019: Rs. 2,946 million).
15.4.3 Loans to other financial institutions include advances made to microfinance banks under financial inclusion and infrastructure
project (FIIP). These loans are fully secured against demand promissory notes.
15.5 The interest / mark-up rate profile of the interest / mark-up bearing loans and advances is as follows:
2020 2019
(% per annum)
Government owned / controlled and private sector financial institutions 0 to 14.49 0 to 12.00
Employees loans (where applicable) 0 to 10.00 0 to 10.00
220
15.6 During the year ended June 30, 2020, the Bank in response to the COVID-19 pandemic has launched several new financing
facility schemes in line with its mission to maintain financial and monetary stability. The following facilities were introduced via
IH&SMEFD circular no. 01 and 03 of 2020 dated March 17, 2020 and IH&SMEFD circular no. 06 of 2020 dated April 10,
2020:
i) temporary economic refinance facility

ii) refinance facility for combating COVID-19 (RFCC)
iii) refinance scheme for payments of wages and salaries to workers and employees of business concerns
Facilities disbursed to banks under the above mentioned schemes aggregated to Rs 38,244 million and were interest free.
These facilities have been recorded at fair value and a loss for fair valuation amounting to Rs 4,194 million has been recorded
in these financial statements.
Note 2020 2019
15.7 Credit loss allowance --------------- (Rupees in '000) --------------
Opening balance 2,203,678 2,130,236

Impact on opening balances due to initial application of IFRS 9 - 46,761
2,203,678 2,176,997
Closing balance 2,185,759 2,203,678
16 ASSETS HELD WITH THE RESERVE BANK OF INDIA
Gold reserves
- opening balance 7,573,743 5,102,356
- appreciation for the year due to revaluation 28.3.1.1 2,405,211 2,471,387
Closing Balance 9,978,954 7,573,743
Sterling securities 682,421 670,887
Government of India securities 318,125 331,449
Rupee coins 6,464 6,726
16.1 10,985,964 8,582,805
Indian notes representing assets receivable
from the Reserve Bank of India 16.2 957,200 997,292
21.1 11,943,164 9,580,097
16.1 These assets were allocated to the Government of Pakistan as its share of the assets of the Reserve Bank of India under the
provisions of Pakistan (Monetary System and Reserve Bank) Order, 1947. The transfer of these assets to the Bank is subject
to final settlement between the Governments of Pakistan and India (also refer note 28.3.1).
16.2 These represent Pak Rupee equivalent of Indian rupee notes which were in circulation in Pakistan until retirement from
circulation under the Pakistan (Monetary System and Reserve Bank) Order, 1947. Realisability of these assets is subject to
final settlement between the Governments of Pakistan and India (also refer note 28.3.1).
17 BALANCES DUE FROM THE GOVERNMENTS Note 2020 2019

OF INDIA AND BANGLADESH --------------- (Rupees in '000) --------------
India
Advance against printing of notes 39,616 39,616
Receivable from the Reserve Bank of India 837 837
40,453 40,453
Bangladesh
Inter office balances 819,924 819,924
Loans, advances and commercial papers 17.1 12,280,787 11,406,171
13,100,711 12,226,095
17.2 13,141,164 12,266,548
17.1 These represent interest bearing loans and advances (including commercial papers) provided to the Government of
Bangladesh.
17.2 The realisability of the above balances is subject to final settlement between the Government of Pakistan and Government of
Bangladesh and India (also refer notes 28.1 and 28.3.1).
Note 2020 2019
18 PROPERTY, PLANT AND EQUIPMENT --------------- (Rupees in '000) --------------
Operating fixed assets 18.1 78,452,596 79,496,485

Capital work-in-progress 18.3 557,057 379,168
79,009,653 79,875,653
221
18.1 Operating fixed assets
2020
Buildings Electronic
Buildings
Freehold Leasehold on Plant and Furniture Office data Motor
on freehold Total
land* land* leasehold Machinery and fixtures equipment processing vehicles
land*
land* equipment
------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------
As at July 01, 2019
Cost / revalued amount 17,496,689 54,121,144 2,326,662 4,620,726 1,266,565 51,769 239,687 2,080,831 564,372 82,768,445
Accumulated depreciation - - - - (739,638) (40,821) (216,056) (1,935,057) (340,388) (3,271,960)
Net book value 17,496,689 54,121,144 2,326,662 4,620,726 526,927 10,948 23,631 145,774 223,984 79,496,485

Opening net book value 17,496,689 54,121,144 2,326,662 4,620,726 526,927 10,948 23,631 145,774 223,984 79,496,485
Additions 606 - 2,095 - 4,444 1,401 8,162 311,588 212,680 540,976

Transfers from capital work in progress - 8,593 16,833 133,041 19,344 - 18,777 - - 196,588
606 8,593 18,928 133,041 23,788 1,401 26,939 311,588 212,680 737,564
Disposals
Cost - - (723) - (67,286) (1,393) (31,496) (36,824) (155,632) (293,354)
Accumulated Depreciation - - - - 52,039 391 27,172 16,259 143,482 239,343
- - (723) - (15,247) (1,002) (4,324) (20,565) (12,150) (54,011)
Adjustments ** (1,587,900) 1,587,900 (354,288) 354,288 - - - - - -
Depreciation charge - 954,871 115,064 288,740 88,642 2,269 8,449 166,051 103,356 1,727,442
Net book value 15,909,395 54,762,766 1,875,515 4,819,315 446,826 9,078 37,797 270,746 321,158 78,452,596
As at June 30, 2020

Accumulated depreciation - 954,871 115,064 288,740 776,241 42,699 197,333 2,084,849 300,262 4,760,059
Net book value 15,909,395 54,762,766 1,875,515 4,819,315 446,826 9,078 37,797 270,746 321,158 78,452,596
2019
Electronic
Buildings on Buildings on
Leasehold Plant and Furniture Office data Motor
Freehold land* freehold leasehold Total
land* Machinery and fixtures equipment processing vehicles
land* land*
equipment
------------------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------------------
As at July 01, 2018
Accumulated depreciation - (2,590,461) (255,448) (501,326) (649,188) (95,124) (221,556) (1,776,409) (299,164) (6,388,676)
Net book value 13,035,959 35,915,221 1,974,327 3,826,977 579,981 12,480 17,875 312,808 236,174 55,911,802

Opening net book value 13,035,959 35,915,221 1,974,327 3,826,977 579,981 12,480 17,875 312,808 236,174 55,911,802
Additions - - 30,207 - - 8,461 17,838 164,842 106,679 328,027

Transfers from capital work in progress - - 43,344 142,690 28,905 - 12,873 - - 227,812
- - 73,551 142,690 28,905 8,461 30,711 164,842 106,679 555,839
Revaluation during the year 4,460,730 15,610,795 53,891 272,330 - - - - - 20,397,746

Reversal due to revaluation - (3,954,813) (363,580) (690,516) - - - - - (5,008,909)
4,460,730 19,565,608 417,471 962,846 - - - - - 25,406,655
Disposals
Cost - - (30,555) (123,993) - (64,296) (30,455) (173,228) (77,645) (500,172)
Accumulated Depreciation - - 1,696 23,750 - 57,072 12,554 73,821 60,984 229,877
- - (28,859) (100,243) - (7,224) (17,901) (99,407) (16,661) (270,295)
Adjustments ** - 4,667 - 1,396 8,491 - - - - 14,554

- - - - (4,853) - - - - (4,853)
Depreciation charge - 1,364,352 109,828 212,940 85,597 2,769 7,054 232,469 102,208 2,117,217
Net book value 17,496,689 54,121,144 2,326,662 4,620,726 526,927 10,948 23,631 145,774 223,984 79,496,485
As at June 30, 2019

Accumulated depreciation - - - - 739,638 40,821 216,056 1,935,057 340,388 3,271,960
Net book value 17,496,689 54,121,144 2,326,662 4,620,726 526,927 10,948 23,631 145,774 223,984 79,496,485
-
* These represents revalued assets

** Adjustments include reclassification within different categories of assets
222
18.2 Land and Buildings of the Bank are carried at revalued amount. The latest revaluation was carried out on June 30, 2019 by
M/S M.J.Surveyors (Private) limited which resulted in a surplus of Rs. 25,407 million. The revaluation was carried out based
on the market value assessment being the fair value of the land and buildings. Had there been no revaluation, the carrying
value of the revalued assets would have been as follows:
2020 2019
--------------- (Rupees in '000) --------------
Freehold land 39,205 39,205

Leasehold land 179,380 194,626
1,352,980 1,557,323
18.3 Capital work-in-progress

Office equipment 43,568 61,570
Electronic data processing equipment 195 195
Plant and machinery 166,810 38,045
557,057 379,168
18.4 During the year, the management of the Bank has revised the estimate of the useful life of leasehold land on the basis of
extension clause of the lease agreements. The revision has been accounted for as a change in accounting estimate in
accordance with the requirements of International Accounting Standards (IAS) 8 'Accounting policies, changes in accounting
estimates and errors'. Had the revision in useful lives of these assets not been made, the depreciation expense for the year
would have been higher by Rs 1,774 million and consequently profit for the year would have been lower by the same amount.
Note 2020 2019

19 INTANGIBLE ASSETS --------------- (Rupees in '000) --------------
Intangible
Software
Balances 19.1 103,278 198,754
Capital work-in-progress 3,064 -
106,342 198,754
Additions Accumulated Accumulated Net book Annual rate of

Cost at Cost at Amortisation
during the amortisation amortisation value at June amortisation
July 1 June 30 for the year
year at July 1 at June 30 30 %
--------------------------------------------------------------- (Rupees in '000) --------------------------------------------------
Software 2020 974,467 23,108 997,575 775,713 118,584 894,297 103,278 33.33
Software 2019 790,063 184,404 974,467 648,369 127,344 775,713 198,754 33.33
Note 2020 2019

20 OTHER ASSETS --------------- (Rupees in '000) --------------
Commission receivable and others 3,562,082 3,563,949

Unrealised gain on local currency derivatives 467,045 -
Other advances, deposits and prepayments 10,663,304 6,456,559
14,692,431 10,020,508
21 BANKNOTES IN CIRCULATION
Total banknotes issued 21.1 6,458,935,813 5,285,185,252

Banknotes held with the banking department 8 (172,707) (159,748)
Notes in circulation 6,458,763,106 5,285,025,504
21.1 The liability for banknotes issued by the issue department is recorded at its face value in the unconsolidated balance sheet. In
accordance with section 26 (1) of the SBP Act 1956, this liability is supported by the following assets of the issue department.
223
Note 2020 2019

--------------- (Rupees in '000) --------------

Foreign currency accounts and investments 9 218,465,780 447,218,637
6,458,935,813 5,285,185,252
22 CURRENT ACCOUNTS OF GOVERNMENTS
22.1 Current accounts of governments - payable balances
Federal Government 22.3 530,892,360 953,723,619

Provincial governments
- Punjab 22.4 81,724,341 71,904,587
- Sindh 22.5 65,497,762 22,340,295
- Khyber Pakhtunkhwa 22.6 11,159,840 18,825,192
- Baluchistan 22.7 40,926,370 20,449,672
Government of Azad Jammu and Kashmir 22.8 5,046,863 97,061
Gilgit - Baltistan Administration Authority 22.9 13,542,566 14,173,504
217,897,742 147,790,311
748,790,102 1,101,513,930
22.2 Current accounts of governments - receivable balance
Railways account 22.10 30,157,106 28,200,405
22.3 Federal Government
Non-food account 508,391,267 929,325,959

Zakat fund accounts 7,929,167 9,256,663
Other accounts 14,571,926 15,140,997
530,892,360 953,723,619
22.4 Provincial Government - Punjab
Non-food account 76,274,341 42,007,486

Zakat fund account 154,335 1,565,166
Other accounts 5,295,665 28,331,935
81,724,341 71,904,587
22.5 Provincial Government - Sindh
Non-food account 59,101,115 20,279,182

Other accounts 4,639,565 461,338
65,497,762 22,340,295
22.6 Provincial Government - Khyber Pakhtunkhwa
Non-food account 97,619 9,396,814

Other accounts 2,838,479 1,842,538
11,159,840 18,825,192
22.7 Provincial Government - Baluchistan
Non-food account 38,330,273 17,067,872

Other accounts 775,021 2,004,263
40,926,370 20,449,672
224
2020 2019
--------------- (Rupees in '000) --------------
22.8 Government of Azad Jammu and Kashmir 5,046,863 97,061
22.9 Gilgit - Baltistan Administration Authority 13,542,566 14,173,504
22.10 These balances carry mark-up ranging from 8.41% to 13.80% per annum (2019: 6.83% to 13.13% per annum).
23 PAYABLE TO ISLAMIC BANKING INSTITUTIONS AGAINST BAI MUAJJAL TRANSACTIONS
This represents amount payable to various Islamic Banking Institutions against purchases of Government of Pakistan (GoP)
Ijara Sukuks by the Bank on Bai Muajjal basis (deferred payment basis).
24 PAYABLE UNDER BILATERAL CURRENCY SWAP AGREEMENT
24.1 Payable under bilateral currency swap agreement with the People's Bank of China (PBoC)
A bilateral currency swap agreement (CSA) was entered between the Bank and the PBoC on December 23, 2011 in order to
promote bilateral trade, finance direct investment, provide short term liquidity support and for any other purpose mutually
agreed between the two central banks. The original agreement was renewed on December 23, 2014 for a period of three
years with overall limit of CNY 10,000 million and equivalent PKR. The bilateral CSA has been further extended on May 23,
2018 for a period of three years, with amount increased from CNY 10,000 million to CNY 20,000 million and equivalent PKR.
The Bank has purchased and utilized CNY 20,000 (Rs. 475.138 billion) million against PKR during the year with the maturity
buckets of three months to 1 year (2019: CNY 20,000 million (Rs. 466.280 billion) with maturity bucket of three months to 1
year). These purchases have been fully utilised as at June 30, 2020 and the same amounts are outstanding as on June 30,
2020. Interest is charged on outstanding balance at agreed rates.
Note 2020 2019

25 DEPOSITS OF BANKS AND FINANCIAL INSTITUTIONS --------------- (Rupees in '000) --------------
Foreign currency
Scheduled banks 39,655,440 37,854,192
Held under cash reserve requirement 25.1 197,323,325 244,598,533
236,978,765 282,452,725
Local currency
Scheduled banks 25.1 919,385,365 950,672,620
Financial institutions 14,653,730 13,031,466
Others DBFI - Others 85,699 81,959
934,124,794 963,786,045
1,171,103,559 1,246,238,770
25.1 This includes cash deposited with the State Bank of Pakistan by scheduled banks under regulatory requirements.
Note 2020 2019

26 OTHER DEPOSITS AND ACCOUNTS --------------- (Rupees in '000) --------------
Foreign currency
Foreign central banks 75,676,791 152,341,810
Foreign government 512,412,169 487,918,827
Others 13,029,732 29,067,136
26.1 & 26.2 983,607,445 1,033,757,468
Local currency
Special debt repayment 26.3 24,243,841 24,243,841
Government 26.4 17,850,348 17,850,348
Foreign central banks 2,226 2,172
Others ODA - Others 61,574,676 34,391,768
110,015,037 82,276,300
1,093,622,482 1,116,033,768
225
26.1 This includes FCY deposits equivalent to Rs.504,152 million (based on exchange rate as of June 30, 2020) (2019: Rs
480,156 million (based on exchange rate of June 30, 2019)), carrying interest at twelve month LIBOR + 1.00% (2019: LIBOR
+ 1.75%), payable semi-annually. These deposits have been set off against the Rupee counterpart receivable from the
Federal Government and have been covered under Ministry of Finance (MoF) Guarantee whereby the MoF has agreed to
assume all liabilities and risks arising from these deposits.
2020 2019
26.2 The interest rate profile of the interest bearing deposits is as follows: (% per annum)
Foreign central banks 0.51 to 2.61 2.03 to 3.00

International organisations 3.00 to 4.53 3.00 to 4.53
Foreign government 3.00 3.00
Others 0.17 to 2.40 1.98 to 2.51
26.3 These are interest free and represent amounts kept in separate special accounts to meet forthcoming foreign currency debt
repayment obligations of the Government of Pakistan.
26.4 These represent rupee counterpart of the foreign currency loan disbursements received from various international financial
institutions on behalf of the Government and credited to separate deposit accounts in accordance with the instructions of the
GoP.
Note 2020 2019

27 PAYABLE TO THE INTERNATIONAL MONETARY FUND --------------- (Rupees in '000) --------------
Borrowings under:
- fund facilities 27.1 & 27.3 816,542,992 924,568,518
- allocation of SDRs 27.2 229,401,334 225,495,788
1,045,944,326 1,150,064,306
Current account for administrative charges 52 47
1,045,944,378 1,150,064,353
27.1 The IMF provides financing to its member countries from general resources account (GRA) held in its general department.
GRA credit is normally governed by the IMF’s general lending policies (also known as credit tranche policies), which provide
financing for balance of payments (BoP) and budgetary support needs.
Under GRA financing, the IMF granted Extended fund facility (EFF) amounting to SDR 4,393 million in FY 2013-14, having
repayment period of 4½ – 10 years, with repayments in twelve equal semi-annual instalments. A total amount of SDR 4,393
million has been disbursed under twelve tranches of EFF. The repayment under this facility started from March 2018 and will
continue till September 2026. Repayments made during the year amounted to SDR 540 million (2019: SDR 270 million) in 16
different tranches (2019: 8 tranches)
27.2 This represents amount payable against allocation of SDRs. A charge is levied by the IMF on SDR allocation of the Bank at
weekly interest rate applicable on daily product of SDR.
Note 2020 2019

27.3 Interest profile of amount payable to the IMF is as under: (% per annum)
Fund facilities 27.3.1 1.05 to 2.03 1.89 to 2.16
27.3.1 The IMF levies a basic rate of interest (charges) on loans based on SDR interest rate and imposes surcharges depending on
the amount and maturity of the loan and the level of credit outstanding. Interest rates are determined by the IMF on weekly
basis. Charges are, however, payable on quarterly basis.
Note 2020 2019

28 OTHER LIABILITIES --------------- (Rupees in '000) --------------
Local Currency
Provision against overdue mark-up 28.1 11,886,685 11,012,018
Special reserve provision under FIIP 10,245,290 9,140,395
Remittance clearance account 4,096,502 1,591,851
Exchange loss payable under exchange risk coverage scheme 477,713 563,869
Dividend payable 28.2 10,000 -
Unrealised loss on derivative financial instruments - net 22,298,736 112,862,311
Other accruals and provisions 28.3 41,018,769 33,656,895
Others 9,497,049 8,047,395
99,530,744 176,874,734
226
28.1 This represents suspended mark-up which is recoverable from the Government of Bangladesh (former East Pakistan) subject
to the final settlement between the governments of Pakistan and Bangladesh.
28.2 This represent dividend payable on shares held by the Government of Pakistan and government controlled entities amounting
to Rs. 10 million (2019: NIL).
Note 2020 2019

--------------- (Rupees in '000) --------------
28.3 Other accruals and provisions
Agency commission 15,505,814 14,538,592

Provision for employees' compensated absences 42.7.9 5,321,424 3,019,130
Provision for other doubtful assets 28.3.1 13,525,632 11,162,564
Other provisions 28.3.2 2,845,378 2,850,288
Others 3,820,521 2,086,321
41,018,769 33,656,895
28.3.1 Provision for other doubtful assets
Provision against assets held with / receivable from the Government of

India and the Reserve Bank of India
- issue department 11,943,175 9,580,107
- banking department 40,483 40,483
11,983,658 9,620,590
Provision against assets receivable from the Government of Bangladesh
- issue department - -
- banking department 28.4 1,541,974 1,541,974
1,541,974 1,541,974
28.3.1.1 13,525,632 11,162,564
28.3.1.1 Movement of provisions for other doubtful assets
Opening balance 11,162,564 8,235,135

Appreciation relating to gold reserves held by
the Reserve Bank of India 2,405,211 2,471,387
Closing balance 13,525,632 11,162,564
28.3.2 This represent provision against home remittance amounting to Rs. 260.363 million (2019: Rs. 260.363 million), specific
claims pertaining to provision made against claims under arbitration amounting to Rs. 1,600 million (2019: Rs. 1,600 million)
and other provision made in respect of various litigations and claims against the Bank amounting to Rs. 985.02 million (2019:
Rs. 989.92 million).
28.4 This includes liability maintained against balances due from the Government of Bangladesh amounting to Rs. 778.399 million
(2019: Rs. 778.399 million).
Note 2020 2019

--------------- (Rupees in '000) --------------
29 DEFERRED LIABILITY - UNFUNDED STAFF
RETIREMENT BENEFITS
Pension 23,868,103 19,235,767

Gratuity scheme 90,324 60,967
Benevolent fund scheme 393,081 285,915
Post retirement medical benefits 9,506,824 9,052,574
Six months post retirement facility 694,630 542,990
42.7.3 34,552,962 29,178,213
Provident fund scheme 183,113 205,170
34,736,075 29,383,383
227
30 SHARE CAPITAL
2020 2019 2020 2019

--------------- (Number of shares) -------------- --------------- (Rupees in '000) --------------
Issued, subscribed and

paid-up capital
1,000,000 1,000,000 Fully paid-up ordinary shares of Rs. 100 each 100,000 100,000
Authorised share capital
1,000,000 1,000,000 Ordinary shares of Rs. 100 each 100,000 100,000
The shares of the Bank are held by the Government of Pakistan and certain Government controlled entities except for 200
shares held by the Central Bank of India (held by Deputy Custodian Enemy Property, Banking Policy and Regulations
Department, State Bank of Pakistan) and 500 shares held by the State of Hyderabad.
31 RESERVES
31.1 Reserve fund
This represents appropriations made out of the annual profits of the State Bank of Pakistan in accordance with the provisions
of the State Bank of Pakistan Act, 1956.
31.2 The reserves for acquisition of PSPC
This represents reserves against the Bank's exposure in PSPC.
31.3 Reserve for building up share capital
The Board of Directors has approved appropriation of Rs.67.673 billion for building up of share capital.
31.4 Other funds
This represents appropriations made out of the annual profits of the Bank in accordance with the provisions of the State Bank
of Pakistan Act, 1956.
32 UNREALISED APPRECIATION ON GOLD RESERVES Note 2020 2019

HELD BY THE BANK --------------- (Rupees in '000) --------------
Opening balance 464,180,641 311,313,769

Appreciation for the year due to revaluation 7 148,822,917 152,866,872
613,003,558 464,180,641
33 CONTINGENCIES AND COMMITMENTS
33.1 Contingencies
a) Contingent liability in respect of guarantees given on behalf of:

Federal Government 33.1.1 13,459,912 16,387,061
Federal Government owned / controlled bodies and authorities 8,150,080 9,094,341
21,609,992 25,481,402
b) Other claims against the Bank not acknowledged as debts 33.1.2 20,202 86,826
c) In addition to the above claims, there are several other lawsuits / investigation filed by various parties as a result of the
regulatory actions / investigations taken by the Bank in its capacity as regulator and banker to the government, which the
Bank is currently contesting in various courts of laws / forum. The management of the Bank believes that the Bank has
reasonable position in respect of these litigations and accordingly no provision for any liability may be needed in these
unconsolidated financial statements.
33.1.1 Above guarantees are secured by counter guarantees from the Government of Pakistan.
33.1.2 These represent various claims filed against the Bank's role as a regulator and certain other cases.
228
Note 2020 2019

33.2 Commitments --------------- (Rupees in '000) --------------
33.2.1 Foreign currency forward and swap contracts - sale 1,134,906,714 1,724,182,418
33.2.2 Foreign currency forward and swap contracts - purchase 177,598,187 524,896,291
33.2.3 Futures - sale 9,323,533 6,478,867
33.2.4 Futures - purchase 9,056,126 8,000,504
33.2.5 Capital Commitments 33.2.5.1 484,591 353,753
33.2.5.1 This represent amounts committed by the Bank to purchase assets from successful bidders.
33.2.6 The Bank has a commitment to extend equivalent PKR of CNY 20,000 million (Rs. 475.138 million) (2019: CNY 20,000
million (Rs.466.280 million)) to Peoples Bank of China under bilateral currency swap agreement as disclosed in note 24.1 to
these unconsolidated financial statements.
33.2.7 The Bank has made commitments to extend advance under ways and means limits to the provincial governments of Pakistan,
Government of Azad Jammu and Kashmir and Gilgit-Baltistan Administration Authority in the normal course of its operations.
The unutilised limits as on June 30, 2020 amounted to Rs. 7,500 million (2019: Rs. 76,900 million).
Effective from June 29, 2020, the extension of direct credit by the Bank to provincial governments has been taken over by the
Federal Government and the Bank's commitment to provide ways and means advance to provincial governments is
withdrawn.
In case the Government of Azad Jammu and Kashmir and Gilgit-Baltistan Administration Authority exceed their respective
ways and means limits, the Bank charges a penal rate of 4% over and above the normal rate of return on the amount
exceeding the ways and means limit.
34 DISCOUNT, INTEREST / MARK-UP AND / Note 2020 2019

OR PROFIT EARNED ON FINANCIAL ASSETS --------------- (Rupees in '000) --------------
At amortised cost
Discount, interest / mark-up on government transactions:
- Government securities 1,047,999,770 568,337,040
- Federal Government scrips 82,200 82,200
- Loans and advances to and current accounts of governments 34.1 534,618 358,435
Securities purchased under agreement to resale 128,764,269 43,833,298
Interest income on preference shares 4,224,784 4,209,078
Return on loans and advances to financial institutions 12,837,164 11,643,681
Foreign currency deposits 13,603,153 16,084,959
Profit on Sukuks purchased under Bai Muajjal agreement 14,398 142,202
Others 252,897 833,123
1,208,313,253 645,524,016
Fair value through profit or loss
Foreign currency securities 10,058,650 10,943,995
2020 2019
34.1 Interest profile on loans and advances to facilities are as under: (% per annum)
Mark-up on facility 8.41 to 13.80 6.83 to 13.13
Additional mark-up (where ways and means facility limit is exceeded) 4 4
2020 2019
35 INTEREST / MARK-UP EXPENSE --------------- (Rupees in '000) --------------
Deposits 29,581,779 15,443,987
Interest on bilateral currency swap 20,560,492 21,817,682
Interest on special drawing rights 13,718,133 18,812,906
Securities sold under agreement to repurchase 1,499,607 47,978,340
Profit on Sukuks purchased under Bai Muajjal agreement 6,728,246 4,636,357
Charges on allocation of special drawing rights of the IMF 1,255,045 2,070,227
73,343,302 110,759,499
229
Note 2020 2019

--------------- (Rupees in '000) --------------
36 COMMISSION INCOME
Market treasury bills 36.1 2,503,164 2,870,683

Management of public debts 36.1 1,594,705 731,831
Prize bonds and national saving certificates 36.1 543,056 526,374
Draft / payment orders 6,793 7,456
Others 70 52
4,647,788 4,136,396
36.1 These represent commission income earned from services provided to the Federal Government.
Note 2020 2019

37 EXCHANGE GAIN / (LOSS) - NET --------------- (Rupees in '000) --------------
Gain / (loss) on:

- foreign currency placements, deposits, securities and
other accounts - net 83,567,128 (233,065,048)
- IMF fund facilities (10,474,773) (232,359,891)
- Special drawing rights of the IMF (6,682,595) (40,486,086)
66,409,760 (505,911,025)
38 OTHER OPERATING INCOME - NET
Penalties levied on banks and financial institutions 3,933,387 2,033,174

License / credit information bureau fee recovered 1,682,274 951,784
Gain / (loss) on disposal of investment - net:
- local - at fair value through profit or loss 246,596 186,113
- foreign - at fair value through profit or loss 673,692 (2,552,143)
920,288 (2,366,030)
Gain on remeasurement of securities
at fair value through profit or loss 1,223,141 3,748,571
Others 146,079 24,341
7,905,169 4,391,840
39 OTHER INCOME - NET
Loss on disposal of property, plant and equipment (376) (145,109)

Liabilities and provisions written back - net 25,946 7,493
Grant income under foreign assistance program 173,726 61,971
Income from subsidiary 39.1 69,340 54,379
Others 39.2 113,558 134,662
382,194 113,396
39.1 This represents income of a subsidiary - SBP Banking Services Corporation transferred to the Bank in accordance with the
arrangements mentioned in note 42.5 to these unconsolidated financial statements.
39.2 These include service charges at the rate of 0.12% of the total value of re-issuable cash deposited by various banks with SBP
Banking Services Corporation field offices and National Bank of Pakistan's chest branches.
230
40 BANKNOTES' PRINTING CHARGES
Banknotes printing charges are paid to Pakistan Security Printing Corporation (Private) Limited (a wholly owned subsidiary of
the Bank) at agreed rates under specific arrangements.
41 AGENCY COMMISSION
Agency commission is mainly payable to National Bank of Pakistan (NBP) under an agreement for providing banking services
to Federal and Provincial Governments as an agent of the Bank. Furthermore, certain portion of the agency commission also
pertains to Bank of Punjab (BOP), which was appointed as agent of the Bank in March 2016, to collect Government of
Punjab's taxes and receipts.
Note 2020 2019

--------------- (Rupees in '000) --------------
42 GENERAL ADMINISTRATIVE AND OTHER EXPENSES

Retirement benefits and employees' compensated absences 42.1 & 42.7.4 7,208,632 3,621,190
Insurance 56,241 53,608
Depreciation 18.1 1,727,442 2,117,217
Fund managers / custodian expenses 298,246 346,315
Postages, telegram / telex and telephone 238,157 205,409
Training 42.2 224,904 274,507
Board committee expenses 11,541 11,000
Recruitment charges 4,924 10,525
Others 250,054 280,224
15,947,753 12,233,434
Expenses allocated by:

SBP Banking Services Corporation 42.3 9,864,384 6,487,836
9,864,384 6,487,836
Expenses reimbursed to:
SBP Banking Services Corporation 42.4 8,249,267 8,060,641
8,249,267 8,060,641
34,061,404 26,781,911
42.1 This includes an amount relating to defined contribution plan aggregating Rs. 310.36 million (2019: Rs. 255.93 million) and
employee compensated absences amounting to Rs. 2,627.653 million (2019: Rs. 203.167 million).
42.2 This includes Rs 211.455 million relating to NIBAF representing reimbursement of training expenses relating to employees of
the Bank.
2020 2019
--------------- (Rupees in '000) --------------
42.3 Expenses allocated by SBP Banking Services Corporation - a subsidiary
Retirement benefits and employees' compensated absences 9,598,953 6,174,970

Credit loss allowance (29) 121
9,864,384 6,487,836
231
42.4 Expenses reimbursed to SBP Banking Services Note 2020 2019

Corporation - a subsidiary ------(Rupees in '000)------

Insurance 21,761 17,905
Passages, rent and recreation allowance 318,520 293,380
Fuel 5,730 4,523
Conveyance 18,826 21,127
Postage and telephone 17,359 17,521
Training 14,670 100,411
Remittance of treasure 180,119 174,077
Bank guards' charges 209,879 198,601
Uniforms 35,086 34,436
Expenses to be reimbursed to National Institute of Banking and Finance
(Guarantee) Limited 201,008 -
Others 293,757 337,601
8,249,267 8,060,641
42.5 SBP Banking Services Corporation (the Corporation), a wholly owned subsidiary of the Bank, carries out certain functions and
activities principally relating to public dealing on behalf of the Bank and incurs administrative costs in this respect.
Accordingly, under mutually agreed arrangements, all of the above costs have been reimbursed to or allocated by the
Corporation while profit of the Corporation for the year ended June 30, 2020, as mentioned in note 39.1 to these
unconsolidated financial statements, has also been transferred to the Bank.
42.6 Auditors' remuneration 2020 2019

A. F.
EY Ford
KPMG Ferguson & Total KPMG Total
Rhodes
Co.
-------------------------------- (Rupees in '000) ----------------------------------
State Bank of Pakistan
Audit fee 4,285 4,285 8,570 3,241 3,241 6,482
Out of pocket expenses 715 715 1,430 537 537 1,074
Sindh Sales Tax on services 400 400 800 302 302 604
5,400 5,400 10,800 4,080 4,080 8,160
SBP Banking Services Corporation
Audit fee 3,570 3,570 7,141 2,699 2,699 5,398
Out of pocket expenses 1,430 1,430 2,859 1,079 1,079 2,158
Sindh Sales Tax on services 400 400 800 302 302 604
5,400 5,400 10,800 4,080 4,080 8,160
10,800 10,800 21,600 8,160 8,160 16,320
42.7.1 During the year the actuarial valuations of the defined benefit obligations were carried out under the projected unit credit
method using the following significant assumptions:
2020 2019
- discount rate for year end obligation 9.25% p.a 14.25% p.a
- salary increase rate 14.00% p.a 15.00% p.a
- pension indexation rate 7.25% p.a 8.50% p.a
- medical cost increase rate 9.25% p.a 14.25% p.a
- petrol price increase rate (where applicable) 14.00% p.a 15.00% p.a
- personnel turnover 6.51% p.a 6.40% p.a
- normal retirement age 60 Years 60 Years
Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and experience
in Pakistan. The rates assumed are based on the adjusted SLIC 2001 - 2005 mortality tables with 1 year setback.
232
42.7.2 Through its defined benefit plan, the Bank is exposed to a number of risks, the most significant of which are detailed below:
Discount rate risk
The risk of changes in discount rate, since discount rate is based on corporate / government bonds, any decrease in bond
yields will increase plan liabilities.
Salary increase / inflation risk
The risk that the actual salary increase is higher than the expected salary increase, where benefits are linked with final
salary at the time of cessation of service, is likely to have an impact on liability.
Pension Increase
The risk that the actual pension increase is higher than the expected, where benefits are being paid in form of monthly
pension, is likely to have an impact on liability.
Mortality risk
The risk that the actual mortality experience is lighter than that of expected i.e. the actual life expectancy is longer from
assumed.
Withdrawal risk
The risk of actual withdrawals experience may differ from that assumed in the circulation.
42.7.3 Change in present value of defined benefit obligation
2020
Post Six months
Benevolent
Pension fund Total
scheme
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
Present value of defined benefit obligation July 01, 2019 19,235,767 60,967 9,052,574 285,915 542,990 29,178,213
Current service cost 273,656 8,645 188,866 1,789 38,562 511,518
2,818,738 17,107 1,434,595 38,944 114,384 4,423,768
Benefits Paid (2,751,086) (3,168) (621,239) (50,351) (21,812) (3,447,656)

Liability Transferred to SBP Banking Service Corporation
- a subsidiary - - - - - -
Remeasurements:
experience adjustments 4,564,684 15,418 (359,106) 118,573 59,068 4,398,637
4,564,684 15,418 (359,106) 118,573 59,068 4,398,637
Present value of defined benefit obligation as on June 30, 2020 23,868,103 90,324 9,506,824 393,081 694,630 34,552,962
2019
Post Six months
Pension Total
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
Present value of defined benefit obligation July 01, 2018 22,486,289 52,919 7,548,086 384,472 493,134 30,964,900
Interest cost on defined benefit obligation 1,940,670 4,679 661,379 33,001 43,663 2,683,392
2,230,174 10,316 815,731 36,349 78,320 3,170,890
Benefits Paid (1,846,585) (1,856) (398,869) (35,586) (15,970) (2,298,866)
Liability Transferred to SBP Banking Service Corporation
- a subsidiary - - (6,919) (178) (1,447) (8,544)
Remeasurements: -
assumptions (4,806,367) (2,274) 243,971 (97,204) (10,514) (4,672,388)
experience adjustments 1,172,256 1,862 850,574 (1,938) (533) 2,022,221
(3,634,111) (412) 1,094,545 (99,142) (11,047) (2,650,167)
Present value of defined benefit obligation as on June 30, 2019 19,235,767 60,967 9,052,574 285,915 542,990 29,178,213
233
42.7.3.1 The break-up of remeasurements recognised during the period in the other comprehensive income are as follows:
Remeasurements recognised in the other comprehensive income
2020
Post Six months

Benevolent
Pension fund Total
scheme
benefits benefits
\------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------

- Experience adjustments (4,564,684) (15,418) 359,106 (118,573) (59,068) (4,398,637)
(4,564,684) (15,418) 359,106 (118,573) (59,068) (4,398,637)
Allocated by SBP Banking Services Corporation - a subsidiary* (6,194,573) (1,689) 67,163 (126,747) (41,946) (6,297,792)
2019
Post Six months
Pension Total
benefits benefits
\------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
- Actuarial gains / (losses) from changes in financial assumptions 4,806,367 2,274 (243,971) 97,204 10,514 4,672,388
- Experience adjustments (1,172,256) (1,862) (850,574) 1,938 533 (2,022,221)
3,634,111 412 (1,094,545) 99,142 11,047 2,650,167
Allocated by SBP Banking Services Corporation - a subsidiary* 6,555,808 21 (701,087) 174,670 9,498 6,038,910
*Under mutually agreed arrangements, the amount has been allocated to the State Bank of Pakistan.
42.7.4 Amount recognised in the unconsolidated profit and loss account
2020
Post Six months

Benevolent
Pension fund Total
scheme
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------

2,818,738 17,107 1,434,595 38,944 114,384 4,423,768
2019
Post Six months
Pension Total
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------

Contribution made by employees - - - (3,521) - (3,521)
2,230,174 10,316 815,731 32,828 78,320 3,167,369
234
42.7.5 Movement of present value of defined benefit obligation
2020
Post retirement Six months post
Benevolent
Pension Gratuity scheme medical retirement Total
fund scheme
benefits facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
Net recognised liabilities at July 1, 2019 19,235,767 60,967 9,052,574 285,915 542,990 29,178,213
Amount recognised in the unconsolidated
Remeasurements 4,564,684 15,418 (359,106) 118,573 59,068 4,398,637
Liability Transferred to SBP Banking Service
Corporation - a subsidiary - - - - - -
Net recognised liabilities at June 30, 2020 23,868,103 90,324 9,506,824 393,081 694,630 34,552,962
2019
Post retirement Benevolent fund Six months post

Pension Gratuity scheme Total
medical benefits scheme retirement facility
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------
Net recognised liabilities at July 1, 2018 22,486,289 52,919 7,548,086 384,472 493,134 30,964,900
Amount recognised in the unconsolidated
profit and loss account 2,230,174 10,316 815,731 36,349 78,320 3,170,890
Remeasurements (3,634,111) (412) 1,094,545 (99,142) (11,047) (2,650,167)
Liability Transferred to SBP Banking Service
Corporation - a subsidiary - - (6,919) (178) (1,447) (8,544)
Employees contribution / amount transferred - - - - - -
Net recognised liabilities at June 30, 2019 19,235,767 60,967 9,052,574 285,915 542,990 29,178,213

------(Rupees in '000)------
Pension
Discount rate 1% (1,716,188) 1,994,244
Future pension increase 1% 1,537,865 (1,338,766)
Gratuity
Discount rate 1% (8,268) 9,454
Post retirement medical benefit scheme

Discount rate 1% (983,039) 1,213,502
Future Post-Retirement medical cost increase 1% 1,160,138 (945,431)
Benevolent
Discount rate 1% (20,824) 23,287
Six months post retirement facility

Discount rate 1% (50,537) 56,913
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. When
calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value
of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been
applied as when calculating the liability of all schemes recognised within the unconsolidated balance sheet.
235
42.7.7 Duration of defined benefit obligation

Post
Six months
Gratuity retirement Benevolent
Pension post retirement
scheme medical fund scheme
facility
benefit
Weighted average duration of the defined
benefit obligation 9 Years 10 Years 12 Years 6 Years 8 Years
42.7.8
Estimated expenses to be charged to the unconsolidated profit and loss account for the year ending June 30, 2021
Based on the actuarial advice, the management estimates that charge in respect of defined benefit plans for the year ending
June 30, 2021 would be as follows:
Post
Six months
Gratuity retirement Benevolent
Pension post retirement Total
scheme medical fund scheme
facility
benefit
------------------------------------------------------------------(Rupees in '000)------------------------------------------------------------------

Amount chargeable to the unconsolidated
42.7.9 Employees' compensated absences
The Bank's liability for employees' compensated absences determined through an actuarial valuation carried out under the
Projected unit credit method amounted to Rs. 5,321.424 million (2019: Rs. 3,019.130 million). An amount of Rs. 2,627.653
million (2019: Rs. 203.167 million) has been charged to the unconsolidated profit and loss account in the current period based
on the actuarial advice. Expected charge in respect of the scheme for the year ending June 30, 2021 would be Rs 868.840
million. The benefits paid during the year amounted to Rs. 325.359 million (2019: Rs 111.516 million). In case of 1% increase /
decrease in discount rate the net charge for the year would decrease / increase by Rs. 332.103 million and Rs. 373.057 million
respectively and the net liability would also be affected by the same amount. In case of 1% increase / decrease in salary rate
the net charge for the year would increase / decrease by Rs. 380.605 million and Rs. 345.742 million respectively and the net
liability would also be affected by the same amount. The weighted average duration for the liability against employee's
compensated absences is 7 years.
43 (REVERSAL) / CHARGE FOR CREDIT LOSS ALLOWANCE ON FINANCIAL INSTRUMENTS - NET
The following table reconciles the expected credit losses allowance for the year ended June 30, 2020 by classes of financial
instruments:
2020
Securities
Foreign Loans,
Current purchased
currency Investments - advances and
accounts of under Total
accounts and Local bills of
governments agreement to
investments exchange
resell
------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------
As at June 30, 2019 12,995 78,953 2,203,678 - 27 2,295,653

Reversals during the year (12,907) - (17,919) - (20) (30,846)
As at June 30, 2020 88 78,953 2,185,759 - 7 2,264,807
2019
Foreign Loans, Securities

Current
currency Investments - advances and purchased under
accounts of Total
accounts and Local bills of agreement to
governments
investments exchange resell
------------------------------------------------------------------------ (Rupees in '000) ------------------------------------------------------------------------
As of June 30, 2018 (under IAS 39) - 817,388 2,130,236 - - 2,947,624

Adjustments on initial recognition of IFRS 9 66 (738,435) 46,761 - 15 (691,593)
As of July 1, 2018 (under IFRS 9) 66 78,953 2,176,997 - 15 2,256,031
Charge during the year 12,929 - 26,681 - 12 39,622
As at June 30, 2019 12,995 78,953 2,203,678 - 27 2,295,653
236
44 PROFIT FOR THE YEAR AFTER NON-CASH ITEMS Note 2020 2019
AND OTHER ITEMS --------------- (Rupees in '000) --------------
Profit/(loss) for the year 1,159,930,848 (846,146)

Adjustments for:
Depreciation 18.1 & 42.3 1,992,902 2,429,962
(Reversal)/Charge of Credit loss on financial instruments (30,846) 26,693
Provision / (reversal) for / write-off:
- retirement benefits and employees' compensated absences 16,807,585 9,796,160
(Gain) / loss on disposal of property, plant and equipment 39 376 145,109
(Gain) / loss on disposal of financial assets (673,316) -
Dividend income (400,000) (2,390,000)
Effect of exchange (gain) / loss on assets and liabilities (135,463,963) 184,496,821
1,042,240,027 194,241,985
45 CASH AND CASH EQUIVALENTS
Local currency - coins 1,028,584 1,039,138

Foreign currency accounts and investments 1,843,398,267 1,374,793,536
Earmarked foreign currency balances 62,010,317 72,702,673
Special Drawing Rights of the International Monetary Fund 29,537,127 55,461,054
1,935,974,295 1,503,996,401
46 RELATED PARTY TRANSACTIONS
The Bank enters into transactions with related parties in its normal course of business. Related parties include the Federal
Government as major shareholder of the Bank, Provincial Governments, Government of Azad Jammu and Kashmir, Gilgit-
Baltistan Administration Authority, government controlled enterprises / entities, retirement benefit plans, directors and key
management personnel of the Bank.
46.1 National Institute of Banking and Finance (Guarantee) Limited (the institute) 2020 2019
--------------------- Rupees in '000 ---------------------
Balances at the year end
Payable against training programs 303,256 33,049
Current account with the Institute 116,649 105,235
Transactions during the year

Training expense 211,455 271,257
Payments / (Receipts) 74,759 293,094
Grant during the year - 70,546
46.2 Pakistan Security Printing Corporation (Private) Limited
Balances at the year end

4E+05 Payable against printing charges 1,811,854 1,262,615
2E+05 Receivable against salaries 10,822 79,691
Transactions during the year

Banknotes printing charges 15,991,886 13,755,031
46.3 Governments and related entities
The Bank is acting as an agent of the Federal Government and is responsible for functions conferred upon as disclosed in
note 1 to these financial statements. Balances outstanding from and transactions with the Federal and Provincial
Governments and related entities not disclosed elsewhere in the financial statements are given below:
2020 2019
Transactions during the year --------------------- Rupees in '000 ---------------------
- Creation of MRTBs - 19,225,370,000
- Creation of PIBs - 7,187,000,000
- Retirement / rollover of MRTBs 569,000,000 22,250,040,000
- Commission income from sale of Market Treasury Bills, issuance of prize bonds, National Saving Certificates and
management of public debt (refer note 36.1)
237
46.4 Remuneration to key management personnel
Key management personnel of the Bank include members of the Board of Directors of the Bank, Governor of the Bank,
Deputy Governors of the Bank and other executives of the Bank who have responsibility for planning, directing and controlling
the activities of the Bank. Fee of the non-executive members of the Board of Directors is determined by the Board. According
to section 10 of the State Bank of Pakistan Act, 1956, the remuneration of the Governor is determined by the President of
Pakistan. Deputy governors are appointed and their salaries are fixed by the Federal Government. Details of remuneration of
key management personnel of the Bank are as follows:
2020 2019
--------------- (Rupees in '000) --------------
Short-term employee benefit 787,130 471,777
Post-employment benefit 86,871 62,525
Loans disbursed during the year 44,174 123,765
Loans repaid during the year 120,645 109,194
Directors' fees 11,780 11,904
Number of key management personnel 19 19
Short-term benefits include salary and benefits, medical benefits and free use of the Bank maintained cars in accordance with
their entitlements. Post employment benefits include gratuity, pension, benevolent fund, post retirement medical benefits, six
months post retirement facility and contributory provident funds.
46.5 Subsidiaries of the Bank
Material transactions with the subsidiaries have been disclosed in these unconsolidated financial statements in note 39.1,
39.2 and 42. The subsidiaries of the Bank and their primary activities are given in note 1.3 to these unconsolidated financial
statements.
46.6 Associated undertakings of the Bank
46.6.1 SICPA Inks Pakistan (Private) Limited (SICPA) - associated undertaking
SICPA is a joint venture of SICPA SA, Switzerland and PSPC, incorporated in 1995. The company operates a facility in
Karachi for manufacturing security inks for printing of all denominations of currency notes and other value documents, such
as, passports, postage stamps and stamp papers, etc.
46.6.2 Security Papers Limited (SPL) - associated undertaking
SPL is an associated company of PSPC. It was established in 1965. It became a joint venture company of Iran, Turkey and
Pakistan in 1967, under the protocol of regional corporation of development (now economic corporation organisation) in 1967.
SPL is engaged in manufacturing of paper required by PSPC for printing banknotes, prize bonds, non-judicial stamp paper,
share certificates and watermarked certificate / degree papers for various educational institutions of Pakistan.
47 RISK MANAGEMENT POLICIES
The Bank is primarily subject to interest / mark-up rate, credit, currency and liquidity risks. The policies and procedures for
managing these risks are outlined in notes 47.1 to 47.9 to these unconsolidated financial statements. The Bank has designed
and implemented a framework of controls to identify, monitor and manage these risks. The senior management is responsible
for advising the Governor on the monitoring and management of these risks.
47.1 Credit risk management
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to
incur a financial loss. Credit risk in the Bank's portfolio is monitored, reviewed and analysed by the appropriate officials and
the exposure is controlled through counterparty and credit limits. Counterparties are allocated to a particular class based
mainly on their credit rating. Foreign currency placements are made in approved currencies and government securities. Loans
and advances to scheduled banks and financial institutions are usually secured either by government guarantees or by
demand promissory notes. Equity exposure based on their nature are not exposed to credit risk. Geographical exposures are
controlled by country limits and are updated as and when necessary with all limits formally reviewed on a periodic basis. The
Bank's exposure to credit risk associated with foreign investments is managed by monitoring compliance with investment limits
for counterparties. The Bank's credit risk mainly lies with exposure towards government sector and financial institutions.
Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on
the unconsolidated balance sheet.
238
47.1.2 Impairment assessment
The references below show where the Bank’s impairment assessment and measurement approach is set out in this report. It
should be read in conjunction with the summary of significant accounting policies.
47.1.3 Definition of default
The Bank defines a financial instrument as in default when the financial asset is credit - impaired and meets one or more of
the following criteria:
Quantitative criteria
The borrower is more than 90 days past due on its contractual payments are considered default by the Bank.
Qualitative criteria
- a breach of contract, such as default or past due event;
- the lenders of the counterparty have granted a concession to the counterparty for economic or contractual reasons;
- relating to the counterparty’s financial difficulty that the lender would not otherwise consider;
- the likelihood or probability that the counterparty will enter bankruptcy or other financial reorganisation; or
- the dissolution of an active market for that financial asset due to financial difficulties.
47.1.4 Credit rating and PD estimation process
The Bank's PD estimation process is based on the probability of default assigned to each counterparty according to their
external credit ratings and the related historical credit losses experience, adjusted for forward-looking information.
2020 2019
Internal rating External Rating
12 month PD 12 month PD
Performing
High grade 0.0000% 0.0000% Sovereign
High grade 0.0000%-0.0318% 0.0000%-0.0318% AAA
High grade 0.0318%-0.0751% 0.0318%-0.0751% AA+ to AA-
High grade 0.0751%-0.2334% 0.0751%-0.2334% A+ to A-
Standard grade 0.2334%-0.5574% 0.2334%-0.5574% BBB+ to BBB-
Standard grade 0.5574%-1.3393% 0.5574%-1.3393% BB+ to BB-
Standard grade 1.3393%-3.3597% 1.3393%-3.3597% B+ to B-
Rating below standard 3.3597%-9.6562% 3.3597%-9.6562% CCC+ to CCC-
Rating below standard 9.6562%-100% 9.6562%-100% CC
Non performing
Individually impaired 100% 100%
47.1.5 Exposure at default
The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment
calculation, addressing both the client’s ability to increase its exposure while approaching default and potential early
repayments too. To calculate the EAD for a stage 1 financial instruments, the Bank assesses the possible default events
within 12 months for the calculation of the 12mECL. For stage 2 and stage 3 the exposure at default is considered for events
over the lifetime of the instruments. The Bank determines EAD by modelling the range of possible exposure outcomes at
various points in time, corresponding the multiple scenarios. PDs are then assigned to each economic scenario based on the
outcome of the Bank’s models.
47.1.6 Loss given default
Loss given default represents the Bank's expectation of the extent of loss on a defaulted exposure. LGD varies by type of
counterparty, type and seniority of claim and availability of collateral or other credit support.
47.1.7 Significant increase in credit risk
The Bank considers a financial asset to have experienced a significant increase in credit risk when:
- credit rating falls below investment grade in case of investments made in financial assets, or
- the contractual payments are 30 days past due.
47.1.8 Collateral and other credit enhancements
To mitigate its credit risks on financial assets, the Bank seeks to use collateral, where possible. The collateral comes in
various forms, such as cash, securities, letters of credit / guarantees and demand promissory notes. The collaterals held
against financials assets of the Bank have been disclosed in their respective notes, where applicable.
239
47.2 Concentrations of risk
Concentration risk arises when a number of counterparties are engaged in similar business activities or have similar
economic features that would cause their ability to meet contractual obligations to be similarly effected by changes in
economic, political or other conditions. The Bank's significant concentrations arising from financial instruments at the
reporting date without taking any collateral held or other credit enhancements is shown below:
47.2.1 Geographical analysis
2020
Asia (other
Pakistan)
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------
Financial assets `
Foreign currency accounts and investments - 771,653,490 991,293,185 420,343,857 9,994,287 13,695,211 2,206,980,030
Earmarked foreign currency balance 62,010,317 - - - - 62,010,317
Monetary Fund - - 29,537,127 - - - 29,537,127
Securities purchased under agreement to resell 917,539,647 - - - - 917,539,647
Bangladesh - 13,141,164 - - - - 13,141,164
Other assets 6,252,653 8,160,701 3,305 6,225 - - 14,422,884
Total financial assets 9,219,419,180 795,247,514 1,020,861,172 420,350,082 9,994,287 13,695,211 11,479,567,446
2019
Asia (other
Pakistan)
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------
Financial assets
Foreign currency accounts and investments - 597,212,845 348,408,820 352,875,855 94 77,356,774 1,375,854,388
Earmarked foreign currency balance 72,702,673 - - - - 72,702,673
Monetary Fund - - 55,461,054 - - - 55,461,054
Bangladesh - 12,266,548 - - - - 12,266,548
Other assets 9,629,381 - 103,253 - - - 9,732,634
Total financial assets 9,384,264,847 611,813,696 404,000,126 352,875,855 94 77,356,774 10,830,311,392
The geographical analysis is based on composition of financial assets in the specific continents other than for Pakistan which
has been disclosed separately. All continents having significant composition have been presented separately while the
remaining have been clubbed under "Others".
240
47.2.2 Industrial analysis
2020
Banks &
national entities
institutions
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------
Financial assets
Foreign currency accounts and investments 1,269,465,668 385,876,467 - - 551,637,895 - 2,206,980,030
Monetary Fund - 29,537,127 - - - - 29,537,127
181507 Loans, advances and bills of exchange 327,949 - 85,686,655 - 697,696,790 11,866,752 795,578,146
Bangladesh 13,141,164 - - - - - 13,141,164
Other assets 12,349,274 9,531 53,625 - 1,041,808 968,646 14,422,884
2019
Banks &
national entities
institutions
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------
Financial assets
Foreign currency accounts and investments 425,771,043 242,471,231 - - 707,612,114 - 1,375,854,388
Monetary Fund - 55,461,054 - - - - 55,461,054
Loans, advances and bills of exchange 327,949 - 68,334,074 - 507,033,361 11,948,820 587,644,204
Bangladesh 12,266,548 - - - - - 12,266,548
Other assets 8,109,341 103,253 126,330 - 448,487 945,223 9,732,634
47.3 CREDIT EXPOSURE BY CREDIT RATING
The credit quality of financial assets is managed by the Bank using external credit ratings. The table below shows the credit
quality by class of assets for all financial assets that are neither past due nor impaired as at the reporting date and are
exposed to credit risk, based on the rating of external rating agencies. The Bank uses lower of the credit rating of Moody's,
Standard & Poor's and Fitch to categorise its financial assets in foreign currency accounts and investments. For domestic
financial assets credit rating of VIS and PACRA are used.
241
2020
(47.3.1) BBB
------------------------------------------------------------------------(Rupees in 000')-----------------------------------------------------------------------
Financial assets
investments 1,269,406,931 398,541,244 108,441,477 425,450,285 5,140,093 - - 2,206,980,030
Monetary Fund - - - - - - 29,537,127 29,537,127
arrangements - - - - - - 27,555 27,555
to resell - 244,674,800 464,483,712 199,225,964 6,846,463 2,308,708 - 917,539,647
Investments - local 7,327,843,272 68,120,503 9,128,446 2,088,455 - - - 7,407,180,676
Loans, advances and bills of exchange - 310,103,108 431,490,408 31,988,290 141,068 115,223 21,740,049 795,578,146
India - - - - 1,964,210 - - 1,964,210
Other assets 12,349,274 - 467,045 - - - 1,606,565 14,422,884
Total financial assets 8,702,795,484 1,021,439,655 1,014,011,088 658,752,994 14,132,287 15,524,642 52,911,296 11,479,567,446
2019
(47.3.1) BBB
------------------------------------------------------------------------(Rupees in 000')-----------------------------------------------------------------------
Financial assets
investments 1,177,140 660,969,824 64,310,345 637,190,089 264,911 11,942,079 - 1,375,854,388
Monetary Fund - - - - - - 55,461,054 55,461,054
arrangements - - - - - - 26,999 26,999
to resell - 523,385,265 233,372,228 20,924,775 - 5,235,887 - 782,918,155
Investments - local 7,816,047,732 53,850,807 - - - - 32,560,301 7,902,458,840
Loans, advances and bills of exchange - 235,255,045 289,604,403 27,647,659 90,608 19,047 35,027,442 587,644,204
India - - - - 2,006,354 - - 2,006,354
Other assets 8,211,659 262,440 495,563 98,658 - - 664,314 9,732,634
Total financial assets 7,927,378,747 1,476,065,078 588,514,637 683,534,121 10,488,794 28,709,680 114,445,702 10,830,311,392
47.3.1 Government securities and balances, pertaining to Pakistan, are rated as sovereign. The international rating of Pakistan is B
(as per Standards & Poor's).
47.3.2 The collateral held as security against financial assets to cover the credit risk are disclosed in the respective notes.
242
47.4 LIQUIDITY ANALYSIS WITH INTEREST / MARK-UP RATE RISK
47.4.1 Interest / mark-up rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market
interest / mark-up rates. The Bank has adopted appropriate policies to minimise its exposure to this risk.
2020

Sub-total Sub-total
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------

Financial assets
Non-derivative assets:
Foreign currency accounts and investments 1,509,074,108 130,627,178 1,639,701,286 566,621,706 307,161 566,928,867 2,206,630,153
Monetary Fund 29,537,127 - 29,537,127 - - - 29,537,127
Current accounts of governments 3,574,338 - 3,574,338 26,582,768 - 26,582,768 30,157,106
Investments - local 5,998,000,000 1,329,843,271 7,327,843,271 29,641,655 49,695,750 79,337,405 7,407,180,676
Assets held with the Reserve Bank of India - - - 1,964,210 - 1,964,210 1,964,210
Bangladesh - - - 13,141,164 - 13,141,164 13,141,164
Other assets - - - 13,954,810 1,029 13,955,839 13,955,839
9,001,533,665 1,660,255,830 10,661,789,495 735,704,911 81,256,118 816,961,029 11,478,750,524
Derivative assets
Foreign currency accounts and investments - net - - - 362,728 (12,851) 349,877 349,877
Other assets - - - 467,045 - 467,045 467,045
- - - 829,773 (12,851) 816,922 816,922
Grand total 9,001,533,665 1,660,255,830 10,661,789,495 736,534,684 81,243,267 817,777,951 11,479,567,446
Bills payable - - - 1,226,036 - 1,226,036 1,226,036
Current accounts of the governments* - - - 748,790,102 748,790,102 748,790,102
Current account with SBP Banking Services
Corporation - a subsidiary - - - 52,124,619 - 52,124,619 52,124,619
and Finance (Guarantee) Limited - a subsidiary - - - 186,607 - 186,607 186,607
Payable to Islamic banking institutions
against Bai Muajjal transactions 18,533,398 - 18,533,398 979,560 - 979,560 19,512,958
Payable to the International Monetary Fund 229,375,871 815,030,053 1,044,405,924 1,538,454 - 1,538,454 1,045,944,378
Other liabilities - 10,245,290 10,245,290 26,705,862 - 26,705,862 36,951,152
1,805,991,650 825,275,343 2,631,266,993 8,473,680,602 - 8,473,680,602 11,104,947,595
Other liabilities - - 22,298,736 - 22,298,736 22,298,736
1,805,991,650 825,275,343 2,631,266,993 8,495,979,338 - 8,495,979,338 11,127,246,331
On balance sheet gap (a) 7,195,542,015 834,980,487 8,030,522,502 (7,759,444,654) 81,243,267 (7,678,201,387) 352,321,115
Foreign currency forward and swap contracts

- sale - - - 1,134,906,714 - 1,134,906,714 1,134,906,714
purchase - - - 177,598,187 - 177,598,187 177,598,187
Futures - sale - - - 9,323,533 - 9,323,533 9,323,533
Off balance sheet gap (b) - - - 1,331,369,151 21,609,992 1,352,979,143 1,331,369,151
Total yield / interest risk sensitivity gap (a+b) 7,195,542,015 834,980,487 8,030,522,502 (9,090,813,805) 59,633,275 (9,031,180,530) (979,048,036)
Cumulative yield / interest risk sensitivity gap 7,195,542,015 8,030,522,502 16,061,045,004
* The Bank has the contractual right and intention to offset these balances against their respective non-interest bearing deposit balances. Mark-up on these balances is charged only when these
balances are in debit
243
2019

Sub-total Sub-total
---------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------

Financial assets
Non-derivatives assets:
Foreign currency accounts and investments 892,741,689 120,092,725 1,012,834,414 356,432,350 3,824,339 360,256,689 1,373,091,103
Monetary Fund 55,461,054 - 55,461,054 - - - 55,461,054
Current accounts of Governments 3,180,892 - 3,180,892 25,019,513 - 25,019,513 28,200,405
Investments - local - 7,246,985,402 7,246,985,402 569,062,328 86,411,110 655,473,438 7,902,458,840
Loans, advances and bills of exchange 372,117,616 163,810,398 535,928,014 51,677,784 38,406 51,716,190 587,644,204
Assets held with the Reserve Bank of India - - - 2,006,354 2,006,354 2,006,354
Bangladesh - - - 12,266,548 - 12,266,548 12,266,548
Other assets - - - 9,731,605 1,029 9,732,634 9,732,634
2,105,622,950 7,530,888,525 9,636,511,475 1,100,761,748 90,274,884 1,191,036,632 10,827,548,107
Derivatives assets
Foreign currency accounts and investments - - - 2,763,285 - 2,763,285 2,763,285
Grand total 2,105,622,950 7,530,888,525 9,636,511,475 1,103,525,033 90,274,884 1,193,799,917 10,830,311,392
Bills payable - - - 1,146,660 - 1,146,660 1,146,660
Current accounts of the Governments* - - - 1,101,513,930 - 1,101,513,930 1,101,513,930
Corporation - a subsidiary - - - 44,969,274 - 44,969,274 44,969,274
and Finance (Guarantee) Limited - a subsidiary - - - 105,235 - 105,235 105,235
Bai Muajjal transactions 119,769,544 - 119,769,544 4,640,688 - 4,640,688 124,410,232
Payable to International Monetary Fund 225,080,856 921,001,932 1,146,082,788 3,981,565 - 3,981,565 1,150,064,353
1,977,549,024 921,001,932 2,898,550,956 7,676,456,898 - 7,676,456,898 10,575,007,854
1,977,549,024 921,001,932 2,898,550,956 7,789,319,209 - 7,789,319,209 10,687,870,165
On balance sheet gap (a) 128,073,926 6,609,886,593 6,737,960,519 (6,685,794,176) 90,274,884 (6,595,519,292) 142,441,227
Foreign currency forward and swap contracts - sale - - - (1,838,743,608) - (1,838,743,608) (1,838,743,608)
purchase - - - 548,529,115 - 548,529,115 548,529,115
Futures - sale - - - (8,204,543) - (8,204,543) (8,204,543)
Off balance sheet gap (b) - - - (1,291,654,087) 25,481,402 (1,266,172,685) (1,266,172,685)
Total yield / interest risk sensitivity gap (a+b) 128,073,926 6,609,886,593 6,737,960,519 (5,394,140,089) 64,793,482 (5,329,346,607) 1,408,613,912
Cumulative yield / interest risk sensitivity gap 128,073,926 6,737,960,519 13,475,921,038
* The Bank has the contractual right and intention to offset these balances against their respective non-interest bearing deposit balances. Mark-up on these balances is charged only when these
balances are in debit
47.4.2 The effective interest / mark-up rate for the monetary financial assets and liabilities are mentioned in their respective
notes to the financial statements.
244
47.5 Interest rate risk
47.5.1 Cash flow interest rate risk
Cash flow interest rate risk is the risk of loss arising from changes in variable interest rates. The sensitivity analysis below
have been determined based on the exposure to interest rates for floating rate assets and liabilities. The analysis is prepared
assuming the amount of average assets and liabilities outstanding at the balance sheet date was outstanding for the whole
year.
If interest rates had been 10 basis points higher / lower and all other variables were held constant, the Bank's profit for the
year ended June 30, 2020 would increase / decrease by Rs 3,344.02 million (2019: Rs 1,749.27 million). This is mainly
attributable to the Bank's exposure to interest rates on its variable rate instruments.
47.5.2 Fair value interest rate risk
Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market
interest rates.
The Bank is exposed to fair value interest rate risk on its fixed income securities, classified as financial assets at fair value
through profit or loss and financial asset at fair value through other comprehensive income. To manage its fair value interest
rate risk arising from investments in these securities, the management adopts practices mentioned in note 47.9 to these
unconsolidated financial statements.
As at June 30, 2020, a 10 basis points shift in market value, mainly as a result of change in interest rates with all other
variables held constant, would result in profit for the year to increase by Rs 384.77 million (2019: Rs 198.79 million) or
decrease by Rs 386.18 million (2019: Rs 200.15 million) mainly as a result of a increase or decrease in the fair value of
fixed rate financial assets classified as financial asset at fair value through profit and loss.
47.6 Currency risk management
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
Foreign currency activities result mainly from the Bank's holding of foreign currency assets under its foreign reserves
management function and the overall level of these assets is determined based on the prevailing extent of credit and liquidity
risks. In order to avoid losses arising from adverse changes in the rates of exchange, the Bank's compliance with the limits
established for foreign currency positions is being regularly monitored by the management.
The Bank also holds from time to time, foreign currency assets and liabilities that arise from the implementation of domestic
monetary policies. Any foreign currency exposure relating to these implementation activities are hedged through the use of
foreign currency forwards, swaps and other transactions.
The Bank also enters into forward foreign exchange contracts with the commercial banks and financial institutions to hedge
against the currency risk on foreign currency transactions.
The sensitivity analysis calculates the effect of reasonably possible movement of the currency rate against Pak Rupee, with
all other variables held constant, on the unconsolidated profit and loss account and equity. If the Rupee had weakened /
strengthened 1 percent against the principal currencies to which the Bank had significant exposure as at June 30, 2020 with
all other variables constant profit for the year would have been Rs. 9,830.59 million higher / lower (2019: Rs. 14,255.59
million). Net foreign currency exposure of the Bank is as follows:
2020 2019
--------------- (Rupees in '000) --------------
US Dollar (295,354,414) (972,112,595)

Pound Sterling (77,327,599) (81,468,161)
Chinese Yuan 279,547,027 49,812,533
Euro (306,242,263) (345,499,790)
Japanese Yen (37,738,016) (83,450,003)
United Arab Emirates Dirham 709,707 3,109,629
Australian Dollar 10,799 16,052
Canadian Dollar 1,805 346,500
Others 332,068 3,686,836
(436,060,886) (1,425,558,999)
245
Net exposure in Special Drawing Rights (SDR) is allocated to its five basket currencies i.e. the US dollar, the Euro, the
Chinese Yuan, the Japanese Yen and the British pound sterling in the ratio of their percentage allocated by IMF for SDR
basket.
The composition of the Bank's financial instruments and the correlation thereof to different variables is expected to change
over time. Accordingly, the sensitivity analyses in note 47.6 and 47.7 prepared as of the reporting date are not necessarily
indicative of the effects on the Bank's unconsolidated profit and loss of future movements in different variables.
47.7 Price Risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors
specific to the individual financial instrument or its issuer or factors affecting all similar financial instruments traded in the
market.
The Bank is exposed to equity securities price risk because of investment in listed equity securities by the Bank classified as
at fair value through other comprehensive income. These investments are held as per the specific directives of the
Government of Pakistan in accordance with the provisions of the State Bank of Pakistan Act, 1956 and other relevant
statutes. Accordingly, price risk on listed equity securities can not be managed by the Bank.
In case of 5% increase or decrease in KSE 100 index on June 30, 2020, other comprehensive income would increase or
decrease by Rs. 644.941 million (2019: Rs. 655.904 million) and equity of the Bank would increase or decrease by the
same amount as a result of gains / (losses) on equity securities classified as fair value through OCI.
The analysis is based on the assumption that the equity index would increase or decrease by 5% with all other variables
held constant and all the Bank’s equity instruments move according to the historical correlation with the index. This
represents management's best estimate of a reasonable possible shift in the KSE 100 index. The composition of the Bank's
investment portfolio and the correlation thereof to the KSE index is expected to change over time. Accordingly, the sensitivity
analysis prepared as of June 30, 2020 is not necessarily indicative of the effect on the Bank's equity instruments of future
movements in the level of KSE 100 index.
47.8 Liquidity risk management
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with the
financial instruments. In order to reduce the level of liquidity risk arising out of the local currency activities, the Bank
manages the daily liquidity position of the banking system including advancing and withdrawal of funds from the system for
smoothening out daily peaks and troughs.
The risk arising out of the Bank's obligations for foreign currency balances or deposits is managed through available
reserves generated mainly from borrowings and open market operations. The maturity profile of Bank's financial assets and
financial liabilities is given in note 47.4.1 to these unconsolidated financial statements.
47.9 Portfolio risk management
The Bank has appointed external managers to invest a part of the foreign exchange reserves in international fixed income
securities. The external managers are selected after conducting a thorough due diligence by the Bank and externally hired
investment consultants and appointed after the approval of the Board. The mandates awarded to the managers require them
to outperform the benchmarks which are based on fixed income global aggregate indices. The benchmarks are customised
to exclude certain securities, currencies and maturities to bring it to an acceptable level of risk and within the Bank's
approved risk appetite. Managers are provided investment guidelines within which they have to generate excess returns
over the benchmark. Safe custody of the portfolio is provided through carefully selected global custodian who is independent
of the portfolio managers. The custodian also provides valuation, compliance, corporate actions and recovery and other
value added services which are typically provided by such custodian. The valuations provided by the custodian are
reconciled with the portfolio managers and recorded accordingly.
48 FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties
in an arm’s length transaction and is usually determined by the quoted market price. The following tables summarises the
carrying amounts and fair values of financial assets and liabilities:
246
Carrying value Fair value

2020 2019 2020 2019
---------------------------------------(Rupees in '000)---------------------------------------
Financial assets
Local currency - coins 1,028,584 1,039,138 1,028,584 1,039,138
Foreign currency accounts and investments 2,206,980,030 1,373,091,103 2,206,980,030 1,373,091,103
Earmarked foreign currency balances 62,010,317 72,702,673 62,010,317 72,702,673
Special drawing rights of the International Monetary Fund 29,537,127 55,461,054 29,537,127 55,461,054
under quota arrangements 27,555 26,999 27,555 26,999
Securities purchased under agreement to resell 917,539,647 782,918,155 917,539,647 782,918,155
Current accounts of governments 30,157,106 28,200,405 30,157,106 28,200,405
Investments - local 7,407,180,676 7,902,458,840 7,552,796,283 7,885,297,556
Loans, advances and bills of exchange 795,578,146 587,644,204 795,578,146 587,644,204
Assets held with the Reserve Bank of India 1,964,210 2,006,354 1,964,210 2,006,354
Bangladesh 13,141,164 12,266,548 13,141,164 12,266,548
Other assets 14,422,884 12,495,919 14,422,884 12,495,919
Financial liability
Banknotes in circulation 6,458,763,106 5,285,025,504 6,458,763,106 5,285,025,504
Bills payable 1,226,036 1,146,660 1,226,036 1,146,660
Current accounts of Governments 748,790,102 1,101,513,930 748,790,102 1,101,513,930
Corporation - a subsidiary 52,124,619 44,969,274 52,124,619 44,969,274
and Finance (Guarantee) Limited - a subsidiary 186,607 105,235 186,607 105,235
Bai Muajjal transactions 19,512,958 124,410,232 19,512,958 124,410,232
Payable under bilateral currency swap agreement 476,722,596 469,397,756 476,722,596 469,397,756
Deposits of banks and financial institutions 1,171,103,559 1,246,238,770 1,171,103,559 1,246,238,770
Other deposits and accounts 1,093,622,482 1,116,033,768 1,093,622,482 1,116,033,768
Payable to the International Monetary Fund 1,045,944,378 1,150,064,353 1,045,944,378 1,150,064,353
Other liabilities 36,951,152 148,964,683 36,951,152 148,964,683
48.1 The table below analyses financial and non-financial assets carried at fair value, by valuation method. The different levels
have been defined as follows:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices) (Level 2).
- Inputs for the assets or liabilities that are not based on observable market data (i.e. unobservable inputs e.g. estimated
future cash flows) (Level 3).
2020

Foreign currency accounts and investments - 500,826,405 - 500,826,405

661,730,772 535,928,075 77,366,991 1,275,025,838

Futures - sale 9,374,673 - - 9,374,673
247
2019

Foreign currency accounts and investments -
held for trading - 202,587,281 - 202,587,281

522,475,809 235,147,582 78,565,221 836,188,612
Futures - sale 8,024,543 - - 8,024,543
The Bank's policy is to recognise transfers into and out of the different fair value hierarchy levels at the date when the event
or change in circumstances require the Bank to exercise such transfers.
All financial assets and liabilities except the items disclosed above, have fair value equal to the carrying amount.
There were no transfers between levels 1 and 2 during the year.
48.2 Valuation techniques used in determination of fair values within level 2 and level 3
Item Valuation approach and input used

Forward foreign exchange contract The valuation has been determined by interpolating the mid rates announced
by State Bank of Pakistan.
Operating fixed assets (land and building) The fair value of land and building are derived using the sale comparison
approach. The sales value is determined by physically analysing the
condition of land and building and by ascertaining the current market value of
similar land, which is selling in near vicinity. Moreover, for buildings, the
valuer has also considered prevailing current cost of construction for relevant
type of civil work carried out thereon, where ever required. Please refer note
18.2 highlighting the year of valuation and external valuer name.
Foreign currency debt securities These are measured at fair value using the rates published by the valuation
expert portals, such as, Bloomberg, S&P , Reuters etc.
Unquoted equity securities The value of unquoted equity securities are determined by using the market
adjusted price to book ratio of the comparable quoted companies.
The valuations, mentioned above, are conducted by the valuation experts appointed by the Bank which are also on the panel
of the Pakistan Banks' Association (PBA). The valuation experts use a market based approach to arrive at the fair value of
the Bank's properties. The market approach uses prices and other relevant information generated by market transactions
involving identical or comparable or similar properties. These values are adjusted to reflect the current condition of the
properties. The effect of changes in the unobservable inputs used in the valuations cannot be determined with certainty,
accordingly a quantitative disclosure of sensitivity has not been presented in these unconsolidated financial statements.
248
49 CLASSIFICATION OF FINANCIAL INSTRUMENTS

2020
At fair value through
At fair value
other
through profit or Amortised cost Total
comprehensive
loss
income
---------------------------------------(Rupees in '000)---------------------------------------
Financial assets
Investments - local - 7,327,843,271 79,337,405 7,407,180,676
Bangladesh - 13,141,164 - 13,141,164
Other assets - 14,422,884 - 14,422,884
2019
At fair value At fair value through

through profit or Amortised cost other comprehensive Total
loss income
---------------------------------------(Rupees in '000)---------------------------------------
Financial assets
Investments - local - 7,816,047,732 86,411,108 7,902,458,840
Bangladesh - 12,266,548 - 12,266,548
Other assets - 3,145,470 - 3,145,470
2020

Amortised cost Total
profit or loss
----------------------------------------------------------(Rupees in '000)----------------------------------------------------------
Bills payable 1,226,036 - 1,226,036
Current accounts of governments 748,790,102 - 748,790,102
Current account with SBP Banking Services Corporation - a subsidiary 52,124,619 - 52,124,619
Current account with National Institute of Banking and Finance (Guarantee)
Limited - a subsidiary 186,607 - 186,607
Payable to Islamic banking institutions against Bai Muajjal transactions 19,512,958 - 19,512,958
249
2019

Amortised cost Total
profit or loss
----------------------------------------------------------(Rupees in '000)----------------------------------------------------------
Bills payable 1,146,660 - 1,146,660
Current accounts of Governments 1,101,513,930 - 1,101,513,930
Current account with SBP Banking Services Corporation - a subsidiary 44,969,274 44,969,274
Current account with National Institute of Banking and Finance (Guarantee)
Limited - a subsidiary 105,235 - 105,235
Payable to Islamic banking institutions against Bai Muajjal transactions 124,410,232
50 NON-ADJUSTING EVENT
The Board of Directors of the Bank in their meeting held on October 26, 2020 have appropriated an amount of Rs
NIL million to "Revenue Reserve". The balance of profit after allocation of such appropriation will be transferred to the
Government of Pakistan. The financial statements of the Bank for the year ended June 30, 2020 do not include the effect
of above appropriation and transfer of balance profit to the Government of Pakistan, which will be accounted for in the
financial statements of the Bank for the year ending June 30, 2021.
51 DATE OF AUTHORISATION
These financial statements were authorised for issue on October 26, 2020 by the Board of the Bank.
52 CORRESPONDING FIGURES
Corresponding figures have been rearranged and reclassified, wherever necessary for the purpose of better presentation
and comparison. No significant reclassifications have been made during the current year except for the following:
2019
FROM TO
Rupees in '000
Foreign currency accounts and investments Foreign currency accounts and investments 358,836,324
- current accounts - deposit accounts
Loans, advances and bills of exchange Loans, advances and bills of exchange
- Private sector financial institutions - Government owned / controlled financial
institutions 3,179,720
Other liabilities Other liabilities
- others - other accruals and provisions 778,399
Discount, interest / mark-up and / or profit earned Discount, interest / mark-up and / or profit earned
- foreign currency securities - Profit on Sukuks purchased under
Bai Muajjal agreement 142,202
Discount, interest / mark-up and / or profit Discount, interest / mark-up and / or profit earned
earned
- foreign currency securities - others - 588,169
Interest / mark-up expense Interest / mark-up expense
- Deposits - Interest on bilateral currency swap 21,817,682
- forward cover under exchange risk - foreign currency placements, deposits,
coverage scheme securities and 'other accounts - net 4,101
- Exchange risk fee income - foreign currency placements, deposits,
securities and 'other accounts - net 39,672
53 GENERAL
Figures have been rounded off to the nearest thousand rupees, unless otherwise stated.
_______________________ _______________________ _______________________

250
A Chronology of Important Policy Announcements
A-1 Banking Policy & Supervision Group
Standardization of Quick Response (QR) Codes for Payments in Pakistan: SBP issued this circular
for Standardization of QR Codes for payments in Pakistan whereby all institutions issuing and/ or
acquiring QR codes for payments in Pakistan shall adopt EMVCo’s EMV QR Code Specifications for
Payment Systems (PSD Circular No. 02 dated September 27, 2019).
Framework for Managing Risks of Trade Based Money Laundering and Terrorist Financing: SBP
issued a comprehensive “Framework for Managing Risks of Trade Based Money Laundering and
Terrorist Financing” with the objective to strengthen trade related AML/CFT regime and restrict
possible misuse of banking channels (EPD Circular No. 04 dated October 14, 2019).
Implementation of International Financial Reporting Standard 9 (IFRS 9): SBP advised Banks/
Micro Finance Banks to ensure implementation of IFRS 9 within the prescribed timeline i.e., January
01, 2021 (BPRD Circular No. 04 dated October 23, 2019).
Regulations for Digital On-boarding of Merchants: SBP issued Regulations on Digital On-boarding
of Merchants in order to facilitate growth of digital payments in Pakistan (PSD Circular No. 03 dated
November 01, 2019).
Rules for Digital On-boarding of Merchants: SBP issued Rules on Digital On-boarding of
Merchants to facilitate growth of digital payments (BPRD Circular No. 05 dated November 01, 2019).
Framework for Risk Management in Outsourcing Arrangements by Financial Institutions: SBP

issued amendments in Framework for ‘Risk Management in Outsourcing Arrangements’ with the
objective to facilitate FIs for undertaking outsourcing arrangements with third parties including group
companies and effectively managing risks arising out of such engagements (BPRD Circular No. 06
dated December 17, 2019).
Branchless Banking Regulations for Financial Institutions: SBP revised the existing Branchless
Banking Regulations in order to strengthen controls related to Money Laundering/ Terrorist Financing
risks (BPRD Circular No. 10 dated December 30, 2019).
Guidelines on Transfer and Assignment of Non-Performing Assets to Corporate Restructuring

Companies: SBP issued guidelines on “Transfer and Assignment of Non-Performing Assets(NPAs) to
Corporate Restructuring Companies(CRCs)” in order to regulate transfer and assignment of NPAs
from Banks/ DFIs to CRCs (BPRD Circular No. 3 dated May 15, 2020).
1
A-2 Development Finance Group
Islamic Refinance Scheme for Working Capital Financing of Small Enterprises and Low-End
Medium Enterprises: SBP introduced Mudarabah based "Islamic Refinance Scheme for Working
Capital Financing of Small Enterprises and Low-End Medium Enterprises" to meet working capital
requirements of certain SME sectors (IH&SMEFD Circular No. 11 dated August 06, 2019).
Relaxations to Exporters under Export Finance Scheme (EFS)/Islamic Export Refinance Scheme
(IERS) and Long Term Financing Facility (LTFF)/Islamic Long Term Financing Facility (ILTFF):
SBP issued the circular to provide relief to customers under EFS/IERS and LTFF/ILTFF in view of
COVID – 19 (IH&SMEFD Circular No. 05 dated March 20, 2020).
2
B Organizational Chart
3
C Management Directory*
Name Designation Email Phone
Governor/Deputy Governor
Dr. Reza Baqir Governor governor.office@sbp.org.pk 021-99212447-8
Mr. Jameel Ahmad Deputy Governor (Banking & FMRM) jameel.ahmad@sbp.org.pk 021-99212451-2
Dr. Murtaza Syed Deputy Governor (Policy) murtaza.syed@sbp.org.pk 021-99221535
Ms. Sima Kamil Deputy Governor (FI, DFS & IT) sima.kamil@sbp.org.pk 021-99221455-6
Executive Directors/Chief Economist
Dr. Inayat Hussain ED - BSG inayat.hussain@sbp.org.pk 021-99221496

Mr. Muhammad Ali Choudhary Research Advisor ali.choudhary@sbp.org.pk 021-99221137
Mr. Muhammad Ali Malik ED - FMRM muhammad.alimalik@sbp.org.pk 021-99221960
Mr. Muhammad Amin ED/CIO amin@sbp.org.pk 021-99221551
Mr. Qasim Nawaz ED - HR qasim.nawaz@sbp.org.pk 021-99221499
Mr. Saleemullah ED - FRM saleem.ullah@sbp.org.pk 021-99221481
Vacant ED - BP&RG - -
Syed Samar Hasnain ED - DFG samar.hasnain@sbp.org.pk 021-99221606
Managing Directors of SBP Subsidiaries
Syed Irfan Ali MD - DPC syed.irfan@sbp.org.pk 021-99217224
Mr. Muhammad Ashraf Khan MD - SBP BSC ashraf.khan@sbp.org.pk 021-99221349
Mr. Muhammad Haroon Rasheed MD - PSPC haroon.rasheed@sbp.org.pk 021-99248683
Mr. Riaz Nazar Ali Chunara MD - NIBAF riaz.chunara@sbp.org.pk 051-9269833
Directors
Mr. Abid Qamar Director - ERD/Chief Spokesman abid.qamar@sbp.org.pk 021-99221979
Mr. Amjad Ali Director ITD amjad.ali@sbp.org.pk 021-99221880
Mr. Aniq Aziz Director - IMID aniq.aziz@sbp.org.pk 021-99221962
Mr. Arshad Mahmood Bhatti Director - EPD arshad.bhatti@sbp.org.pk 021-99221459
Mr. Asif Mahmood Director - BC & CPD asif.mahmood@sbp.org.pk 021-99221432
Mr. Asim Iqbal Director - ITS & PMD asim.iqbal@sbp.org.pk 021-99221249
Dr. Asma Ibrahim Director - M & AG asma.ibrahim@sbp.org.pk 021-99221011
Dr. Azizullah Khattak Director - S & DWD aziz.khattak@sbp.org.pk 021-99221565
Dr. Farooq Arby Director - RD farooq.arby@sbp.org.pk 021-99221161
Mr. Fazal Mahmood Director - BID-I fazal.mahmood@sbp.org.pk 021- 99221878
Mr. Ghulam Muhammad Abbasi Director - IBD ghulam.muhammad@sbp.org.pk 021-99221414
Dr. Mahmood ul Hasan Khan Director MPD mahmood.khan@sbp.org.pk 021-99221548
Mr. Maraj Mahmood Director - IACD maraj.mahmood@sbp.org.pk 021-99221519
Mian Farooq Haq Director IH&SMEFD mian.farooq@sbp.org.pk 021-99221547
Mr. Mohammad Mansoor Ali Director - OCS / Corporate Secretary mansoor.ali@sbp.org.pk 021-99221522
Mr. Muhammad Akhtar Javed Director - BPRD akhtar.javed@sbp.org.pk 021-99221680
Mr. Muhammad Akmal Director - SPD akmal.bhatti@sbp.org.pk 021-99221130
Mr. Muhammad Amin Khan
Director - DMMD amin.lodhi@sbp.org.pk 021-99221865
Lodhi
5
Name Designation Email Phone
Mr. Muhammad Javaid Ismail Director - FSD javaid.ismail@sbp.org.pk 021-99221504

Mr. Nasser Jahangir Khan Chief Information Security Officer nasser.khan@sbp.org.pk 021-99221145
Mr. Noor Ahmed Director - AC & MFD noor.ahmed@sbp.org.pk 021-99221579
Dr. Omar Farooq Saqib Director - EPRD omar.farooq@sbp.org.pk 021-99221533
Mr. Qader Bakhsh Director FD qader.bakhsh@sbp.org.pk 021-99221110
Mr. Rahat Saeed Director - ISD rahat.saeed@sbp.org.pk 021-99221245
Mr. Raza Mohsin Qizilbash Director - LSD raza.mohsin@sbp.org.pk 021-99221390
Ms. Sahar Z. Babar Director - HRD sahar.babar@sbp.org.pk 021-99221871
Mr. Shaukat Ali Director - BID-II shaukat.ali@sbp.org.pk 021-99221132
Syed Ali Raza Director TOD ali.raza2@sbp.org.pk 021-99221133
Syed Mansoor Ali Director RMD syed.mansoor@sbp.org.pk 021-99221253
Syed Jahangir Shah Director - OSED syed.jahangir@sbp.org.pk 021- 99221965
Syed Sohail Javaad Director - PSD sohail.javaad@sbp.org.pk 021-99221169
* Above list is in alphabetical order as of October 27, 2020

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Annual

STATE BANK OF PAKISTAN

Mr. Shehzad Ali Sharif shehzad.sharif@sbp.org.pk

Mr. Ibaad Ahmed Khan ibaad.ahmed@sbp.org.pk

Dr. Reza Baqir

October 27, 2020

Dr. Tariq Hassan (Member, Board since July 23, 2019)1

Mr. Azam Faruque (Member since November 14, 2018)

Mr. Ali Jameel (Member since July 23, 2019)

Mr. Muhammad Saleem Sethi (Member since July 23, 2019)

Monetary Policy Committee

Dr. Asad Zaman (Member, MPC since June 3, 2019) 3

Dr. Naved Hamid (Member, MPC since January 24, 2019)

Dr. Hamid is also a member of the Advisory Committee of Planning

of Economists and the Chair of the Working Group on "Export

Dr. Hanid Mukhtar (Member, MPC since June 3, 2019)

Dr. Mukhtar did Ph.D. in Economics from Boston University, USA.

Mr. Jameel Ahmad (Member since January 30, 2016)

Mr. Ahmad attained a Masters degree in Business Administration from

Dr. Murtaza Syed (Member MPC since January 27, 2020)

economies, including Colombia, Cyprus, the Euro Area, Japan and

Dr. Syed has a Ph.D in economics from Nuffield College at the

Dr. Inayat Hussain – Executive Director BSG (Member since May 8,

Dr. Hussain is member of the MPC, Council of Regulators (a body

and Institute of Bankers in Pakistan. He also holds FRM designation and

Dr. Ahmed holds Ph.D. in Economics from the University of Cambridge,

Committees of the Board

Committee on Human Resources

Publications Review Committee (PRC)

Enterprise Risk Management Committee

Financial Law Reform Committee (FLRC)

Corporate Management Team (CMT) and CMT-HoD Forum

• Banking Policy Committee

Corporate Management Team (CMT)4

Dr. Reza Baqir

Mr. Jameel Ahmad Dr. Murtaza Syed Ms. Sima Kamil

4 CMT Composition as of October 27, 2020.

Source: State Bank of Pakistan; and Pakistan Bureau of Statistics

1.1.1 Policy Coordination

1.1.2 Measures For Effective Communication

 Restructuring the Monetary Policy Statement (MPS): An important instrument of policy

1.1.3 Strengthening Monetary Policy Formulation

Trends and developments

Change in Monetary Policy Implementation Framework – Transition to Symmetric Interest

End to Debt Monetization from the SBP

 Improved SBP’s ability to anchor inflation expectation and manage inflation.

Market Based Exchange Rate Regime

1.2 Money and Debt Market

1.2.2 Rationalization of PIBs Holding Limit

1.2.3 Restricting Institutional Investors from Participating in NSS

Accordingly, in June 2020, GoP, on recommendation of the SBP, restricted participation of

1.2.4 Simplification of Tax Regime for Non-Resident Investors to Encourage Investment in

1.2.5 Signing of International Agreements with Counterparties

1.3 Foreign Exchange Reserve Management

1.4 Remittances and other Initiatives

1.4.1 Ease of Doing Business

1.4.3 FATF Action Plan And Pakistan’s Mutual Evaluation

of Statutory Regulatory Orders and Notifications of Government of Pakistan in terms of United

1.4.4 Measures During COVID-19