State Bank of Pakistan Act, 1956

This extends to the whole of Pakistan. It shall come into force at once and except Section 46, shall be deemed to have taken effect on and from the twelfth day of May, 1948.
Definitions: the definitions as contained in the Act are given hereunder:
"Annual general meeting" means the annual meeting of the shareholders-of the Bank;
"Approved foreign exchange" means currencies declared as such by any notification under Sec19;
"The Bank" means the State Bank of Pakistan;
"Bank Notes" means notes made and issued by the Bank in accordance with Section 24 and include currency notes of the Government of Pakistan issued  by the Bank;
“Central Board" means the Central Board of Directors of the Bank;
"Co-operative Bank" means a society registered under the Co-operative Societies       Act, 1912, or any other law for the time being in force in Pakistan relating to       co- operative societies, the primary object of which is to provide financial       accommodation to its members;
"Debentures" includes participation term certificates;
"Director" means a Director for the time being of the Central Board;
 "General meeting" means the meeting of the share-holders ' of the Bank convened for       transacting such       business as may be specified in the notice convening the meeting;
"Governor" and "Deputy Governors" means respectively the Governor and Deputy      Governors of the Bank;
"Loans and advances" includes finances provided on the basis of participation in profit  and loss, mark up in price, leasing, hire-purchase of otherwise;
"Local Board" means a Local Board of Members;
"Member" means a Member for the Local Board;
"Rupee coin" means one-rupee coin and one-rupee notes which are legal tender in        Pakistan;
"Scheduled bank" means a bank for the time being included in the list of banks       maintained under sub-section (1) of Section 37;
"Securities" includes securities as defined in the Capital Issues (Continuance of       Control) Act, 1947 (XXIX of 1947);
"Shares" includes modaraba certificates.
 
Establishment and incorporation of the Bank: Sec 3:
As soon as may be after the commencement of this Act steps shall be taken to establish, in accordance with the provisions of this Act, a bank to be called the State Bank of Pakistan or Bank Dautat-e-Pakistan, for the purposes of taking over, as from the first day of July, 1948, the management of the currency from the Reserve Bank of India, and carrying on the business of Central Banking.

The Bank shall be a body corporate by the name of the State Bank of Pakistan or Bank Daulat-e-Pakistan, having perpetual succession and a common seal, and shall by the said name sue and be sued.  
Share Capital: Sec 4
The original share capital of the Bank shall be three corers of rupees divided into three hundred thousand fully paid-up shares of the nominal value of one hundred rupees each, out of which not less than fifty one per cent shall be held by the Federal Government and the balance by the public.
The share capital may be increased by a resolution of the Central Board subject to the approval of the Federal Government, but not less than fifty-one per cent of the additional share capital shall be issued to the Federal Government.   
The nominal value, issue price, the manner in which the new shares may be issued and allotted and their assignment to the registers of shareholders maintained under sub-section (1) of Section 7 shall, subject to the approval of the Federal Government, be determined by the Central Board  
Guarantee by Federal Government: Sec 5
Notwithstanding anything contained in the Acts hereinafter mentioned in this Section, the shares of the Bank shall be deemed to be included among the securities enumerated in Section 20 of the Trusts Act, 1882 and to be approved securities for the purposes of the Insurance Act, 1938 and the Banking Companies Ordinance, 1962 (LVII of 1962).
 
Offices, Branches and Agencies: Sec 8
The head office of the Bank shall be situated in Karachi.

1. The Bank may establish branches, offices and agencies in Pakistan, or, with the prior approval of the Federal Government any-where outside Pakistan.
2. The Bank shall create a special Agricultural Credit Department, the functions of which shall be
3. To maintain an expert staff to study all questions of agricultural credit and be available for consultation by the Federal Government, Provincial Governments, Provincial Co-operative Banks and other banking organizations;
4. To co-ordinate the operations of the Bank in connection with agricultural credit and its relations with the Provincial Co-operative Banks and any other organizations engaged in the business of agricultural credit.

Central Board of Directors: Sec 9
The general superintendence and direction of the affairs and business of the Bank shall be entrusted to the Central Board of Directors which may exercise all the powers and do all acts and things that may be exercised or done by the Bank and are not by this Act expressly directed or required to be done by the Bank in general meeting or in annual general meeting. 
The Central Board shall consist of-

1. The Governor;
2. Secretary, Finance Division, Government of Pakistan; and
3. Seven Directors, including one Director from each Province, to be nominated by the Federal Government ensuring representation to agriculture, banking and industrial sectors.

The Governor shall be the chairman of the Central Board.
 All decisions of the Central Board shall be taken by majority of members present and voting and in the event of equality of the votes, the Governor may exercise a casting vote
 
Functions and responsibilities of the Central Board: Sec 9-A
The Central Board shall, with a view to secure stability of monetary system:
Regulate and supervise monetary and credit system:

• Provided that in regulating the monetary and credit system, the Central Board shall keep in view the National policy objectives of the Federal Government,
• Provided further that the Governor may, in any emergency which in his opinion requires immediate action, take measures under this clause as may be necessary in the circumstances and shall, in the next meeting of the Central Board, report to it for approval of such action;
• determine, in consultation with the Federal Government, the limit of credit to be extended to the Federal Government and Provincial Governments  tender advice to the Federal Government on monetary policy and its interaction with fiscal and exchange rate policy;
• Analyze and report periodically to the Federal Government on the impact of the policies being followed on the state of the economy; and
• Discharge such other functions as may be necessary for regulating the monetary  system or as may be assigned by the Federal Government.

Monetary and Fiscal Policies Coordination Board Sec. 9B

1. Federal Minister for Finance Chairman
2. Federal Minister for Commerce Member
3. Deputy Chairman, Planning Commission  Member
4. The Governor Member
5. Secretary, Finance Division, Govt of Pakistan        Member

The Board shall- 

1. Coordinate fiscal, monetary, foreign trade and exchange rate policies;
2. Ensure consistency amongst macro-economic targets  in the areas of fiscal, monetary and external account aggregates and recommend adjustments for the approval of the Federal Government;
3. Recommend monetary aggregates and Government borrowing for consideration of the National Economic Council;
4. Review fiscal and monetary measures to secure monetary aggregate targets;
5. Consider limits of the government borrowing as revised from time to time in the meetings to be held before and after passage of the annual budget; and
6. Review the level of Government borrowing in relation to the predetermined or revised targets after every quarter; and
7. Review the expenditure incurred in connection with raising of loans and Government borrowing

Executive Committee: Sec 11
There shall be an Executive Committee consisting of the Governor, Deputy Governor, if any, three Directors elected by the Central Board to represent respectively the areas specified in the Schedule and an officer appointed by the Federal Government to act as Member of the Executive Committee.
 
Except when the Central Board is in session, the Executive Committee shall deal with and decide any matter within the competence of the Central Board. Local Boards, their constitution and functions

Qualifications and disqualification of Directors and Members: Sec 13
No person shall be or shall continue to be a Director or Member-

1. Who is a Member of the Central or Provincial Legislature; or
2. Who is a salaried Government official; or
3. Who is, or at any time has been, adjudicated an insolvent or has suspended payment or has compounded with his creditors; or
4. Who is found lunatic or becomes of unsound mind; or
5. Who is an officer or employee of any bank; or
6. Who is a Director of any bank other than the Bank, but he shall not- be disqualified or cease to be a Director if he is a Director of a co-operative bank.
7. Who is not, within six months from the date of his becoming a Director or Member, as the case may be, registered as a holder of unencumbered shares of the Bank of the nominal value of five hundred rupees;
8. Who absents himself from three consecutive meetings of the Central Board, or Local Board without leave from the Central Board or Local Board as the case may be?

Nothing in clause (b) and (g) of sub-section (1) shall apply to the Government official nominated as a Director by the Federal Government.
The Federal Government shall sell shares at par to a Director or Member nominated by it under Section 9 and 12, seeking to obtain the minimum shares qualification required under this Section, but no such share shall be disposed of by such Director or Member otherwise than by resale to the Federal Government at par, and the Federal Government shall have the right to order the transfer at par of all or any of such shares to itself, whereupon all or any of such shares shall be deemed to have been transferred to it.
Term of office of Directors-and Members: Sec 14
The elected Directors and Members shall hold office for three years on the expiry of which they shall cease to hold office.
A Director or member shall not be removed from his office before the completion of his tenure except when he has done any act which is a breach of trust reposed in him or is guilty of misconduct:
 Directors and Members shall on the expiry of their term of office be eligible for re-election or re-nomination, as the case may be. 
General and annual general meeting: Sec 16
The annual general meeting shall be held annually at Karachi, or a place in Pakistan where there is an office or branch of the Bank, within three months from the date on which the annual accounts of the Bank are closed.
 In the said meeting the shareholders present shall be entitled to discuss the annual accounts, the report of the Central Board on the working of the Bank throughout the year, and the auditors' report on the annual balance sheet and accounts.
A general meeting may be convened by the Central Board at any other time.
Every share holder shall be entitled to attend at any general meeting; and each shareholder who has been registered on a register maintained under Section 7 for a period of not less than six months ending with the date of the meeting, as holding five or more shares shall have one vote, and on a poll, each' shareholder so registered shall, subject to a maximum of ten votes, have one vote for each five shares, and such votes may be exercised either personally or by proxy
 
Business which the Bank may transact: Sec 17

1. Bank is authorized to carry on and transact the several kinds of business hereinafter specified, namely:- The accepting of money on deposit from, and the collection of money for the Federal Government, the Provincial Governments, Local Authorities, bank and other persons: provided that no interest shall be paid on deposits received from the Federal Government, a Provincial Government, or a Local Authority;
2.  

(a) The purchase, sale and rediscount of bills of exchange and promissory notes drawn on and payable in Pakistan and arising out of bonafide commercial or trade transactions bearing two or more good signatures one of which shall be that of a scheduled bank, and maturing within one hundred and eighty days from the date of such purchase or rediscount, exclusive of days of grace;
(b) The purchase, sale and rediscount of bills of exchange and promissory notes, drawn on and payable in Pakistan and bearing two or more good signatures one of which shall be that of a scheduled bank and drawn or issued for the purpose of financing seasonal agricultural operation or the marketing of crops, and maturing within fifteen months from the date of such purchase or rediscount exclusive of days of grace;

1. The purchase and the sale of approved foreign exchange;

 (b) The purchase, sale and rediscount of bills of exchange including treasury bills, drawn in or on any place in countries whose currency has been declared as approved foreign exchange and maturing within one hundred and eighty days from the date of purchase, provided that no such purchase, sale or rediscount shall be made in Pakistan except with a scheduled bank;

1. The making to Local Authorities, scheduled banks or co-operative banks of advances and loans repayable on demand or on expiry of fixed periods not exceeding one hundred and eighty days against the security of: stocks, funds and securities, other than immovable property, in which a trustee is authorized to invest trust money by any law for the time being in force in Pakistan;
2. The making to the Federal Government or Provincial Governments of advances repayable in each case not later than three months from the date of the making of the advance;
3. The making to institutions or banks, specially established for the purpose of promoting agricultural or industrial development, or for the financing of construction of houses, in the country or co-operative banks of advances and loans for such amounts and on such terms and conditions
4. the issue and purchase of telegraphic transfers, demand drafts and other kinds of remittances made payable at its own branches, offices or agencies;

1. (a)The purchase and sale of securities of the Federal Government or a Provincial Government of any maturity or of such securities of a Local Authority as may be specified in this behalf by the Federal Government by notification in the Official Gazette on the recommendation of the central Board;

1. The sale and realization of all property, whether movable or immovable which may in any way come into the possession of the Bank in satisfaction, or part satisfaction of any of its claims;
2. The acting as agent to Federal Government, any Provincial Government, or any Local Authority in the transaction of any of the following kinds of business, namely:-
1. the purchase and sale of gold or silver or approved foreign exchange;
2. the purchase, sale, transfer and custody of bills of exchange, securities or shares in any company;
3. the collection of the proceeds, whether principal or interest, profit, dividend or other return, of any securities;
4. the remittance of such proceeds at the risk of the principal, by bills of exchange payable either in Pakistan or elsewhere;
5. the management of public debt; and
6. the transacting of special drawing rights with the International Monetary Fund;
1. The making and issue of bank notes subject to the pro-visions of this Act;
2. The exercise of powers and the performance of functions and duties entrusted to the Bank by or under this Act or any other law for the time being in force;
7. The entering into clearing and payments arrangements with any country or group of countries, on a general or regional or sub-regional basis, participation in the formation and settlement of international payments transactions under such arrangements, and incurring financial and other obligations relating thereto;
1. Establish credits and give guarantees; and
2. Generally, the doing of all such matters and things as may be necessary, incidental to or consequential upon the exercise of its powers or the discharge of its duties or functions under this Act.

Issue Department: Sec 26
The issue of Bank Notes shall be conducted by the Bank in an Issue Department which shall be separated and kept wholly distinct from the Banking Department and the assets of the Issue Department shall not be subject to any liability other than the liabilities of the Issue Department as hereinafter defined in Section 32.
Cash Reserve of Scheduled Banks to be kept with the Bank: Sec 36
Every scheduled bank shall maintain with the Bank a balance the amount of which shall not at the close of business on any day be less than such percentage of demand liabilities and that of the time liabilities of such bank in Pakistan as may be determined by the State Bank.
Scheduled Banks: Sec 37

1. The Bank shall maintain at all its offices and branches an up-to-date list of banks declared by it to be scheduled banks under Clause (a) of sub-section (2).
2. The Bank shall, by notification, in the official Gazette

Power to require returns from Corporations: Sec 38
The Bank may require any Corporation with which it has any transactions under Section 17 to furnish returns referred to in under sub section (3) of Section 36, and if it does so require, the provisions of sub-Section. (6), (7) and (8) of Section 36 shall apply, so far as may be, to such Corporation as if it were a scheduled bank.
Publication of consolidated statement by the Bank: Sec 39
The Bank shall compile and publish in such manner and at such times as the Federal Government may direct, a consolidated statement from such information as may be received under this Act.
Returns
Submission of Returns by State Bank: Section 40

1. The Bank shall prepare and transmit to the Federal Government a weekly account of the Issue Department and of the Banking Department in such form as the Federal Government may, by notification in the official Gazette direct. The Federal Government shall cause these accounts to be published weekly in the official Gazette.
2. The Bank shall also, within four months from the date on which the annual accounts of the Bank are closed, release to the public and simultaneously transmit to the Federal Government a copy of the annual accounts signed by the Governor, the Deputy Governor, if any, and the Chief Accounting Officer of' the Bank, and certified by the Auditors together with a report by the Central Board on the working of the Bank throughout the year, and the Federal Government shall cause such accounts and report to be published in the official Gazette.
3. The Bank shall also, within two months from the date on which the annual accounts of the Bank are closed, transmit to the Federal Government a statement showing the name, address and occupation of, and the number of shares held by each shareholder of the Bank.

The Bank and its officers to be public officers: Section 46:

1. For the purposes of Section 124 of the Evidence Act, 1872, the provisions of Part IV of the Code of Civil Procedure, 1908 -and the provisions of rule 27 of Order V, and rule 52 of Order XXI of the said Code, the Bank and any person in the service of the Bank acting in his capacity as such shall be deemed to be public officer.
2. The provisions of Section 123 of the Evidence Act shall apply to the unpublished records of the Bank and the Governor shall be deemed to be the officer or head of the department concerned.
3. Every person in the service of the Bank shall be deemed to be a public servant within the meaning of section 21 of the Pakistan Penal Code (Act XLV of 1860) -

Production of unpublished record of bank, etc: Sec 46-A

1. No court tribunal or other authority shall be entitled to compel the bank or any person in the service of the bank to produce or, as the case may be, give any evidence derived from, any unpublished record of the bank
2. No court, tribunal or other authority shall permit any one to produce or give evidence derived from, any unpublished record of the bank, except with the prior permission in writing of the Governor who may give or withhold such permission as he thinks fit.
3. Notwithstanding anything contained in this Act or any other law for the time being in force', a report prepared by the Bank on a banking company under Section 40 of the Banking Companies Ordinance, 1962 (LVII of 1962), shall be deemed to be unpublished for the purposes of subsections (1) and (2) even if a copy of such report has been supplied to the banking company to which the report pertains or to the Federal Government or to the Pakistan Banking Council constituted under Section 9 of the Banks (Nationalization) Act, 1974.

Inconsistent orders not to be issued: Sec 46-B
No governmental or quasi-governmental body or agency shall issue any directive, directly or indirectly, to any banking company or any other financial institution regulated by the Bank which is inconsistent with the policies, regulations and directivities issued by the Bank pursuant to this Act, the Banking Companies Ordinance, 1962 (LVII of 1962) or any other law in force.
Liquidation of the Bank: Sec 50
The Bank shall not be placed in liquidation save by order of the Federal Government and in such manner and on such terms and conditions as it may direct.