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Core functions of SBP:
1: STATE BANK AS A BANK OF ISSUE
The State Bank of Pakistan has the role right to issuenotes except subsidiary coins which are issued by the Government. The Bank adopted the Proportional Reserve System for the issue of notes upto December 1965. The level of currency banking by gold bullion, foreign securities is now fixed 1200 million through an ordinance in December 1965. This system of note issue is known as minimum Reserve System. The size ofnotes issue reflects the public demand for money. The amount of notes in circulation can be increased to meetthe public demand and are adjusted according to the general level of prices and economic activity in the country. The assets of the Issue Department are always equal to liabilities.
2: FRAMING AND OPERATION OF MONETARY POLICY:
The State Bank of Pakistan frames and operators the monetary policy. Monetary policy is conducted by the State Bank of Pakistan to regulate and control the volume of money and credit supply in the country in order to achieve specific economic objectives such as price stability, reducing unemployment, etc. The main instruments of monetary policy are (i) Open market operation. (ii) Changing the reserve requirement and (iii) Changing the discount rate.
3: REGULATION AND SUPERVISION OF BANKS:
The State Bank of Pakistan has full powers to supervise and control the banking system in the country. The regulatory powers relate to the licensing of banks, and their branch, expansion, liquidity of assets of banks, management and methods of working of the banks amalgamation and reconstruction and liquidation of banks, inspection of banks etc.
4: FOREIGN EXCHANGE MANAGEMENT:
The State Bank of Pakistan acts as custodian of foreign exchange reserves manages exchange control and external value of the rupee and acts as the agent of the government in respect of Pakistan’s

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