ISLAMABAD: The National Assembly on Monday passed the State Bank of Pakistan (Amendment) Bill, 2015, to further amend the SBP Act of 1956.

The purpose of amendments is to bring the existing legislation in conformity with the international best practices of a modern central bank.

The newly-elected Speaker Sardar Ayaz Sadiq chaired the session. The bill was moved by Parliamentary Secretary Rana Mohammad Afzal.

The existing clauses pertaining to shareholders, executive committee and local boards have been omitted in the SBP Act by introducing various amendments in the Act since these are no longer relevant after the promulgation of the bank (Nationalisation) Act 1974.

A statutory Monetary Policy Committee with external experts to be appointed by the federal government has been established, which will be responsible to formulate, support and recommend the monetary policy and take appropriate decisions relating to key interest rates, supply of reserves, exchange rate policy, and limit and nature of advances and loans to the government.

The main object for introducing this statutory committee is to enable the State Bank to perform its essential functions in a professional way in a changing and emerging financial environment. Consequently various sections in the Act have also been amended in order to secure the independent statutory role of the Monetary Policy Committee.

An enabling clause to allow SBP for establishment of depositors’ protection fund has been introduced. Draft law on the deposit protection fund is already under consideration of the federal government whereby the fund will be a subsidiary of SBP.

A new section on lender of last resort has been introduced in the Act to provide legal certainty to the support that is already being provided by the SBP to the troubled banks.

Another new section on regulatory powers has been introduced in the Act to provide explicit powers to SBP for issuing directives, imposing and recovering penalties, which is already being exercised by SBP under Banking Companies Ordinance 1962.

In order to further the role of Islamic banking in Pakistan, it is necessary for the bank to engage in Shariah Compliant Instruments. Amendment has been introduced whereby bank is allowed to hold property for the purposes of use of Shariah Compliant Instruments .

The role of SBP has been strengthened further by substituting the federal government approval wherever required, with the board’s approval. This is reflected in various amendments, including but not limited to establishing offices, agencies or branches outside Pakistan, approve registration or approve foreign currency, total amount of assets and the value of such assents, forms of weekly returns submitted to the federal government.

Two ordinances The Foreigners (Amendment) Ordinance, 2015 (No 12 of 2015) and The National Database and Registration Authority (Amendment) Ordinance, 2015 (No 13 of 2015) were also laid before the House.

The ordinances were laid by Parliamentary Secretary for Interior, Maryam Aurangzeb.

The House also adopted a resolution “that the National Assembly resolves to extend the Income Tax (Amendment) Ordinance, 2015 (No.10 of 2015) for a further period of 120 days from Nov 7.

Published in Dawn, November 10th, 2015