Question

List five functions of following financial institutions?     

• IMF

• World Bank

• SBP

Answer 1

Five function of IMF

1) Credit Facilities : IMF is maintaining numerous borrowing and credit facilities therefore on facilitate the member countries in correcting state of affairs in their balance of payments. These credit facilities include-basic credit facility, extended fund facility for a amount of three years, countervailing finance facility, lociffer stock facility for serving to the first manufacturing countries, supplementary finance facility, special oil facility, trust fund, structural adjustment facility etc. The Fund also charges interest from the borrowing countries on their credit.

2) Exchange Stability:

The first necessary operate of International Monetary Fund is to take care of exchange stability and thereby to discourage any fluctuations within the rate of exchange. The Found ensures such stability by creating necessary arrangements like—enforcing declaration of value of currency of all members in terms of gold or United States of America dollar, implementing devaluation criteria, up to ten per cent or additional by additional info or by taking permission from International Monetary Fund severally, forbidding members to travel sure multiple exchange rates and additionally to shop for or sell gold at costs aside from declared value.

3. Eliminating BOP Disequilibrium:

The Fund helps the member countries in eliminating or minimizing the short-period equilibrium of balance of payments either by commercialism or loaning foreign currencies to the members. The Fund additionally helps its members towards removing the long amount situation in their balance of payments. just in case of basic changes within the economies of its members, the Fund will advise its members to vary the par values of its currencies.

4. Reducing Tariffs:

The Fund additionally aims at reducing tariffs and alternative restrictions obligatory on international trade by the member countries therefore on stop restrictions of payment of funds or to avoid discriminating practices.

5. General Watch:

The International Monetary Fund is additionally keeping a general watch on the financial and financial policies followed by the member countries to confirm no flouting of the provisions of the charter.

Five function of World Bank

1. world bank provides various technical services to the member countries. For this purpose, the Bank has established “The Economic Development Institute” and a employees faculty in Washington.

2. Bank will grant loans to a member country up to 20 of its share within the paid capital.

3. The quantities of loans, rate of interest and terms and conditions are determined by the Bank itself.

4. Generally, Bank grants loans for a specific project punctually submitted to the Bank by the member country.

5. The person nation needs to repay either in reserve currencies or within the currency within which the loan was sanctioned.

Five Function of SBP :

1) Banker to Banks: As banker to the regular banks, SBP:

a. Holds deposits created by them as an area of their needed reserves—5% at this time.   

b. Lends them funds as a “lender of the last resort” to satisfy their pressing wants by discounting their bills of exchange and other

2) Acts as a Clearing House:

Provides facilities, physical and/or electronic, to regular banks to clear cheques and different claims drawn against every other—deposited by their customers for collection--by adding up what they owe or owed them and transfer funds from their accounts at SBP.

3) Supervisor of Banks and different financial Institutions:

One of the basic responsibilities of the banking company is regulation and oversight of the economic system to make sure its soundness and stability also on shield the interests of depositors. The banking activities square measure currently being monitored through a system of ‘off-site’ surveillance and ‘on-site’ examination and oversight. off-site surveillance is conducted through regular checking of assorted returns frequently received from the various banks. On different hand, on-the-scene examination is undertaken by the banking company within the premises of the involved banks once needed.

To broaden monetary markets as additionally to diversify the sources of credit, variety of non-bank monetary establishments were allowed to extend considerably. The banking company has additionally been charged with the responsibilities of regulation and oversight of such institutions.

4) institution of Paper Currency:

State Bank has the only authority to issue paper notes. it's the prime responsibility to management its offer so as to make sure a stable worth of cash, i.e., its worth or buying power. Its notes, however, don't seem to be convertible into gold or silver.

5) exchange rate Management and Balance of Payment:

The Bank is accountable to stay the charge per unit of the rupee at an applicable level and prevent it from wide fluctuations so as to take care of aggressiveness of our exports and maintain stability within the exchange market. as the custodian of country’s external reserves, it's chargeable for management of the foreign exchange reserves.