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MGT604 - Management of Financial Institutions - Lecture Handout 06

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The State Bank of Pakistan (SBP) is the central bank of Pakistan. While its constitution, as originally lay down in the State Bank of Pakistan Order 1948, remained basically unchanged until January 1, 1974, when the bank was nationalized, the scope of its functions was considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today. The headquarters are located in the financial capital of Pakistan, Karachi with its second headquarters in the capital, Islamabad.


Before independence on 14 August 1947, the Reserve Bank of India (central bank of India) was the central bank for what is now Pakistan. On 30 December 1948 the British Government's commission distributed the Bank of India's reserves between Pakistan and India - 30 percent (750 M gold) for Pakistan and 70 percent for India.

The losses incurred in the transition to independence were taken from Pakistan's share (a total of 230 million). In May, 1948 Muhammad Ali Jinnah (Founder of Pakistan) took steps to establish the State Bank of Pakistan immediately. These were implemented in June 1948, and the State Bank of Pakistan commenced operation on July 1, 1948.


Under the State Bank of Pakistan Order 1948, the state bank of Pakistan was charged with the duty to "regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage".

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MGT613 - Production / Operations Management - Lecture Handout 14

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We often come across statements similar to these, this bulb (product) is not as reliable as the previous bulb or my newspaper’s analysis and report writing (service) is not as reliable as my friend’s newspaper analysis. These two sentences summarize what human mind is looking for? That is reliability. Reliability is sought by customers from all organizations. Interestingly enough, the personnel working inside the organization whether engineers or managers also seek reliability of operations, management, IT, Accounting and other host of functions that help an organization perform its day to day routine activities effectively. Reliability is no longer that art which was considered to be possessed by a family of skilled craftsman rather has now evolved in to a vast and ever increasing field of Engineering. Reliability in general and reliability engineering in fact play a very critical part in an organizations product or service gaining competitive advantage over the organizations competitors.


We often overlook the concept of Reliability and confuse it with the concept of safety. Safety is one small aspect of reliability. Reliability needs to be looked into with the important perspective of failure of a product /service and normal operating conditions for that particular product or service. Lets us briefly look at the definitions of reliability, along with what is termed as failure and what are the normal operating conditions for a product.

  • · Reliability: The ability of a product, part, or system to perform its intended function under a prescribed set of conditions
  • Failure: Situation in which a product, part, or system does not perform as intended
  • Normal operating conditions: The set of conditions under which an item’s reliability is specified e.g. an automobile designed for operation in Europe may not fulfill its intended useful service in Pakistan. SO IT HAS THE POTENTIAL TO FAIL AND BE LESS RELIABLE. Kindly pay more attention to the word potential here, potential refers to something hidden or attached either to the performance or operations of a product. A bank servicing its client if fails to provide reliable normal operating service can lead to disastrous financial consequences for its customers similarly if a pharmacy starts dispensing expired medicines it can cause serious health hazards to its customers. All products and services carry with them the potential of doing something harmful if they are unable to function according to normal operating conditions. The thing or characteristic or quality that avoids something aberrant happening is known as RELIABILITY.

  • Read more: MGT613 - Production / Operations Management - Lecture Handout 14