The story of NBP is part of our struggle for economic independence. When we won political independence, our economy was controlled by Non-Pakistanis, mostly Hindus. East Pakistan was spared from massive migration but its economy was also, being dependent on Calcutta, badly hurt. Most bankers and business experts left Pakistan and the economic life was brought to a standstill, these mostly branches of Imperial Bank of India were only in partial operation with skeleton staff.
It was decided that Reserve Bank of India would act as the common monetary authority of both countries up to September, 1948. But this arrangement did not prove well. In August 1947, we were given a first installment of Rs.200 million (20 crore) as our share, leaving a balance of Rs.550 million (55 crore) but it was not paid when asked for.
In October 1947 there was fighting in Kashmir, when India refused to give us the amount of Rs.55 crore if we did not give up all interest in Kashmir, which we refused. In response, Reserve Bank of India refused to make even an advance for ways and means. Despite that India had to pay our 50 crore, (the remaining 5 crore still remains unpaid). There was a controversy on establishment of our central bank because we had no experience or expertise but it was resolved and SBP was created, 3 months ahead of schedule, on July 1, 1948, which was the last public appearance of the Quaid-e-Azam. SBP claimed its share of Assets of Reserve bank of India against the Indian currency retired from Pakistan, but this 50 crore India disputed and virtually refused to settle this dispute uptil now.
In 1949 (September) U.K. devalued its currency, India followed suit but we did not. India said we had contravened the agreement of keeping both currencies at par. We said we had not done that, India had done it arbitrarily without consulting us. On October 3, 1949, the two central banks were to announce the new par value of both currencies but India denied a day earlier. India also froze our trade - balance surplus which is still an unsettled dispute. India also withdraw the Marwari merchants who were employed annually for movement of jute crop by financing it. There being no jute industry, prices fell sharply, foreign banks and foreign merchants stood aside and an agrarian unrest was threatening. Two Ordinances were, therefore, issued.
1.Jute Board Establishment Ordinance &
2.NBP Ordinance dated 08.11.1949
NBP was established on 20.11.1949 to provide finance to suitable parties. NBP stood behind jute trade, SBP stood behind NBP and the government stood behind SPB. Speedy it was such that 6 branches came into being at once and the doubts on our ability to handle this situation were dispelled for ever. Now, as the Jute Board and NBP were in the field, the foreign merchants and bankers also rushed in to get their share in the business and consequently NBP had to lay out much less finance than it could. Mr.Ghulam Farooq was chairman Jute Board & Mr. Mumtaz Hassan was chairman NBP. Until June, 1950, NBP remained exclusively in jute operations, thereafter other commodities were also taken-up. After that Mr. Zahid Hussain, Governor SBP assumed additional charge also as chairman NBP's Board of Directors, & Mr.M.A. Muhajir became its first M.D.
In 1952 NBP replaced Imperial Bank of India. This arrangement was negotiated by Mr. Mumtaz Hassan as Acting Governor of SBP. In 1962 when Mr. Mumtaz Hassan became MD (He had already served NBP for 10 years as its Chairman of government Director), the number of branches had increased from 6 to 239 and deposits from Rs.5 crore (50 million) to 106 crore (one bn & 60 mln) , profit, from 3 million (3 lac) to 21 million (2.1. crore) and the staff increased from 380 to 7091, as compared to 1949-50. In Dec. 1966 its 600th branch was opened raising the deposits to 2.31 bn. and staff to 14, 963. Upto 1965, the shareholders had received 225% of their original...