Theory of economics

Banking system of Uzbekistan and its features

The National Bank for Foreign Economic Activity of the Republic of Uzbekistan was established by the Decree of the first President of the Republic of Uzbekistan Islam Karimov in September 1991..In accordance with the resolution of the president of the Republic of Uzbekistan “on measures to re-organize the unitary Enterprise of the National Bank of foreign economic activity of the Republic of Uzbekistan in the form of an action Society” dated November 30, 2019 PP-4540 was reorganized in the form of a National Action Society.

In the years of independence, the work done for banking systematization in our country has been yielding its results. Currently, banks are working with entrepreneurs not only as a client, but also as a close partner. Entrepreneurs are provided with a wide range of opportunities by banks and at the same time are gaining the confidence of the population. At present, 854 branches of 26 commercial banks, 4292 mini – banks and retail service institutions are serving in our country. At the same time, banks are creating favorable conditions for the further development of their services. Today, banks have also established the opportunity to provide remote online services for their customers. With this, banks are waiting for the queue of customers and end various misunderstandings. Although it was not so much that such a system was created, the bank's customers increased by 90 percent compared to the previous one, if we rely on accurate accounting, it exceeded 1.1 million. The reason why the possibilities of using plastic cards at the present time are also becoming increasingly popular is that plastic cards are convenient in all respects. Although it is true that a few years ago there were problems with plastics, now this method of payment has been simplified for a while and more favorable opportunities are being created. One example is that in the last five years, the use of plastics has increased by 5 times. The introduction of Information Technology in the banking system has led to an increase in the quality of Service and a further increase in the population's confidence in the bank. The establishment of commercial banks on the basis of international criteria created the conditions for the introduction of the Basel-3 system, the first among the Commonwealth countries, based on the recommendations of the yang of Basel on banking supervision, that is, on the basis of a system that meets the generally accepted requirements of financial accounts in banks. According to this, the demand for the capital of commercial banks has been increased, new standards for the provision of liquidity have been introduced, and risk management systems have been further improved.

The banking system of Uzbekistan is a two-tier system of banking, which has been tested on the basis of world experience and adopted globally, and is considered a network of central banks and commercial banks. As a central bank, it ensures the regular functioning of the bank and financial institutions. In the first place, financial institutions should avoid financial confusion, when there are problems from the financial side in the activities of banks and when banks cannot fulfill their obligations before depositors. To solve such issues, the central bank uses the functions of regulation and control in relation to the second tier – commercial banks. The task of the central bank does not involve interference in the daily work of commercial banks. The central bank should ensure the regulatory management of commercial banks, their solvency and liquidity, as well as protect the interests of depositors. With the monetary policy of the central bank, to treatment should have control over the mass of money, low unemployment and create an atmosphere of economic growth. The central bank acts as an emission bank, which means that it has the right to issue Money Tokens into circulation and withdraw them from circulation. The second stage of the banking system is the network of commercial banks, which is the main link in the provision of services to the people and the population. They are the link between carrying out various settlements, credit transactions and transactions related to the performance of various banking services on a contractual basis for legal entities and individuals.

In 1991, a number of banks began to develop in the Republic of Uzbekistan. At a new stage of the economy, Uzbekistan began to adopt modern methods of work, becoming increasingly systematic. 1991-1992 was a new Turning year for banks and their activities. The adoption of the law of the Republic of Uzbekistan “on banks and banking activities” served as the basis for the establishment of a two-level banking system and the assignment of a number of new tasks to the Central Bank of the country. At the time of these changes, the tasks of regulating the circulation of money, the development of the system of commercial banks and the payment system were defined. Financing of economic sectors should have been practically carried out by specialized commercial banks operating on newly established, modern principles and conditions.

In 1993-1994, more consistent reforms in the banking system continued. Since July 1, 1994, the transfer of the national currency-sum of the Republic of Uzbekistan to circulation has become an important reform of the banking system of the Republic of Uzbekistan not only in the formation of the bank, but also in the economy. This in turn meant that the central bank was fully independent in its little activities and could effectively regulate and organize the national currency system through market instruments in the future. Since that time, the central bank's activities on the implementation of monetary credit policy, as well as on the regulation of work on the currency, management of banking activities and subsequently the establishment of an effective system of payment, were aimed at ensuring the stability of a full-fledged national currency.

1995-th year is distinguished as a period of improvement of banking legislation. Historically important document-the law” on the Central Bank of the Republic of Uzbekistan " enriched not only the legal basis of the banking system, but also clearly defined the new status and powers, main goals and functions of the Central Bank of the Republic of Uzbekistan. In addition, in order to further improve the quality of service to the population in this year, necessary conditions have been created in order to create a competitive environment in the credit and deposit market. After the abolition of the law restricting the amount of individual savings attracted to the size of the capital of banks, banking opportunities were significantly changed. It quickly manifested its effect. If in the beginning of 1994, 98.5 percent of the population's savings bank (now the people's Bank) accounted for 1.5 percent of the contribution of other banks, by the end of that year, the contribution of commercial banks increased and the figure in this regard increased to 12.8 percent. By today, the figure is about 83.2 percent.

In 1996, the law of the Republic of Uzbekistan “on banks and banking activities” concerted the legal basis of the activity of secondary banks, that is, commercial banks. It should be noted that two important documents on the banking system – “on the Central Bank of the Republic of Uzbekistan” and “on banks and banking activities” - take into account the experience of countries with developed financial systems in the development of the laws of the Republic of Uzbekistan. These laws, as well as the law” on the protection of the rights of Axiom societies and axioms", created legal conditions for the organization of non –state banks in the form of shares and private-commercial. During this period, it is possible to distinguish two factors that have had a special impact on the development of the banking system. The first is the result of the reforms carried out in 1996 the Central Bank of the Republic of Uzbekistan became a full-fledged body of monetary management and banking supervision the second is the banking system of the second level of the law of the Republic of Uzbekistan “banks and banking activities in the right way” - the legal basis of the activity of commercial banks was thoroughly determined. In order to diversify the bank's assets and attract foreign capital, the principles for the formation of commercial banks were enshrined in it. During this period, credit and financial institutions serving separate sectors of the economy were established. Such specialization is agriculture, aerospace, it was due to the need to finance the national economic sectors such as the automotive industry. In the future, specialized banks have gone beyond the scope of their customers and operations to the requirements of a new level of development of the country's economy and the business environment. In addition, the processes of formation of the Central Bank of the Republic of Uzbekistan as the governing and controlling body of the banking sectors continued to be protested. The legislative base on the banking system has been updated in terms of quality and coordinated with the international banking practice.

In this year 1997, one of the strategic directions of the reforms was to stimulate the flow of private capital in the banking sector. In the same year, the decree of the president of the Republic of Uzbekistan, “on measures to promote the establishment of private commercial banks”, was intensively developed after the publication of the decree. In this was given the privilege of opening banks with a share of not less than 50 percent of physical banks. 1997 year is important in the history of the development of the banking system with the beginning of implementation of Information System in banking activities. It is known that until this time all the calculations on the territory of the Republic of Uzbekistan were carried out all day. Since March 1997, a new software was introduced, all calculations began to be carried out automatically. These payments made it possible to deliver to regions outside the republic within 15 minutes, to remote areas from Tashkent within 3 minutes. At that time, the settlement mechanism was established and the bank implemented a modern system of electronic payments. Banks were given the opportunity to purchase computers and telecommunications equipment and equip departments with them — a unique opportunity at this time. They were exempted from a number of tax payments, taking into account the modernization of important equipment for the operation of their capital. Therefore, in terms of financial and economic quality, new customers began to appear both local and foreign investors.

In 1999-2000, foreign exchange policy was liberalized and foreign currency trading was established in the OTC market. This is due to the foreign exchange demand and offer of authorized banks and created the opportunity to buy currencies from their customers on a free exchange rate with a contract. Since July 1, 2001, small business enterprises have been able to carry out in foreign currency, in addition, through the transfer of the share of currency through the bank's cash desks of the export volumes produced by them. I took a step to promote small private entrepreneurship in our republic and expand its participation in the foreign economy. In the same year, a United Fund in the currency of free circulation was established. This served as an important tool for the development of the OTC foreign exchange market in Uzbekistan. At this time, the banking system has significantly developed cooperation between private sectors. As important factors for the development of this cooperation, it is possible to improve the quality of services provided by banks, the emergence of a competitive environment in banks and the processes associated with the support of entrepreneurship in our country. During this period, it is possible to observe that banks 'lending policies have been widely adopted, that customers' requests have been carefully studied, and that the bank has been formed to provide a high level of service in response to customers ' needs.

In 2002, reliable and effective management of deposits was created in banks. The law of the Republic of Uzbekistan “on guarantees of protection of deposits of citizens in banks” was established the fund of guarantee of deposits in banks. Other than the state commercial people's Bank, the banks operating in the territory of the Republic joined it. Reliability in addition, high quality of Service and mutual partnership relations with customers have become the main printing lines in banks of Uzbekistan. The banking system has been improved institutionally. The software documentation developed with the aim of liberalization and reforming the banking sectors and the further improvement of its efficiency were determined in advance. On the basis of these documents lies the systematic and step-by-step implementation of the process of liberalization of the activities of banks. This makes it possible to further strengthen the confidence of the population in relation to the banks of the country in the observance of these principles. This approach is undoubtedly a significant achievement in the process of establishing a reliable banking system.

2003-2004 was a period of liberalization and further strengthening of reforms in the country, the period of development of the banking system. The enterprises began to change their form of ownership. Banks have improved in line with the requirements of the new stage of economic development of the country. Its resource base has expanded, diversified its activities and attracted new shareholders through the production of banks and banking products based on IT technologies. Factors related to the liberalization of the foreign exchange market and the creation of special conditions for the implementation of the sum conversion of international transactions had a positive impact on the activities of banks. On October 15, 2003, the Republic of Uzbekistan accepted the obligations of the agreement of the International Monetary Fund. Therefore, the operations of enterprises have gained the opportunity to carry out the conversion. It is noteworthy that Uzbekistan has achieved its goal in practice, without external funds, in terms of its own resources. These reforms have created good opportunities for entrepreneurs who have directly benefited from the conversion of the national currency, the sum. This has provided a truly productive activity. The central bank's monetary policy was aimed at keeping inflation in check, preventing high fluctuations in the national currency, stimulating exports and making efficient use of foreign exchange resources. The high price situation in world markets compared to Uzbekistan's exports also allowed to maintain an export - oriented monetary policy and increase the volume of gold and foreign exchange. Reforms to further develop the banking system have not stopped. Its main focus is to strengthen the corporate governance system by increasing the role of shareholders in the management of banks, strengthening the financial balance of banks by improving the quality of foreign exchange assets, further improving the banking system and expanding the range of banking services, increasing the role of commercial banks in investment. It should be noted that the mechanism for the use of credit by business structures in the industry (including through international financial institutions) has been improved.

2005-2006 was a period of further economic and investment activity of the banks of the Republic. During these years, the income tax exemption of the banks of the Republic was an impetus to the activity of banks. In addition, under the state program stopped levying taxes on the establishment of mini banks of commercial banks. With this, the strengthening of the monetary policy was carried out reforms aimed at the stability of the exchange rate of the national currency. With this, it has increased the confidence of citizens towards banks. Opening a deposit account to banks has increased significantly in comparison. Banks deposit is noticeable the increased service quality is even better. At the same time, a new type of Service rental service began to take place in banks. The promotion of private banks in the Republic was influenced by the increase in competition and the improvement of the quality of Service. This created favorable conditions for the promotion and development of entrepreneurship.

2006-2007 was a period of development of mortgage lending. Such a new form of banking services was well appreciated by the population. This resource, which serves for the social protection of all the population, especially young people, was strengthened by the laws of the Republic of Uzbekistan “on consumer credit ”and “on mortgage”. Of great importance is the fact that the law of the Republic of Uzbekistan “on consumer credit” is aimed at protecting the rights of customers. This law has created wide opportunities to improve living conditions.

In 2008-2009, the development of retail products became the main direction of the bank for entrepreneurship subjects of the population. In this direction, he took it on the basis of the prints of world practice. In turn, this has improved the service of the population in sight and the use of loans for entrepreneurs. In the course of these reforms, banking activities have played an important role in improving the standard of living of the population. With this, the banks further increased their activity under the laws "on consumer credit right" and "on mortgage". Commercial banks of Uzbekistan have further strengthened their services in relation to the new reality in our country, new products of banks have been introduced into the market and financial institutions have been launched to introduce their activity on the basis of international standards.

In 2010, commercial banks of Uzbekistan began to be considered as a specialized credit institution. This, on the one hand, has become important in meeting the financial needs of enterprises, entrepreneurs and the population in addition to the fact that the farms attract funds. According to foreign and local experts, in the last years in our republic there is a deepening of banking activities and abandonment of basic specialization. With this, the bank determines in advance the content of transactions and credit relations.

Foreign exchange policy in 2012 began to maintain the stability of the national currency and price and promote exports. The inflationary, monetary and macroeconomic indicators were targeted and the central bank's refinancing rate was maintained at 12 percent in 2012. This indicator ensured the achievement of demand and supply for resources in the money market, increased investment opportunities of enterprises, provided the balance of the resource base of the economy lending and commercial banks.

To further enhance the investment activity of commercial banks in 2011-2015, to expand the participation of commercial banks in order to provide financial support for investment projects, to improve the system of project appraisal and evaluation, taking measures to prevent the formation of problematic debts with loans, ensuring sustainable growth and quality improvement of the credit portfolio of commercial banks in 2011-2015 has been defined as the priority directions of reforming the financial and banking system in the Republic and increasing the balance of payments in 2011-2015.

Speaking about the activities of the central bank and the banking system in 2017, it is worth noting that this year high inflation pressure, active changes in the economy, foreign exchange policy and liberalization of foreign economic relations were carried out. The main emphasis on in this, the reduction in the level of inflation in the economy with the effective use of monetary instruments was also aimed at preventing risks associated with a strong devaluation of the exchange rate. In order to reduce inflation in the economy in the half of 2017, as well as to limit the growth of the money supply: the level of capital of banks and the requirements imposed on liquidity have increased even more.

During the conference on banking activities in 2019, a wealth of information was provided on the reforms in the banking system. It should be noted that in this year's banking system, it is necessary to increase the efficiency of banking institutions and the bank's responsibility for the introduction of modern business roads. This set out a number of tasks for the heads of the banking institution for the following years during the conference on the activities of banks. These tasks are as follows:

- Strengthening the financial balance of banks, introduction of corporate governance principles;

- Transformation in the activities of banks and introduction of new services in the banking system;

- Credit portfolio dividing by quality improvement and diversification

- Further improvement of the quality of service provided by banks and full protection of consumer rights;

These data were reforms and changes in the banking system of Uzbekistan from independence to the present time.