banking presentation

Banking Operations & Management

Khalid Jamil Ansari

July 22, 2012

BANKING

Course Objectives

Learn what a Bank is

Banker Customer Relationship

What different accounts banks offer

What checks are and how they work

Learn about electronic banking

SBP’s Prudential Regulations and SECP Rules

Learn about the Financial System

Savers(Surplus Unit)

Borrowers(Deficit Unit)

Save and

Expecta Price forSacrifice

World without Banks

Borrow from Savers

& Pay a Price

Suppliers Direct Contact Users

Savers(Surplus Unit)

Borrowers(Deficit Unit)

Save and

Expecta Price forSacrifice

World with Banks

Motive Savers to deposit

Saving for a Price

Borrowed Savers’ Savings

from Bank &

Pay a Priceto Bank

Suppliers Custodian Users

EVOLUTION OF WORD “BANK”

1ST OPINION

• Word “Bank” is derived from the word “Banque” or “Bancus” which means a bench.

• Jews used to transact the business of money exchange on benches in the market place & when businesses failed, “Bancus” was destroyed by the people.

2ND OPINION

• Word “Bank” is derived from the German word “Bank” which means joint stock fund.

EARLY GROWTH

• Babylonians developed the banking system as early as 2000 B.C and their temples were used as “Banks” coz of the prevalent respect & confidence.

• King Hammurabi laid down rules & regulations for banking operations.

• In 687 B.C Gyges (Croesus), King of Lydia invented gold and silver ingots which were used as money.

• Earliest known public bank is called as “Bank of Venice” which was established in 1157 A.D

• Then various other banks during 1336 to 1349 were established in Italy

• In 1401, German public bank was formed comprising the operations of discounting ,deposit and transferring of money.

• In 1407, Bank of Genoa was formed.

• In 1587, a state bank under the name of Banco di Rialto was formed in Genoa.

• In 1609, Bank of Amsterdam was also formed.

• Finally in 1690, Bank of Hamburg came into existence with the business of accepting deposits of fine silver or foreign moneys and to run accounts on these deposits.

MODERN BANKING

• Modern banking originated in the 14th Century in Barcelona.

• Banking in its modern form started from Britain when King Edward –II of Great Britain established the office of Royal Exchanger for changing foreign money at the profit for the benefit of the Crown.

• Later on this business was taken over by goldsmiths & they introduced strong safes to fulfill their requirement.

• They issued notes or receipts to their depositors in respect of the cash or articles left with them and they were called as “Goldsmith Notes”.

• Goldsmith bankers formed into a corporation in 1695, known as Bank of England.

• BOE lent £ 1,200,000 at 8% interest to William –III and he allowed the right to issue Notes Payable to bearer on demand up to the amount of this loan.

• By the year 1700, BOE was not only issuing notes but also conducting accounts for customers.

• BOE was the only Joint stock company which was given the monopoly of issuing Bank Notes.

• An act passed in 1708, the privilege of issuing notes was withdrawn from Joint Stock Co and confound to private banks with more than six partners.

• Later on check currency was introduced and this proved to be very suitable.

• In 1946, the Labour Government nationalized the bank of England and transferred the existing stock to the nominee of the British treasury and thus Governors, Dupty Governors and Directors were appointed.

• In 1955, British Bank made a departure by undertaking hire-purchase finance for companies such as buying industrial plants and machinery but interest on it was very high.

• A bank is a commercial or state institution that provides financial services , including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit.

• A bank is a business. Banks sell services - financial services such as car loans, home mortgage loans, business loans, checking accounts, savings accounts, certificates of deposit, and credit card services. Some people go to the bank in search of a safe place to keep their money. Others go to the bank seeking money for loans to buy houses or cars, start businesses, expand farms, or do any of the other things that require borrowing money.

Where do banks get the money to lend?

• They get it from all the people who open savings and other types of accounts. Banks act as a go between the people who save and people who need to borrow. If savers didn't put their money in banks, the banks would have little or no money to lend.

BANKER

• A Person or an Organization doing banking business i.e accepting deposits and granting loans to individuals and to corporate houses.

CUSTOMER

• A Person who has some sort of account either current, fixed or saving with the banker.

Banker Customer Relationship

Duty of Secrecy

Termination of Relationship

Account Opening

customer comes

back by providing the best services

Make a customer, not a sale. - Katherine Barchetti

First you earn new customers, then you must learn to keep them. - Ron Kaufman

Rule #1: The customer is always right. Rule #2: If the customer is wrong, see Rule #1.

- Stew Leonard

Rule #3: If you can't remember the rules, ask your customers. They will remind you. - Ron Kaufman

“Customers are not an interruption to our work; they are the purpose of it.”

ATTITUDE…

• Words can be refused but a positive attitude that springs from sincere belief cannot

• People are persuaded more by attitude than logic because:–People are ruled by emotions–Emotions are contagious

ENTHUSIASM…

• Enthusiasm lets you do things with excitement and energy

• It’s like an electric current that creates attraction

• It invites people to join with you in your belief in what you are selling

• It shows in your voice, body language and willingness to do whatever you can to provide your customers with the best possible service

THE POWER OF PASSION…

• If attitude is mind, enthusiasm is body, then passion is spirit

• It’s about having love and respect for what you do personally and professionally

POSITIVITY…

• Read something inspiring everyday

• Find a quote that means something to you and hang it where you can see it

• Look for new crowd if people around you are angry and bitter

• Count your blessings

• Find attitude mentors

GIVE IT ALL YOU HAVE…

• To be high achiever, you have to put in time and effort necessary to lessen the possibility of failure

• A positive attitude stimulates effort

• When you are faced with less perfect situations you have two choices:– Live in disappointment– Pick yourself up and start again

KNOWLEDGE…

• Business knowledge

• Industry knowledge

• Company knowledge

• Product knowledge

• Process knowledge

• Policy knowledge

• Selling knowledge

PERSISTANCE…

Never, never, never give-up!!

BUILD THE RIGHT RELATIONSHIPS

• People do business with you if:

–They like you

–They trust you

–They respect you

Why Customers Quit?

1% Die

3% Move away

5% Other friends

9% Competitive reasons

14% Product dissatisfaction

68% Attitude or Indifference of an Employee

Customers Need….

Customers need a Good Product

Customers need a Good Price

Customers need Timely Delivery

Fulfill the customer's six basic needs

• Fairness• Friendliness• Understanding• Control• Options• Information

Customers want a variety of responses from you. Most of all,

people want to be treated like human beings. Some of what they

want include:

To be taken seriously

To be treated with respect

To get immediate action

To clear up the problem so that it never happens again

To be listened to

What do Customers Want?

Customers Want….

• To be understood

• To be respected

• To feel that they’re in control

• To be treated fairly

• To be recognized

TIP: Customers are humans! Deal with their human emotions first before you address the problem.

Basically, Customer Service is all about Understanding the Customer

Techniques for Personalized Service

• Remembering customer names

• Using names properly

• Remembering personal things

• Sensing their needs

• Letting them know that you care

Conversation Tips

• The person who speaks first, generally sets the tone for the conversation

• The person who asks good questions, can generally control the content

• A good listener can generally control the outcome

Speak First

• Smile at the Customer

• Say the Name (if you know it)

• “Can I help you?”

• “Why don’t you sit down?”

• “If you just give me a few minutes…”

Body Language that Matters

• Eye Contact

• Facial Expressions

• Body posture & movement

• Hand gestures

• Touching

• Physical Distance

• Dress!

Power talk! Make Things Go Your Way

• We make up our mind about someone on the basis of three sets of clues:

• What they say• How they speak (pitch/tone/speed/volume)• How they look to us• How important do you feel each one is? When we form an opinion about

somebody, how much do each of these influence us?

• %• What the person says ____•• How they speak ____•• How they look to us ____•• Total 100%

Meeting Face to Face

• How your message is communicated

– Words 7%

– Tone of Voice 33%

– Body language 60%

“If you want small changes, work on your behaviour; if you want quantum-leap changes, work on your paradigm"

Stephen R. Covey….

• Over 50% of the message• Read signals and be aware of your own

Expressing Opposition

Showing Interest

Thinking/Deciding

Lacking Interest

Body Language

Don't Say...

• 1. No • 2. That's not my job • 3. I don't know • 4. Calm down • 5. I'm busy right now • 6. Call me back • 7. You want it when? • 8. I have to put you on hold

Do Say...

• 1. This is what I can do for you • 2. Here's how I can help you • 3. I'll find out • 4. I'm sorry • 5. I'll be with you shortly • 6. I'll call you back • 7. I'll try my best • 8. Can you hold for a moment?

3 Steps to “NO”

Give an explanation

Show concernGive

alternatives / options

Importance of Customer

most important person in any business

pays our salaries

is not dependent on us, we are dependent on them

is not an interruption of our work, but the purpose of it

will go where s/he receives the best service

“It is not enough we do our best; sometimes we have to do what is required”

Duty of Secrecy

Bank’s Duty of Secrecy

• Bank secrecy (or bank privacy) is a legal code in some jurisdictions under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply (for example, a criminal complaint has been filed).

Banker’s Duty of Secrecy

Confidential

Maintain Secrecy

Banker must not disclose the condition of his/her customers' account except on reasonable and proper occasion and the obligation to observe secrecy does not end even with closing of the customers' account.

In some cases, additional privacy is provided to beneficial owners through the use of numbered bank accounts or otherwise.

Obligation of Secrecy, may not be considered essential on the following :

1. Under Compulsion of Law

2. Duty to Public to Disclose

3. In the interest of the Bank

4. Express or Implied Consent of Customer

5. Common Courtesy to other Bankers52

BANKER & CUSTOMER RELATIONSHIP

• Debtor & Creditor

• Bailor And Bailee

• Principal And Agent

• Licencer & Licencee

• Pledger & Pledgee

• Mortgagor & Mortgagee

Bailor and Bailee

• When the banker provides safe-custody facilities to his customers for their valuables, the relationship becomes that of Bailor and Bailee, where the customer is the bailor and the banker is bailee.

Principal and Agent

• When a banker performs agency services he becomes agent of his customer. Theses services include collection of cheques and other negotiable instruments etc.

Pawner/Mortgagor and Mortgagee

• When a customer pledges goods and documents with the bank as security for an advance, he becomes the Pawner and bank becomes Pawnee. Similarly, when advance to the customer is made against security of immovable properly, the relationship becomes that Mortgagor and Mortgagee, where banker is the Mortgagee and customer is the Mortgagor.

Termination of Relationship

1. Notice by a customer

2. Notice by BankerObstinacy of the CustomerDeath of CustomerCustomer’s InsanityCustomer’s InsolvencyOrder of CourtAssignment of AccountUnsatisfactory Operation

Why are customers so important ?

In the modern Era, “ Survival of the fittest” is the only Strategy which can enable our bank to survive & remain competitive in the Banking Sector. That is why, Bankers’ missions are no longer Product, Profit or Market , but Banks only focus on Customers’ Supremacy.

The quality of customer service holds key to success .

What is ‘service’ ?

A Service is Intangible, yet it provides satisfaction to the Customer

It is performed by People, not manufactured by Machines

A service may or may not be tied to tangible goods

This is the fastest growing Sector in Economy

It does not recognize Geographical boundaries

What is Service?

Meeting CustomerExpectations

What is Service?

“When one meets or exceeds the customers’ expectations”

“Only promise what you deliver and deliver what was promised”

The service concept

Finding out what Customers want

Designing a service to meet customers’ needs

Providing customers with best service

Setting Service Standards

Measuring Service Performance

Empowering Staff to meet Customers’ needs

Basic Rule

The basic rule in providing excellent customer service is to make it as easy, convenient and pleasant as possible for your clients to do business with you .

Why is good customer service

so important?

Why is good customer service so important?

CUSTOMERS

• Who is a customer?

• Why customer is so important to us?

• Can we succeed without partnering with our customers?

• How do we develop long term relationships with our Customers?

• How do you evaluate MCB’s services if you are a customer?

Two Kinds of Customers

• External– People outside who buy our products and services

• Internal – People within the business who need our service(s) to

get their job done

The 7 C’s (key factors for

becoming customer focused)

• Commitment

• Customer understanding

• Clarity

• Communication

• Change

• Co-ordination

• Can do’

WHAT IT TAKES TO DELIVER SUPERIOR SERVICE

• Attitude, enthusiasm & the power of passion

• Knowledge

• Confidence

• Appearance & Clothing

• Persistence

• Building right relationships

ATTITUDE…

• Words can be refused but a positive attitude that springs from sincere belief cannot

• People are persuaded more by attitude than logic because:– People are ruled by emotions– Emotions are catching

ENTHUSIASM…

• Enthusiasm lets you do things with excitement and energy

• It’s like an electric current that creates attraction

• It invites people to join with you in your belief in what you are selling

• It shows in your voice, body language and willingness to do whatever you can to provide your customers with the best possible service

THE POWER OF PASSION…

• If attitude is mind, enthusiasm is body, then passion is spirit

• It’s about having love and respect for what you do personally and professionally

POSITIVITY…

• Read something inspiring everyday

• Find a quote that means something to you and hang it where you can see it

• Look for new crowd if people around you are angry and bitter

• Count your blessings

• Find attitude mentors

GIVE IT ALL YOU HAVE…

• To be high achiever, you have to put in time and effort necessary to lessen the possibility of failure

• A positive attitude stimulates effort

• When you are faced with less perfect situations you have two choices:

• Live in disappointment• Pick yourself up and start again

KNOWLEDGE…

• Business knowledge

• Industry knowledge

• Company knowledge

• Product knowledge

• Process knowledge

• Policy knowledge

• Selling knowledge

Service Quality

Good Bad Excellent

Importance of Customer

• Most important person in any business• Pays our salaries• Is not dependent on us, we are dependent on them• Is not an interruption of our work, but the purpose of it• Will go where s/he receives the best service

Importance of Service

• Customers demand it.

• Proven factor in improving profitability.

• Gives us an edge over competition.

The Service-Profit Chain

Service Oriented Employees

Good Service – Satisfied Customers

More Profit

Higher incentives/bonus for Employees

CHAIN OF SERVICE- TEAMS

If everyone in the chain gives good service, it will eventually pass on to the external customer

Kia Apko Maloom Hai?

• Poor service is responsible for 40% of customer defections

• A customer who receives poor service tells on average 8 – 16 others

• It costs 5 times more to get a new customer than to keep an existing one

• Customers can spend up to 10% more on the same product with better service.

"Your most unhappy customers are your greatest source of learning….“

Bill Gates….

How to delight a Customer?

‘Delighting the Customer ‘ means:

Fewer customers are lost

Less Time & Money spent on Advertising & Marketing to find new customers

Less use of costly discounts

New offer to attract new customers

Spending more time for meeting needs of best customers only

Free Publicity from your best customers87

Your customer

service experiences

…………..

Role Play

Constructive Service

vs. Unconstructive

Service

Be the first one to greet customer with a smile or acknowledge with a nod

If the customer walks in and you are doing work on your computer, leave the screen and acknowledge

Listen to the customer Ask questions to identify the

actual issues Answer customer queries Guide the customer to the

relevant source for answering queries or resolving problems

Do not greet/acknowledge the customer even if the CCR is preoccupied

Keep looking at the screen while acknowledging/ talking to the customer

Interrupt when the customer is talking

Jump to conclusions when talking to customer to simplify matters

Pass the customer to another person without assuring that he/she is the relevant source for answering the query

CONSTRUCTIVE ATTRIBUTES UNCONSTRUCTIVE ATTRIBUTES

Be empathetic and patient when handling complaints

Be transparent in giving information to the customer

Answer the phone promptly in 3 rings

Close the customer encounter with inquiry

Follow-up when assurance has been given

Deliver service on time Be at the workstation at sharp

9:00 a.m. to serve the customer Handle multiple tasks/queries

Display impatience while handling customer complaints

Hide or misrepresent relevant information

Do not answer phone in three rings

Do not observe proper encounter closure

Do not to follow-up even when assurance has been given to the customer

Do not observe the committed time frame

Not be ready to serve the customer at sharp 9:00 a.m.

Not be able to prioritize/manage multiple tasks/queries

If some customer has to be taken to lockers or BM’s room etc accompany them to the desired destination or have someone take them.

Communicating with the customer using “aap” regardless of the age of the customer

Don’t wait for the customer to approach you. You should be the one to approach the customer and show your care.

Ensure that the premises is kept clean, comfortable and presentable

Ensure clean desk policy all the time

If some customer has to be taken to lockers or BM’s room etc. direct them by hand where to go

Communicating with the customer informally i.e. using “tum” etc. while addressing the customer

Wait for the customer to approach you when you see that he/she is encountering a problem e.g. while filling a deposit slip, cheque etc.

Not be concerned about cleanliness and comfort of premises

Have a cluttered desk

• A market is never saturated with a good product, but it is very quickly saturated with a bad one.

• Henry Ford

How to handle complaints?

Complaints should be handled courteously, sympathetically and - above all - swiftly.

Make sure that your business has an established

procedure for dealing with customer complaints and that it is known to all of your employees.

If you do not Receive

any Complaint,

then ?

It may mean : whether

Your service is perfect?

Your customers are too frighten to complain?

Your customers do not bother to complain?

Your customers have tried complaining and nothing changed, so they left?

How to handle complaints, when you

get them?

How to handle complaints, when you get them?

The following should be included in any set of guidelines on managing complaints :-

1. Recognize the customer’s feelings and listen carefully,

2. Collect all the data and details,

3. Accept the responsibility, don’t try to pass it over,

4. Find out what the customer wants, work out what you can do and do it quickly,

5. If there are things you cannot do, say so and explain why,

6. Work out how to give that little bit more,

7. Don’t argue with your customer,

8. Check that the customer is satisfied, and thank him/her for bringing the problem to your attention,

9. Work out what you can learn from the experience and how you can stop it happening again,

& 10. Make Contact, if appropriate, with the customer at a later date, to ask about his/her current experience of your service .

…in the new global and diverse workplace requires

excellent Serving skills!

Success for YOU…

Individuals

Sole Proprietorships

Partnerships

Companies (Public / Private)

Types of Customers

NATURE OF ACCOUNTS

Personal AccountsThese are non-business accounts of individuals:

Private individuals

Lady Customers

Minors

Joint Accounts

NATURE OF ACCOUNTS

Business Accounts Sole Proprietorship Partnership Accounts Company Accounts

Private Limited Companies

Public Limited Companies

Limited by Guarantee Companies

NATURE OF ACCOUNTS

Personal Representatives Attorney’s Accounts Executors and Administrators

Public or Official Accounts Banks, Government officials and Military Funds etc

NATURE OF ACCOUNTS

Other Accounts

– Clubs, Societies, Associations

– Agents

– Executors and Administration

– Trustees

– Minor

NATURE OF ACCOUNTS

Other Accounts– Illiterate/Disable/Blind Persons/ Photo

– Government

– MCB Employee Salary Accounts

– Non Residents

– NGOs

How many types of Accounts?

TYPES OF ACCOUNT

Current Account

Saving account

Term & Notice time deposit

Types of Accounts

–Single–Joint

Individual Account

Joint Account

An account in the name of two or more, other than partners or trustees is called a Joint Account. Operational instructions in the Application for Account Opening must be filled in clearly.

When such account is opened, it is necessary that the banker should obtain clear directions as to whether one or more of them shall operate the account.

Joint Account

The following points should be kept in mind regarding the Operations of Joint Account:

1. Cheques are signed appropriately i.e. according to the operational instructions.

2. All Joint Account holders must sign “Letter of Authority while delegating authority to operate the account by the third party(s).

3. While making payments of cheques drawn jointly, care should be exercised to verify each signature.

Use additional signature card

Zakat Declaration Form is required for both

Joint Accounts of individuals or accounts of Proprietorship and Partnership concerns can also be opened.

Joint Account

There is no restriction on non-residents maintaining accounts jointly with residents. These accounts should be treated as non-resident accounts irrespective of the fact that whether these accounts are to be operated solely or jointly by the residents.

Joint Accounts of Resident and Non-Residents:

Issuance of Locker to Joint Account

Particulars of all are filled in the locker application form, Specimen Signature Card is filled by only those authorized to operate the locker facility.

Death of the Customer

Lunacy of Customer

Insolvency of Customer

Joint Accounts and Mandate

Personal Accounts

Stop-Payment in a Joint Account

Survivorship

Joint Account of Husband and Wife

Bankruptcy of Joint Account Holder

Safe Custody Item in Joint Names

ACCOUNTS OF CUSTOMERS: GENERAL

Illiterate Person:

• A person is not disqualified to become a customer of the bank merely because of his illiteracy. The extra precautions for illiterate person must be taken.

ACCOUNTS OF CUSTOMERS GENERAL

Illiterate Person:

• Instead of specimen signature, both right hand and left hand thumb impressions from male and female account holders are taken on the cards as well as on the account opening form.

Illiterate Person:

• Obtain two passport size attested Photographs. (One photograph shall be pasted on the Account Opening Form and the other one will be pasted on Specimen Signature Card.

Illiterate Person:

• In case of a customer with shaky signatures the account should be opened as ‘Photo Account’. All cheque withdrawals are in physical presence of customer.

Illiterate Person: An illiterate customer must come personally to

operate his / account, because he / she has to put his / her thumb impressions on the cheque in presence of the bank officer.

Illiterate Person: An illiterate account holder should be advised not in

issue cheques payable to other persons either for cash payment or for collection and clearing.

Pardanashin Lady:

A household woman, whether observing pardah or not is known as Pardanashin woman.

Pardanashin Lady:

If such a lady is literate and can sign her name, there is no difficulty in opening an account but in case of an illiterate woman, it is difficult to verify her thumb impressions and sometimes even to identify her. Therefore, the bankers generally avoid opening such account and suggest the opening of a joint account with some literate person as an alternative.

Non-Pardanashin Lady:

Current accounts may also be opened in the names of non-pardanashin ladies who can read and write English, or one of the local languages provided the Manager / Manager Operations personally satisfies himself / herself in each instance that the lady understands the nature of it.

Minor’s Accounts :• According to law a person is regarded as a

'minor' until he has attained the age of 18 years. if the Court appoints guardian of his/her person or property, then the period of his minority extends to the age of 21.

Minor’s Accounts :

These accounts are opened in the name of the minor on the request of his guardian who signs the account opening form himself/herself, and gives his/her own specimen signature for the operation of the account,

but the title of account remains in the name of both the minor and guardian, such as 'X' (Minor) 'Y' (guardian).

In case of death of Natural Guardian, operation in the Account will be stopped. The Minor will be allowed to withdraw after attaining age of majority by producing evidence in this regard and after getting Legal Opinion from concerned offices.

If the Minor is survivor and has not yet reached the age of majority, the balance can be paid on the production of Guardianship Certificate from the competent Court of Law.

Joint Account : An account opened in the name of two or more

persons is known as joint account. Joint account is not partnership or trust account.

Joint Account : When such account is opened, it is necessary that

the banker should obtain clear directions as to whether one or more of them shall operate upon the account.

Joint Account :

It is called a 'mandate for joint account'. However in the absence of such directions the banker should allow the operations under the signatures of all the joint account holders.

Joint Account : Upon the death of one of the holders of a joint

account, the balance of which is repayable to the survivors, the account, will, of course, continue but the survivor or survivors should be requested to transfer the balance into a new account in his or their own names, a fresh account opening form, etc, being taken. When the balance is not repayable to the survivors(s), the account must be stopped and the concerned offices addressed in the matter.

ACCOUNTS OF SPECIAL CUSTOMERS – SOLE PROPRIETORSHIP PARTNERSHIP

ACCOUNTS OF SPECIAL CUSTOMERS

Accounts in the Names of Firms (Sole Proprietorship):

Applications to open accounts in the name of private firms will be made on AOF on which the names of all partners and the specimen signatures of those who intend to operate the account must be obtained.

ACCOUNTS OF SPECIAL CUSTOMERS PARTNERSHIP (PARTNERSHIP ACT – 1932)

Partnership Account: Partnership is the relation between persons who

have agreed to share the profits of the business carried on by all or any of them acting for all. A partnership can be created either by an oral agreement or by a written agreement.

Attested copy of “Partnership Deed” duly signed by all partners of the firm must be obtained.

Operation of Firm‘s Account:

The account is to be operated according to instructions given in the partnership deed or instructions given at the time of opening the account.

Operation of Firm's Account:

Every partner has an implied authority to countermand payment of any cheque drawn on the firm's account and the banker is bound to comply with the instructions issued by that partner.

ACCOUNTS OF SPECIAL CUSTOMERS – AUTONOMOUS BODIESLOCAL BODIESGOVERNMENT ACCOUNTS

AUTONOMOUS & LOCAL BODIES: These are autonomous institutions formed under

the Local Bodies Act, such as Municipal Corporations or Mu nicipal Committees, District Councils, and Union Councils etc.

AUTONOMOUS & LOCAL BODIES:

They are governed by their own Managing Committees, comprising generally of elected members.

AUTONOMOUS & LOCAL BODIES:

They are administered through notifications issued under the Act from time to time. The Chairman of these Local Bodies may be elected by the members or nominated by the Government.

ACCOUNTS OF CUSTOMERS – CLUBS, SOCIETIES, & ASSOCIATIONSTRUSTAGENTS PRINCIPAL EXECUTORADMINISTRATORLIQUIDATOR

Accounts of Clubs, Societies and Associations:

These are non-trading organizations and formed for the promotion of culture, science, education, recreational activities and charitable purposes etc.

Some of these institutions are registered under the Societies Registration Act. 1866, and are issued a Certificate of Registration after they have been found fit for registration.

The affairs of these institutions are administered by a body known as 'Governing Body’ or 'Managing / Executive Committee’ which draws its authority from the rules and regulations or bye-laws of the institution.

Executor's and Administrator's account:

An EXECUTOR is a person to whom the execution of a will is entrusted by the testator. The executor derives his authority from the will. He has to carry out all the directions contained in the testator's last will. The testator may appoint any person, including a minor or a married woman, as the executor of his will; however, a minor will not be able to act as the executor during his minority. An administrator is appointed to act until the minor attains his majority.

Executor's and Administrator's account:

An ADMINISTRATOR is a person appointed by a court of law to look after the estate of a person who died without leaving a will or the persons he appointed are incapable of acting as executors.

Types of Accounts

Sole ProprietorshipJoint Stock Company (Public/Private)Partnership (Registered/Unregistered)SocietiesAssociations/Club/TrustAutonomous BodiesGovt. Institutions (Federal/Provincial)ResidentNon-resident

Business Account:

Banking sector can be used for which

two serious crimes?

1. Money Laundering

2. Financing Terrorist Activities

Why do we perform KYC /

Why do we perform KYC / CDD?

To Prevent Money Laundering Combat Terrorist Financing

CCUSTOMER DUE DILIGENCE

1- Customer Identification2- Customer Acceptance

3- Accounts & Transaction Monitoring

4- Risk Management

M – 1 KYC

M – 2 AML

M – 3 Record Retention

M - 4 Correspondent Banking

M – 5 Suspicious Transactions

M – 1 KYC

M – 2 AML

M – 3 Record Retention

M - 4 Correspondent Banking

M – 5 Suspicious Transactions

Memory Quiz - M1 TO M5

Sno. Regulation Your Choice

1 AML Measures

2 Correspondent Banking

3 Customer Due Diligence

4 Suspicious Transactions

5 Record Retention

M1 M2 M3 M4 M5

Answer to Memory Quiz - M1 TO M5

S. No.

RegulationYour Choice

1 AML Measures M2

2 Correspondent Banking M4

3 Customer Due Diligence M1

4 Suspicious Transactions M5

5 Record Retention M3

M1 M2 M3 M4 M5

1 SBP regulations relating to CDD / KYC / AML make the new account opening difficult

Proper account documentation and following CDD / KYC / AML procedures provide satisfaction and protection to all branch staff against various types of risks

Your UNDERSTANDING about the following statements

Select: True or False

1SBP regulations relating to CDD / KYC / AML make the new account opening difficult F

Proper account documentation and following CDD / KYC / AML procedures provide satisfaction and protection to all branch staff against various types of risks

Your UNDERSTANDING about the following statements

S. no. What we need to know?

True or False

1 Customer Identification

2 Customer Acceptance / Rejection

3 Assigned Risk Rating (Normal or High)

4 Nature of Customer’s Business

5 Beneficial Ownerships & Third Party Mandates

MCB has a statutory (legal) obligation to know its customers!

Where Banks are different from other business

organizations?• Banks conduct their business allowed under ‘Banking

Companies Ordinance 1962’

• Banks are regulated by country’s central bank – State Bank of Pakistan

WHAT DO BANK OFFERS/DO?

Direct Deposits Of Paychecks

A Bank Card That Can Be Used In ATM’s

A Credit Card Linked To Your Bank Account That Includes A Line Of Credit To Use In An Emergency

Overdraft Privileges To Insure That All The Checks You Write Will Be Paid.

• Accepting Deposits from public/others (Deposits) • Lending money to public (Loans) • Transferring money from one place to another

(Remittances) • Acting as trustees • Keeping valuables in safe custody • Government business

FUNCTIONS OF MODERN BANK

• Provide inexpensive media of exchange

• Bank keeps deposits of public

• Bank finances trade and industry

• Banks acts as reservoir of funds

• Issue notes and controls money supply

• Helps in development of agriculture and industry

• Acts as the custodian customers valuables

• Bank discount bills

• Purchase and Sell Stock Exchange securities

• Act as underwriters for raising capital or loan by Govt

• Collects and make payments of BOE on behalf of its customers.

TYPES OF BANKS

• CENTRAL BANKS

• COMMERCIAL BANKS

• SAVING BANKS

• MERCHANT BANKS

• MORTGAGE BANKS

• CONSUMER BANKS

• INVESTMENT BANKS

• DEVELOPMENT BANKS

• COOPERATIVE BANKS

• EXIMP BANKS

• CREDIT UNIONS

• BROKERAGE FIRMS

Quaid inaugurated

State Bank of Pakistan (July 01, 1948)

CENTRAL BANK

• It is the reservoir of credit.

• Principle Banking Institution of a country

• Operated under Some Degree of state control• Has the responsibility of maintaining economic

equilibrium

• Controls Money Supply & Value of Credit in the Economy

• Works for the overall interest of the CountryE.g; State Bank of PakistanReserve Bank of India

FUNCTIONS OF A CENTRAL BANK

• ISSUING NOTES

• GOVERNMENT’S BANKER– Gives Loan to Govt without limitation of amount– Collects and pays money on behalf of Govt– Manages Public debts– Act as Financial Adviser to the Govt

• BANKER’S BANK– Provide short term credit to Commercial Banks by rediscounting

first class bills and other securities.

• MANAGEMENT OF GOLD STANDARD– Responsible for the Gold standard to control the stability of

exchange Rate.

• LENDER OF LAST RESORT– Controls the flow of credit in accordance with the need of

business.

• CUSTODIAN OF NATIONAL RESERVE– Acts as the trustee of the entire economy of the country– Keeps national reserve in the form of gold, silver and

securities.

• CREDIT CONTROL

• CLEARING HOUSE

• EXCHANGE CONTROL– Maintain foreign exchange and rate of exchange.

• MISCELLANEOUS FUNCTIONS– Publishes FS– Development of banking system

Pakistan Financial Sector

• Commercial Banks– Short term lenders– Financers of Working Capital

• Development Financial Institutions– Long term lenders– Fixed Assts Financers

• Non Banking Financial Companies– Medium and Long term financers– Equity Financers– Fixed Asset Financers

• Others:– Fund Management Companies– Pakistan Postal Service– Govt. agencies

1. Public Sector Commercial Banks (PSCBs)

2. Local Private Banks (LPBs)

3. Foreign Banks (FBs)

4. Specialized Banks (SBs)

Category of Commercial Banks

Commercial Banks

Public Sector Commercial Banks

Local Private Banks

Foreign Banks

Specialized Banks

Public Sector Commercial Banks

1. First Women Bank Limited

2. National Bank of Pakistan

3. The Bank of Khyber

4. The Bank of Punjab

5. Sindh Bank

Local Private Banks1. Albarak Islamic Bank BSC

2. Allied Bank Limited

3. Askari Bank Limited

4. Bank Al-Falah Limited

5. Bank Al-Habib Limited

6. Bank Islami Pakistan Ltd.

7. Burj Bank Ltd.

8. Dubai Islamic Bank Pakistan Ltd.

9. Faysal Bank Limited

10. Habib Bank Limited

11. Habib Metropolitan Bank Ltd

Local Private Banks

12. JS Bank Limited13. KASB Bank Limited14. MCB Bank Limited15. Meezan Bank Ltd.16. Mybank Limited17. NIB Bank Limited18. Samba Bank Limited19. Silk Bank Limited20. Standard Chartered Bank (Pakistan) Limited21. Soneri Bank Limited22. Summit Bank Limited23. United Bank Limited

Foreign Banks

1. Barclays Bank PLC (Pakistan Operation)

2. Citibank NA

3. Deutsche Bank AG

4. HSBC Bank Middle East Ltd. (Pakistan Operation)

5. Oman International Bank SAOG

6. The Bank of Tokyo – Mitsubishi Limited

Specialized Banks1. Industrial Development Bank of Pakistan

2. SME Bank Limited

3. The Punjab Provincial Cooperative Bank Limited

4. Zarai Tarqiati Bank Limited

Islamic Banks

1. Al Baraka Islamic Bank BSC Pakistan

2. BankIslami Pakistan Ltd.

3. Burj Bank Ltd.

4. Dubai Islamic Bank Pakistan Ltd.

5. Meezan Bank Ltd.

Microfinance Banks

1. Khushhali Bank Ltd.

2. Network Microfinance Bank Ltd.

3. Pak Oman Microfinance Bank Ltd

4. Rozgar Microfinance Bank Ltd.

5. Tameer Microfinance Bank Ltd.

6. The First Microfinance Bank Ltd.

Development Financial Institutions DFIs

1. China Investment Company Ltd.2. House Building Finance Corporation 3. National Investment Trust Ltd4. Pak Brunei Investment Company Ltd5. Pak Iran Joint Investment Company6. Pak Kuwait Investment Company Pvt. Limited7. Pak Libya Holding Company Pvt. Ltd8. Pak Oman Investment Company Ltd9. Saudi Pak Industrial & Agricultural Investment Co. Pvt. Ltd.

Non Banking Finance Companies - NBFCs

• Investment Banks• Leasing Companies• Modarabas

Government of Pakistan/Agents•National Saving Centres•WAPDA & CAA•Pakistan Postal Services

Others:•Insurance Companies•Stock Exchanges•Securities Companies

Other Financial Institutions

Segments1. Corporate

2. Commercial

3. SMEs

4. Consumers

5. Agricultural

6. Micro financing

7. Islamic Banking198

COMMERCIAL BANKS

Commercial banks receive deposits from the general public which are repayable on demand upon written orders of the

depositors.

They provide short term finances to trade,

commerce & industry.

Fees are generally highest, and service is often impersonal.E.g. MCB, HBL, UBL, NIB, ABL, RBS, etc

- Elements of Commercial Bank

- Primary and Secondary Functions of Commercial Banks

SAVING BANKS

Saving banks are usually owned by depositors or creditors whose dividends are paid as interest on their accounts.

Their Fee Is Lower Than Commercial Banks.

Depositors Should Inform Them Before Withdrawing From Checking

• Saving banks deposits are paid to depositors only on the submission of:

• Pass book• Certificate of deposit

Few saving banks operating in Pakistan are:

• National saving organization• National saving banks• Post office saving banks

MERCHANT BANKS

• Finance domestic and international trade in UK

• These trades were financed by BOE and merchant banks charged commission for their services.

• Gradually they entered into other banks activities also.

MORTGAGE BANKS

• Mainly Deal in Loans for the acquisition or construction of real estate against the security of mortgages.

• They also deal in Loan association and farm loan association.

• E.g.

CONSUMER BANKS

• Provide finances for purchasing consumption goods for the use of borrowers.

• Consumer finance companies, sales finance companies and credit unions are some popular forms of consumer banks.

• E.g. MCB Bank, HBL, NIB Bank, SCB, ABL, UBL, etc.

INVESTMENT BANKS

• Assists business houses and the Govt.al bodies to raise money through the sale of stocks and bonds for long term purposes.

• Perform usual function of raising deposits of idle money from public.

• E.g. IDBP, PLHC, Pak Oman, Kuwait Investment, SPIAICL, etc

DEVELOPMENT BANKS

• Provide long term development finances to the trade, commerce and industry.

• Few development banks in Pakistan are:

• Agriculture Development Bank of Pakistan• Industrial Development Bank of Pakistan etc.

– Provide finance for the promotion of trade, commerce and industry.

EXIMP BANKS

BROKERAGE FIRMS

• Offer limited Banking services.

• They offer low cost or free savings and checking coordinated with investing.

• They require large minimum balances.

• They may have private insurance but not FDIC insurance.

CREDIT UNIONS

• Credit Unions are not for profit FI.

• They are typically formed by the employees of a company, labor union, or a religious group and operated as a cooperative.

• They offer a full range of Financial services

• Pay higher rates on deposits and charges lower rates on loans than commercial banks.

PRs for Banks/FIs

• SBPs PRS:1. PRs for Corporate/Commercial

Banking2. PRs for SMEs3. PRs for Consumer Financings4. PRs for Agriculture Finance5. PRS for MFBs

• NBIFs Rules

DEVELOPMENT OF BANKING IN AMERICA

• First bank was established in 1720 when British Parliament passed the Bubble Act to restrict the incorporation of banks in order to protect the monopoly of Bank of England.

• In 1794, eighteen banks were chartered in US, but they went bankrupt coz of their poor management.

• Free bank Act was passed in 1838,which allowed the opening of a bank by any group of people who could deposit US bonds or Real estate bonds or mortgages with state Controller.

• National Bank Act was passed by Congress in 1863, which required each national bank to deposit US bonds =1/3 of its capital.

• This provided strength to the Notes issued by National Bank as they held their value.

• The banking Act in 1935, laid the foundation for the Federal Reserve System by establishing federal reserve Committee charged with controlling open market operations and buying and selling of Govt securities.

• Banking system of US has some unique features as it is based on “dual Banking” and these features are as follows:

• Unit Banking: bank limited its business in single bank location.

• Branch Banking: Has no of branches for its operations as well as main office & they are controlled by BODs.

• Holding Company: Hold a controlling stock in a group of banks.

Funds Available to Banks for Lending

Answer the following QuestionCan banks lend entire funds they receive from various

sources – mainly from deposits?

Funds Available to Banks for Lending

Answer is No!

Banks are required to create following reserves from the funds before they lend.

1. Cash Reserve (CRR) 2. Statutory Reserve (SLR)

For creating reserves, Funds available are divided into two types of liabilities:

1. Demand Liabilities 2. Time Liabilities

Why SBP Requires Banks to Maintain these Reserves?

CRR:Cash Reserve is maintained in the form of cash. It is maintained with SBP for clearing and miscellaneous purposes.

SLR:Revenues of GOP are less than its Expenses. To meet the short fall (deficit) in the revenue, GOP has to borrow. For this purpose, GOP (central & provincial government) issue securities (bonds) of varying terms and amounts.

Why SBP Requires Banks to Maintain these Reserves?

SLRExamples of securities/bonds issued by GOP are Pakistan Investment Bonds, Market Treasury Bills, Defence Saving Certificates, Special Saving Certificates. GOP receive cash when banks and individuals purchase these securities.

SBP, on behalf of and at the directions of GOP, requires banks to investment a minimum of 9% of their Demand Liabilities (mainly deposits) in securities issued by central or provincial government or the agencies of these two. This form of borrowing by GOP is as such rightly termed as deficit borrowing.

Demand Liabilities (General)

• Current deposits• Savings deposits• Short Notice deposits• Overdue Fixed deposits• Call Deposits• Unclaimed balance accounts• Payment Orders, TTs, MTs, Outstanding Drafts,

Demand Drafts, Certificates payable• Markup/Interest accrued on all above deposits

Other Demand Liabilities

• Margin on LCs

• Margin Guarantees

• Locker’s Keys security

• Unclaimed Dividend/Dividend payable

• Security Deposit Account (Amount deposited by Supplier of Stationery and Furniture etc. as security)

• Sundry Deposits Account

• Mark up/Interest accrued

• Any other miscellaneous liabilities payable on demand

Time Liabilities (General)• Fixed/Term Deposits including customers,

banks and other financial institutions with tenor of six months and above)

• Return/Interest accrued on above accounts

• Provision for taxation, staff benefits and accrued expenses

• Any other miscellaneous liabilities payable on notice or after specified period

Other Time Liabilities

CRR – Cash Reserve Requirement

– 05% on weekly average basis

– 04% on daily basis

Basis: Total Demand Liabilities

– Demand liabilities includes time deposits with tenor of less than one year

– Time Liabilities (including Time Deposits with tenor of

one year and above) will not require any cash reserve

Reserve is maintained in the form of

‘Cash’ with SBP

BSD Circular N

o. 29 of 2008N

ovember 01, 2008

SLR – Statutory Reserve Requirement

09% of Total Demand Liabilities – including Time Deposits with tenors of less than one

year– Time Liabilities (including Time Deposits with tenor of

one year and above) will not require SLR

Reserve is maintained in the form of ‘Investment’ in approved securities.

SBP decides which are approved securities

Example – Funds available for lending

Total Demand Liabilities (date): Rs. 20,000Less: 5% Cash Reserve Rs. 1,000

Less: 9% Statutory Reserve Rs. 1,800

Funds Available for lending Rs. 17,200

BSD Circular No. 29November 01, 2008

Cash Reserve Requirements

Please refer to BSD Circulars Nos. 25 and 26 dated October 17, 2008 on the captioned subject.

BSD Circular No. 29 of 2008 November 01, 2008Cash Reserve Requirements

Time Liabilities (including Time Deposits with tenor of 1 year and above) will not require any Cash Reserve.

All other instructions on the subject shall, however, remain unchanged.

BSD Circular No. 29 of 2008November 01, 2008

Cash Reserve Requirements

It has been decided to reduce Cash Reserve Requirements by 1% as under with immediate effect instead of 15th November 2008 as earlier notified by above referred circulars:

BSD Circular No. 29 of 2008 November 01, 2008Cash Reserve Requirements

Weekly average of 5.0% (subject to daily minimum of 4.0%) of total Demand Liabilities (including Time Deposits with tenor of less than 1 year)

BSD Circular No. 26 of 2008 October 17, 2008

Cash Reserve & Statutory Liquidity Requirements

Please refer to BSD Circulars No. 20 of October 8, 2008 and No. 11 dated May 22, 2008 on the captioned subject. In exercise of the powers conferred upon the State Bank of Pakistan under Section 36 of the State Bank of Pakistan Act, 1956, and Section 29 of the Banking Companies Ordinance, 1962 it has been decided to reduce the Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (SLR) as under:-

SBP Circular on CRR & SLR

Circular Page 1228

A- Cash Reserve Requirement: a. Effective from 18th October, 2008:

i) Weekly average of 6.0% (subject to daily minimum of 5.0%) of total Demand Liabilities (including Time Deposits with tenor of less than 1 year)

ii) Time Liabilities (including Time Deposits with tenor of 1 year and above) will not require any Cash Reserve.

Circular Page 2229

b. Effective from 15th November, 2008:

In line with earlier Circular No. 20 of October 8, 2008, it is reiterated that the CRR will be further reduced as under: i) Weekly average of 5.0% (subject to daily minimum of 4.0%) of total Demand Liabilities (including Time Deposits with tenor of less than 1 year)

ii) Time Liabilities (including Time Deposits with tenor of 1 year and above) will not require any Cash Reserve.

Circular Page 3230

B- Statutory Liquidity Requirement:

Effective from 18th October 2008:

i) 9% (excluding CRR) of Total Demand Liabilities (including Time Deposits with tenors of less than 1 year).

ii) Time Liabilities (including Time Deposits with tenor of 1 year and above) will not require any SLR

Circular Page 4 (last page)

Bank’s Business is regulated byBanking Companies Ordinance 1962

Defines the business of a bank!

Bank’s Business is regulated byBanking Companies Ordinance 1962

BCO Defines the business of a bank!

Banking means:– The accepting of deposits of money from

the public• The purpose of accepting deposits is lending

and investment• The deposits are repayable on demand or

otherwise, and withdrawable by cheque, draft, order or otherwise

Business of Banking Companies

• The borrowing, raising, or taking up of money;

• The lending or advancing of money either upon or without security;

• The drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scripts (PTCs/TFCs, Musharika certificates, Modaraba certificates and such other instruments as may be approved by the State Bank) and other instruments, and securities whether transferable or negotiable or not

• The granting and issuing of letters of credit, traveller’s cheques and circular notes;

• The buying, selling and dealing in bullion species;

• The buying, selling of foreign exchange including foreign bank notes;

• The acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities (PTCs/TFCs, Musharika certificates, Modaraba certificates and such other instruments as may be approved by the State Bank) and investment of all kinds;

• The purchasing and selling of bonds, scripts or other forms of securities (PTCs/TFCs, Musharika certificates, Modaraba certificates and such other instruments as may be approved by the State Bank) on behalf of constituents or others,

• The negotiating of loans and advances;

• The receiving of all kinds of bonds, scrip's of valuables on deposits or for safe custody or otherwise;

• The providing of safe deposits vaults

• The collecting and transmitting of money and securities

CHEQUES

Cheques Are The Hubs Of The Banking System

Handwritten Notes That Tell Bankers That How Much Money To Pay Out Of Your Account

TYPES OF A CHECK• BEARER CHEQUE• ORDER CHEQUE• CROSSED CHEQUE• OPEN CHEQUE

BEARER CHEQUE

• Cheque bears the phrase “or bearer” after the name of the payee.

• Amount under such cheque is payable to any person who presents it before the banker

• Cheque does not require endorsement.

ORDER CHEQUE

• Phrase ‘Or order’ is written after the name of payee.

• Amount is payable only to that person whose name is mentioned in the cheque.

• Cheque requires endorsement if it I to be cashed by any other person.

CROSSED CHEQUE

• Cheque which bears across it bears two parallel transverse lines.

• B/w these two lines the cheque may also contain the phrase “& Co.” or “Not Negotiable” or “ A/c Payee Only”.

• This cheque is mostly used in business circle.

• Objective of this cheque is to protect the amount from forgery & fraudulent.

OPEN CHEQUE

• It can be presented by payee to the bank and can be cashed a crossed the counter.

• Open cheque means that the crossings are cancelled and these must be initiated by the drawer.

• It is very risky coz if it get lost ,it can be easily cashed by the person who gets it.

Amount to be paidName of a person or

company to who can demand the amount of the check

Check Routing #

Depositor’s Sign

NAME OF A/C HOLDER & A/C NUMBER

Counter Fall

WHY A CHECK BOUNCE?

If there is not enough money in your account to cover a check you write and your bank refuses to honor or (pay) it. The person who cashed it gets the bad check back, and usually has to pay a fee.

A minimum balance is the least amount of money that a bank requires you to keep on deposit to qualify for certain balance like reduce fee or free checking.

WHAT IS A MIN BALANCE?

SERVICES THAT A BANK OFFERS

• DEPOSITS– CURRENT ACCOUNTS– SAVING ACCOUNTS– CORPORATE ACCOUNT– COMMERCIAL ACCOUNT – ESCROW ACCOUNT

• VAULT• ATMS• ASSURANCE• LOANS

Is it Difficult to Open an Account?

• When you have decided on a bank you want to do business with and want to open a savings account, you take your money you want to deposit to the bank. A service representative will help you with the paperwork. The only form you need to fill out is a signature card which requires you to sign your name and then print your name, address, telephone number, date of birth, CNIC number, and your mother's madden name (as a means of identification).

HOW TO OPEN AN ACCOUNT?

Individual • Duly filled Account Opening Application

• Specimen Signature Card

• Photocopy of Computerized National Identity Card (CNIC) or copy of Passport of the individual attested by BM or BOM or Designated Authorized Officer of the bank. (When copy of CNIC/Passport is attested by the authorized officer of the bank he/she must affix the stamp “Original Seen” along with AS/IBS number under his seal and signature).

• CNIC of the individual must also be verified through NADRA on-line VeriSys System.

• In case the CNIC does not contain a photograph, the bank in addition to CNIC, should also obtain any other document such as driving license etc. that contains a photograph. However, if the individual does not have any other valid document which bears photograph following documents should be obtained:

A copy of the photograph duly attested by gazetted officer or Nazim

A copy of CNIC without photograph duly attested by the same person who attested the copy of photograph as per above. (Ensure that the CNIC and the photograph are of the same person whose account is being opened.)

A confirmation in writing to the effect that the individual have no other document bearing photograph 250

• In case of a salaried person, attested copy of his/her service card/ salary slip or any other acceptable evidence of service, including but not limited to a certificate from the employer.

• In case of non-salaried/un-employed individual, KYC should be conducted with extra vigilance and source of income/ funds should be validated prudently.

• In case of illiterate person, a passport size photograph of the new account holder besides taking Left and Right thumb impressions on the account opening application & Specimen Signature Card (SSC).

• In case the signatures mismatch with CNIC, undertaking as per Annexure to be obtained from him/her. 251

Sole Trader/Proprietorship

• Sole Trader / Proprietorship declaration

Partnership

• Attested copy of “Partnership Deed” duly signed by all partners of the firm.

• Attested copy of Registration Certificate with Registrar of Firms. In case the partnership is unregistered, this fact should be clearly mentioned on the Account Opening Form.

• Authority letter in original, in favor of the person authorized to operate the account of the firm duly signed by all partners. 253

Companies Registered under Companies Ordinance 1984

• Resolution of Board of Directors for opening of account specifying the person(s) authorized to operate the company account (Duly Signed by all Directors OR Company Secretary along with One Director) and company seal affixed however the signatories on Board of resolution for opening an account shall be governed by Authorities spelled out in the Memorandum & Articles of Association.

• Certification of the following documents by Company Secretary / Notary Public:a) Memorandum and Articles of Associationb) Certificate of Incorporationc) Certificate of Commencement of Business (not required for Private Ltd

companiesd) Latest List of Directors on Form 29 issued by the Registrar SECP.

• Copies of CNIC of all the Directors verified through NADRA Online VeriSys and attested by an officer of the bank.

• Note : Authorized officer of the bank must see the Original documents and affix the stamp “Original Seen” along with AS/IBS number under his seal and signature before placing the copies in record

Board Resolution?

• A written document or statement that records a decision or action made by a Board of Directors during a board meeting. The board resolution can be found in the minutes book of the Company. Board resolution can also be referred to Director Resolution, or company board resolution.

• • The Board of Directors of a company is responsible

for deciding and making major commercial decisions for and on behalf of the Company. Some decisions passed in the form of Board Resolution are as follows:

• A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors. It is often simply referred to as "the board".

Board Resolution?

• Opening & operation of a bank account (sample of board resolution)

• Purchase of property for business use• Purchase of company's motor vehicle• Application of banking facilities with the banks• Payment of dividends• Election of new members or

Appointment of new director• Acceptance of the resignation of board members • Other business matters

Resolution to Open Bank Accounts

• A proposal to open a Current Account with the (Name of the Bank with address) was placed before the Board for conducting its day-to-day financial transactions. After discussions, the Board unanimously:

• “RESOLVED THAT Current Account in the name & style of ‘(Name of the Company)’ be opened with the (Name of the Bank with address), for the operations of the activities of the Company and that the following Authorized Signatory (ies) of the Company be and are hereby authorized to open and operate the said account:

• INDIVIDUALLY • Name of the person(s) authorized with designation • JOINTLY • Name of the person(s) authorized with designation • And • 1. THAT the said Bank be instructed to accept and act upon

any instructions relating to the account kept in the name of the Company or relating to any transactions of the Company with the Bank, provided the instructions are signed by the authorized signatory(ies) of the Company in the manner mentioned as above.

• WHEREAS, the Board of Directors has determined it to be in the best interest of the Corporation to establish a banking resolution with

• ______________________________________________________________, (_the Bank).

• RESOLVED, that the Vice President of Finance of the Corporation is hereby authorized to designate any bank or trust company in any city in the United States (the _Bank_) as a depository for the funds of Corporation.

• RESOLVED, further, that the Vice President of Finance of the Corporation, namely: ________________________ is hereby authorized to name and designate in writing any officer or officers, employee or employees of the Corporation to withdraw the funds of the Corporation deposited with any one or more of said depositaries by checks or drafts, in the name of Corporation

• The persons, whose signatures appear below, one of whom is a Director of the Company, have been duly authorized to mandate the opening of the account. The information provided for the opening of this account is true and correct in all material respect.

• Dated: ____________________________________ Dated: ___________

• Name: __________________________________________Name: __________.. Designation: Director__________________________________________ Designation: ___.__.__.

• Signature: ______________________________ Signature

The Memorandum and Articles of Association?

The Memorandum is the constitution of the company

The Memorandum of Association sets out the company's name, where the registered office of the limited company is situated and what it will do

The memorandum of association of a company, often simply called the memorandum (and then often capitalized as an abbreviation for the official name, which is a proper noun and usually includes other words), is the document that governs the relationship between the company and the outside.

COMPANIES REGISTERED UNDER COMPANIES ORDINANCE 1984

• The Memorandum and Articles of Association must be carefully read. The Memorandum is the constitution of the company and the Articles define the powers of the directors; when these powers are not clear, the company should be asked to explain what procedure has been adopted to regularize the position. A company cannot do business of a character not included in the Memorandum, but usually these powers are very extensive. The Memorandum will show what are the borrowing powers, etc; and what was the capital of the company at the time of formation.

Memorandum of company limited by shares.-

• In the case of a company limited by shares,-• (a) the memorandum shall state -

• (i) the name of the company with the word "limited" as the last word of the name in the case of a public limited company, and the parenthesis and words "(Private) Limited" as the last words of the name in the case of a private limited company;

• (ii) the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is to be situate;

• (iii) the objects of the company, and, except in the case of a trading corporation, the territories to which they extend;

Memorandum of company limited by shares.-

• (iv) that the liability of the members is limited; and

• (v) the amount of share capital with which the company proposes to be registered, and the division thereof into shares of a fixed amount;

• (b) no subscriber of the memorandum shall take less than one share; and

• (c) each subscriber of the memorandum shall write opposite to his name the number of shares he takes.

Memorandum of company limited by guarantee.-

• In the case of a company limited by guarantee. -

• (a) whether or not the company has a share capital, the memorandum shall state -

• (i) the name of the company with the parenthesis and words "(Guarantee) Limited" as the last words of its name;

• (ii) the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is to be situate;

• (iii) the objects of the company, and, except in the case of a trading corporation, the territories to which they extend;

• (iv) that the liability of the members is limited; and

• (v) that each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member, or within one year afterwards, for payment of the debts and liabilities of the company contracted before he ceases to be a member, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount; and

• (b) if the company has a share capital, -

• (i) the memorandum shall also state the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount;

• (ii) no subscriber of the memorandum shall take less than one share; and

• (iii) each subscriber shall write opposite to his name the number of shares he takes.

Memorandum of company limited by guarantee.-

Memorandum of unlimited company.-

• In the case of an unlimited company, -

• (a) whether or not the company has a share capital, the memorandum shall state -

• (i) the name of the company;

• (ii) the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is to be situate; and

• (iii) the objects of the company, and, except in the case of a trading corporation the territories to which they extend; and

• (b) if the company has a share capital, -

• (i) no subscriber of the memorandum shall take less than one share; and

• (ii) each subscriber shall write opposite to his name the number of shares he takes.

The Articles of Association?

The Articles define the powers of the directors

The Articles of Association set out the rules for the running of the company's internal affairs. Every limited company must register Articles of Association

Form of memorandum and articles.-

• The form of -

• (a) the memorandum of association of a company limited by shares;

• (b) the memorandum and articles of association of a company limited by guarantee and not having a share capital;

• (c) the memorandum and articles of association of a company limited by guarantee and having a share capital;

• (d) the memorandum and articles of association of an unlimited company having a share capital, shall be respectively in accordance with the forms set out in Tables B, C, D and E in the First Schedule or as near thereto as circumstances admit.

WHAT IS A COMPANY?

• A company can be defined as an “artificial person”, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.

• The English word company has its origins in the Late Latin word companio or “companion”, and the Old French military term compaignie (first recorded in 1150), meaning a “body of soldiers". By 1303, the word referred to trade guilds. Usage of company to mean “business association” was first recorded in 1553 and the abbreviation “co.” dates from 1769

PUBLIC COMPANIES AND PRIVATE COMPANIES

• Companies are also sometimes distinguished for legal and regulatory purposes between public companies and private companies.

DIFFERENTIATE PUBLIC COMPANIES AND PRIVATE COMPANIES?

• Public companies are companies whose shares can be publicly traded, often (although not always) on a regulated stock exchange.

• Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders.

COMPANY INCORPORATION /REGISTRATION OFFICES IN PAKISTAN

• Company Registration (formation/incorporation) in Pakistan is administered under a single umbrella of Securities Exchange Commission of Pakistan, which acts as the prime regulatory authority for the companies in most cases.

• Securities Exchange Commission of Pakistan works for company registration (formation/incorporation), periodic monitoring, compliance issues of corporate laws and legislation, before and after company registration for companies of all sizes in Pakistan.

Certificate of incorporation?

• A certificate of incorporation is a legal document relating to the formation of a company or corporation. It is a license to form a corporation issued by state government.

Certificate of commencement of business?

• A private limited company can commence business on receipt of certificate of incorporation.

• A public company has, however, to wait to commence business till a certificate of commencement of business is received from the registrar of the joint stock companies.

• The certificate of commencement of business is granted on fulfilling the following a few other requirements:-

1) Where prospectus has been issued inviting the public on subscribe for shares.

2) Shares payable in cash have been allotted to the amount of minimum subscription.

3) Every director of the company has paid the full amount of the shares payable in cash.

4) There is no money liable to be paid to applicants for shares which have been offered for subscription.

5) A statutory declaration by the chief executive or one of the directors and the security that the aforesaid conditions have been compared with.

The registrar on being fully satisfied that:1- The verified declaration has been filed.2- All other requirements of the ordinance have been compiled with.

Minimum number of directors of a company. -

• (1) Notwithstanding anything contained in any other law for the time being in force,-

• • (a) every single member company shall have at least one director;• • (b) every other private company shall have not less than two directors; and• • (c) every public company other than a listed company shall have not less

than three directors,• • appointed and elected in the manner provided in this Ordinance.• • (2) Every listed company shall have not less than seven directors to be

elected in a general meeting in the manner provided in this Ordinance.•

Clubs, Societies & Associations• Certified copies of:

• Certificate of Registration issued by the Registrar of Co-operative Societies/ Registration Authority.

• Bye-Laws/ Memorandum & Articles of Association of the Society containing official seal of the Registration Authority on each page thereof.

• Resolution of the Governing Body/Executive Committee

• List of members of the Managing Committee

• Permission of the Registrar of Co-operative Societies for opening of account in the name of society is required under Section 37 (d) of Co-operative Societies Act 1925.

Clubs, Societies & Associations• In case of Associations, permission of the Registration Authority for

opening of account in the name of Association as required under Section 7 © of Voluntary Social Welfare (Registration & Control) Ordinance 1961.

• An undertaking signed by all the authorized persons on behalf of the institution mentioning that when any change takes place in the persons authorized to operate on the account, the banker will be informed immediately.

• Bank should obtain copies of CNICs of all the members of Governing and Executive Bodies of DHA etc, or ask for delegation of power to Administrator under section (7) & (8) of the Pakistan Defense Housing Authority Order, 1980 and accept copy of CNIC of Administrator as well as authorized signatories for the purpose of opening accounts of DHA or similar other authorities subject to the condition that all other requirements laid down under PR-M1 shall be complied with in letter and spirit. 289

Agents

• Certified copy of “Power of Attorney”

• Copy of CNIC of the Agent attested by an officer of the bank. (Authorized officer of the bank must affix the stamp “Original Seen” along with AS/IBS number under his seal and signature).

Executors and Administration

• Photocopy of Computerized National Identity Card (CNIC) of all the Executor/Administrator attested by an officer of the bank. (When copy of CNIC is attested by the authorized officer of the bank he must affix the stamp “Original Seen” under his seal and signature)

• Certified copies of Letter of Administration or Probate.

Trust• Certified copy of Registered Instrument of Trust OR Trust Deed by

Registrar of Trust. please check purpose, source of funds and dissolution clause of the trust

• Resolution duly passed by the Trustees regarding opening and operation of Account in the Bank in the name of Trust. It must be ensured that mandate for operation of account given in the resolution is not in violation of the provision of Trust Deed.

• List of Trustees duly certified at least by two Trustees should be obtained.

• Certified copies of Letter of Administration/ Instrument of Trust or Trust Deed

• Branch Manager has to ensure that the opening of Trust Account and subsequent operation in the account is in accordance with the spirit of KYC, Customer Due Diligence (CDD) and other Money Laundering / Combating Financing of terrorism (AML/CFT) safeguards. 292

Minor (Age below 18 years)

• Minor is allowed to open by his guardian, preferably jointly in the name of guardian and Minor or Minor, payable to either or survivor opener of the Account.

• Title of Account is on the Minor’s Name (As per Form–B) & word “Minor” be added to the Title of Account.

• Account/Client must be opened by using the CNIC No. of the Minor which is provided in the Form B

• In the Account Opening Application, the particulars of the Guardian will be filled out in the column of “Personal Information”.

• Attested photocopy of Form-B of Minor

Illiterate/Disabled/Blind Persons/Photo

• Two passport size attested Photographs. (One photograph shall be pasted on the Account Opening Form and the other one will be pasted on Specimen Signature Card.

• Left and Right thumb impressions on the account opening application & Specimen Signature Card (SSC).

Government

• It must be ensured that government accounts are not opened in the personal names of the government official(s). Any such account, which is to be operated by an officer of the Federal / Provincial / Local Government in his/her official capacity, shall be opened only on production of a special resolution/authority from the concerned administrative department duly endorsed by the Ministry of Finance or Finance Department of the concerned provincial or Local Government.

Employee

• Request email/ letter from the Manager or Unit or Department head

Non-Resident

• Obtain following additional documents along with the documents mentioned for opening an individual account:

i. Copy of Passport 1st 4 pages.ii. Copy of the page of the passport where last-entry into

Pakistan was stampediii. Copy of Valid Visa of Pakistan for foreigners.iv. Copy of Valid Visa of the relevant country for Non-Resident

Pakistanisv. Copy of “Work Permit” or “Employer Certificate” or

“Employer Card”.vi. Written request to open an account which clearly states that

he/she is a foreign national and purposes of account opening.

EXEMPTION FOR SENIOR CITIZENS TO OPEN AN A/C AGAINST EXPIRED CNIC

• For senior citizen having age of 65 years or above Central Bank has allowed banks to open an account on the basis of expired CNIC. This change in the policy is based on the fact that NADRA has provided a relaxation to the senior citizens from renewing their CNICs after attaining the age of 65 years or above.

(Refer SBP circular BPRD/BLRD-09/2009-3857 dated June 09, 2009).

1. Account maintained by Employee of Government/semi Government institutions for salary, pension and Benevolent fund.

2. Accounts opened and maintained by School’s Management Committees

3. Dormant Accounts

4. All collection accounts.

5. Students

6. Mustahqeen of Zakat

7. Zakat accounts maintained for disbarments of Zakat fund.

8. Employees and their spouses.

9. Basic Banking Accounts.

10. Privilege Banking Customers

EXEMPTION OF SERVICE CHARGES

Mandatory Requirements

1) Next of kin details required

2) Nature of account & Currency should be clearly mentioned

3) Mother name

4) Address verification

5) Name as per CNIC (Title of Account)

6) Mother CNIC required

7) Admitting officer stamp required on SS card

8) Dr/Cr turnover in KYC form required

9) Customer acknowledge required on AOF with branch Stamp sign

10) Proper filled KYC forms

11) PBA code

12) Alteration Customer sign

13) Occupation must be match with provided documents300

Basic Account Opening Formalities

Introduction

Importance of Account Opening

Types of Accounts

1. JOINT ACCOUNT

2. PROPRIETORSHIP ACCOUNT

3. PARTNERSHIP ACCOUNT Minor as a Partner: Minor Attaining Majority: Death of a Partner: Retirement of Partner: Admission of New Partner:

4. TRUST ACCOUNTS

5. COMPANIES REGISTERED UNDER COMPANIES ORDINANCE 1984

6. CLUBS/ SOCIETIES/ ASSOCIATIONS

7. LOCAL BODIES ACCOUNT

8. LOCAL / DISTRICT ZAKAT/ USHR COMMITTEE ACCOUNT

9. MINOR ACCOUNT

10.STUDENT ACCOUNT

11.ILLITERATE/ DISABLE/ BLIND PERSONS BANK ACCOUNTS

12.SHARES COLLECTION ACCOUNT

13.COLLECTION ACCOUNT Main Collection Accounts: Subsidiary Collection Accounts:

14.NON-RESIDENT ACCOUNTS

DORMANT/ INOPERATIVE ACCOUNTS & FINANCIAL INSTRUMENTS

• The account become dormant if there is no activity in the account (excluding system generated activity e.g. Profit disbursement) shall be classified and flagged by the system as “dormant accounts”. (No financial entry is passed). However half yearly profit shall continue to be applied as usual on Savings accounts only.

Type of Account Dormancy Inoperative Un-Claimed (Escheated)

Current Accounts 6 Months 2 Years 10 Years

Saving Accounts 1 Year 3 Years 10 Years

Financial Instruments - - 3 years from Date of Issuance

Note: Accounts opened and maintained by School Management Committees (SMCs) duly constituted by Education Department, Government Sindh shall not be transferred / flagged as “Dormant” and shall be exempted from levy of ‘Service Charges’ on account of non maintenance of minimum balance requirement

(BPRD Circular Letter # 02 dated Jan 25, 2010)

ZAKAT ON PLS SAVINGS & OTHER SIMILAR ACCOUNTS

• On 1st of Ramadan every year, Zakat is deducted at source on all categories of PLS saving and other similar Accounts except those fulfilling the exemption criteria as per Zakat & Usher ordinance 1980.

Definitions of some the terminologies and calculation/deducted process

Sahib-e-Nisab: Means a person who owns or possess assets not less than “Nisab” as announced by the Administrator General Zakat each year before the start of Ramadan

Rate of Zakat: The current rate of Zakat is 2.5%

Valuation Date The 1st day of the Zakat year (i.e. 1st of Ramadan).

ZAKAT EXEMPTIONS

1. A person who is not a “Sahib-e-Nisab”.

2. All Non-Muslims & All Non-residents.

3. Customers who died on or before 1st of Ramadan.

4. Federal Government, Provincial Government or a Local Authority.

5. Any organization which is owned wholly, directly or indirectly, by the Federal or Provincial Government or a Local Authority.

6. Subsidiary of any organization which is owned wholly, directly or indirectly, by the Federal or Provincial Government or a Local Authority.

7. National Investment (Unit) Trust.

8. Investment Corporation of Pakistan & Its Mutual Fund.

9. A Recognized Provident Fund.

10. Any Unit fund maintained by Defense Services including Civil Armed Forces.

11. A Zakat Fund.

12. All registered charitable organizations.

13. A deeni madrassah registered by Zakat Department.

14. A mosque.

15. A registered orphanage

16. A Workers Participation Fund.

17. Customers who have submitted the certificate/affidavit of Zakat Exemption (CZ-50) before 1st Shabban in their respective Branches.

18. All FCY Accounts/FCY Term Deposits

What is Electronic Banking?

• Electronics and computers have made banking an around-the-clock business. You can now do much of your banking even when your bank is closed. You no longer need to plan your schedule around your banks business hours.

• Automated Teller Machines (ATMs) are computers that are much like limited-service bank branches. You can use them to make a withdrawal, make a deposit, make a payment, transfer money from one account to another, or check your account balance. In some cases, ATMs of different banks are linked together so you can use them when you travel to a different part of town or even to another state. All you need to use an ATM is a plastic card from your bank and your own personal password called a PIN number.

• You can also have your employer electronically deposit your pay directly to your bank account each payday. Direct deposit is also popular among people who receive Social Security checks or pension checks because it saves them the bother of standing in line at the bank, battling bad weather, or worrying about being robbed on the way home from the bank

• Another electronic banking service is called electronic funds transfer or EFT. By using EFT, a bank can transfer large amounts of money to another bank by wiring an electronic message. There is no need to write a check or load up an armored car with cash and there's no long wait for the money to be moved. Electronic transfers take only an instant. An electronic message instructs a computer to deduct a certain amount of money from one bank account and then add the same amount to another bank account. No cash changes hands, but money is transferred just the same.

banking presentation - july 22, 2012

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