UNIVERSTY OF KARACHIKARACHI UNIVERSITY BUSINESS

SCHOOL

MBA Banking & Finance 2014

Semester II

ABOUT ASKARI BANK

Askari Bank Ltd (formerly Askari Commercial

Bank) is a commercial and retail bank in Pakistan

It was founded on October 9, 1991, as a Public

Limited Company. On June 21, 2013 the bank was

acquired by Fauji Group. It is a branch of Army

welfare organization. (AWT). The Bank is listed

on the Karachi, Lahore & Islamabad Stock

Exchanges

ABOUT ASKARI BANK

Askari Bank has expanded into a

nationwide presence of almost 250

Branches, and an Offshore Banking Unit in

Bahrain. A shared network of over 3000

online ATMs covering all major cities in

Pakistan supports the delivery channels for

customer service. As on December 31,

2013, the Bank had equity of Rs. 9 billion.

CLEARINGThe transfer of fund from a branch

of bank to the other bank on which

the instrument is drawn, without

involving cash through “state bank’s

clearing house”.

TYPES OF CLEARING

Inward clearing

Outward clearing

INWARD CLEARING

“Inward clearing means cheques

received by the bank from other

bank”

INWARD CLEARINGThe inward clearing process decreases the

deposits of the bank.

The main operational task done by the banks

were:

Validation of customer account with the

“CORE BANKING SYSTEM”(CBU).

Searching the physical instrument or return

in.

Archival of all the physical instrument.

•

OUTWARD CLEARING

“Outward clearing means cheques

sent for collection”

OUTWARD CLEARING

OR

“The cheque of other bank, which the

account holder deposit in their account”

Outward clearing increases the deposits of

the bank.

DIFFERENT FORMS OF INWARD /

OUTWARD CLEARING

LOCAL CHEQUE CLEARING

• (within the same geographical/clearing

zone)

INTERCITY CHEQUE CLEARING

• (drawn on a bank outside the local clearing

zone)

FOREIGN CHEQUE CLEARING

• (drawn on a bank/location outside the

country of the collecting bank)

EXAMPLEWhen we receive inward clearing we have to

debit our customer account and when we receive

outward clearing we have to send it to relevant

bank for payment.

For example:

A cheque drawn on “HBL” deposited in

“MCB” bank is an outward cheque for

“MCB” & is an inward for “HBL”

INWARD

In inward we are the

paying banks

OUTWARD

In outward we are the

collecting banks on

behalf of the customers

& will launch the

instrument in clearing

DIFFERENCE

CLEARING INSTRUMENTS

Cheques

Demand draft

Pay order

Travelers cheques

ROLE OF

NATIONAL INSTITUTIONAL

FACILITATION TECHNOLOGY

(NIFT) IN CLEARING

ABOUT NIFT

NIFT - National Institutional Facilitation Technologies

(Pvt.). Ltd. was incorporated in September 1995 as joint

venture between a consortium of six banks and

entrepreneurs from the private sector. All commercial

banks and all of their branches in major cities avail

NIFT services. As of January 2014, 38

commercial banks and their 8382 branches in 273 major

cities, and towns utilize NIFT services through

28 Data Centers.

ROLE OF NIFT IN CLEARING

NIFT commenced its ACH(automated clearing

house)operations in 1996, after signing an agreement

with THE STATE BANK OF PAKISTAN.

ACH is computer based clearing & settlement

facility for interchange of electronic debits & credit

among Financial Institution.

NIFT SERVICES

OVERNTGHT CLEARING

• overnight clearing included return cheques

processing (24 hour clearing cycle)

SAME DAY / HIGH VALUE CLEARING

• Same day/high value clearing included return

cheque processing(3 hour clearing cycle)

NIFT SERVICES

INTERCITY CLEARING

Intercity clearing included return cheque processing (48

hour clearing process)

COUNTRY WIDE LOCAL US DOLLAR

CLEARING

Countrywide local US $ dollar clearing included return

cheque processing (5 day clearing cycle)

MICR SPECIFICATION

MICR (magnetic ink character recognition) is a technology used to verify the legitimacy or originality of paper documents, especially checks. Special ink, which is sensitive to magnetic fields, is used in the printing of certain characters on the original documents.

MICR SPECIFICATION

OUTWARD CLEARING

PROCESS

Outward

Cheques deposited

Scrutiny of cheque & deposits slip

Stamping

Posting

Separate deposits slip & cheque

Make bundle of 50 cheques per list

Send to NIFT

Bundle cover

Final voucher prepared

INWARD CLEARING

PROCESS

Inward

Cheque withdrawals

Scrutiny of cheque & stamps

Posting

Cancelation

Send to account dept

Returns marked

Attach return memo

Return voucher prepared

Send to NIFT

Transfer stamp

REASONS OF CHEQUE

RETURN BY BANK

CHEQUE RETURN MEMO

ITEMS NECESSARY FOR

CLEARING INSTRUMENTS

Crossing stamps

Clearing stamps

Date(which should be current)

Endorsement stamp on back side

Amount in figures & words should be

matched

Signature verification

REQUIRED STAMPS

REQUIRED SLIPS

DEPOSIT SLIP

ONLINE TRANSFER SLIP

CLEARING PROCESS

BY NIFT

RECEIVING OF INSTRUMENTS

& SEND TO NIFT

• At the front office cheques are received. The cheques are then stamped withthe clearing stamps

• The amount of cheque is then posted in the system. i.e. this amount is Cr. Inthe customer’s account

• Next the clearing cheques & other instruments are endorsed by the bankthrough the signatures of the of an authorized signatory

• The cheques /other instruments & deposits slip are separated & the clearinginstruments are prepared in the bundles

• Each bundle of clearing instruments is add –listed & counted & send to NIFT

PROCEDURE AT NIFT

The instruments received from each bank are then passedthrough a scanner.

Preparation of slips which contains the amount & number ofall the instruments received from a bank

Instruments are seperated & are bundled according to theirrespective branches

The main account branch account will be Cr. Or Dr by thenet difference

NORMAL CLEARING CYCLE

SAME DAY CLEARING CYCLE

SPECIAL CLEARING CYCLE

INTERCITY CLEARING CYCLE

ADVANTAGES TO BANK

Central repository

Sound management

Cuts cost

Shorter cycle

Saves employees effort

No loss of cash

Convenient

ADVANTAGES TO CUSTOMER

Short cycle

Responsive

Safety

Simplicity