organization of banking in pakistan

8/3/2019 Organization of Banking in Pakistan

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Organization of Banking inPakistan

Subject: Money, Banking & FinanceBBA (Hons) 3 Semester

Groups: B, E, and F

Course Supervisor: Karim Ullah

Chapter # 03


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Evolution Of Banking

As early as 2000 B.C, Babylonians had developed a system of Banks

The word Bank itself is derived from the worlds bancus, Banqui or Back

Greece and Rome had played an important historical role in the development of

banks they called the bankers as Argentarii, Mensarii or Callybistoe

The Bank of Venice is established in 1157

In 1401 a public bank was established in Barcelona.

The Bank of Amsterdam was established in 1609

Bank of England was established in 1694.


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Define -Bank, Banker, Banking

A banker orbankis a financial institution whose primary activity is to act

as a payment agent for customers and to borrow and lend money.

Section 5(b) of Banking Companies Ordinance 1962 define banking as:

banking means the accepting, for the purpose of lending or

investment, of deposits of money from the public, repayable on

demand or otherwise, and withdrawable by cheque, draft, order orotherwise;


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State Bank of Pakistan (SBP)

1. The State Bank of Pakistan (SBP) is the central bank of Pakistan

2. State Bank of Pakistan Order 1948

3. The State Bank of Pakistan Act 1956

4. Banking Companies Ordinance, 1962

5. Banks Nationalization Act, 1974


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State Bank of Pakistan (SBP)

Following are the broad Categories of SBPs functions:

1. Statutory obligations (RMD)/ required minimum distribution

2. Core functions of state bank of Pakistan

3. Regulation of liquidity

4. Ensuring the soundness of Financial System


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1. Statutory Obligations (RMD)/Required Minimum Distribution

Statutory Obligations Can further be divided into the following:

1.1 Statutory Cash Reserve1.2 Statutory Liquidity Requirement

1.3 Maintenance of Liquidity against Certain Liabilities

1.4 Submission of Annual audited accounts by NBFIs

1.5 Annual Accounts

1.6 Submission of Returns

1.7 Minimum Capital Requirements


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2. Core functions of State Bank ofPakistan

2.1 Primary functions:

This Category includes issue of notes, regulation and supervision of

the financial system, bankers bank, lender of the last resort, bankerto Government, and conduct of monetary policy.

2.2 Secondary Functions:

This category includes the agency functions like management of

public debt, management of foreign exchange, etc


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3. Regulation of Liquidity


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4. Ensuring the Soundness ofFinancial System

4.1. Regulation and Supervision

4.2. Exchange Rate Management and Balance of Payments

4.3. Developmental Role of State Bank


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Classification of Banks

Classification based on functions:

Central Banks

Commercial Banks

Exchange Banks

Saving Banks

Agricultural Banks

Industrial Banks


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Classification Based on Ownership:

Public Sector Banks

Private sector Banks

Cooperative Banks


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Classification Based on Domicile and Registration:

Domicile Domestic Banks

Foreign Banks

Registration

Scheduled Banks

Non-scheduled Banks


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BANKERS FUND

Chapter # 04


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THE BANKERS FUND

The funds available to a banker for the purpose of its business

Normally consists of the following:

1. Banks capital through issuance of shares.

2. The Reserve Fund.

3. Liquid Assets.

4. Deposits by the Customers.


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THE BANKERS FUND

The Reserve Fund.

Fund created from the profit of the bank to meet any contingencyobligations.

Obligation on all the banks under banking ordinance 1962.


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THE BANKERS FUND

Liquid Assets

Obligation for all the banks to maintain liquid assets under bankingordinance 1962.

The amount of liquid assets should be 35% of the total liabilities.

Includes Cash in hand, Balance with the S.B.P, D.A.C etc.


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THE BANKERS FUND

Deposits ( The Life Blood of a Bank).

Money collected from the customers for deposit.

The volume of the deposit is much bigger than other sources.

This money is further used for lending purposes.

Greater the difference between lending and deposit percentage, greaterwill be the profit and same applies for the volume of deposit.


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THE BANKERS FUND

One of the basic functions of banks is to collect deposits.

It creates the relation of Debtor (Bank) and Creditor (Customer).

The bank then uses these funds but is liable to pay bank upon demand.


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THE BANKERS FUND

Nature of Deposits.

Broadly classified in to following categories.

1. Current Deposits.2. Fixed / Time Deposits.

3. Saving Deposits.

Classified on the basis of duration and purpose of deposit.


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THE BANKERS FUND

Current Deposits.

No Profit No loss deposits.

Amount payable to customer when ever it is demanded.

Payments done through cheques till the balance limit.

Customer is required to maintain a minimum balance in currentaccount otherwise charges will be deducted


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THE BANKERS FUND

Fixed or Termed Deposits.

Deposits which are fixed for a specific time duration.

Time duration varies ( 1,3,5 Years)

Interest (profit) is paid and the percentage depends upon the time period.

In case of premature encashment deductions are made from the interest /

profit.


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THE BANKERS FUND

Savings Deposits.

Normal accounts like current accounts.

Customer can deposit amount which can be withdrawn through cheques.

Certain amount of interest is paid based upon amount of deposits.

Normally any kind of customer can open saving account.


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THE BANKERS FUND

Non Resident Accounts.

Accounts of individuals, firms or companies residing in countries

outside Pakistan are known as Non Resident Accounts

Non resident accounts are categorized as following.

1. Accounts of Pakistan national permanently resident and domiciled

abroad.

2. Accounts of Pakistan nationals who got out of Pakistan for a short

duration in connection with study, business tour or entertainment trip.

3. Accounts of foreign nationals ordinarily residing in Pakistan but go

abroad for a short duration.

4. Accounts of foreign nationals residing abroad.


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THE BANKERS FUND

Debits from the Non Resident Account. Payment on behalf of the account holder direct to the institutions

concerned in respect of insurance premium, club bills or other

payments of regular nature. These payments must be supported byreceipts and bills, vouchers etc. Payments of Government and municipal dues. Disbursement in Pakistan from the amount received from abroad in the

account through banking channel. Amount representing payments through Cheques direct to the carrier or

the travel agent for travel within the country by train, sea, or air forself, wife, children and parents. Amount needed to purchase the share of public ltd companies, N.I.T

units, Prize binds, Defense saving certificates etc.


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THE BANKERS FUND

Payments against bills for hotel expenses in Pakistan of the account

holder and his family.

Cheques drawn for self or in favor of his dependents residing in

Pakistan for their maintenance.

Amount to reverse previous credits.

Payment of Loan Installments.


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THE BANKERS FUND

Credits in the Non Resident Account.

Receipts on account of salary, allowances, bonus, commission etc

through Cheque.

Dividend or Interest of an investment through cheque.

Income from landed property and agricultural rent against identity of

depositor.

Credit of remittances received from abroad through banking channel.

Interest accrued on the account.


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THE BANKERS FUND

Sale proceeds of landed property as supported by a registered sale

deed.

Amounts representing the maturity proceeds of insurance policy and

sale proceeds of the shares of the public limited companies.

Refund of amounts previously debited or overcharged.

ALL THESE DEBITS/CREDITS REQUIRE S.B.P APPROVAL.

organization of banking in pakistan

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