INTRODUCTION

well-developed monetary sector is pre-requisite for the development of any

country. The banking system can contribute greatly to the realization of a

nation’s potentialities for development by helping to keep aggregate

demand in proper balance with the supply of those resources, which are responsive to

monetary demand.

AEVOLUTION OF BANK

Different opinions exist about the origin of the ‘Bank’. According to some

authorities the word “Bank” itself derived from the words “Bancus” or “Banque”, that

is a bench. The early bankers, the Jews in Lombrady, transacted their business of

money exchange on benches in the market place. When the business failed the

“Banco” was broken by the people; and the word “Bankrupt” has evolved from this

practice. This etymology is however ridiculed by Macleod on ground that “the Italian

money changers as such were never called Banchieri in the Middle Ages. There are

the others who are of the opinion that word “Bank” is originally derived from the

German word “Back” meaning a joint stock fund, which was italianised into “Banco”

when the German the greater part of the Italy.

Banks are financial intermediaries. By endowing its obligations with attractive

features, an intermediary sells its obligations at a higher price than it has to pay for the

1CHAPTER ONE

Introduction

obligations it buys. The spread between the interest rate it pays on its own obligations

of others constitutes the margin from which the other expenses of doing business must

be deducted. The next profit after these deductions represents the return to the

shareholders for their participation in the activity of financial intermediary.

FORMAL DEFINITION

“Bank is an institution transacting the business of accepting for the purpose of

money from public, repayable on demand or otherwise and withdrawal by cheque,

draft, order and includes any post office saving bank.”

These are the following types of banks

Central Bank

Commercial Bank

Industrial Bank

Exchange Bank

Saving Bank

Mortgage Bank

COMMERCIAL BANKS

Commercial banks are companies “which transact business of banking in

Pakistan Commercial Banks have constituted the most important source of

institutional credit in the economy of Pakistan.

COMMERCIAL BANKING SCENARIO IN

PAKISTAN

At the time of independence in 1947, there were 38 scheduled banks with 195

offices in “Pakistan”. But by December 31, 1973 there were 14 scheduled Pakistani

Commercial Banks with 3,233 offices all over Pakistan and 74 offices in the foreign

countries.

Nationalization of Banks was not done 1st January 1974 under the

Nationalization Act 1974 due to certain objectives. But it had negative effects on the

efficiency of the banking sector. Afterwards, a Privatization Commission was set up

on January 22, 1991. The commission transferred many banks to the private sector,

i.e., MCB and ABL. The government approved and permitted the establishment of 10

new private banks in August 1991. Hence many new private banks have incorporated

since then. Askari Commercial Banks is one of the namely established private

scheduled banks. It is a branch of Army Welfare organization, (AWT).

ARMY WALFARE TRUST

Army welfare trust was established mainly for the welfare of army officials.

The office of army welfare trust is situated at AWT PLAZA Rawalpindi.

AWT offers the “AWT Saving Scheme” to the army officials only.

AWT has further as units.

1. Askari Associates

2. Askari Leasing

3. Askari General Insurance

4. Private Businesses

(a) Textile Mill

(b) Cement Industry

(c) Petroleum

5. Askari Commercial

Askari Association deals with the share holding.

Askari General Insurance & Askari Leasing are registered at stock exchange.

Cement Industry, Firstly produced “Nizam Cement”.

Recently AWT invested their capital with Mobil named as “Askari Mobil.

ARMY WELFARE TRUST AWT

ASKARI

GENERAL

INSURANCE

ASKARI

ASSOCIATE

(PVT) Ltd.

BUSINESSES

ASKARI

COMMERCIAL

BANK

ASKARI LEASING

TEXTILEPETROLEUMCEMENT

AN INTRODUCTION TO ASKARI COMMERCIAL

BANK, LIMITED.

Askari Commercial Bank, Limited was incorporated on October 09, 1991 as a

Public Limited Company and is listed on Karachi, Lahore and Islamabad Stock

Exchanges. The bank obtained its business commencement certificate on February 23,

1992.

The bank, since its inception has achieved and sustained an increasing trend of

profitability and growth by focusing on the basic essentials of banking. The Head

Office of Askari Commercial Bank, Limited at AWT Rawalpindi. The Head Office

leads and supervises all the branches scattered in the far off areas. The

departmentalization of head office has been done on the basis of functions. In order to

perform various functions there are eight divisions of the Head Office.

PRESIDENT SECRETARIAT

The president supervises all the working of the branches. He holds meeting

with the branch managers and make the policies in the coordination with Board of

Directors.

AUDIT DIVISION

The head of this department is called Audit Chief. This division audits the

various branches and certifies that their working is flawless.

CREDIT DIVISION

The credit division supervises the credit department of different branches. It

sanctions the various credit advises sent to it by different branches and monitors the

loans.

CORPORATE AND PLANNING DIVISION

This division is responsible for the corporate affairs and the various planning

schemes of Askari Commercial Bank, Limited.

FINANCIAL DIVISION

The financial division permeates into the aspects of the banks. It makes the

financial statement and look after monetary affairs of the bank.

BUSINESS DEVELOPMENT DIVISION

This deals in marketing aspects, promotional and other areas of the business

development like expansion and enhancement.

INTERNATIONAL DIVISION

The international division is responsible for managing international relations

with other foreign banks. All sorts of international affairs are settled here.

HUMAN RESOURCES DIVISION

The human resources division manages the personal affairs and administers

the personal policies.

LAW DEPARTMENT

This is the department that coordination all the divisions. All the divisions are

bridged together through this department

ORGANIZATIONAL CHART

The organizational chart is given on next page

HIERARCHY STRUCTURE

PRESIDENT

SENIOR EXECTIVE VICE PRESIDENT

EXCUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

OFFICER GRADE I

OFFICER GRADE 2

OFFICER GRADE 3

JUNIOR OFFICER

PABX OPERATOR

DRIVER

PEON

BR

AN

CH

HIE

RA

RC

HY

ACCOUNT OPENING DEPARTMENT

Borrowing funds from different sources has become an essential feature of

today’s business enterprises. But in the case of a bank borrowing funds from outside

parties is all more vital because the entire banking system is based on it. The

borrowed capital of a bank is much greater their own capital. Banks borrowing is

mostly in the form of deposits. These deposits are lent out to different parties. Such

deposit creation is done through opening an account in the bank.

TYPES OF ACCOUNTS

In ACBL, there are the following types of accounts:

Current Account.

Saving Account.

Askari Special Deposit Account.

Askari Bachat Certificate.

Notice Deposit.

Term Deposit.

2CHAPTER TWO

ACCOUNT OPENING

DEPARTMENT

Current account

In current account there is no interest on it. It is for only transaction purposes.

They are paid on demand. When a banker accepts a demand deposit, he incurs the

obligation of the paying all cheques drawn against him to the extent of the balance in

the account. As there is no profit paid on this account it is also called chequing

account because cheques can be drawn on it. Current account is mostly opened for

business.

Saving account

The purpose of this account is to induce the habit of saving individuals in the

neighborhood. The profit is PLS saving and ASDA Accounts in ACBL are chequing

accounts paid on the basis of profit and loss sharing at the rate of 8.5% six monthly.

The minimum deposit for opening the account is Rs.100/- (as obvious in the

Annexure).

Though individuals open such accounts for saving purpose persons belonging

to Armed Forces, and different military institutions open this account.

Askari special deposit accountant (ASDA

ACCOUNT)

ASDA account is an interest bearing current account interest is paid on it at

the rate of 8.00% with the minimum balance from Rs.50000 Million to Rs.0.499

Million. The payment of return is monthly, where as the rate of return with aspect to

the amount of minimum deposit clear from deposit schedules in annexure. It is also

chequing account because cheques can be drawn on it. It is necessary for this account

that the client must maintain a minimum balance of Rs.0.05 million at the end of the

month, no interest is paid. That’s why it is similar to current account.

It is mostly opened by business but individuals too open this account.

Askari bachat certificate

ABCs are long term fixed deposit for 3 and 5 years. These are not term

deposits because payment of return is on monthly basis rather than on maturity of

deposits. The minimum balance requirement is Rs.25000/- and maximum balance

requirement is Rs.1.0 million. If ABC is for 3 years, the rate of return for 3 years is

12%; if ABC is for 5 years the rate of return is 13.00%. Because in such account the

balance is kept for either ‘3’ or ‘5’ years within the bank no cheque is drawn on it.

That’s is why it is not a chequing account, but only payment of return is made

monthly.

Notice deposits

Notice deposits are kind of fixed deposits. The minimum balance requirement

for opening the account is Rs.5000/- and payment is drawn on maturity of the specific

period. Notice deposit is of the two kinds:

One for which a prior notice of 30 days and above is required from the

customer before with drawing deposited amount and for which rate of

return is 8%.

Second for which a prior notice of 30 days and above is required from the

customer before with drawing the deposited amount and for which rate of

return is 10%.

Term deposits

A term deposit is a deposit that is made for a certain periods of time. At the

end of the specific period, the customer is allowed to with draw the principle amount.

ACBL term deposits are of types clear in the deposit scheme in the Annexure.

One of them is “Askari” Advantage one month. The rate of return on this account is

12.0% for 4 years.

The term deposit account varies from one month to 5 years, and the minimum

balance requirement is Rs.5000/- for all other nine accounts (as clear from deposit

scheme in the annexure).

PROFIT CALCULATION METHOD

Monthly payment of return

Profit = (deposited amount *rate of return) / 12

Where 12 = no of the months in a year

Profit = (50000* 9.5) / 12

=Rs.395/-

On Maturity basis

Profit = (Principal amount * Rate of return) * (no of days or no of the months

from the date account opening).

For PLS saving account

Profit (minimum balance * rate of return) / 2

= (100 * 8.5%) / 2

8.5/2 = Rs.4.25/-

The amount of profit is given to deposits in

three ways:

By cash

By sending a bank draft to depositors home address or officers or

whichever is specified as mailing address.

The amount is credited in any one of the checking accounts of the

depositor.

ACCOUNT OPENING PROCEDURE

For the chequing accounts (C/A, ASDA, SAVING), there are different types

of account holders are required for all these types of account holders. The operation /

procedure requirement that is needed for “Individual Account” differ greatly from

“Joint Account” Proprietorship “Partnership”, “Limited Company” and “Club Society

or Association” as explained below.

INDIVIDUAL’S ACCOUNT

When a single man or woman opens an account in his/her own name and has

the right to operate it is called individual account.

Documentation

For literate person copy of National Identity Card is required as a primary

requirement. For illiterate person and Pardanashin Woman, along with the copy of

National Identity Card requirement he or she must come in person for opening the

account.

OPERATION

The person place a “Check Mark” in the type of account and type of operation

required.

He/she fills in part-1 of the form, a fix his/her either two or four similar signature

(or thumb expression in the signature space and get it introduced and signed by a

person who already has an account with the bank and write his account no in the

specific rows in a specific space.

The person fills in “next of kin” position where he/she father, mother,

husband/wife or any other relative’s name, his/her address, phone no and affix

his/her signature to certify this requirement. This requirement is needed because in

his/her absence bank can have correspondence with the specific person.

The person put her/his signature (or thumb expression) on the signature specimen

card (SS CARD) similar in the area on the form. One the back of SS card mailing

address, telephone no, person to contact and introducer space is filled in. All these

requirement are necessary for future.

The person deposits the initial amount for opening account on to the cash counter.

The person put his signature on form-A (check book requisition) on two places in

“authorized signature” and fills in the “Title of Account” space by writing his

name.

If the person put his signature in Urdu or any language other than English, he

signed a “Vernacular Form” where he undertakes that affixed signature are

original and his own signature.

The next day is the opening of account.

JOINT ACCOUNT

When two or more persons, neither partners, nor trustees, open an in their

name is called joint account. Joint account can be opened by husband and wife or two

persons of same sex.

Documentation

For joint account copy of N-I-C Card of all the persons is obtained other

things remaining same as in individuals account.

OPERATION

The person checks the type of amount and type of operation required in the

respective box on the form.

The persons fill in the Part-I and Part-II in the form.

Signatures of both persons are obtained on the form in the area specified for

signature and SS Cards.

In the title of account space names of all persons are maintained.

Accounts holder specified in the form that they will operate the form singly or

jointly.

PROPRIETORSHIP ACCOUNT

When the owner of the firm operating singly, opens an account in his firm

name of when an owner of a firm operating singly, opens an account in his firm name,

this account is called a proprietorship account proper himself liable for all his acts.

Documentation

For this kind of account, an application for opening the account on the firm

letter – pad (having the firm name) is required along with the N-I-C Card of

proprietor.

OPERTION

All operation remains the same except that the firm name is written in the

“Title of the Account” area and signature of the proprietor are affixed in the SS Card

and the area specified for signatures on the form.

PARTNER SHIP ACCOUNT

The account is opened in the firm name and all partners designate one or two

persons to act on behalf of the partnership firm all acts on behalf of firm. The partners

in the partnership firm are liable for the acts of the firm jointly and severely. Every

partner has in a firm has an implied authority bind his co. partners by drawing and

enclosed cheques.

Documentation

Copy of N.I.C. Card of all partners.

Application to open the account on the firm letter pad.

Partner ship deed in case registered partnership firm.

Letter showing the implied authority of one or more partners to act on behalf of

the firm.

In case of non-registered partnership firm, understanding on behalf of the firm to

remain liable for all acts of the firm.

Name, address of all partners is written on the pad.

OPERATION

All other requirement remain same except that the form is dully signed by all

partners cards are signed by all those partners who will act on behalf of the firm and

along filling Part-I, Part-IV is also filled.

LIMITED COMPANY ACCOUNT

Documentation

Memorandum of associations.

Articles if the association.

Resolution of the Board of Directors.

Certificate of incorporation.

Certificate of commencement of business.

N.I.C.

OPERATION

The person authorized in the resolution of the Board of Directors put their

signature on SS Cards.

Next of Kin requirement is not need in case of a limited company.

After completing all these formalities, introducer’s signature is verified

customer signatures are admitted by stamping “Admitted” near signatures and again

signatures on SS card are admitted in the same way. The same process of verification

and admission of signature is repeated on the form-A and signature on next of Kin

area.

After completing each and every formalities, are signed by all those partners

who will act on behalf of the firm and along filling part-I, part-IV is also filled.

LETTER OF THANKS

At the start of the letter 2nd day, ACBL issues letter of thanks to “Account

opener” and “Account introducer” for the trust the have on ACBL.

STAMPING “POSTED”

After completing all this process, the forms are signed from manages of the

branch after which they forms are stamped across as “POSTED” on one corner of the

front side of the form. Then they are posted in the respective. “Account opening file”

very next day chequebook is issued to the customer. The account opening form is

attached in the Annexure.

OTHER RESPONSIBILITIES OF ACCOUNT OPENING

DEPARTMENT

Cheque-book issuing

Check books are issued only for chequing account such as current account,

saving account and ASDA account. They are not issued for other fixed and term

deposits because of their long term accounts “nature”.

When an account is opened, cheque-book is usually issued the next day,

however they too are issued on the same day of opening the account keeping in view

the energy requirements the account holder and after that cheque-books are issued

whenever customer need cheque-books.

Cheque-books leaves varies with the nature of the account. For example, 25

leaves and 50 leaves chequebook are issued for current and ASDA accounts. Where

as 10 leaves and 25 leaves chequebook are for saving accounts. Usually 25 leaves

cheque-books are given only army fund accounts, and 10 leaves cheque-books are

handed over to “easily individual’s account, holder”.

In ACBL, the fact behind issuing current and ASDA and 50 leaves for and 10

leaves and 25 leaves for saving accounts is the SEP requirement which is of the view

that, because current and ASDA accounts are for business transactions purposes, there

fore they need more leaves cheque-book. There is Rs.2/- excise duty and 50-paisa

provincial tax carried on chequebook leave.

Issuing procedure

Firstly, signatures on chequebook requisition are verified by matching with

signatures on SS Cards.

Secondly, cheque book leaves number, account number, account holders’

name are mentioned in the cheque book is made by mentioning and the total of sum of

excise duty and provincial tax.

Fourthly, the name of A/c holder and date of cheque book issuance is written

on cheque book requisition the account opening officer puts his initials on requisition

leave.

Fifthly, A/c number is stamped over the leaves of cheque book and finally

authorized person affix his signature over the debit voucher and he voucher is

attached from the cheque book and is handed over to the customer.

Receiving inward checks

Another responsibility and function of account opening department is to

receive inward cheques for collection of other banks as well as of ACBL. Then these

cheques are sent to clearing official who clears these checks at SBP from other banks.

Account closing

Account is closed on the written request of the customer ACBL debits

Rs.100/- as charges for closing the customer account from that account. The account

holder with draws the amount by writing a cheque and just leaves Rs.100/- in his

account. But to surrender the chequebook yet if some leaves are yet to be write to the

bank as a necessary requirements for closing the account.

Procedure

1. The customer for individuals account write an application to the manager of the

bank an a simple paper about the closing of his account with the bank (In case of

proprietor ship partnership and limited company account the application should be

written an firm or company letter-head).

2. The individual or in case of other type-proprietor firm and company surrender the

cheque book to the bank.

3. The chequebook is then torn from one side and is attached with the application.

4. In case of Ltd. Company Account resolution of the board of directors is also

obtained to attached it with the application.

5. The account opening form of the account holder is taken from the account-

opening file, and the application, chequebook, and resolution of board of directors

in case of limited company account are attached with the form.

6. Lastly, it is written in “Red Ink on the form that account closed” and “Date of

account closing”.

Everyday posting

At the end of each day, posting of cheque books is performed, the account

department OG3 makes credit vouchers of excise duty and provincial tax on cheque

book leaves, and posts it in the company.

PROCEDURE FOR OPENING OTHER ACCOUNT

1. Askari Bachat certificate

The ABC application form is filed and signed. All the requirements are properly

fulfilled. The detail is written.

The credit voucher is made against the cash that the customer deposits to the

bank.

The certificate is filled according to the specification.

The certificate is then handed over the customer.

The entry is made in the ABC register.

The application is then posted in the file.

2. Notice deposit

The procedure for issuing notice deposit in ACBL is as follows:

The customer comes to the bank and specifies the number of days for which

he wants to deposit hid money in notice deposit.

The credit voucher is made for the amount of cash to be deposited the

presence of account is not necessary.

The notice/deposit form is then filled by the officer. The date of opening, the

period the name of the customer, the signature etc. are all written on the form.

The notice deposit receipt is filled according. All the requirements are carried

out the signature of the customer and the authorized officer, the stamp of the

bank etc.

The notice deposit receipt is then given to the customer.

The number of the notice deposit form and notice deposit is noted receipt is

then given to the customer.

The number of the notice deposit form and notice deposit receipt is noted in

the notice deposit register.

After completion of the form, it is posted in the notice deposit file.

A 0.2% tax on the principal amount is taken while issuing the receipt.

A credit voucher made and the amount is credited to the tax on ND.

Term deposit

Any person can open a term deposit. He needs not have an account in the

bank. The procedure is the came as that of the notice deposit.

FOREIGN EXCHANGE DEPARTMENT

The FOREX department works effectively with an extensive correspondent

network and deals with import, export and foreign remittances. The detail is as

follows:

Import section

In case of import, first a L/C is opened in the bank on behalf of importer.

Importer submits a request for opening a L/C and prepares an application form. The

importer seeking to open a L/C, must be registered with Export Promotion Bureau, it

is the basic requirement.

A documentary letter of credit can be defined as:

A conditional guarantee given by a bank to named beneficiary (seller of

goods), to make payment for the goods dispatched by him to the buyer, against

presentation of the called for documents and compliance with all other terms and

conditions of the credit”.

3CHAPTER THREE

Foreign Exchange department

TYPES OF DOCUMENTARY CREDIT

1. Revocable credits

A revocable credit may be amended or cancelled by the issuing bank at any

moment and without any prior notice to the beneficiary.

2. Irrevocable credits

An irrevocable credit is one, which neither can be cancelled nor can be amended

without the issuing the bank, the confirming bank if any, and the beneficiary.

3. confirmed credits

All credits, whether revocable or irrevocable, are advised to the beneficiary

without any engagement on the part of the advising bank, although they do include an

undertaking of the issuing bank to cover the negotiation of correct documents, if they

are presented. However, such an undertaking of the issuing bank does not bind the

advising bank at all that it will also definitely take such action for the simple reason

that the undertaking to beneficiary is solely of the issuing bank. The advising bank

may refuse to pay, accept or negotiate the documents, though correctly tended by the

beneficiary, for any commercial, economic or political reason, prevailing at that time,

under which the bank feels that it would not be possible to obtain reimbursement from

the issuing bank, for the money paid to the beneficiary.

Therefore, to avoid this risk, the beneficiary may ask the importer to provide

him a guarantee from a bank operating in his country, preferably his own bank, to the

effect that against presentation of correct documents by the beneficiary, the payment

shall be made to him immediately “Without Recourse”. In such cases, the issuing

bank requests the advising bank to provide the desired undertaking/guarantee to the

beneficiary. This guarantee is in addition to, and not in substitution for, the

undertaking already given by the issuing bank.

4. Red clause or packing credits

“A Red clause Credit” is one which contains a special clause, authorizing the

advising or confirming bank to make advances to the beneficiary, enabling him to

manufacture or purchase the goods required to be exported under the credit. In other

words, a red clause credit is a “Pre-shipment advance” to the exporter. The amount of

advance, which may be up to 100% of the amount of credit, is clearly specified in the

credit.

5. Revolving credits

A revolving credit is one where, under the terms and conditions thereof, the

amount of the credit is automatically renewed or reinstated, without specific

amendment to the credit, after each drawing.

A Revolving Credit may revolve either in relation to “Time” or in relation to

“Value”. A credit, which revolves in relation to time, is a more useful and practical

instrument. For example, a revolving credit can be made available for Rs.50000/- on

monthly basis, with an overall validity period of six months. In this case, the

beneficiary can present the documents for Rs.50000/- only, in a month, irrespective of

the fact whether or not he has drawn any sum during the previous month. Thus total

liability on account of negotiation of documents under the credit will not exceed

Rs.300000/- in any case. However, such credits may be issued either on “Cumulative”

or “Non-Cumulative” basis. If the credit is Cumulative, the amount not utilized during

one month can be carried forward and made available in the following or subsequent

months. However, in case of “Non-Cumulative” credit, any short falls in drawings in

a particular month are cancelled and not carried forward to the next or subsequent

months.

6. Transferable credits

A credit may be “Transferable” only if it specifically indicates so. The

transferable credit is usually established when the first beneficiary is not in a position

to supply the goods himself, and wishes to transfer a part or all of his under the credit

to one or more beneficiaries, who are willing to supply the goods.

7. Back-to-back credits

When a credit is not “Transferable”, and the beneficiary is also not in a position to

supply the goods himself, he approaches his bank to issue a fresh credit on his behalf

in favor of another beneficiary, who is willing to supply the goods. As a consequence,

the beneficiary of the original/first credit becomes the applicant of the “Second

Credit”, who is responsible for reimbursing his bank for all payments made under the

“Second Credit”, regardless of the fact whether or not he himself is paid under the

“First Credit”. Diagram shows back-to-back credit:

PROCEDURE FOR OPENING LETTER OF CREDIT

General consideration

1. Letters of credit are normally opened against prior sanctioned limits. However,

where prior sanctioned limit is not available, the branch first submits a CLP to the

competent authority.

2. Appropriate margin against letter of credit as prescribed in the LC limit is

recovered prior to opening of letter of credit.

3. Where the amount of credit is Rs.5000000/- or above, credit report of the

beneficiary is also obtained before establishing the letter of credit. The charges of

this report are recovered from importer.

LC application

a) Application is made by the importer on the bank’s standard form ACBFE 201.

b) In case of guarantee, the guarantor signs the clause printed at the foot of the form

on the reverse.

c) The signature of both the applicant and guarantor are verified. The application

form should bear special adhesive stamp of appropriate value.

d) The application should be filled by the importer himself.

e) The instructions in the letter of credit should be precise and free from any

ambiguity.

f) The blank spaces in the application must be completed and alteration should be

properly authenticated under the signature of the opener.

g) Details of every LC opened must be recorded in the Category Post Book. In the

cases where original category Pass Book is in the custody of some other bank,

attested copy of category Pass Book and NOC is obtained from that bank before

opening any LC and that bank is of details of LC opened.

DOCUMENTATION

I. Indent/Performa invoice/firm order

II. Insurance certificate

III. Insurance cover note

IV. Import registration certificate

Indent/Performa Invoice/Firm Order

An Indent/Performa Invoice/Firm Order contains quantity unit price and total cost

of the goods is obtained along with LC application form prior to opening the letter of

credit. The Indent/Performa Invoice/Firm Order is a signed document and is

countersigned by the importer. It is ensured that price is competitive and the amount

of LC does not exceed the amount of Indent.

Insurance Certificate

The insurance certificate is obtained for the goods being imported, which insures

that the goods are risk free.

Insurance Cover Note/Policy

Under the existing Exchange Control Regulations the insurance for import is

covered in Pakistan. The points are noted while scrutinizing the Insurance Cover

Note/Policy:

The insurance cover note/policy has been obtained for CFR/FOB value +10%

and the premium paid receipt is obtained.

It has been issued in the joint name of the bank and the applicant.

Risk to be covered clearly stated. Expressions such as all “Usual Risks” are

not accepted. Appropriate Risk is covered for the item being imported plus the

risks of “War” and “SRCC” or any special risks arising from the nature of the

merchandise are specified such as “Breakage of glass”, “damage to

refrigerators” etc.

Where shipment on deck is allowed, the insurance cover note/policy must

cover such shipment.

The insurance company should be on the approved list of the bank and the

amount of interest should be within the limit of the insurance company as

prescribed by the Head Office.

Import Registration Certificate

To get registered with Export Promotion Bureau and to get Import Registration

Certificate is a basic requirement for every importer.

HOW TO ESTABLISH A LETTER OF CREDIT?

Documentary Letter of Credit can only be opened by branches authorized to deal

in foreign exchange. The branches, which are not authorized to deal in foreign

exchange, submit their customer’s application for opening letter of credit duly

completed and signed in all respect along with all other documents to the nearest

authorized branch.

After completion of the above formalities the opening should proceed further

as under:

1) Foreign currency amount is converted into Pak Rupee, at TT/OD selling rate.

2) The names of advising and reimbursing banks are from the International Division.

3) Margin, commission, postage and cable/telex charges (if LC is being opened by

cable/telex) are calculated. If the LC is being opened on behalf of an authorized

branch it is ensured that margin as prescribed by SBP/Head Office has been fully

recovered, where as the commission on LCs of unauthorized branches is shared

equally by the opening branch and the forwarding branch.

4) Full particulars of the LC recorded in the LC opening register.

5) Separate folio is allotted for each customer in this register and necessary entries

for LC liability and margin are recorded at the time of opening of LC.

6) Vouchers are passed on the same day.

AMENDMENTS IN LETTER OF CREDIT

An irrevocable letter of credit once communicated to and acted upon by the

beneficiary can be amended without the consent of all parties concerned with LC.

Such a credit can only be amended or cancelled with the consent of all parties, i.e., the

opener, the beneficiary, the opening bank and the confirming bank (if any). All the

amendments must be within the Exchange Control Regulations in Pakistan.

Types of Amendments:

Usually the following types of amendments may be needed

1. Verifying the signature of the opener of the LC, whenever a request for amending

the import LC is received.

2. Checking that amendment is in accordance with the International Rules and

Regulations.

3. If the amendment involves any increase in the amount of LC, it is acceptable only

if it is covered within the prior sanctioned limits of the party.

4. In case of extension of date of shipment/negotiation it should be ensured that the

amended date is not beyond the validity of permissible period.

5. If the change of beneficiary is requested in letter of credit by the opener it should

be proved by documentary evidence, e.g., the original letter from the beneficiary

showing his inability to ship the goods or new contract of sale.

6. If the seller and purchaser subsequently decide to change the mode of shipment,

such type of amendment can also be incorporated in letter of credit. This

amendment is also incorporated in insurance cover note/policy.

7. Sometimes partial shipment or transshipment is requested by the importer. This

type of amendment requires change in insurance cover/policy.

LC sight

Documents are received

The documents are verified as per covering schedule.

A scrutiny sheet is prepared and all discrepancies are recorded.

In case of discrepancies, an advice is sent to negotiating bank with intimation to

importer.

After that negotiating bank contact with the importer, ask the importer to accept

the discrepancies until such time the are held on risk and responsibility of

negotiating bank.

On receipt of instructions of importer/negotiating bank regarding acceptance of

the discrepancies/payment instructions further action is accordingly taken.

If the issuing bank refuses to accept the documents it must give reply to, by any

fastest means of communications (usually fax machine is used) to the negotiating

bank or remitting bank (or to the beneficiary if it received documents directly

from him), the issuing bank shall then be entitled to claim from the remitting bank

refund of any reimbursement which have been made to that bank.

The documents are lodged in PAD register when all documents are in order and

running PAD number is marked on all documents under bank’s stamp.

An advice is sent to importer along with I-Form to be signed and then returned.

TT/OD selling rate prevailing on the date of lodgment to be maintained on the

covering schedule along with date.

If forward exchange has been booked and documents are received within the

validity period then the bill amount is to be converted into Pak Rupees on booked

rate and forward contract is set off. However F.C. charges are converted on

TT/OD selling rates.

The vouchers are prepared and are posted. Vouchers are passed at the time of

lodgment of documents.

P.A.D. RETIREMENT

The Importer’s Debit Authority is received and signatures are verified.

It is ensured that I-Form is returned duly signed by the importer.

Vouchers are prepared and posted for the retirement of documents. The markup is

recovered from the date of negotiation to the date of payment and charges as per

bank schedule are recovered.

Documents are delivered after endorsing bill of exchange to customer along with

cost memo against his acknowledgment.

The documents for the SBP monthly returns are stamped.

LC USANCE

Documents are received.

The documents are verified as per covering schedule.

A scrutiny sheet is prepared and all discrepancies are recorded.

In case of discrepancies, an advice is sent to negotiating bank with intimation to

importer.

After that negotiating bank contact with the importer, ask the importer to accept

the discrepancies until such time the are held on risk and responsibility of

negotiating bank.

On receipt of instructions of importer/negotiating bank regarding acceptance of

the discrepancies/payment instructions further action is accordingly taken.

If the issuing bank refuses to accept the documents it must give reply to, by any

fastest means of communications (usually fax machines is used) to the negotiating

bank or remitting bank (or to the beneficiary if it received documents directly

from him), the issuing bank shall then be entitled to claim from the remitting bank

refund of any reimbursement which have been made to that bank.

An advice is sent to importer and bill of exchange and I-Form is presented to

importer for signing and then returning.

On receipt of signed Bill of Exchange, customer’s account is debited by the

document value being the stamp duty. Then the Treasury Department is advised

about the maturity of the date.

Acceptance numbers are allotted and the details are entered in register duly

marking the maturity dates.

The documents are lodged in PAD register when all documents are in order and

running PAD number is marked on all documents under bank’s stamp.

The documents are delivered after endorsing bill of exchange to customer.

The vouchers are prepared and are posted.

The negotiating bank is informed of the maturity.

The client is advised three days prior maturity to keep sufficient funds in his

account on maturity.

The payment is at maturity to negotiating bank duly informing the Treasury

Department.

The vouchers are prepared and are posted.

EXPORT SECTION

Export is another section of Foreign Exchange Department. It too generates

income to the bank as well as the country. In ACBL Multan, it is operated by two

persons.

Under the registration (import and export) order 1952 no person can export

any commodity from Pakistan unless he is duly registered as an exporter with the

Export Promotion Bureau. Bank should ensure that the exporter is registered with

WPB before certifying any export Form-E for him. The registration number should be

quoted on the relative export form.

Requirement of E-Form

Every exporter is required to furnish a declaration to customs authorities for

the good being exported. The declaration is submitted on a prescribed Form-E in

quadruplicate, which is certified by the authorized dealers.

Issuance of E-Form

1. E-Form in quadruplicate is issued to the exporter having an account with

the bank against written request. In case the exporter maintains an account

at a branch other than the exchange dealing branch, the request is routed

through the branch, which has the account within it.

2. Before issuing E-Form, it is ensured that the exporter has given the

attested photocopies of required documents such as Valid Export

Registration Form, NIC, and Challan copy of Renewal Fee Paid to the

bank.

3. Credit Report of the exporter is also obtained to ensure the Credit

Worthiness of the exporter.

4. The set of E-Form after completion is then entered in the E-Form Issuance

Register and acknowledgment is obtained from the exporter or any

authorized person of the exporter.

5. Utmost Care is taken while issuing E-Form because it is the security

document. Blank E-Form is never issued.

6. If full details of consignment is not available, at least exporter’s name,

address, goods to be exported etc., must be filled in the E-Form.

Certification of E-Form

Before lodgment of E-Form to customs authorities, it is required to be certified

by the Authorized Dealers. When the quadruplicate set of E-Form is presented for

certification, that set is very minutely scrutinized and following details are checked:

Export Registration Number (is correctly mentioned on the E-Form).

Signatures of the exporter or his authorized signatory are duly verified at the

counters.

All blank space in E-Form is correctly, legibly and properly filled in without any

overwriting.

After certifying the correctness of the E-Form, it is then entered in E-Form

certification register in the folio allotted to each exporter separately. Bank/Branch

stamp is then affixed beneath the certificate available and signed by the authorized

officer. All the four copies of the E-Form duly certified are delivered to the exporter

or his authorized person.

Submission of E-Form

After certification of E-Form, all the four copies are submitted to the custom’s

authorities for clearance of consignment. Three copies of E-Form are returned by the

customs’ authorities retaining the original after endorsement of shipment on the

relative portion on E-Form. The quadruplicate copy is retained by the exporter while

the duplicate and triplicate copies are submitted to the authorized dealers along with

other documents for negotiation within 14 days from the date of shipment. The bank

retains the duplicate copy for its record while the triplicate copy is surrendered to SBP

on realization of proceeds.

Utilization of E-Form

E-Form is invariably utilized and received within 21 days form the date of

certification or 14 days from the date of shipment failing which the exporter is

persuaded to submit the form without further delay. In case the exporter does not

respond to the requests, the matter is reported to SBP.

Cancellation of E-Form

E-Form is cancelled in two ways:

If goods are not exported and E-Form is not presented to the customs’ authorities,

the same is surrendered to the bank for cancellation, which is recorded in separate

file, duly marked “Cancelled”.

If E-Form has been in the hands of customs authorities but the goods could not be

shipped due to non-availability of space in ship or due to any other reason, the

exporter is required to submit three copies of E-Form along with original “Shut

Out Notice” duly stamped and certified by customers to the bank. The bank

submits all the three copies along with “Shut Out Notice” to SBP under a covering

letter for cancellation and record at their end.

Certification of E-Form in case of advance payment

Sometimes the exporter may receive payment for the item to be exported in

advance without waiting for the documents. In such a case the advance payment

received for this purpose is required to be declared by the exporter for such on the

prescribed form “Advance Payment Voucher”. A “proceeds certificate” is issued to

the exporter for such payments which is required to be produced at the time of

certification of E-Form as well as at the time of presentation of documents to the

bank. Advance payment is certified of the reverse side of E-Form under the seal and

signatures of the authorized dealer, which is required for reporting to the State Bank

of Pakistan.

Negotiation

Negotiation is giving the value to the beneficiary for drafts and/or documents

as distinct from merely examining and forwarding them to he issuing bank.

Documents are submitted at the counters of negotiating bank along with the

covering letter of exporter after completion of shipment formalities. Documents

contain, besides other documents as per LC terms, the original LC along with all

relevant amendments duly authenticated by the Advising Bank. All documents are

carefully scrutinized and are comply with the terms and conditions of the LC. No

documents should be inconsistent with each other or with terms and conditions of LC.

EXPORT FINANCE SCHEME

State Bank of Pakistan introduced a “Refinance Scheme” for products in 1973

which was renamed in 1977 Export Refinance Scheme. The purpose of this scheme is

to boost export and earns foreign exchange.

Salient features of the scheme

The finance shall be sanctioned by one of the scheduled banks for the exports

of eligible items only, both on pre-shipment or post-shipment basis, at concessionaire

rates prescribed by the SBP. State Bank of Pakistan sanctions limits to the scheduled

banks to obtain refinance from SBP for the finance made by them under the scheme.

It is at the option of the bank to obtain refinance from SBP or to finance the exporter

from their own resources. But the bank shall not recover markup exceeding the

prescribed concessionaire rates. Finance allowed under the scheme is exempt for

calculation of per-party exposure credit ceiling and liquidity requirement.

The finance under the scheme is available for exports through banking channel

for

I) Exports of all eligible items,

II) Exports of eligible commodities locally produced and supplied locally

against international tenders,

III) Export of eligible commodities from the tariff areas of Pakistan to

Export Processing Zones in Pakistan, and

IV) All inputs/supplies by indirect exporters against export commitment of

main exporter under an Irrevocable Letter of Credit.

The scheme operates under two parts viz. Part-1 & Part-2. The maximum

period of finance allowed under Part-1 of the scheme, both on pre-shipment and post-

shipment basis is 180 days.

Export finance under Part-1

Export finance is allowed for exports against a Letter of Credit or a Firm

Contract. In case of a LC name of the commodity and the amount of LC are noted but

in case of the contract, full details of the contract are noted and exporter verify the

signature of buyer on the firm contract. Sales on consignment basis do not qualify for

refinance facility. Finance is allowed for total period of 180 days inclusive of pre-

shipment and post-shipment period. However, if the exporter avails finance on post-

shipment basis, it shall be for 180 days or the date of realization of proceeds

whichever occur earlier.

Documentation

Pre-shipment DP Note

Undertaking (as per Annexure A of the said scheme) on non-judicial stamp paper

Copy of letter of credit or firm contract/firm export order

Post-shipment DP Note

Undertaking (as per Annexure A of the said scheme) on non-judicial stamp paper

Copy of letter of credit or firm contract/firm export order

Bill (s) of lading

Invoices

Duplicate copy of form (s) ‘E’

Procedure The party sent a request letter.

The scrutiny sheet is prepared, the case is stamped with ACBL stamp and

authorized persons affix their signatures.

The above mentioned documents are sent to SBP for approval.

The FAPC number is entered into to the respective register.

A separate file is maintained.

On approval, SBP sends an advice to bank.

On the 180th day SBP debits his balance and the bank’s account.

Export finance under part-2

An exporter avails of finance limit at the concessionaire rate in a financial year

to half of the export performance of eligible commodities made by him during the

previous financial year. The limit is available to the exporter on revolving basis.

Where in outstanding balance on any date shall not exceed ‘Half’ of the export

performance. The exporter shall be required to repatriate export proceeds of eligible

items (excluding receipts from exports for which finance has been obtained during the

period) two times of the daily average of finance obtained by him during the

monitoring period.

Documentation

Copy of Letter of Credit

DP Note

Undertaking (as per Annexure of the said scheme) on non-judicial stamp paper

Form ‘EE’

Customer’s invoices

Bill of lading

OPENING AND MAINTENANCE OF FOREIGN CURRENCY

ACCOUNTS OPENING

1. All persons, firms and companies of local or foreign origin, whether resident or

non-resident, can open foreign currency accounts. All foreign currency account

are interest based and are not PLS based.

2. Accounts may be opened in any foreign currency.

3. Deposits are FC Accounts may be made in the form of cash, traveler’s cheques,

FEBCs, FDDs/FTTs etc.

4. Travelers cheques issued by banks/institutions operating in Pakistan whether local

or foreign cannot be deposited in Foreign Currency Accounts. However, T/C’s

issued against Foreign Currency Account can be deposited into foreign currency

account. Now the question arises that how it can be verified that a particular T/C

is issued against quota or F.C A/c. The answer is that T/C’s issued against quota

“Not encashable in Pakistan” stamp is affixed on it. The quota T/C’s have to be

surrendered against Pak. Rupees.

5. Banks or any other agency cannot inquire or raise any question about the sources

of funds deposited in foreign currency accounts by the customers. However, on

few occasions banks can disclose the secrecy of F.C. Accounts if (i) it is in the

interest of the nation (ii) in the interest of the bank (iii) through court orders and

(iv) desired by Government agency (Narcotic Control Board SRO).

6. Any amount, at any time, can be withdrawn from these accounts and there is no

limit for cash withdrawals.

7. Sale proceeds of goods exported from Pakistan, earnings of residents of Pakistan

on account of services rendered in Pakistan, earnings or profits of the overseas

offices/branches of Pakistan firms/companies/banks etc. are not eligible for credit

to foreign currency accounts.

8. State Bank of Pakistan has given permission to utilize the funds lying in foreign

currency accounts for adjustment towards export proceeds, short realized/not

realized within the admissible period.

FOREIGN REMITTANCES

The word “remittances” means transfer of finds from one place to another. It

may be ‘inland remittance’ or ‘remittance abroad’. Inland remittance means transfer

of funds from one place to another within national boundaries. While remittance

abroad or foreign remittance means transfer of funds one country to another.

Foreign remittance can either be inward or outward. In case of inward

remittance, foreign exchange flows in while in case of outward remittance, foreign

exchange flows out. In banking terms in case of inward remittances, authorized

dealers purchase foreign exchange when it is received in the forms of MTs, TTs,

Drafts, Bills TCs and Foreign Currency Notes. In contrast, when it is outward

remittance, authorized dealers sell foreign exchange by issuing MTs, TTs, Drafts,

Bills, TCs, and Foreign Currency Notes.

Classification of inward remittance

Inward remittances mainly fall in one of the following five categories:

Indenting commission

Advance payment against exports

Sale proceeds of exports

Passage money

Miscellaneous earning

1.Indenting commission

The remittance is received in favor of indenting agent in Pakistan, who

negotiated/corresponded sale on behalf of foreign exporter.

2.advance payment

A Pakistani exporter may negotiate with a buyer abroad on the condition that full

or part of the sale proceeds may be remitted before shipment.

3.Sale proceed of exports

Sale proceeds of a Pakistani exporter is received in part in full as per terms of the

Documentary Credit or Firm Contract.

4.Miscellaneous earnings

The remittance is received for rendering any service to foreign customer/clients

viz. Cost of advertisement, fee of legal service etc.

REPORTING OF INWARD REMITTANCES

(SBP’S REQUIREMENTS)

All inward home remittances are to reported to Exchange Control Department,

SBP, either on I.R.V. (Inward Remittance Voucher) Code No. 9610 or on form ‘R’

with the monthly returns as per procedure laid down in para 7 ch XXII of Exchange

Control Manual 1992. If amount of remittance is up to Rs.10,000 or its equivalent in

foreign currency enter in I.R.V.

In case amount of remittance is over Rs.10,000 or its equivalent in foreign

currency complete and signed form ‘R’ to be submitted to Exchange Control with

monthly returns.

In case of home remittance, beneficiary should not be referred for purpose of

remittance. Form ‘R’ and IRV should be submitted by the bank to SBP on behalf of

beneficiary.

REMITTANCE DEPARTMENT

emittance department provides to the customer of the bank. The main function

of this department is transfer of funds.RINSTRUMENTS OF BILLS AND REMITTANCE DEPARTMENT

The instruments that are handled in the Remittance department are as follow:

Demand Draft.

Telegraphic transfer.

Mail transfer.

Pay order.

Pay slip.

OBC.

IBC.

4CHAPTER FOUR

REMITTANCE

DEPARTMENT

Demand Draft

A demand draft is an instrument, which is drawn by one bank upon another

bank for a specific sum of money payable on demand. It is made by the bank and

given to the purchaser against cash or cheque.

If two banks are involved, then one banks sends a DD to anther bank. But in

customer – Bank case the customer sends his DD to the receiver.

Issuance Procedure

A demand draft application to given to the customer, he fills in a relevant

information and signs it.

The officer in charge then checks the information form.

The charges such as commission, excise duty, postage are charged as per effective

schedule of Charges. Tax is exempted if he is taxpayer and knows his No.

In case of cash deposit the cashiers counts his amounts and sign the DD

application and enters it in the register.

The cash received equals the amount of remittance and the cheques there on.

Then the officer of the bills and remittance department signs it and operation

manager counter signs it.

The entry is the made in the DD issuing register.

It is given to the customer.

Vouchers are passed.

The vouchers and the DD form given for posting at the computer.

The DD advises be printed at the computer and mailed to the respective branch.

Note: - On the country, when a DD is received i.e. a customer go to bank with the DD, the

procedure is as fallow.

The DD credit advice is received through mail. The No’s are checked and

signatures are verified.

An entry is made on the DD payable register, and the voucher is made.

The DD credit is attached with the vouchers and given for the posting at the

computer.

When DD is received, The test No’s are checked, and the payment is made.

The vouchers are given for posting. And the payment is made.

The vouchers are given for posting. And the entry that was made in register is

closed. I.e. DD payable is nil.

TELEGRAPHIC TRANSFER/ MAIL TRANSFER

Concept

A telegraphic transfer is a fastest and safest way to transfer money. The

message is fixed. Mail transfer is Sowa than a T.T. the transfer is through mail.

Issuance

The request for maintenance through T.T is taken on the standard printed from.

The customer fills it and signs it.

The Head and remittance department checks it, the charges such as commission,

tax and telex as per effective schedule and sign it .

If he fills the tax exemption form then no tax is levied.

Then a neat T.T is made on the white slip. There are 3 copies. The original faxed

to the branch, one to the Head Office and one are kept as record.

The entry is made in the TT issuing register.

When commission bill is received, it is attached to the T.T office copy in the file.

Payments

When a T.T arrives, the test numbers are checked and the signatures are

verified.

The entry is done in the T.T payable register.

If there is no account then the T.T receipt needs revenue stamps and then the

payment is made.

The T.T receipt is strictly non-negotiable.

PAY ORDER

Concept

It is a cheque drawn by a bank on itself. Pay order is an instrument in which

three parties are involved. The purchaser, the bank and the receiver. It can be

purchased by any customer. It is usually made by govt. Bodies. A single bank is

included in this case.

Issuance

The standard form is given to the customer; he fills in the detail and signs it.

The concerned staff checks the form. Charges as per effective schedule are

applied.

The cash of the pay order is received.

A cost memo is signed, stamped and handed over to the applicant as a receipt.

Then the pay order receipt is filled accordingly.

Counter foil is also filled.

An entry is made in the pay order issued register.

Then the authorized office after checking the pay order signs it.

The pay order is then handed over to the application after obtaining his signature

on the P.O form.

A voucher is also made and posted at the computer Cr. bills payable account P.O

issued.

On presentation of the pay order receipt the receipt is signed by two authorized

officers of the branch.

The P.O entry is made in the P.O issued register.

Then the amount is credited to the account of the customer or paid in cash.

The P.O is posted at the computer.

PAY SLIP

Concept

It is an instrument used by the banks for its payment. The slips are issued to

the employee of the banks their bills and invoices. The bills are transferred to pay

slips. In this case only one bank is involved and that is the issuer as well as the payer.

Procedure

Procedure prescribed for P.O for issuance and payment is followed for pay

slips with the following expectations.

Pay Slips are the issued by the bank for the settlements of this own payment

No excise duty is applicable on P.S.

Issuance

A credit voucher is sent from the account department to the remittance

department.

The Pay Slips books is taken out and filled according to the credit voucher.

It is entered in the P.S./P.O register.

An authorized officer, AVP, signs it.

The Payslips is handed to the customer.

A voucher made and posted payment.

The P.S. is received on the counter, clearing or transfer.

On receiving the P.S. if it is transferred in the P.S. register.

The payment is made and the P.O. is posted at the computer.

If Askari branch is in that city, the OBC forwarding schedule in sent to that Askari

Branch. Otherwise it is addressed to the particular Branch to whom the cheque

belongs.

OUTWARD BILLS FOR COLLECTION

Concept

The bills, which are sent to, their city banks for the local clearing in that city

are called outward bills for collection.

Procedure

The cheques that are banks in other cities are separated.

That are entered in the OBC register, the number is written in the stamps.

The OBC forwarding schedules / (Annexure) are prepared for the different

branches.

The respective cheques are attached with the schedule.

Two authorized officers sign the schedule.

The office copy is filled and the original schedule is mailed.

On clearance the respective banks send back the OBCS along with IBCA. Inter

branch credit advice.

The OBC numbers are checked from the OBC register and then any entry is made.

Charges i.e. commission charges and postage charges are deducted from the A/C.

Vouchers are made.

At the end of the day. The contra vouchers are made.

INWARD BILLS FOR COLLECTION

Concept

The bills, received from other banks out of city for the local clearing, are

called inward bill for collection.

Procedure

The OBC of the other branches will be IBC’s of this branch. So an OBC

forwarding schedule is received by mail.

The cheques are entered in the IBC register. The IBC numbers are allotted to

them.

The cheques are lodged for clearing.

After realization, an IBCA is prepared and mailed to the branch.

At the end of the day two contra vouchers are made and posted.

OTHER FUNCTIONS

Balancing the Register

At the end of the day, all the registers are balanced with the computer

balances. The heads and checked are as follows.

DD payable.

TT payable.

MT payable.

OBC lodged.

OBC Collection

IBC lodged.

IBC collection

Bills payable.P.S. Issued.

Bills payable P.O. issued.

If the payables are not cleared for a lot of days, a reminder is sent to the respective

branches.

CREDIT DEPARTMENT

he earning of a commercial bank are chiefly derived from interest charge on

loans and discounts it is there necessary to consider the position of a banker

with regard to loan advances. The profitable uses which banker with regard

and advances. The profitable uses which bankers in the country make of their funds

may be classified as follows.

T Call loans and repayable at short notice.

Investment in Government and other stock exchange securities.

Purchase and discounting of bills.

Loans and advances.

LENDING POLICY

This policy statement sets out the principles for Board of Directors who will

determine credit activity of ACBL. The Board of Directors delegates authority to

5CHAPTER FIVE

CREDIT DEPARTMENT

Credit Committee to approve, to direct, and to review commercial lending of ACBL

to ensure its efficiency and effectiveness.

The purpose of this policy statement board which are the implemented by the

credit committee. The pollicies are defined under the following headings.

CREDIT PRINCIPLE

The following principles are to be adopted for lending authority, approval,

monitoring and control on a basis consistent with ABCL’s operational objectives and

business stages.

OBJECTIVES

Providing suitable credit services and products.

Not compromising ABCL’s standards in extending credit.

Transactions, which don’t apparently exhibit adequate commercial consideration, will

not be undertaken accept when authorized by the credit committee/president

STRUCTURE

The authority structure should enable effective adoption to changes in the

economical, technological regulatory and competitive environment.

PEFORMANCE

The education and admission of the loan portfolio should contribute with in

defined and acceptable risk limitation toward attaining satisfactory return on the

bank’s capital. Credit advancement shall focus on the development and enhancement

of customer relationship and are measured on the basis of the net yield for each

customer relationship where individual transaction should also be profitable

ADMINISTRATION

The administration of the loan process should insure compliance with all laws

and regulations of regulatory authorities and the credit policy of the ACBL. Lending

where repayment and performance on mark up or profit servicing deteriorates are

identified at early stage and closely monitored by the branches to avoid loan losses.

Loan facilities and related security are closely and regularly monitored by separate

unit unconnected with the credit approval process regularly in order to access the

collectiability of the loan portfolio and effectiveness of the security.

CREDIT PORTFOLIO LIMITS

The nature of the credit portfolio are governed by guidelines set down by the

credit committee from time to time, which are in keeping with local regulatory

requirement. These guidelines are consistent with overall ACBL’s limits.

TOTAL FACILITIES

The aggregates of all the facilities shall confirm to regulatory

requirement as specified from time to time.

TERM FACILITIES

Aggregate term facilities for more than one year should not exceed

30% of credit portfolio. Any facility for more than one year shall require prior

approval of the credit committee.

UNSECURED FACILITIES

The aggregate of all advances to a single person should not exceed than the

guidelines stipulated by the regulatory authorities.

SECURITY

Security accepted as collateral for credit facilities are properly valued by

approved surveyors. Appropriate margins of security are taken in accordance with not

only local regulations and practice but such margins should also reflect disposal costs

and potential price movement of the underlying assets.

EXPOSURE AGAINST NON-FUNDS BASED FACILITIY

The aggregate of contingent or non- funds based facilities should not exceed

ten times the paid-up capital and general reserves free of loses, provided always that

this limit is within the relevant regulation currently in force.

FINANCING AGAINST SHARE

Where as credit facility will not be extended towards floatation of

share capital of Public Listed Companies, facilities will not be consider against

unlisted shares. Where facilities are considered against quoted share. Which are freely

marketable, such financing are subject to the margin requirement of the regulatory

authorities or as determined by the credit committee whichever being the higher.

BORROWER FINANCIAL STATEMENT – TOTAL

BORROWINGS

Credit facilities extended will not exceed to time the capital and

reserves free of losses as per audited accounts for the borrower. The borrowers

account must be audited by a recognized “Charted Accountant” wherever the credit

exposure is in excess of Rs.10.00 million. Where credit exposure is in excess of RS.

2.00 million but bellow RS. 10.00 million accounts must be signed by the borrower

and the internal auditor/charted accountant. For amount less than 2.00 million

accounts may be signed by the borrower only

BORROWER LIQUIDITY/ LEVERAGE RATIOS

The branches must also ensure that the current ratio of the borrowers is

equal to or less than one. The debt- equity ratio should not exceed 60:40 except in

cases where a debt- equity ratio has been specified by the regulatory authorities. This

condition may be subject to change by the regulatory authorities.

CREDIT REVIEWS

All limits are subject to at least an annual review and where necessary

branch managers will forward half- yearly reviews. This review function is the

responsibility of the branches that will submit periodic reports to the credit division

immediately notifying any change in environmental factors. The changes are assessed

on expiry of limits or reassessed before the scheduled periodic review whenever

necessary.

CREDIT APPROVAL

The primary individual factor determining the quality of the banks

credit portfolio is the ability of each individual, counter party to honor, on a timely

basis, all credit commitments made to the bank. This must be accurately determined

by the authorizing credit personal prior to credit approval.

The credit approval process must be as follows:

AUTHORITY

Credit are extended in accordance with the authority levels approved/

delegated by the Board of Directors from time to time; provided credit approval is

required at short notice rather than that at normal span, the proposal may be referred

directly to the credit division. The credit division has authority with the agreement of

a quorum of the members of with the appropriate credit committee, to extend the loan.

DOCUMENTATION

It is the essential that the proposal defines clearly the purpose of the

facility, the source of repayment, the agreed repayment schedule, the value of security

and the customer relationship consideration implicit in the credit division.

The security to be accepted as collateral for the facility and all documentation

relating to the security of the facilities must be in the approved form. All approval

procedures and required documentation must be completed and security is perfected,

prior to the disbursement of the facility.

CREDIT RISK ASSESSMENT

It is necessary to have a detail and complete credit risk assessment for

each facility. Customer relationship must not be over emphasized. It is the absolute

responsibility of the proposing officers and the branch managers to ensure that all

necessary proposal documentation is collected before the facility request is sent to the

credit division or committee.

PREVEVTION OF CRIMINAL USE OF BANKING

CHANNELS

The branch manager shall ensure that all credit facilities being

proposed, every efforts has been made to determine the true identity of a customer

and in case of each transaction the source of funds is established. The relevant

Prudential Regulations applicable must be compiled with before forwarding credit

applications to the approved authority

CREDIT ADMINISTRATION

The principle elements of credit administration are as follows:

1) credit approval

2) credit maintenance

3) facility evidence maintenance

4) credit monitoring and review

CREDIT FILE MAINTENANCE

The credit file on each facility must contain all information necessary to

facilitate ready monitoring of that facility. The primary items will include:

Credit Application is received from the customer and Credit Report about

it is received from the credit information Bureau of the SBP whenever

necessary

Credit approval documentation summarizing details of the borrower;

credit requested, purpose of credit repayment sources collateral

description, valuation and guarantors.

Evidence of the credit approval and date upon which approval was

granted together with any comment and maintained by the credit

division.

Details if all related facilities to the same customer group are to the credit

by the branches and maintained by the credit division.

An assessment of the competence and quality of the borrowers

management, the general economic and competitive environment of the

borrowers industry and any other pertinent factor which may affect the

borrower’s ability to repay the facility.

All supporting data such as financial statements and analysis therefore

references, credit investigation, results and notes of all discussions with

the borrower and other relevant parties.

Written instructions for the disbursement schedule of funds.

Summary sheet containing information on amount dates for mark up

/profit charges and commitment fees, identification of industry risk and

classification/ rating of the borrower, guarantor and security details of

overdue payments.

Each credit file must be maintained in saved in fireproof location at

branches and access restricted to authorized personal.

FACILITY EVIDENCE MAINTENANCE

All legal documents and register of security must be maintained at

branch such documents may include:

Signed credit agreement

Signed guarantees or other evidence of credit security or collateral

agreements.

All concerned documents are held in the secure location.

CREDIT MONITORING REVIEW

RESPONSIBILITY

Responsibility lies in branch manager to monitor the overall profile and risk aspect of

the credit portfolio in accordance with criteria setout in bank’s Credit Policy. This

quarterly review is held to judge performance responsibility of the manager to ensure

at each credit extension the portfolio complies with all limits set. The branch manager

must provide a quarterly classification summary to the Credit Division which include

following information:

Total Facilities

Term Facilities

Exposure to customer group

Unsecured facilities

Industry exposures.

He will provide a commentary on any local development, which may impact upon

limit setting and the risk of the credit portfolio.

ASSESSMENT

A formal assessment of each customer is carried out on a regular basis. It facilities to

any one customer group are booked in the customer’s circumstances, which may

adversely affect the management of the facility, and in particular the credit rating

assigned to the customer must be documented and advised by the manager.

PRINCIPLES OF LENDING

PROFITABILITY

The credit advancement shall focus on the development and enhancement of customer

relationship and are measured on the basis of net yield for each customer relationship

where individual transaction is profitable.

SOURCE AT REPAYMENT

It is from productive use of the facility on the normal cause of business operation the

borrower can repay the request loan in a timely manner.

CHARACTER AND ABILITY OF BORROWER

The integrity of the borrower and his ability to conduct business are of paramount

importance and can precedence over the values of securities offered. The individual

proprietors/partners/directors and / or managers are men of undoubted integrity and

having sufficient experiences in their line of business,

PURPOSE AND AMOUNT OF FACILITY

The purpose of advance is within the policy of the bank in accordance with SBP

directives and Exchange Control Regulations. It must be ensured that advance is not

and shall not be used for any spectacular purpose. The amount requested for finance is

the reasonable proportion for any purpose.

PERIOD

The repayment perios is definite and should not be in access of one year for the term

facility. Any proposal

For facility more than one year are subject to prior approval of credit committee.

SECURITY

Facilities are adequate and are secured properly by approved surveyors of the bank;

the securities are properly valued by approved surveyors of the bank. Appropriate

margins are taken in accordance with not only local regulation and practices but such

margins should also reflect disposal costs and potential price moments of underlying

assets.

LEVEL OF LENDING

THE STRUCTURE FOR LENDING IN ACBL HAS FOUR

LEVELS:

Branch Credit Committee

Credit Committee at Head Office

Executive Committee

Board

BRANCH CREDIT COMMITTEE

The Branch Credit Committee gives first approval. It has discretionary powers with in

which it implements Credit Facility decisions. The credit department in branch

prepares credit line proposal (CLP) for each advance along with other supporting

documents. The supporting documents and CLP are presented to the Branch Credit

Committee for considerations. The branch credit committee exercises judgment

individually and judiciously on accordance with Bank’s lending criteria.

If the proposal is within the discretional powers of the committee, the proposal

may be approved after thorough evaluation of the credit risk. The approval limit is

returned to Credit Department of Branch for post approval administration.

After that disbursement authorization certificate are obtained from the

committee, which are signed by the Branch Committee and counter signed by the

Resident Auditor to ensure that support is perfected before release of funds.

The Branch Credit Committee shall prepare minutes of its meetings, and send

copy of the minutes, copy of CLP (approved), and security details sheet to Credit

Division of Head Office within 7 days of the sanctioning for post factor review.

In case the CLP is beyond the powers of Branch Committee, the proposal is

forward for approval of the Head Office Credit Division with the recommendation by

the Branch Committee.

HEAD OFFICE CREDIT COMMITTEE

The 2nd approval level in lending organization is Head Office Credit

Committee. When the CLP is beyond the discretionary power of the Branch Credit

Committee, the CLP is sent to Credit Division at Head Office along with all

supporting documents and recommendation of Branch Credit Committee.

The Head Office Credit Division processes the proposal is handed over to

Head Office Credit Committee for their decision. The CLP is reviewed by Head

Office Credit Committee and decided upon as per the policies of the Bank if the

proposal is within its powers. The Head Office Credit Committee conveyed the

proposal to the Branch Credit Department, which maintain all relevant records for

approval either by Credit Committee/Executive Committee or the Board.

EXECUTION COMMITTEE

The next level for sanctioning the Credit facility is the Executive Committee.

If a proposal is beyond the discretionary powers of the Credit Committee, it is

forwarded to the Executive Committee for their decision.

BOARD

The highest authority of Credit Approval vets in the Board of Directors. All

CLPs beyond the power of the Executive Committee s referred to the Board by the

Secretariat Division along with the form.

URGENT APPROVAL

In exceptional circumstances if an approval is required at short notice, outside

of the normal time scales for approval, the proposal is referred directly to the Credit

Division at Head Office.

All such referrals are accompanied by a priority decision request. The Credit

Division with the agreement of a quorum of the members appropriate Credit

Committee, will advise approval for the proposed facility. All such approvals,

together with appropriate supporting documents, are submitted to Credit Committee

or Board for Information and post factor approval at their next regular meeting.

RENEWALS / REVIEW

The reviews/renewals of Credit line Proposals would be on half yearly basis or

as per the original sanction advice, and shall pass through the same process and levels

as for the original proposal.

INDUSTRIAL CREDIT POLICY

TERM FACILITIES

The bank will provide credit facilities for fixed term investment to well

reputed and established industrial groups for a period not exceeding 5 years. Subject

to the general guidelines outlined in credit the policy. The maximum amount of credit

will not exceed the lower of any regulatory requirement or guidelines set down by the

credit committee. The rate of mark up is competitive with risk. The credit facilities

may be extended both directly and through lease arrangements the tension of

industrial credit by ACBL are following means:

MARK-UP FINANCING:

The bank will provide Term Credit facilities on mark up basis for fixed investment on

the terms elaborated above. Initially the Credit facilities are extending to industrial

projects backed by established and well-reputed industrial groups. However at,

subsequent stage new entrants may also be considered for credit facilities.

BRIDGE FINANCING:

The bank will provide bridge-financing facilities to the projects having

obtained firm underwriting commitment. The financing is repaid out of the proceeds

of public issue of shares.

LOCALLY MANUFACTURED MACHINERY

FINANCING:

To encourage the use of locally manufactured machinery; the State Bank of Pakistan

presently provides confessional line of credit to different banks. The profit on such

financing is shared between SBP and loan administrating bank. Askari Commercial

Bank will approach SBP for a line of LMM financing and after sanctioning of such

line of credit by SBP. The bank will initiate extension of LMMM financing on the

terms and conditions prescribed by SBP.

4-LEASE FINANCING

ACBL will provide lease financing to well-established and reputed concerns through

arrangements with some leasing companies. The rate of return on lease financing is

currently higher than mark-up rates, i.e., ranging from 20-22% per annum relative to

mark up rate of 16%-18% per annum. Through this means the banks may provide

financing to leasing companies for onward lease to already identified client with lease

rental assigned to the bank and first charge perfected on leased assets. The repayment

to under these arrangements is typically 3 to 4 years depending upon the repayment

capability of the client.

TYPES OF ADVANCES

Advances can be classified in to two categories.

Secured Advances

Unsecured/Clean Advances

SECURED ADVANCES

Secured advances will include pledge, hypothecation charges or mortgages on

tangible readily reliable unencumbered assets, the sale proceed of which will repay

the customers obligations and /or acceptable bank guarantee and letters of credit and

assignment of receivable from government controlled bodies offered as security for

customer obligation.

UNSECURED /CLEAN ADVANCES

Such advances include lending which are not covered by any tangible security.

LOAN APPLICATION PROCEDURE

For availing the credit facilities the applicants apply through any branch of the

bank on prescribed application form.

The branch will evaluate the application and if it meets with credit standards of

the bank forward the application to credit division at head office with their

recommendations.

Application may also be received directly by the Credit Division.

The credit division after reviewing the application will prepare credit summary for

presentation to credit committee and if the Executive Committee for their

acceptance in principal or rejection of detailed processing.

In case of acceptance of the proposal for detailed appraisal, the applicants are

issued Form ‘A’ or Form ‘B’ for submitting detailed information on the project

being considered for financing.

On the basis of information received from the client and gathered by the Credit

Division through other sources detailed appraisal report on the project are

prepared by the credit division for representation to the Credit Committee/

executive Committee for approval. Subsequent to the approval of the credit, the

branch will ensure that the client complete all the legal formalities as prescribed

by the bank before any draw down is permitted.

LEGAL DOCUMENTATION

The client will complete the legal documents as prescribed by the bank before

funds can be released.

DISBURSEMENT

In completion of legal documents and security arrangements and receipt of a

completion certificate from recognized legal counsel, the bank according to the

approval schedule prepared by bank after obtaining confirmation of other payments

have been funds from the sponsors other sources.

The funds are released in installments as per term of credit sanction. Before

release of any successive installment the branch will satisfy the credit division that the

funds already released by the bank and co-financiers have been implementation of the

project and the project is proceeding as envisaged without cost overruns, delays or

any other adverse development. The release of funds is matched with the physical

progress of the project.

FEES AND CHARGES

The client will pay to the bank following main fees and charges:

Preliminary appraisal fee of RS.1000/- to be paid with preliminary application.

This fee is non- refundable. However, it may be adjusted against the detailed

appraisal fee in case the proposal is accepted for detailed processing by the credit

committee.

Detailed appraisal fees at the rate of ½% of financial assistance are refunded in

case the finance by at the bank.

Legal documentation fee is charged at the rate of ¼ %of the financial assistance or

actual cost incurred the bank which ever is higher.

Commitment fees are charged at the rate of 1-1/2% per annum on the amount of

the funds approved by the bank but remaining undistributed 30 days from the date

of sanction.

Monitoring fee are charged at the rate of 1/10% per annum of funds outstanding

against the client during the currency of loan.

Any other cost incurred by the bank in connection with extension with credit

facilities including cost relating to the appraisal and monitoring of the project are

recovered from the client.

TERMS AND CONDITIONS OF INDUSTRIAL CREDIT

Industrial credit facility by the bank is subject to standard terms and

conditions.

MERCHANT BANKING

In merchant banking the bank for time being will limit its operations to the

selective underwriting of public issue of shares by reputed companies only.

The public offering are being underwritten by commercial banks, investment

banks and modarbas at underwriting commission of 1-1/2% to two and half percent

(2-1/2%) thereby earning substantial profits without involvement of fund based

facilities. All underwriting facilities shall require the approval of credit committee and

if necessary the Executive Committee. The branches will not communicate the

interest or agreement in principle.

SANCTIONING OF ADVANCES

1- Credit Line Proposal (CLP) for all credit facilities in accordance with lending

criteria committee regulatory requirements.

2- Credit Line Proposals are completed by the incharge of credit department in the

branch and the manager. The branch manager and incharge Credit Department

shall both put signatures on the CLP after their individual satisfaction. The CLP

number and other information are recorded in the CLP register.

3- If the proposal is with in the discretionary powers of the Branch Credit

Committee, than CLP along with supporting documents are presented to the

Branch Credit Committee in its meeting for decision on proposed facility. The

committee shall exercise the delegated power judiciously and prudently whereby

credit risk are evaluated by applying conventional sound lending standards.

4- The minutes are sent to Credit Division at Head Office within one week of the

date of the meeting along with copy of the approved limit and a security details

sheet mentioning the document obtained concerning the sanctioned advances for

information and action, where necessitated. The original CLP and supporting

document are retained by the branch for customer's credit file.

5- At Credit Division the designated officer shall examine this sanctioned advance to

ensure the limit sanctioned is within the lending criteria of the bank and the power

of the branch credit committee. The concerned branch is advised on the case

where necessary. Credit Division shall also maintain branch wise record of all

such advances sanctioned by the Branch credit Committee.

6- In case, the proposed advance is beyond the powers of the branch credit

Committee than CLP along with the supporting documents are initially received

by the Branch Credit Committee and are forwarded to Head Office with its

recommendation.

7- The Credit Division at Head Office will also record these CLPs received from

branches in their Credit Line Proposal Register, process the proposal that ensures

also that the same is in line with the Bank's policy and confirms to the

requirements. After processing credit division shall present the proposal, with

views, to Credit Committee/Executive Committee or Board for consideration.

8- In case the proposal is approved, the sanction advice are sent to the branch and a

set of a records are retrained for maintaining credit file for the borrowers at the

Head Office. The credit files are recorded in the file register.

9- Upon receipt of approval the branch shall enter its receipt in CLP register and

record the particulars of sanctioned proposal particulars of sanctioned proposal in

limit sanctioned register. Thereafter the branch proceeds to complete all

documentation formalities and perfection of security as stimulated in the sanction

advice.

PREPARATION OF SPREAD SHEET

The spreadsheet are prepared for a series of financial statements (say 3-4

years) since it provides useful comparisons and sets out trends over the period which

are of immense importance in evaluating the financial strength and repayment

capacity of the business enterprise. Notes to audit accounts must also be studied and

incorporated in the spreadsheet.

According to prudential Regulations every bank shall as a matter of rule, obtain

copy of account relating to the business of the borrower for analysis record in the

following manners:

I. Where the bank's exposure does not exceed Rs.2.00 million. the borrowers duly sign Accounts.

II. Where the exposure exceeds 2 millions but does not exceed Rs. 10 million, the Accounts are duly signed by the borrowers and counter signed by the Internal Auditors of the Branch or Chartered Accountants.

III. Where the exposure exceeds Rs.l0 million, the Accounts are duly signed by the practicing Chartered Accountants.

Spread Sheet Main Features

The main feature of spreadsheet and the guidelines to prepare the same are

given bellow:

Detailed Item Description

1. Name

2. Location

3. The principal place of Business.

4. Amounts in

5. Use figure in thousands to permit recording of all significant amounts.

6. currency

7. Insert the currency of the amounts Pak Rs.

8. Auditor

9. If audit account, the name of the auditor

10. Audited or unaudited

11. Unqualified or Qualified

12. Date

13. Credit Report

A credit report is the report about a party at branch level consisting of

necessary information to assess net worth of the party. It is concise but comprehensive

and contains he following information

1. Name and Address.

2. Date of Establishment.

3. Date of Account Opening

4. Nature of Business.

5. Experiences in the line of business.

6. Past performance and present status.

To prepare the comprehensive credit report as discussed above, the following

point are paid special attention.

1) It is prepared by using all the resources at command

2) It is factual and non exaggerated

3) It is reviewed and change made when ever the occasion so demand.

4) Financially statements submitted by the parties are accepted after making

independent investigation from the market regarding their genuineness. It is very

common that parties overestimates their assets and under valued their liabilities,

we should make our own conservative of their assets and liabilities based on our

investigation

5) Discrete inquiries are made to find out certain hidden liabilities of the parties

which may effect the business abruptly and adversely.

6) A report from previous bankers should also be obtained.

7) If the business is running into loss it are ascertained that loss is not due to bad

management.

8) Conduct of the account should also be evaluated conservatively goodwill is an

indicator of future prospects of the business.

9) Good will of the customer should also be evaluated conservatively. Goodwill is an

indicator of future prospects of the business.

10) Trading profit and loss accounts where available are critically examined.

11) In the case of partnership concern, the following information should also be given:

(a) Name of the partners with their individual contribution towards the

capital of the firm and their profits.

(b) Borrowing power of the partner if partnership deed in available.

(c) Profit and loss counts for the last three years.

12. In case of limited Company the following points should also be concerned:-

(a) Certificate of in corporation and certificate of commencement of

business are examined.

(b) Purpose of their advance should not be varied from what they said.

(c) Verification of existing borrowing and charges on the properties if any.

(d) Terms of debentures, if issued.

After preparation of credit report, interview with the customer and analysis the

applicants financial statements, the manager are in a position to decide whether the

proposal is justified for further process for final approval. If he finds justification as

per bank's lending criteria the CLP are prepared. In the CLP the branch should

highlight the strong points, recognize the weak points and make suitably the pertinent

recommendation keeping in view all the negatives and positives of the proposal.

LENDING MODES OF FINANCING

Lending with Service Charges

Bank provides finance and will recover only service charges besides the finance

amount. The rate of service charges is determined by State Bank of Pakistan and will

not include cost of deposits and provision for Bad Debts. Lending without any return

(Qarz-E-hasna)

Lending with out any Return (Qarz-e-Hasna)

The object of this mode of financing is socioeconomic justice and presently it

is applicable to providing financial assistance to meritorious and deserving students to

complete on their education and to indigent persons for meeting expenditure on

marriage of girls and medical or surgical treatment.

Neither any extra amount is recovered from the receiver of the finance nor any

compulsory conditions about the date of return of finance are set.

The loan are payable as when the receiver of finance is in a position to repay.

Bankers will thus not earn any profit on their Quarz-e-Hasna financing but

they will have to bear the administrative costs involved there in.

3. Trade Related Mode of Financing

MARKUP

It is a sale of goods at a province mutually agreed between the buyer and the

seller. The sale price consist of cost of goods plus margin of profit and the same is

payable by the buyer on deferred payment basis either in lump sum or in installments.

For example, the bank purchases a particular item for Rs. 200/- and sells it to the

client for Rs. 225/-. The difference of Rs.25/- is the amount of markup. The bank will

recover the sale price of Rs.225/- from the client on deferred payment basis.

Mark Down

It is a purchase by the bank of trade bills / marketable securities belonging to a

client an agreed price which is lower than the face price. The difference between the

two represents the amount of profit . The customer will simultaneously agree to buy

the same from the bank if it remains unpaid on the date. For example the bank may

purchase a trade bill for Rs2OO./- face value of which is Rs.225/- In case Rs.25/- is

the amount of profit (mark down).

Buy Back Argument

The bank will purchase goods or securities from the client at an agreed price

and at the same time as per agreement signed between two. Who will purchase the

same goods or Securities from the bank at price higher than Bank's purchase price

payable at future date.

Lease Functioning

A lease is an arrangement by which a firm acquire the right to use an asset

without owing it for certain periodic cash payment to another firm which owns the

asset. The return on lease financing is paid in shape of 'rent' . The owner is "Lessor"

and user is 'Lessee".

Hire Purchase

It is a technique for vehicle machinery and equipment for medium and long

term period under joint ownership subject to security and insurance cover. The return

is in shape of mark-up

Financing for land developments are done on the basis of developments

Charges rate, which be determined by State Bank of Pakistan. Basically to be used

for orchards including nurseries forestry and water course improvements.

Musharika

It is an agreement between Bank and its client to participate in a business as

temporary partners providing agreed of funds for sharing' profits or losses during a

specified period of law.

Modarba

It is an agreement where one party invests funds and other party puts in

managerial efforts / skills to carry on a business.

Equity Participation

Under this mode, the banker/financier purchases the shares of the company at

market price or at agreed price. Profit is in shape of interim or annual division and

appreciation in the value of market price of shares and loss is in form of reduction in

the market price shares.

Participation Term Certificate (PTCs)

PTCs were introduced in 1980 to replace debentures for providing medium

and long-term local currency finances. They are negotiable instruments issued by a

company in consideration of any fund, money or accommodation received or to be

received by it

whether in cash or against any promise , guarantee. undertaking, for its benefit. The

main features are as follows:

Funds under the PTC arrangements can be obtained either from a single financial

institution or from a financial consortium or syndicate . PTCs are issued for a

specific period not exceeding ten years, excluding the grace period.

Term finance Certificate (TFC)

TFCs are part of the non-participatory redeemable capital. An amalgam of

buy-back and mark-up .It is the most criticized instrument of financing currently

being used in Pakistan and DFLs. Neither has it been recommended by the state Bank

nor it has any legal basis. It was innovated by DFT in 1984-85 and afterwards became

a major mode of term finance in place of PTC. According to the General practice of

banks/DFLs in TFCs, the borrowing company sells the item concerned, that it had

agreed to purchase merely as the result of a paper deal with the item supplying firm,

to the financing institution for a certain "Sale price" and then again purchase the same

from financing institution for a sum called "purchase Price" which is paid in

installments in accordance with the redemption dates of the TFCs issued again it by

borrower company.

TYPES OF CREDIT FACILITIES

Financial against foreign bills

A loan advance against a clean (or against other securities mentioned below)

foreign bill. The repayment of bill is effected from proceeds of the bill against which

loan is advanced.

Security for the Loan

The loan through usually advanced in local currency is advanced against the

security of foreign bill. The bank on the maturity of the bill should presents it to the

Drawee who ordinary would be expected to make payment against it. If however the

bill is not honored by the Drawee the bank should have resource against the customer

to whom the loan was extended.

Additional Security

An additional security for the loan provide for the situation when the Drawee

does not honor the bill the bank should obtain the following:

Demand Promissory Notes

The demand promissory note is from the customer for the amount of the

profit being extended. If the customer is a company, the director and shareholders of

the company are also required to execute such Promissory Notes in their personal

capacity.

Mortgage/Pledge /hypothecation of Goods

A mortgage is the transfer of an interest in specific immovable property by

the borrower (mortgager) to the lender (mortgage) as security for the payment of debt.

Pledge is a formal contract of security whereby the goods/documents ale deposited

with the creditor or lender on condition that they are redelivered to the depositor if the

debt is repaid or can be sold if the borrower defaults. In this case, the lender has the

right to retain the goods/document5 till the debt is paid.

In Hypothecation, the goods are kept as security with the Bank but neither the

ownership nor the possession is passed to the creditor. The ownership or possession of

the goods remains with the borrower, however in case of defaults the Bank can take

possession of the goods.

Charge

When immovable property of one person is made a security for the payment of

another person, and the transaction does not amount to a mortgage, the latter person is

said to have a Charge on the property

The property is registered under the Registration Act. A charge can be fixed or

floating. A fixed charge, or mortgage, on the borrower's property prevents dealings in

it, and binds property in the hands of the third parties. Whereas the floating charge

leaves the company free as long as the company remains a going concern; but when

the company goes into liquidation, the floating charge becomes immediately fixed.

Letter of Set Off

A letter of set off are obtained from the customer and the director

/shareholder /partner / Guarantor of the company. A letter of set off gives the right to

Bank to claim on the assets of the company.

Personal Guarantee

The personal guarantees of directors and shareholder are obtained if the

customer is a company.

Other Securities

Other securities appropriate to the kind of deposit can be obtained

FINANCE AGAINST PACKING CREDITS

Credit guarantee to exporters to facilitate purchase of raw material for the

purpose of the manufacturing finished goods. The Credit is ordinarily guaranteed after

the evidence of Letter of credit firm contact in favor of borrower.

SECURITY FOR THE LOAN

The loan is advance against the security of inventory purchased by the

borrower. It is important that hypothecation Agreement with respect to such

inventory be executed by the customer.

Additional Security

An additional security for the loan, the bank should obtain the following

Demand Promissory Note

Mortgage/ Pledge/ Hypothecation of goods

Floating Charge

Letter of set off

Personal Guarantee

Other Securities.

LETTER OF CREDIT

1. Payment against document

The bank being issuing bank on the Customer's behalf of a letter of credit pays

the negotiating or advancing bank and debits the account of the customer.

Security for the Loan

Until the realization of the amount a full set of document representing title to

the goods shipped by the foreign exporters, is held by the bank as security.

Finance Against Trusts Receipts

Documents of title of the goods imported through the letter of credit are

handed over the customer against the trust receipt to be signed by the letter signifying

that the customer holds the good in trust for the bank. The objectives being that the

customer shall discharge the loan from the sales proceed of the goods.

Financial Against Imported Merchandize

Documents to title under the letter of the credit issued by the bank are handed

over to clearing agent for clearance, who after clearance and until the repayment of

the loan holds them as agent of the bank, goods are released against receipt of their

sales proceeds.

Security for the Loan

The imported goods operate as a security for the loan advanced . The bank

can have recourse to these goods, if the customer failing in the discharge of its

obligations.

Additional Securities

In such cases mentioned above and as additional security for the credit facility

the bank should obtain the following securities at the time of issuing the letter of

credit.

Demand Promissory Note

Mortgage / Pledge / Hypothecation of goods

Floating Charge

Letter of set off

Personal guarantee

Other Securities.

CASH FINANCE

An advance is granted on a short-term basis on security of inventory.

Security for Loan

The inventory pledge/ hypothecated operates as a security for the loan. It is

important that a Pledge / Hypothecation agreement with regard to the

Pledge/Hypothecated goods be executed with the customer.

Additional Security

Demand Promissory Note.

Mortgage / Pledge/ Hypothecation of goods

Floating Charge

Letter of setoff

Personal Guarantee

Other Securities.

CASH DEPARTMENT

Cash department is very sensitive and risky part of the bank. Very cautious and

competent personnel, are needed for the job. ACBL has really such a diligent staff

with appreciable competencies and will to do work.

Main function of Cash department is to deal with cash payment and cash receipts.

CHEQUE

Cheque is bill of exchange drawn on specified banker and not expressed to be

payable other wise than on demand.

The Request of a Cheque

It should be in writing.

The drawer must not put any condition for the payment of the Cheque.

Drawn on a specified banker only.

Payable on demand.

A certain sum of money.

Payable to a specified person.

6CHAPTER SIX

CASH DEPARTMENT

Signed by the drawer.

Types of Cheques

There are three types of cheques.

1. Receiving Cashier's Book FCY

2. Receiving Cashier's Book Pak. Rupee.

3. Paying Cashier’s Book FCY

4. Paying Cashier's Book Pak Rupee.

5. Daily cash position Book FCY

6. Daily cash position Book Pak Rupee.

The receiving cashier’s book is used to write down the details of the incoming

cash.

The paying cashier’s book is used to note the details of the outgoing cash.

The daily cash position books are used to prepare the daily ending balance of the cash

on hand. The books for foreign currency are separate while the books for the

Pakistani Rupee are separate.

CASH DEPOSIT PROCEDURE

A customer comes to deposit cash in his account. The procedure followed in

the cash department in this case as follows:

1. The customer fills the pay -in slip. There are two types of pay-in slips. The

red slip is Filled if he is a current holder. The cashier receives the pay -in slip

and cash.

2. He counts the cash and makes the detail of the notes at the bank of the pay-in-

slip.

3. Then he compares the detail with amount written on the pay-in slip.

4. Signs the pay-in Slip.

5. Writes the entries in the Receiving cashier's book, i.e. serial No, account type,

Account Number, Cheque No and amount.

6. Puts the stamp of the Cash Received on the pay-in slip of writes the serial

number from the receiving cash book.

7. The first portion i.e. the Receipt is taken and given to the customer. While the

latter portion is handed over to the person for the entry in order to update the

data.

CASH PAYMENT PROCEDURE

When a customer comes to withdraw a certain amount from his account, he

brings a Cheque along with him. In this case the following steps are taken.

1. The cashier receives the Cheque and check it whether it is posted or predated.

Cheque can be cashed within six months. A repeated Cheque can not be cashed.

2. He takes two signatures at the back of the Cheque from the bearer.

3. He gives the Cheque for 'posting " at the computer. The computer checks Out

whether there is balance in the account or not. Other instructions are also received

e.g. blocked, frozen, etc. The posting is done the a/c is debited and the Cheque is

stamped “posted" with the serial number and date.

4. The cashier counts the cash and makes the detail at the back of the Cheque.

5. The cash is paid to the person and the Cheque is stamped “Cash Paid"

immediately.

6. The entry is made in thc Paying Cash book and the Serial number is written on the

Cheque.

CALCULATION OF ENDING CASH BALANCE

The official time for receiving deposits and payments is till 1:35. However

some important customer are accommodated afterwards.

The cash in hand is counted. It contains the cash at the counter and the cash in the

strong room.

Then opening balance is taken, i.e., the ending balance of the previous day.

The receipts are added.

The payments are deducted.

This daily cash position is written down on the daily cash position book.

CASH MANAGEMENT

Cash management is a technique of managing cash according to the

requirements of the bank on daily basis. The operation manager manages this aspect

of cash. Every Branch has an accountant at the State bank Of Pakistan . A 5% of the

total deposits has to be maintains so there are two main sources of the cash.

State Bank of Pakistan.

head Oftice.

If Branches borrows cash from Head Office it has to pay an interest of 13% . On

the other hand. If the cash is remitted to head Office, The branch gets a profit at

12.75%.

LIQUIDITY MAINTENANCE

ACBL has to maintain 35% liquidity at SBP. Every branch maintain 5% of its

deposits at the local SBP. But this 30% is kept in the form of Approved securities,

e.g.. Foreign Investment Bills and Treasury Bills.

CLEARING DEPARTMENT

There is no legal obligation on a banker to collect cheques drawn upon other

banks for a customer. However it is function of almost every modern bank of the

collection of cheques and bills on behalf of the customer.

Clearing department services are provided in order to make arrangements for

the economic collection of the cheques, DD’s pay and other negotiable instruments. A

large part of this work is carried on through the clearinghouse.

Clearinghouse

Clearinghouse is a place where all the representation of different banks and

exchange all means of transaction other than cash and then settlement procedure

carried out for the balancing of the SBP accounts.

The clearance house is in the new State Bank Building Pull Mouj Dria. All the

clearing members of each bank go to the clearinghouse for the first clearing at 9:30

and for the second clearing at 1:30.

7CHAPTER SEVEN

CLEARING DEPARTMENT

First clearing

The clearing members take the outward cheques and go to the clearinghouse.

The outward cheques are given to the respective branch members and inward cheques

received. A summary is prepared and given to the supervisor of the clearinghouse. He

balances the accounts of all the banks.

Second clearing

After the outward cheques, they are checked and the ones to return are to be

attached with a memo. Then at 1:30, clearing members goes for the second clearing.

At this returned cheques are received. Once again, the summery is prepared and given

to the supervisor for balancing. The supervisor balances the accounts of nearly 25

banks. The SBP gives ending position to each member.

ROLE OF THE CLEARING DEPARTMENT

Suppose X is an account holder of ACBL, and he has to pay Rs.2, 000/- to pay

who is an account holder of MCB. X draws a cheque in favor of Y and gives it to Y.

Now Y instead of coming to ACBL for payment, deposit the cheque at MCB. The

MCB clearing members will bring those cheques to the clearinghouse and gives it to

ACBL clearing members. The ACBL clearing members brings it back to the bank and

checks the validity of the cheques and in the second clearing the MCB members it

told that his cheque has been cleared.

Book keeping

There are three registers in this department:

Clearing summary register.

Inward clearing register.

Outward clearing register.

Clearing summary register

In this register the clearing summary balance is made. The received cheques

and the delivered cheques are written in the respective columns.

Inward clearing register

The inward clearing register used to write the details of the inward cheques

cleared. Inward cheques are those cheques, which have been recovered from the

different banks. The amount of these will be credited from one SBP Account. So these

cheques are against us and have a negative effect.

Outward clearing register

The outward clearing register is used to write down the detail of the outward

cheques. Outward cheques are those cheques, which have been delivered to different

banks. The amount of these cheques will be debited to SBP account so these cheques

are in favor of us and have a positive effect.

Different instruction is dealt in he clearing department. All negotiable

instruments e.g.

Cheques

Pay slips

Pay orders

Term deposits

In order to make arrangements for the speedy and economic collection of

cheques, bills and other documents payable or deliverable at or through offices of

members of clearing house clearing services are provided in all the big cities by State

bank of Pakistan. Where State Bank of Pakistan has no office.

Procedure

The following procedure is adopted by the branch for clearing items.

All cheques, drafts, pay orders etc. accepted for clearing shall be stamped with

clearing stamp on the face of the instruments, customers, counterfoil and the pay

in slip with date of the next working day, say 1.11.96 because the instrument has

to be presented on 1.11.96.

All cheques received for outwards clearing to be deposited by the customers are

be accepted on the bank’s relevant pay-in slip (ACB DEP FM 007/008) duly filled

in by the depositor as per printed columns of the pay-in slip.

The depositor should write the instrument number, the name, and the branch of

the bank drawn on and should sign at the prescribed column (deposited by) for his

signature.

Immediately on the receipt of the instrument the cleaning official of the bank

affixes the bank’s crossing and clearing stamps on the face of the instrumented

endorsement stamp of the bank. The pay-in-slip shall be stamped on both parts

with the clearing signature beneath the stamp.

The pay in slip along with the instrument is passed on to the operation manager

for his signature on the pay-in-slip.

All instrument received over the counter and from branches for outward clearing

are entered in the outward clearing register (Askari Commercial Bank CLG BK

953). All columns of the registers are filled in for each instrument received from

any other branch of the bank, the name of the branch is mentioned in the column

for the name of depositor.

All instruments are received for outward clearing shall be sorted bank wise.

They are posted at the computer in the next date are received print out.

The grand totals of all schedules amount and number of instruments must agree

with the totals as per outwards clearing register.

SBP Accountant and clearing

All the clearing transaction are done through the SDP Account. At the end of

the working day this SBP. Account has to be 5% a penalty is charged against the

bank. Hence through cash management, limit is maintained taking into account the

clearing transactions.

Clearing position statement

After the 1st and 2nd clearing the clearing positioned is prepared.

A Inwards cheques, Demand Draft, Pay orders, palsy’s etc.

B out wards Cheques, Pending cheques

If amount B is greater than amount A, it means that our cash balance at SBP

has increased and so it is a favorable for bank. On the contrary, if A is greater than

and B it means that one SBP account has decreased and here it is favorable for the

bank.

ACCOUNTS DEPARTMENT

ccounts department is a department, which deals and checks all the activity

of all the department. It also deals in expression of finance of the bank.

Salary payment is also one function of the bank.APreparation of Daily Bank Position Statement

The department prepares Bank’s Daily Position. It is prepared by taking in to

account two computer printouts. The set of a computer printouts is called End of the

Day. The first job in the morning is to prepare this statements, i.e., UNIDOO 100 and

UNIDDO 170 are consulting while making it.

UNIDOO 100

A statement is showing the assets and liabilities of the branch at the particular

date.

8CHAPTER EIGHT

Accounts Department

UNIDDO 170 (Statement of The Deposits)

A statement showing the details deposits in local currency and foreign currency.

After preparing the statement, the officer who has made the statement signs it and

then Manager Operation counter signs it. Then it is fixed to Head Office.

Checking Bank’s Daily Activity

Accounts department deals and checks the entire working of a branch, all the

vouchers that have been posted at the computer are scrutinized in accounts

departments. The “End of Day”. , I.e., computer print is also received from the

computer. The next day the activity is separated some statements from the “End of

Day”. Then next day activity separated some statements from the “End of Day”. The

vouchers are sorted out head wise. The vouchers are matched with the entries in the

statements.

An abnormality if occurs, is immediately dealt with. All the vouchers and instruction

are checked individually against the computer printouts. After checking they are

signed by the incharge accounts department and the counter signed by the manager

operations.

Payment of Salaries

Payment of salaries is also a function of the accounts department. Head Office

provides the salary schedules to each branch. According to the schedule are out on a

“salary statement”.

Pay Structure

There are three types of pay structure.

Basic Salary

It is a salary that is obtained after adding the allowances in the basic salary.

Gross Salary

It is the salary that is obtained after adding the allowances in the basic salary.

Net Salary

It is a salary that is left after adding in the allowances and deducting the

provident fund and deductions.

Net Salary = Basic Salary +Allowances –Deduction.

It is a tradition of an Askari Commercial Banks that the pay is dispatched on

the 26th of each month all over Pakistan. The maintenance and record keeping of

allowance is done the Accounts Department

Medical Allowances

Medical Allowances is 10% of the basic pay. It is also cumulative in nature.

House Rent Allowances

The house rent allowances is 45%of basic pay.

Electricity Allowances

Electricity Allowances are 10% of the basic pay.

Washing Allowances

Washing Allowances are Rs.60/- (for peons and drivers only).

Special Technical Allowances

Rs.230 (to at computer, typing and cash).

Group Insurance

100% for every employee.

Provident Fund

One basic salary in one year. (Deducted from the employer’s salary).

One basic salary in one year. (Provided by the band).

Gratuity

8.3370 of basic salary.

Preparation of the Statements

The accounts department prepares various statements and sends then to Head

Office on monthly basis. The monthly statement sends to finance Division at Head

Office are:

Statements and Liabilities.

Statements and Expenditure.

Statements of sundry creditors outstanding.

Statements of sundry Debtors outstanding.

Statements of operations in sundry creditors during the month.

Statements of operation in miscellaneous expenditure account during the

month.

` Salary statement.

Petty cash statement.

Statement No 4,5,8 and 9 manually prepared. The rest of are computerized

statements. The monthly statements that are sent to the personal and administration

division or human resources division at Head Office are as follows:

Salary Statements.

Advanced Rent Statement.

Maintenance of Bank Vehicles.

Half- Yearly Statements To The Head Office

SBP RETURNS

The accounts department sent various statements to the state bank of Pakistan.

MONTHLY STATEMENT TO SBP

A monthly statement is prepared and sent to SBP. The statement is called

“statement of liabilities and assets” as on 30th of the month. It includes “classification

of other private sector and advances and Bills purchased and discounted by scheduled

Banks of Pakistan”.

Half-Yearly Statement Of Assets And

Liabilities

This is a statement showing the details of assets and liabilities as on 30 th June

and then on 31st December of each year.

CLASSIFICATION OF DEPOSITS

This statement is yellow and shows the classification in color of deposits

according to the following areas.

1- Nature of the deposit

2- No. of the account

3- Type of the deposits

4- Categories of the deposit

5- Rate of the interest /profit

CLASSIFICATION OF ADVANCES

This statement provides the details of the advances. The advances are

classified into various categories:

Nature

Borrower

Purpose

No of account

Security

Managing Retained

Rate of interest

Amount

Classification of Bills Purchased and

Discounted

This statement classifies the bills purchased and discounted according to:

Nature

Category of bills

Amount

CLASSIFICATION OF INVESTMENT IN

SECURITIES AND SHARES

This statement reveals the area of the investment according to:

Nature

Amount

Type of securities

All the elements actually provide clear pictures of the port of advances, deposits and bills purchased. The accounts also deal in the express of the bank. The different bills are dealt with in this department.

DEPRECIATION CALCULATION

The depreciation of assets is calculated through “straight line method”. The

depreciation is calculated both manually and on the computer.

All the accounting functions are organized by the incharge of Account

Department calculated the manually checks it with computer data.

RATE OF DEPRECIAION

Furniture and fixtures 10% written down value

Machinery and equipment 20% written down value

Renovation 20% on the original cost

Carpet and vehicles 20% on the original cost

Others 20% on original cost

MAINTENANCE OF THE LEDGER

Although all the working at the accounts department is computerized. But the

incharge of the account department maintains some ledger on manual basis. There

are:

Level Record Register

Furniture and Fixture

Bank Vehicles Register

Computer Register

Machinery and Equipment

Renovation register

PLASTIC MONEY

Plastic money is the instrument, which can be used as a medium of exchange

in place of cash. It is sound & safe method of transaction. For example credit cards

etc.

Credit Card

Credit Card, card that identifies its owner as one who is entitled to credit when

purchasing goods or services from certain establishments. Credit cards originated in

the United States in the 1930s; their use was wide-spread by the 1950s. They are

issued by many businesses serving the consumer, such as oil companies, retail stores

and chain stores, restaurants, hotels, airlines, car rental agencies and banks. Some

credit cards are honored in a single store, but others are general-purpose cards, for use

in a wide variety of establishments. Bank credit cards, now also in use in Europe, are

examples of the general purpose card. Establishments dispensing almost every form

of product or service are honoring such cards, and it is predicted that credit cards

might some day eliminate the need for carrying cash.

9CHAPTER NINE

Plastic Money

When a credit card is used, the retailer records the name and account number

of the purchaser and the amount of the sale, and forwards this record to the credit card

billing office. At intervals, usually monthly, the billing office sends a statement to the

card holder listing all the charged purchases and requesting payment immediately or

in installments. The billing office reimburses the retailer directly.

Most of the work involved in credit card operations is now handled by

computers. Charges for the use of a credit card are sometimes paid directly by the

card holder, and sometimes borne by the retail establishments that accept them. In the

latter case, the cost is absorbed into the price of the merchandise. Department stores

usually charge interest to credit customers who do not settle their bills within a month,

but certain credit plans do not charge interest until a bill has been outstanding for

several months. Interest rates for overdue balances are regulated by state law. A

continuing problem involved in the use of credit cards is the ease with which they can

be used fraudulently if stolen or lost, although the liability of the owner is limited.

PAKISTAN SCENARIO

Allied & Muslim commercial banks joined hands with master card

international and introduced cards usable both at home and abroad. MCB went a step

a head by introducing a card with the holders photograph. CITI BANK and ASKARI

COMMERCIAL BANK have also introduced photo card. Today there are eight

issuers of the card in Pakistan, which include American express, Citi Bank, Muslim

Commercial Bank, Allied Bank, Diners Club, National Bank of Pakistan, ANZ Grind

lays Bank and Askari Commercial Bank.

ACBL’S OFFERING

The bank is already offering credit cards like Master Cards international in

collaboration with an international financial service organization. In order to enable

them to render more personalized services, they have financial arrangement to offer

master cards international directly to their customer.

Credit card issuing is an important activity that the most successful and modern

banks

are doing, and are generating profit from it. Credit cards arc, actually, of two types:

Master Card

Visa Card

ACBL issues three types of master cards:

Local Card

Silver Card

Gold Card

Local Card:

This master card is issued for the amount of Rs. 25000/- and more. This local card

operates on national level, meaning that it works only in Pakistan.

Silver Card

This master card is issued for the amount of Rs. 35000/-and more. This is an

international card. which is acceptable all over the world.

Gold Card

This master card is issued for the amount of Rs. 200000/- and more. This is an

international card, which is acceptable all over the world.

All these three types of credit cards issued only to those individuals, which

hold accounts with the bank. The bank also takes care that a sufficient amount of

security has been maintained with the bank. The security is almost 125% of the

amount the credit card.

ACBLs credit card is given only to those who have accounts with the bank;

and when application made by the customer is submitted for consideration, the banker

make himself sure that whether the card seeker is the account-holder of the bank or

not. The banker make sure that the cardholder is credit-worthy and maintain sufficient

security against the credit card (about 125% of the amount of the card).

Documents Required

Card seekers are required to submit following documents to the banker in ACBL:

Application to the manager

Personal account statement for last three months

Proof of income

Four colored passport-size photographs bearing the name of the applicant

at the back

An attested copy of national identity card

In case the client has maintained a chequing account with the bank, a

direct debit authority is submitted to banker which authorize the banker on

behalf of the client to debit his account for the charges that are due on him

because of his purchases made through the card and to recover 2% bank

charges for the card monthly

In case of an army-man for silver and gold card, Ex-Pakistani leave is also

asked to submit to the banker

PROCEDURE FOR ISSUING CREDIT CARDS

I. Customer gives all necessary documents to the banker.

II. Banker prepares the credit line proposal (CLP).

III. Banker verifies all these documents.

IV. Documents are then sent to head office.

V. CLP is approved from head office.

VI. Approval goes to Karachi main office where CCs is embossed.

VII. Embossed CCs is sent to issuing office.

VIII. Customers affix their signature on acknowledgment receipt and receive

the cards.

IX. The acknowledgment receipt is then sent to Head Office.

ACBL’s Credit Cards have world-wide acceptability. These cards provide the

bank’s customers with services at thousands of locations in Pakistan and at about 14

million outlets worldwide. These cards provide the customers with the benefit

receiving their monthly billing in Pak. Rupees regardless of the currency of purchase.

There are three payment choices for the bills received for the purchases made by the

customers:

1. Settle your account in full within the specified time.

2. Pay just the minimum amount required.

3. Make partial payment.

With ACBL credit card customers are automatically covered under Askari

Credit Card Travel Insurance Plan up to Rs.1000000/- (which is a value for the gold

card) if you charge the tickets on your card. Regular monthly statements help the

customers keep track of their expenses.

Moreover, they conveniently get a supplementary credit card at a special rate

for their loved ones over 18 years of age.

In case, the credit card is lost, customers need to report on during banking hours need

to follow up in writing within three days. Once the customers make themselves

registered, their liability for the fraudulent use of card will be limited and a

replacement card will be issued to them.

utomated Teller Machine is a hi-teq. Invention in the field of the banking, it

facilitate that a depositor can withdraw money at any time without the need

of banking personnel. We can also deposit money with the help of this

machine. But it is not so much practiced here because of some drawbacks.

ATERMS AND CONDITIONS FOR ISSUE OF ATM CARD

In these terms and conditions, “Cardholder” means the individual to whom the

ATM Card (ASKCARD) is issued, “Bank” means Askari Commercial Bank Limited

and “Bank Account” means the account of the Cardholder maintained with the Bank.

1. The issue of ATM card (ASKCARD) entitles the Cardholder to avail the facilities

of the Bank’s Automated Teller Machines (ATMs) also referred to as machines.

2. It is a condition of issue and use of the Card that the Cardholder maintains a

Current or PLS-SB Account with the Bank at one of its branches in Pakistan. In

the event of the stopped for any reason, whatsoever the Card shall immediately be

returned to the Bank by the Cardholder and its validity shall cease to have any

effect on the date of such closure of A\C henceforth.

3. The card shall remain the property of the Bank at all times. The bank may, at its

sole discretion and without prior notice, cancel or refuse to re-issue or renew the

10CHAPTER TEN

ATM Facilities

card or suspend its use for the time being and call for its return at any time, in

which case the Cardholder shall immediately return the Card to the Bank.

4. The cardholder shall be responsible for the payment of any taxes, duties, levies,

which may be attracted, to payments related to the issuance and use of the card by

the cardholder.

5. The cardholder undertakes not to disclose his/her Personal Identification Number

(PIN) to any other person. In the event of the PIN becoming known to someone

other than the cardholder, that person may be treated by the Bank as an acting

agent of the cardholder. The Cardholder indemnifies the bank against all losses or

damages which may occur as a result of the PIN becoming known to anyone else

from any source whatsoever.

6. The bank shall not be responsible for any loss or damage arising directly or

indirectly from any malfunction of the Card or ATM or any technical or non-

technical defect or breakdown of the machine and/or any part thereof or the

temporary non-availability of case in such machines.

7. Except as otherwise prescribed by law, ACBL shall have no responsibility or

liability for any act or omission or inability to perform any of its obligations

hereunder which results from any cause beyond ACBL’s control.

8. The Cardholder agrees to accept that any cash or instrument(s) delivered through

ATM with the use of Card shall be, for the all the purposes, at the entire risk and

sole responsibility of the Cardholder. The bank would hence be assuming no

responsibility whatsoever in this behalf. The Cardholder understands and accepts

that the crediting of account, as specified on the frontal side of the envelope,

designed for the purpose, will be subject to:

i. In the case of Cash Delivery: Upon physical checking and verification of

the currency note(s) that would be found contained in the envelope, and

confirmation of the correctness of the particulars mentioned on envelope.

ii. In the case of Delivering the Instrument(s): Upon checking and

confirmation of the correctness of the particulars of instrument(s) that

would be found contained in the envelope and after its clearance and/or

realization of its proceeds through lodgments in collection as per

procedure.

9. The physical checking and verification of cash so delivered shall be carried out by

the Bank through its two officials, whose count, checking and findings will be

accepted by the Cardholder as correct and final. The Cardholder also expressly

waives its rights to, in any way, question or challenge the same.

10. The amount stated on the ATM screen or on the printed transaction record/slip

shall not for any purpose whatsoever be takes as conclusive of the status of the

Cardholder’s account with the bank.

11. The Cardholder further undertakes to accept full responsibility for all transactions

made by the use of the Card whether or not made with his/her

knowledge/authority or consent and he/she shall accept the Bank’s record of

transactions as binding for all purposes.

12. The Cardholder shall take every possible due and proper care to prevent the Card

from being lost, mislaid or stolen and shall not pass the Card to any other person.

He shall notify the Bank immediately if the Card is lost, mislaid or stolen or if it

comes into the hands of a third party.

13. Where oral notice or loss or theft of Card is given, it must be simultaneously

confirmed in writing to the Card issuing branch of the Bank and proper

acknowledgment obtained thereof.

14. The Cardholder accepts all debits made to his/her Bank Account arising from the

use of the Card without limitation, (except after written notice of loss has been

acknowledged by the Bank) including any debits on account of fraud, forgery,

pilferage or otherwise on the part of the Cardholder.

15. The Cardholder agrees to pay and authorizes the Bank to debit his/her Bank

Account, as the case may be, with all charges, rates, etc., as may be applicable/due

on account of issuance of ATM Card (ASKCARD), its renewal/re-issuance and

other ATM based facilities, as the case may be.

16. The Cardholder shall ensure to keep sufficient credit balance in the Bank Account

to which the Card relates before making any withdrawals. If for any reason the

account gets overdrawn by the use of the Card, the Cardholder authorizes the

Bank to charge markup and/or service charges at the prevailing rates, on the

amount remain outstanding. Cardholder shall be responsible for immediately

making up the deficit. The bank is authorized to cancel the Card and/or demand

the overdrawn balance together with mark-up & liquidated damages.

17. The Bank reserves the right at any time or from time to time to reduce or increase

the total cash sum allowed to be withdrawn by the Cardholder from the ATMs

through a transaction, during any period.

18. The Bank’s record of any transaction generated electronically or otherwise shall

be conclusive evidence of such transaction.

19. The bank reserves the right to add/amend these terms & condition, at its sole

discretion, which shall be binding on the Cardholder.

20. This Agreement shall be governed, interpreted and enforced in accordance with

the Laws of Pakistan.

21. The bank is authorized to make all such enquiries that it may deem necessary in

connection with the ATM card application.

22. In the event that any one or more of the provision set out here in above shall be

held by a court of competent jurisdiction to be invalid, illegal or unenforceable in

any respect, the validity, legality or enforceability of the remaining provision shall

not be affected or impaired thereby.