TRADE FINANCE & BANKING

An Introduction to Banking

BRANCH BANKING OPERATIONS

2

Banking Operations

Zahid Husain MBA;MA;LL.B Certification in Islamic Banking Deputy General Manager -HBL

After completing the program, participants are

expected to understand:

LEARNING OBJECTIVES

Account Opening And Operations

Learning & Development

Basic Considerations in Account Opening & Its Basic Considerations in Account Opening & Its OperationsOperations

The account is opened in the name of the beneficial owner only and is operated by him or under his validly delegated authority.

The account must be operated for legal & lawful purposes. Specifically, the account must not be used for laundering money or for supporting illegal business activities.

1

The Account Opening Risk ModelThe Account Opening Risk Model

Risks Risks

Risks Risks

Documents Instructions

2

The Account Opening Process ModelThe Account Opening Process Model

Send Letter of Thanks

3

Account Opening Form – The Basic DocumentAccount Opening Form – The Basic Document Account Opening Form – The Basic DocumentAccount Opening Form – The Basic Document 4

Classifications of Accounts Classifications of Accounts5

Common Documents for Account OpeningCommon Documents for Account Opening 6

Additional Documents for Additional Documents for Account OpeningAccount Opening

7

Account Type Documents Purpose

Limited Companies

• Certificate of incorporation Establishing “Legal Entity” of the company

• Memorandum of association • Ensuring company name•Knowing purpose & scope of business

• Articles of association

Knowing Powers of the directors

Knowing internal operating rules & regulations

• List of directors with signatures and photocopy of CNIC attested by company secretary or chief executive

Establishing identity of directors

• Board Resolution regarding opening and operation of the account

Establishing legal identity of the account in the name of the company and authority to operate the account

• Certificate of Commencement of Business

Ensuring Legality of business operations

Additional Documents for Account OpeningAdditional Documents for Account Opening 8

Additional Documents for Account OpeningAdditional Documents for Account Opening 9

Payment & Settlement

Learning & Development

The Payment & Settlement Process

Beneficiary’s Bank Processes

Check

Clearing HouseBeneficiary

Beneficiary’s Bank Claims Settlement for Payment to be

made

1

PHASES IN PAYMENT & SETTLEMENT PROCESS

2

4Payment Concept Model Payment Concept Model

Pays Cash at Counter

Presents Payment Instrument

Credit Accounts

5

Payment LawsPayment Laws

Holder in due Course•Any person who for consideration becomes the possessor of an instrument before it becomes overdue and without knowledge of any defect in the previous title.

Payment in due Course• Payment in accordance with:• Apparent Tenor• In Good Faith• Without Negligence• To Holder in Due Course

Protection to paying banker available only if payment made is “Payment in due course”. Otherwise, the banker will have to bear the loss

An unconditional order in writing by one person to another person who is the banker signed by the person giving it, requiring the banker to pay on demand a certain sum of money to the specified person or the bearer.

CHECK

6

PARTIES TO A CHECK

PAYOR

Bank

UNCONDITIONAL

ORDER

PAY SUM CERTAIN

7

Adil AhmedTen Thousand Only 10,000/-

April 3, 2009

1

2

7

5

4

6

REQUISITES OF CHECK1. Instrument in writing2. Drawn on specified banker3. Pay on demand4. To specified person or bearer

5. Signed by the drawer6. Unconditional Order7. Certain sum of money8. Date

8

8

Muhammad Anwar

Kainat MirzaTen Thousand Only 10,000/-

July 23, 2011

CHECK 8

Muhammad Anwar

TYPES OF CHECKS9

CROSSED CHEQUE

Where a check bears across its face two parallel lines is classified as crossed check.

A crossed check should not be paid at the counter.

The proceeds should be disposed off as per the instructions of the crossing

10

Types of Crossings 11

GENERAL

GENERAL

GENERAL

SPECIAL

Accou

nt P

ayee

Payee

Acc

ount

Onl

y

Not N

egot

iabl

e

And C

ompa

ny& C

ompa

ny

Habib

Ban

k Lt

d

Habib

Ban

k Lt

d

HBL - K

arac

hi

HBL- N

azim

abad

Branc

h.-K

arac

hi

12

4. Restricted 3. Conditional

5. Partial

1. Blank

2. F

ull

An instruction on the back of the check through which the

holder transfers the title to the instrument

to another person

EndorsementFurther In

dorsement is

Restricted

Transferee is not mentioned. Indorsement makes the instrument bearer

Tran

sfer

ee is

men

tione

d.

He

can

furth

er e

ndor

se

Transfer of title is

Contingent to an Event

Title is transferred to tw

o

or more Indorsees.

Negotiation not P

ossible

13Who Can Endorse ?

Payee Indorser

Individual- Payee- Endorsee- Holder

Joint Individuals - All Payees (Individually)

- One of them under authority from rest

Sole proprietorship - Sole proprietor as the owner

Partnership- Authorized partner on behalf of the

Partnership

Joint Stock Company- Individual authorized under a resolution

of the Board

NIFT Clearing Process

NIFTCLEARING

AND SETTLEMENT

HBLBranch A

Check Cleared

Check Cleared

Cleared check to Paying Branch

Check for Collection

HBL Branch

B

Other Bank

Cleared check to Paying Branch

Check for Collection

18

19NIFT Settlement of Accounting and Cash Positions

NIFTClearing and Settlement

HBL CENTRAL

PROCESSING UNIT

STATE BANK

1

2

3

4

HBL REGIONSSETTLEMENT

CASH & ACCOUNTINGPOSITIONS

1 2 3 4

HBL REGIONSSETTLEMENT OF CASH

POSITION

Advise Position

Advise Position

Disburse Cash

Settles Cash Position

Settles Cash &

Accounting Position

1

What was called “Remittance” in the past, is now called “Money Transfer”. It may be defined as the process which enables a “Remitter” to transfer money to a “Beneficiary” at another destination.

Money Transfer Concept Money Transfer Concept

2

The Basic Considerations

3Money Transfer Risk Model Money Transfer Risk Model

Money Laundering

Errors

Frau

d

Technology &

Process Failure

Wrong P

ayment

Exc

hang

e R

ates

• Financial

• Reputational

• Regulatory

RISKS

4Money Transfer Risk Model Money Transfer Risk Model

Money Changers

Non Government Organisations (NGOs)

Non - R

esidents

Trusts-Collection

Accounts

Non

- C

usto

mer

High Risk Transactions

5

Beneficiary

Money Transfer Involves a Series of Independent

Relationships

Paying Bank

Remitter Remitting

Bank

Money Transfer Process 6

7

General InformationIdentity of Applicant

& Beneficiary

Applicants’ Request Terms & Conditions Cash / Debit to Account Charge Account (If Different) Currency Amount (Words & Figures) HBL – Branch

Name Address Telephone No CNIC / Passport No Account Type / No / Bank * Business / Occupation Purpose of Remittance Relationship to Beneficiary *

Modes of Money Transfer Payment Instruction

Bankers Check

Local Funds Transfer

Foreign Demand Draft

SWIFT – Foreign Funds Transfer

*Advise & Pay

Advise & Credit

Remittance Application must be signed by the Applicant(s) or Authrised person in presence of Banks representative

Finally it should be signed by Bank’s authorised persons after processing

Remittance Application – The Basic Document

General Purpose

* Banker’s Check

A check issued by a bank in favour of a beneficiary. This can be payable locally or in a foreign jurisdiction. Payorders, Demand Drafts &Travelers Check are various forms of Bankers' Check.

Local / Foreign Funds Transfer

A device used by HBL online branches to transfer funds from one account to other account within Pakistan.

SWIFT Transfer

A computerised, coded & safe device used by banks to transfer money internationally to a beneficiary having a banking relationship.

Secured e-mail

Transfer of funds to a beneficiary through an e-mail, electronically authorized.

Fast Draft

A Payment Instrument drawn on HBL bank’s branch within country issued by Centralised Inward Remittance Department of the Bank in favour of a Beneficiary having account with other bank to pay amount of a remittance received from UAE & Gulf regions.

Fast Cash

An instrument used by HBL UAE & Gulf for remitting a sum of money to a beneficiary who is a non–HBL customer to be paid in cash by HBL-MISYS Branches coupled with SMS Advice facility.

Fast Direct Credit

A device used by HBL-UAE to instantly credit any account at an HBL-branch in Pakistan with SMS & Centralised Advice facilities to the beneficiary.

UAE Specific

8Money Transfer Products Money Transfer Products