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Management of Financial Institutions

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Management of Financial Institutions - MGT 604
VU
Lecture # 20
BRANCH BANKING IN PAKISTAN
A branch, banking centre or financial centre is a retail location where a bank or financial
institution offers a wide array of face to face service to its customers.
Remittances:
Demand Draft
It's a written order, drawn by one branch of a bank upon another branch of the same bank,
upon other bank under special arrangement to pay a certain sum of money to or to the order
of a specified person."
Parties Involved
1.
Purchaser
2.
Issuing Branch
3.
Drawee Branch
4.
Payee/ Beneficiary
Pay Order
A Pay Order is a written authorization for Pmt, Made in a receipt from issued & Payable by
the bank, to the person named & addressed therein on his giving a proper discharge thereon.
Parties Involved
1.
Purchaser
2.
Issuing / Paying Branch
3.
Payee
Telegraphic Transfer
"T.T instructions regarding PMT are sent to Drawee branch in a coded language and under
confidential number known as TEST Number."
Parties Involved
1.
Applicant
2.
Remitting or Drawing Branch
3.
Drawee Branch
4.
Beneficiary /Payee
Mail Transfer
Like T.T funds can be remitted by MT for the Cr of the payee a/c or the Beneficiary can be
advised to receive the PMT from Drawee branch either in cash on proper identification or
through his banker."
Parties Mail Transfer
1.
Applicant
2.
Drawing Branch
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Management of Financial Institutions - MGT 604
VU
3.
Drawee Branch
4.
Beneficiary
Online Fund Transfer
It's also a fund transfer but only by Online within the Branches.
Parties Involved
1.
Applicant (a/c in Bank)
2.
Beneficiary (a/c in Bank)
3.
2 Branches of Bank (online)
Account Opening Department
Types of Account
1.
Individual
2.
Joint Account
3.
Sole Proprietorship
4.
Club & Societies
5.
Joint Stock Companies
6.
Agents
Operations & Status of Accounts
Nature of Accounts
1.
Current Account
2.
Profit & Loss Sharing
3.
Current foreign currency
4.
Saving Foreign Currency
5.
Term Deposits
6.
BBA "Basic Banking Account"
Deposit
Commercial Bank deposit products offer you an array of privileges and services. Designed
with your banking needs and comfort in mind, these convenient accounts prove that, at
Commercial Banks, banking is about a shared long-term relationship between bank and you.
Current Account
The Current Account allows you the facility of unlimited withdrawals up to the extent of the
balance in your account. Sometimes there will be no tax deducted on the funds that you
choose to keep in these accounts.
Savings or PLS Account
The Savings Account allows you the facility of unlimited withdrawals (up to the extent of
the balance in your account), while accruing profit on your deposit everyday. You can have
the profit paid to you monthly, quarterly, annually or as per your requirement. The passbook
is the traditional document to keep track of earnings in a savings account.
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Management of Financial Institutions - MGT 604
VU
Term Deposit
The Term Deposit offers you the dual benefit of attractive returns with high liquidity, with
options to take your profit monthly, quarterly, annually or at maturity. A time deposit (also
known as a term deposit, particularly in Canada, Australia and New Zealand) is a money
deposit at a banking institution that cannot be withdrawn for a certain "term" or period of
time. When the term is over it can be withdrawn or it can be held for another term.
Generally speaking, the longer the term the better the yield on the money. A certificate of
deposit is a time-deposit product. A deposit of funds in a savings institution under an
agreement stipulating that
(a) The funds must be kept on deposit for a stated period of time,
(b) The institution may require a minimum period of notification before a withdrawal is
made .
Foreign Currency
You have the option of opening Current, Savings and Term Deposit accounts in different
foreign currencies ­ Like US Dollar, Pound Sterling, Japanese Yen, and Euros. This entitles
you to avail all the convenience of local currency accounts including:
1.
Unlimited cash withdrawals up to the balance in your account
2.
Deposits facility
3.
Profit accrued on a daily basis
4.
Automatic rollover of deposits
As per State Bank of Pakistan circulars/regulations
Demand account
1.
The cheque is the traditional mode of payment for a demand account.
2.
A demand account or demand deposit (North America: checking account, UK
and Commonwealth: current account) is a deposit account held at a bank or other financial
institution,
3.
For the purpose of securely and quickly providing frequent access to funds on
demand, through a variety of different channels.
Commercial Banks Loan Facilities:
A loan is a type of debt. All material things can be lent but this article focuses exclusively
on monetary loans. Like all debt instruments, a loan entails the redistribution of financial
assets over time, between the lender and the borrower.
The borrower initially receives an amount of money from the lender, which they pay back,
usually but not always in regular installments, to the lender. This service is generally
provided at a cost, referred to as interest on the debt.
A borrower may be subject to certain restrictions known as loan covenants under the terms
of the loan. Legally, a loan is a contractual promise of a debtor to repay a sum of money in
exchange for the promise of a creditor to give another sum of money.
Secured Loan
A mortgage loan is a very common type of debt instrument, used by many individuals to
purchase housing. In this arrangement, the money is used to purchase the property. The
financial institution, however, is given security - a lien on the title to the house - until the
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Management of Financial Institutions - MGT 604
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mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the
legal right to repossess the house and sell it, to recover sums owing to it. In some instances,
a loan taken out to purchase a new or used car may be secured by the car; in much the same
way as a mortgage is secured by housing. The duration of the loan period is considerably
shorter often corresponding to the useful life of the car.
There are two types of auto loans, direct and indirect.
1.
A direct auto loan is where a bank gives the loan directly to a consumer.
2.
An indirect auto loan is where a car dealership acts as an intermediary between
the bank or financial institution and the consumer
Other Types of Loans
1.
Credit card debt
2.
Personal loans
3.
Bank overdrafts
4.
Corporate bonds
Personal finance
Personal finance is the application of the principles of finance to the monetary decisions of
an individual or family unit. It addresses the ways in which individuals or families obtain,
budget, save and spend monetary resources over time, taking into account various financial
risks and future life events. Components of personal finance might include checking and
savings accounts, credit cards and consumer loans, investments in the stock market,
retirement plans, social security benefits, insurance policies, and income tax management.
Personal Finance is a parameter driven product for catering to the needs of the general
public belonging to different segments. One can avail unlimited opportunities through
Bank's Personal Finance. With unmatched finance features in terms of loan amount,
payback period and most affordable monthly installments, Bank's Personal Finance makes
sure that one gets the most out of his/her loan. Once a good credit history is established, the
door to opportunity opens much wider.
Mortgage Finance
Offers the convenience of owning a house of choice, while living in it at its rental value.
The installment plan has carefully designed to suit both the budget & accommodation
requirements. It has been designed for enhancing financing facility initially for employees
of corporate companies for purchase/ construction/ renovation of house.
Business Finance
In pursuance of the National objectives to revive the economy of the country, Bank is
providing loans to small and medium size business enterprises under Bank's Business
Finance Scheme. Goal is to offer a loan, which enables business community to receive the
financing required by them based on their cash flows. Valued customers can enjoy the
convenience of getting financing on attractive terms with the minimum processing
turnaround time.
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Table of Contents:
  1. Financial Environment & Role of Financial Institutions:FINANCIAL MARKETS &INSTITUTIONS
  2. FINANCIAL INSTITUTIONS:Non Banking Financial Companies
  3. CENTRAL BANK:Activities and responsibilities, Interest Rate Interventions
  4. POLICY INSTRUMENTS:Open Market Operations, Capital Requirements
  5. BALANCE OF TRADE:Balance of Payments Equilibrium, Public Policy and Financial Stability
  6. STATE BANK OF PAKISTAN:History, Regulation of Liquidity, Departments
  7. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS:Banking Inspection Department
  8. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Debt Management
  9. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Training Programs by SBP
  10. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Human Resources Department
  11. MAJOR DRIVERS OF FINANCIAL INDUSTRY:GLOBAL FINANCIAL SYSTEM, The World Bank
  12. INTERNATIONAL FINANCIAL INSTITUTIONS:ADB Projects in Pakistan, Paris Club
  13. PAKISTAN ECONOMIC AID & DEBT:Macroeconomic Stability, Strengthening Institutions
  14. INCREASING FOREIGN DIRECT INVESTMENT:Industrial Sector, Managing the Debt
  15. ROLE OF COMMERCIAL BANKS:Services Typically Offered by Banks, Types of banks
  16. ROLE OF COMMERCIAL BANKS:Types of investment banks, The Management of the Banks
  17. ROLE OF COMMERCIAL BANKS:Public perceptions of banks, Capital adequacy, Liquidity
  18. ROLE OF COMMERCIAL BANKS:Problem bank management, BANKING SECTOR REFORMS
  19. ROLE OF COMMERCIAL BANKING:Private Deposit Insurance,
  20. BRANCH BANKING IN PAKISTAN:Remittances, Online Fund Transfer
  21. ROLE OF COMMERCIAL BANKS IN MICRO FINANCE SECTOR
  22. Mutual funds:Types of international mutual funds, Mutual funds vs. other investments
  23. Mutual Funds:Criticism of managed mutual funds, Money Market Fund
  24. Mutual Funds:Balanced Funds, Growth Funds, Specialized Funds, Measuring Risks
  25. Mutual Funds:Cost of Ownership, Redemption Fee, Reports to Shareholders
  26. Mutual Funds:Internet Fraud, The Pyramid Scheme, How to Avoid Investment Fraud
  27. Mutual Funds:Investing In International Mutual Funds, How to Pre-Select a Mutual Fund
  28. Role of Investment Banks:Recent evolution of the business, Possible conflicts of interest
  29. Letter of Credit:Elements of a Letter of Credit, Commercial Invoice, Tips for Exporters
  30. Letter of Credit and International Trade:Terminology, Risks in International Trade
  31. Foreign Exchange & Financial Institutions:Investment management firms, Exchange Traded Fund
  32. Foreign Exchange:Factors affecting currency trading, Economic conditions include
  33. Leasing Companies:Basic Purpose of Leasing, Technological Benefits
  34. The Leasing Sector in Pakistan and its Role in Capital Investment
  35. Role of Insurance Companies:Indemnification, Insurer’s business model
  36. Role of Insurance Companies:Life insurance and saving
  37. Role of financial Institutions in Agriculture Sector:What is “Revolving Credit Scheme”?
  38. Agriculture Sector and Financial Institutions of Pakistan:What is SMEs
  39. Can Government of Pakistan Lay a Pivotal Role in this Sector?:Business Environment
  40. Financial Crimes:Process of Money Laundering, Terrorist Financing
  41. DFIs & Risk Management:Managing Credit Risk, Managing Operational Risk
  42. Banking Fraud & Misleading Activities:Rogue Traders, Uninsured Deposits
  43. The Collapse of ENRON:Auditing Issues, Corporate Governance Issues, Corrective Actions
  44. Classic Financial Scandals:Corruption, Discovery, Black Wednesday
  45. RECAP:FINANCIAL INSTITUTIONS, CENTRAL BANK,