An Introduction to Banking

1. An Introduction to Banking BRANCH BANKING OPERATIONS

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

4. LEARNING OBJECTIVES After completing the program, participants are expected to understand:

5. Account Opening And Operations Learning & Development

6. 1 Basic Considerations in Account Opening & Its Operations 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.

7. 2 The Account Opening Risk Model Risks Risks Risks Risks Documents Instructions

8. The Account Opening Process Model 3 Customer Issue Cheque Book Request Send Letter of Thanks Documents Establish Identity & Authority Account Opened Deposit Cash Process Documents Banker Request for Cheque Book Meet Customer

9. Account Opening Form – The Basic Document 4 General Information Customer(s) Request Terms & Conditions Account Title Account Type Customer Type Currency HBL – Branch Details of other Accounts Identity Information Beneficial Owner(s) Address & Contacts Nationality Residence Country CNIC / Passport No Profession/Institution Next of Kin Authority Information Operational Instructions Zakat Deduction Instruction (Affidavit) Other Instruction(s) AOF must be signed by the account holder or competent person in the presence of the Bank’s representative. Operational instructions are also obtained on Specimen Signature Card signed by the account holder and authorised Person(s)

10. 5 Classifications of Accounts Organisational Product Type Personal Current Saving Term • Single • Joint • Individuals with • Infirm Signatures • Illiterate • Minor • Senior citizen • Non-resident Proprietorship Partnership Limited Company Trust Club & Association

11. 6 Common Documents for Account Opening

12. Additional Documents for Account Opening 7

13. Additional Documents for Account Opening 8

14. Additional Documents for Account Opening 9

15. Payment & Settlement Learning & Development

16. 1 The Payment & Settlement Process Beneficiary’s Bank Processes Check Sends Check for Collection Deposits Check Beneficiary Clearing House Payment of Cash Process Clearing Beneficiary’s Bank Claims Settlement for Payment to be made

17. 2 PHASES IN PAYMENT & SETTLEMENT PROCESS

18. 4 Payment Concept Model Presents Payment Instrument Pays Cash at Counter Credit Accounts

19. 5 Payment Laws • 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 • 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.

20. 6 CHECK 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.

21. 7 PARTIES TO A CHECK PAYOR Bank BENIFICIARY NAMED PERSON OR BEARER DRAWER CUSTOMER UNCONDITIONAL ORDER PAY SUM CERTAIN

22. 8 REQUISITES OF CHECK • Instrument in writing • Drawn on specified banker • Pay on demand • To specified person or bearer • Signed by the drawer • Unconditional Order • Certain sum of money • Date 4 8 2 April 3, 2009 Adil Ahmed 10,000/- 7 Ten Thousand Only Muhammad Anwar 6 1 5

23. 8 CHECK July 23, 2011 Kainat Mirza 10,000/- Ten Thousand Only Muhammad Anwar

24. 9 TYPES OF CHECKS

25. 10 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

26. Types of Crossings 11 G E N E R A L G E N E R A L Account Payee And Company Payee Account Only & Company G E N E R A L S PE C I A L Habib Bank Ltd Habib Bank Ltd HBL - Karachi Not Negotiable HBL- Nazimabad Branch.-Karachi

27. 12 3. Conditional 4. Restricted Further Indorsement is Restricted Transfer of title is Contingent to an Event Endorsement An instruction on the back of the check through which the holder transfers the title to the instrument to another person Title is transferred to two or more Indorsees. Negotiation not Possible Transferee is mentioned. He can further endorse 5. Partial 2. Full Transferee is not mentioned. Indorsement makes the instrument bearer 1. Blank

28. 13 Who Can Endorse ?

29. 18 NIFT Clearing Process Check Cleared NIFT CLEARING AND SETTLEMENT Cleared check to Paying Branch Other Bank Check for Collection HBL Branch A HBL Branch B Check for Collection Cleared check to Paying Branch Check Cleared

30. 19 NIFT Settlement of Accounting and Cash Positions 1 HBL CENTRAL PROCESSING UNIT OTHER BANKS Advise Position 2 HBL REGIONS SETTLEMENT CASH & ACCOUNTING POSITIONS 3 4 NIFT Clearing and Settlement Settles Cash & Accounting Position HBL REGIONS SETTLEMENT OF CASH POSITION Settles Cash Position STATE BANK Disburse Cash Advise Position 1 2 3 4

31. 1 Money Transfer Concept 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.

32. The money being transferred is legal and would be used for lawful purposes only. Specifically, the transaction must not be for the purpose of money laundering or financing terrorism, or purchases of illegal arms, or similar activities 2 The Basic Considerations

33. 3 Money Transfer Risk Model Money Laundering Fraud Wrong Payment • Financial • Reputational • Regulatory R I S K S Technology & Process Failure Exchange Rates Errors

34. 4 Money Transfer Risk Model Money Changers Foreign Nationals Trusts-Collection Accounts High Risk Transactions Non - Customer Non - Residents Non Government Organisations (NGOs)

35. 5 Remitter Remitting Bank Money Transfer Involves a Series of Independent Relationships Paying Bank Beneficiary

36. 6 Money Transfer Process

37. Remittance Application – The Basic Document 7

38. Money Transfer Products 8 General Purpose UAE Specific * 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.