Types of Banker’s Funds & Banker Customer Relationship
Dec 24, 2015
Types of Banker’s Funds & Banker Customer Relationship
Learning ObjectivesLearning Objectives
Students will be able to:Students will be able to: Understand forms of bank capitalUnderstand forms of bank capital Know the different types of accounts a bank Know the different types of accounts a bank
can offer.can offer. Understand how banks maintain Understand how banks maintain
relationship with its customers.relationship with its customers. Comprehend duties & responsibilities of Comprehend duties & responsibilities of
bank and customersbank and customers Describe termination conditions of bank and Describe termination conditions of bank and
customer.customer.
Banker’s FundsBanker’s Funds
Bank’s CapitalBank’s Capital
The Reserve The Reserve FundFund
Liquid AssetsLiquid Assets
Current Deposits
Fixed & Term Deposits
Saving Deposits
Bank’s CapitalBank’s Capital
Nominal & Authorized Capital
Paid Up Capital
Subscribed Capital
The Reserve FundThe Reserve Fund
Section 21 of the Banking Companies Ordinance, 1962, has made it obligatory for every banking incorporation in Pakistan in Pakistan to create a reserve fund in the following manner:
At least 20% of the balance of Profit in each year
Liquid AssetsLiquid Assets
According to the section 29(1) of the Banking Companies Ordinance, 1962, every bank in Pakistan is under legal obligation to maintain liquid assets in Pakistan.
This amount should be such percentage of the total demand & time liabilities of the bank as may be notified by the State Bank of Pakistan from time to time.
Liquid assets are all cash on hand & balances.According to State Bank of Pakistan the liquid asset
requirement should be maintain at 15%.
Nature of Deposits
Fixed & Term Deposits
Current Deposits
Savings Deposits
Current Deposits Current Deposits Current account is a running account which is continuously in operation. Who is interested to open Current account?
Wish to have working capital in their custody Interested in keeping their money liquid & safeLike to receive & make payment usually through chequeUtilize the agency services of banks frequentlyTake full advantage of other services provided by the bank
Facilities provided to the current account holderThe bank collects properly indorsed cheque, bills etc on behalf of
the current account holders.The bank may allow the facility of overdraft on prior arrangements
to the trustworthy customers.Loans & advances may be sanctioned to the credit worthy current
account holders with ease.A depositor can withdraw sums from the account by means of
cheque and ATM cards supplied by the Bank.Current account is opened with a minimum initial deposit as
prescribed by the bank from time to time.
Fixed & Term Deposits Fixed & Term Deposits
The deposits that can be withdrawn after a The deposits that can be withdrawn after a specified period of time are referred to a fixed specified period of time are referred to a fixed or term deposits.or term deposits.
Period for which bank kept money is three Period for which bank kept money is three months to five years.months to five years.Payment of Fixed/Term deposits before maturity Payment of Fixed/Term deposits before maturity Law of LimitationLaw of LimitationAttachment by CourtAttachment by CourtTerm Deposits account in Joint NamesTerm Deposits account in Joint Names
Saving DepositsSaving Deposits Introduced In England In Pakistan Saving Deposit account with very small
amount & issued a cheque book. No restrictions on withdrawals
Profit & Loss Sharing Profit & Loss Sharing AccountAccount
Rules for Profit and Opened by sharing account Opened with initial minimum deposit It may be opened in the name of individual or jointly in the names two
or more persons All money to be deposited that should be accompanied by a pay-in-
slip showing the name and the number of account Withdrawal from the account by cheque Application for cheque book should be made on printed requisition
book Bank have right to make investment of credit balances and deposited Profit payable and loss recoverable on PLS The joint account may be operated singly by anyone of them Accountholder wishing to close the account must be present pass
book and unused cheque
Foreign currency accountForeign currency account Salient features Salient features
Only designated branches authorized to deal Only designated branches authorized to deal Foreign currency can be accepted Foreign currency can be accepted Deposit can be accepted from residence and non residence Deposit can be accepted from residence and non residence Minimum requirements 1000 US dollarsMinimum requirements 1000 US dollars Monthly rate of return givenMonthly rate of return given It enjoy protection It enjoy protection of economic reform act 1992 Foreign currency or Pakistan rupee at the discretion of the depositor Foreign currency or Pakistan rupee at the discretion of the depositor Exemption from the account as levy of wealth tax for 6 years, income Exemption from the account as levy of wealth tax for 6 years, income
tax, dedication of zakattax, dedication of zakat Gov. of Pakistan will not make inquiries about there sources Gov. of Pakistan will not make inquiries about there sources
Use of Funds Use of Funds
The bankers in Pakistan use their funds The bankers in Pakistan use their funds profitably in the following categories:profitably in the following categories: Short Term loans repayable at short noticeShort Term loans repayable at short notice Investment in Government & other stock Investment in Government & other stock
exchange securitiesexchange securities Loans & advance to trade, commerce and industryLoans & advance to trade, commerce and industry Purchase & Discounting of BillsPurchase & Discounting of Bills Financing imports & Exports tradeFinancing imports & Exports trade
Opening a Bank Account
Formal Application
Introductory Reference
Specimen Signature
Opening the Account
Closing of the Account
Banker-Customer Relationship
Meaning of Banker Meaning of Banker
Dealer in CapitalDealer in Capital Dealer in MoneyDealer in Money Intermediary party b/w Borrower & LenderIntermediary party b/w Borrower & LenderAccording to the Banking ordinance 1962, According to the Banking ordinance 1962,
Banking has been defined as Banking has been defined as “ “ Accepting Deposits for the purpose of Accepting Deposits for the purpose of lending or investment of deposits of money lending or investment of deposits of money from the public, repayable on demand or from the public, repayable on demand or otherwise & withdrawals by Cheque, Draft, otherwise & withdrawals by Cheque, Draft, Order or otherwise.Order or otherwise.” ”
Meaning of Customer Meaning of Customer
Should have an account with the Bank Deal with the bank in its nature Deal with the bank without consideration of
the duration & Frequency of operation of his account
A customer is a person who maintains an account with the bank without consideration of the duration & frequency of operation of his account.
Relationship Between
Banker & Customer
General Relationship Special Relationship
Debtor &
Creditor
Principle & Agent
Bailer & Bailment
Pawner & Pawnee
Mortgager & Mortgagee
Trustee & Agent
Executor, Attorney & Guarantor
Rights & Duties of a Customer to Towards Banker
Rights a customer
Duties of a customer
Rights & Duties of Rights & Duties of a Banker to a Banker to Towards Towards CustomerCustomer
Duties or obligation of a banker towards customer
Rights of banker
Termination of Contract Between Termination of Contract Between a Customer & a Bankera Customer & a Banker
Termination of relationship by a customerChange of PlaceNot satisfied with operationsDeath of Customer
Termination of relationship by a Banker If customer Repeatedly present s cheque after the business
hours Intimation of the death of a customer Insanity of CustomerOn receipt of notice of insolvencyCompany is wound up by the order of the CourtAssigns his total credit balance to third partyGarnishee order for the whole accountChanges in constitution of the Firm
Reasons for Dishonoring a Reasons for Dishonoring a Cheque by a BankCheque by a Bank
A cheque is not in Proper FormA cheque is not in Proper FormWhen a Banker is Justified in When a Banker is Justified in
refusing Paymentsrefusing Payments
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