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JOUHAR DEGREE COLLAGE

Name

•WAQAS KHAN •Banking Issues •Sir. Kamran Khan •BANKING

Report

Assined By

CLASS

LETTER OF TRANSMITTAL ACKNOWLEDGEMENT
September 6, 2012 Sir Kamran Khan Jauhar Degree Collage Gulistan-e-Jauhar Karachi. Dear Sir Kamran I am submitting to you the report that you requested. The report is entitled “Banking Issues”. The content of this report is complete information about the given Issues of Banking. If you should have any questions concerning my report please feel free to contact me. Sincerely Waqas Khan

I would like to deeply appreciate and thanking you the services of our teacher Sir Kamran Khan, the teacher Banking in Jauhar Degree College, for providing guidelines and giving hints. I am also thankful to Mrs. Sehrish Rizvi, the teacher in Jauhar Degree College, for providing guidelines and help me to make my report more effective. Moreover, I am thankful to HBL, UBL, Meezan Bank, MCB, Faisal Bank to provide me information regarding my report.

Latter Of Transmittal

Thank You

Profit on Saving Account Introduction
Report contains the complete information about the discussed issues. Following are the issues to be discussing with current information in banking. Banking Issues are the issues These Issues are about: • Which Bank provides highest Markup on Saving Account? • Withdrawal limit on saving account. • Tenure of short term and Long term Loan and Difference in their rate of interest. • Issues of rate of interest. • Secure loan under bailment of property documents. • Issue of Intra Bank Cheque. • Views on Rate of Interest decrease by State Bank of Pakistan. • Dishonouring of Cheque

Profit rate on Saving Account varies with bank to bank. Different banks provide different profit on saving account but these banks are bounded under the upper and lower limits of profit bank fixed by the State Bank of Pakistan. Lower limit of profit rate on saving account = 5% Upper Limit of profit rate on saving account = 10.5% Following table shows the rate of profit provide by the different banks: Bank Name Meezan Bank United Bank Limited Habib Bank Limited Faysal Bank MCB Standard Chartered Summit Bank Rate of Interest 5% 7.5% 7.19% 6% 6% 6.0% 9.5% On Average monthly maintaining balance. minimum

On Average monthly minimum maintaining balance Rs. 10,000 On Average monthly minimum maintaining balance Rs. 20,000 On Average monthly minimum maintaining balance Rs. 10,000 On Average monthly minimum maintaining balance Rs. 10,000 No minimum average balance required maintaining

On Average monthly minimum maintaining balance Rs. 5000/-

Important Savings Account Features
Certain important points to know about savings accounts in Pakistan are interest rate calculation techniques and modes of payout. For most savings accounts, a minimum balance requirement is preset by the bank. The rate of return is usually dependent on the minimum balance as well. Interest rates also vary with the level of deposit in the savings account. Another crucial point to understand is the calculation of rate of return. Daily calculation of profit on a savings account allows a customer to earn profit on his daily balance being maintained. Monthly interest calculation is on the basis of average balance in the savings account during the entire month. Quarterly, semi-annual and annual profit calculations are on a similar basis as monthly interest calculation. Also important to note is the mode of payout on savings accounts in Pakistan. Monthly payout would entail that the profit accrued over the month would be credited in the savings account at month end. Quarterly, semi-annual and annual payouts follow similar patterns.

Standard Chartered Regular Savings Account 6.00%
Deposit Ranges Minimum Balance Requirements Accessibility Profit Calculation & Payments ATM card only, unlimited transactions every month. Profit calculation daily and payment monthly. Any Deposit amount. No minimum balance requirements.

UBL UniSaver Account 6.00%
Deposit Ranges Minimum Balance Requirements Accessibility Profit Calculation & Payments N/A. Rs. 10,000. ATM/Cheque Book, unlimited transactions every month. Profit calculation monthly and payment semi annually.

Faysal Savings Account 5.00%
Deposit Range Minimum Balance Requirements Accessibility Profit Calculation & Payments ATM/Cheque Book, unlimited transactions. Profit calculation monthly and payment semiannually. Rs. 10,000 and above. Rs. 10,000.

Hamara Summit Family Savings Account 9.50%
Minimum Requirements Profit Calculation & Profit calculation monthly and Balance 5000/-

Payments

payment semi-annually.

Highest Profit on Saving Account
Hamara Summit Family Savings Account 9.50%
Minimum Requirements Profit Calculation & Profit calculation monthly and Balance 5000/-

Payments

payment semi-annually.

Summit Bank provide Highest Interest Rate on Saving Account i-e 9.5%

Reason:
Summit Bank is a new Bank in Pakistan. As every Bank wants to capture more and more customer so that’s why Summit Bank attracts customer to open their account in Summit Bank by providing them largest interest rate.

Withdrawal Limits on Saving Account
Withdrawal limit on Saving Account in Mostly Bank is unlimited except of Habib Bank limited. Habib Bank restricted their customer to maintain at least Rs. 20,000 in their account other wise they will be charged. You can withdraw any amount from your saving account, as in current account. But the profit given to customers by bank is on average monthly maintaining balance. For most savings accounts, a minimum balance requirement is preset by the bank. The rate of return is usually dependent on the minimum balance as well. monthly or daily minimum maintaining balance restricts the saving account holder to withdraw the amount lower then the balance limit because the saving account holder wants to get some profit on his savings. Although limits of withdrawal are terminated from underwriting rules but minimum maintaining balance is working as a tool for restriction of withdrawal.

Short Term and Long Term Loan
Short Term Loan Personal Loan:
Short term Loan is a loan which tenure is One Year. You have to pay the Loan in one year. In some Banks Tenure of Loan is 1-5 Years. But in some Banks 1-3 Years is term as short term loan and 4-5 years loan term as mid term loan.

Personal Loan Features:
Important points to remember before availing personal loans are that an individual should always select an installment amount that can comfortably be withdrawn from the net income. Usually personal loans charge higher markup rates; this is primarily because such lending falls under a bank’s unsecured portfolio. However it is important to note that the mark up amount on personal loans decreases with time as the principle amount decreases.

Repayment Mode and Tenure:
When deciding on availing a personal loan, the tenure of repayment also needs to be considered. The longer the duration, the smaller the installment amount; but the absolute markup amount increases. Another important point to consider is the mode of repayment. Debit instructions for loan repayment are the most convenient form for any individual as the hassle of providing cheques or making payments in the branches on due dates is eliminated.

Long Term Loan Secured Loan:
Long term Loan is a loan which tenure is up to 10-20 Years. Currently Long term Loan is always secured by the property or another asset. Banks usually provide long term loan in the form of mortgage loan or car financing. Because of the fact that high risk involves due the long maturity tenure Banks always secured loan against security. Interest rate on long term secure loan is usually less then personal short term loan.

Secured Loan Features:

The amount available to borrow with secured loans is dependant upon the amount of equity available in your property, which means the amount of the market value minus any loans or mortgage outstanding on it. There are many benefits available with secured loans, and you will find that this type of finance is one of the most cost effective options available. With secured loans you can look forward to far lower interest rates than most standard, unsecured loans, and this is because there is less of a risk to the lender since the loan is secured against an asset.

Issue of rate of Interest
Interest Rate on Personal Loan ( Short term)
• • Tenure 1-5 Years Applicable Rate = 25%-35%

Personal Loan Features: Personal loan depends on the credit history, monthly income of the person. Usually personal loans charge higher markup rates; this is primarily because such lending falls under a bank’s unsecured portfolio. The longer the duration, the smaller the installment amount; but the absolute markup amount increases. HBL Personal Loan Rate Slab depending on Income of the Person:

Consumer Segment Income Top up Replenishment 10000-11999 >12000

Personal Loan Tenure 1-3 yrs 1-3 yrs 4-5 yrs Rate 28.99% 25.99% 28.99%

Standard Chartered Personal Loan 31.00%
Rate Calculation Eligibility Financing Amount and Tenure Debt Burden Repayment installments upto 50% of net income after accounting for other debt payments Fixed Rate – 31% (27% for loan tenure of less then 5 years) Salaried Individuals Upto Rs. 2 Million for 5 years

Hidden Charges:
Late Payment Charges: Rs. 1000 (Varies with bank to bank) Pre-Payment Penalty= 5% of outstanding Principle balance Compound Interest rate.

Interest rate on Secure Loan (Long Term Loan).
• • • • KIBOR+2% - 5% =Applicable Rate Annually Compound Interest Tenure 5-10 years

Rate Calculation =

KIBOR + 5% (1 Year Offer).

Rate Calculation

KIBOR + 4% (1 Year Offer).

Rate Calculation

KIBOR + 4% (1 Year Offer).

Rate Calculation

KIBOR + 3.5% (1 Year Offer).

KIBOR 6 September
10.46 % - 11.13%

Issue of Secure Loan against Property
The amount available to borrow with secured loans is dependant upon the amount of equity available in your property, which means the amount of the market value minus any loans or mortgage outstanding on it. There are many benefits available with secured loans, and you will find that this type of finance is one of the most cost effective options available. With secured loans you can look forward to far lower interest rates than most standard, unsecured loans, and this is because there is less of a risk to the lender since the loan is secured against an asset.

Formula: Loan = Discounting Value of Asset * 70%
Default: If, for any reason, Borrower fails to make any payment on time, Borrower shall be in default. The Lender can then demand immediate payment of the entire remaining unpaid balance of this loan, without giving anyone further notice. If Borrower has not paid the full amount of the loan when the final payment is due, the Lender will charge Borrower interest on the unpaid balance at percent ( %) per year. Right of Offset: If this loan becomes past due, the Lender will have the right to pay this loan from any deposit or security Borrower has with this lender without notice to him/her. If the Lender gives Borrower an extension of time to pay this loan, he/she still must repay the entire loan.

Role of Banking Court:
In case of default usually Bank sends notice to the borrower to paid loan amount. If the borrower refuses to pay the amount, at last bank file a suit in the Banking court against the unpaid borrower. Banking Court allowed the Decree in favor of borrower or lender after hearing the all case. In between case Court give the option to the borrower to paid the amount to the bank with the interest bank charged to borrower but if borrower effuses to pay or he not in condition to pay then decree goes to the favor of Bank. Then Bank can recover the amount of loan from the loan by selling borrower asset.

Issue of Intra Bank Cheque
Intra Bank Cheque.
Intra Bank cheque is the cheque of Bank branch out side the city. Come issues relating to Intra Bank cheque discusses follows: In case of Normal Account: • • Cheque cannot be cash from any branch of Bank. Cheque can be deposit in account and payee will pay charged some amount in clearing of the cheque. Cheque can be cash in any Branch of Bank.

In Case of Online Account: •

Rate of Interest decreases by State Bank
State Bank of Pakistan has announce its new Monetary Policy with a 1.5% decrease in the interest rates. With this reduction, the interest rate reduced from 12% to 10.5%. The new Monetary Policy was announced by Governor State Bank, Yaseen Anwar. Dated : 10-Aug-2012

Views on slashing of interest rate:
Yaseen Anwer (Governor State Bank of Pakistan) blamed the electricity crisis to be the main driver of economic instability. He said that the private sector credit was affected the most as a result of this crisis. Chairman All Pakistan Textile Mills Association (Aptma) Mohsin Aziz has welcomed cut in discount rate by 150 bps by the State Bank of Pakistan (SBP) and termed it a good omen for investment and growth in the country. He said it is a positive move towards the right direction and needed to be continued further until the lending rate drops down to single digit. Mohsin said that the lending rate has practically come down to four percent in the region and similar approach is needed to be followed in Pakistan.

Dishonouring of Cheque
The Law of Dishonouring of Cheque
[Penal Code (XLV of 1860) Section 489-F]

Whoever dishonestly issue a cheque towards re-payment of a loan or fulfillment of an obligation which is dishonored on presentation, shall be punishable with imprisonment which may extend to three years, or with fine, or with both, unless he was establish, for which the burden of proof hall rest to him, that he had made arranges with his bank to ensure that the cheque would be honoured and that the bank was at fault in not honouring the cheque.1

1

Section 489-F inserted by Criminal Law (Amendment) Ord (LXXXV of 2002), dated 25-10-2002

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