Mark -Up Rates

Fixed Mark Up Rates

Chapter 7
Floating mark Up Rates

Rates for BTF Loans

Chapter 8 Documentation
Common Documents

Property Documents to be obtained

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Chapter 13 Approval Matrix
Processing

Recommending/Approving Authority Matrix

Approval in Absence of Chief Manager

Chapter 14 Process Flow
Process Flow

Stage I

Stage II

Stage III

Turn Around Time

Chapter 15
Fees & Charges Processing Charges
External Agencies Charges

Prepayment

Late Payment Charges

Cheque Return Charges

Chapter 16 Repayment

Mode of Repayment Installment

Due Date

Chapter 17 Monitoring

Portfolio Management Default

Management

Chapter 18 Reporting

Weekly Activity Report Monthly MIS

Report Month End Report DPD Report

Chapter 19 Accounting Procedures

Product Routing

General Ledger Accounts to be Opened

Receipt of Application

Payments to Suppliers

Disbursement of loan
 MarkUp Accrual

Monthly Instalment

Late Payment Charges PreMature Termination of Loan

Insurance Premium

Chapter 20 Provisioning & Write -Off

Annexure 1-13 Appendices 1-10

PURPOSE OF FINANCE

1. Purchase of a new/ old built house/ flat/ apartment.

2. Construction of new house.

3. Purchase of Plot only for Subsequent Construction

4. Renovation/ Expansion/ Restoration/ Improvement of existing

house/flat/apartment.

5. Takeover of House Finance obtained by the customer from

other financial institutions/lenders (BTF).
TARGET CUSTOMERS

The Bank's target market for Home Finance Scheme is clearly defined
as:

1. Salaried individuals.

2. Self-employed professionals such as Doctors, Engineers,

Architects, Chartered Accountants, Software and IT Consultants,
Teachers etc.
3. Businesspersons (Sole Proprietors, Partners of partnership firm, or
Directors in private/public limited companies.

(ii) Current business/self-employment's satisfactory track record should be

ascertained/verified through market repute and applicable documents
(Financial or others) as listed in Chapter 8
If business history is less than the above, needs approval from Regional
Head/ Head Consumer Banking Division

Eligibility For Prime Bank Employees

In addition to the above, following are the policy guidelines for availing "Prime
Home" financing facility available to Prime Bank's employees:

i) Applications from Prime Bank staff to avail 'Prime Home' finance facility to
 be executed in line with the governing Prudential Regulation & in
accordance with the bank's "Prime Home SOP and in doing so HR &A
Division, H.O. should regularly deduct the installments at source from
the monthly salary of the concerned employee, instead of obtaining post
dated cheques from him/her.

ii) The branch/RO/HO management may consider to assign the concerned staffs
Provident Fund and/or Gratuity, if need be, as additional securities on case to
case basis.

iii) Prime Home Financing may be extended to the bank's employees qualifying
for the same under the following conditions:

(a) Where the staff member is not availing any Home Finance facility
under
Employee Service Rules Compensation package.
or
(b) Where the staff member is availing Home Finance facility under
Employees
Service Rules compensation package provided there is cushion
available in
his/ her property already mortgaged with the bank.
or
(c) Where the staff member is availing Home Finance facility under
Employees
Service Rules compensation package and wants to avail "Prime
Home" for
any other additional property.

(d) Where the staff member is not entitled to avail the House Loan facility as
per the Bank's House Loan policy;

iv) It would at discretion of bank's management to either fully settle or allow the
continuity of Prime Home loan of an employee at his/her end of service,
keeping in view the tenure of the loan, its outstanding amount and as per
bank's prevalent policy.

Non-Eligible Customers

Customers associated with the below professions may pose a high risk.
Therefore, before processing their applications due diligence should be adopted.

1) Lawyers
2) People belonging to media (actors, actresses, celebrities, singers)
3) Film/ drama production houses
4) Real Estate agents / Investors
FINANCE LIMITS

Prime Home finance, minimum & maximum limits are as follows:

Types of Home Finance Minimum Maximum

Finance Finance
4.1 Purchase of built house/flat/ Rs. 500,000 Rs. 10,000,000

apartment
4.2 Construction of house Rs. 500,000 Rs. 10,000,000
4.3 Purchase of Plot only for Rs. 500,000 Rs. 10,000,000

Subsequent Construction
4.4 Renovation/ Expansion Rs. 200,000 Rs. 7,500,000
4.5 Balance Transfer Facility Rs. 500,000 Rs. 7,500,000
For minimum finance limits, if less than prescribed, needs approval from
Regional Head/ Head of Consumer Banking.

TENURE

Borrower has the option to choose tenure from the minimum

to the maximum as appended below for repayment of loan:
 Types of Home Finance Minimum Maximum
Tenure Tenure
5.1 Purchase 3 Yrs 20 Yrs
5.2 Construct 3 Yrs 20 Yrs
5.3 Purchase of Plot only for 3 Yrs 20 Yrs
Subsequent Construction
5.4 Renovation/Expansion 3 Yrs 20 Yrs
5.5 Balance Transfer Facility 3 Yrs 20 Yrs

EQUITY PARTICIPATION

The debt to equity ratio for each type of home finance is as follows:

Types of Home Finance Debt / Equity Ratio

Bank : Borrower
6.1 Purchase 70 (Bank):30 (Borrower)
6.2 Construct 80 (Bank):20 (Borrower)
6.3 Purchase of Plot only for 50 (Bank):50 Borrower)
Subsequent Construction 50 (Bank):50 Borrower)
6.4 Renovation/Expansion 50 (Bank):50 (Borrower)
(Loan amount to a maximum of 50% of
Assessed Value of house)
6.5 Balance Transfer Facility 70 (Bank):30 (Borrower)

6.1 Purchase : The equity, in case of Purchase shall be in the form of

customer's cash contribution i.e a minimum of 30% of assessed value of
property.

6.2 Construct : The equity, in case of Construction, shall be the plot itself
 which should value at least 20% of the * appraised value of property, wherein
the financing shall be extended up to 80% of the *appraised value of the
property, however not exceeding the maximum limit of Rs. 10.0 million.

* Appraised Value = Assessed Value of the land PLUS estimated

cost of construction.

6.3 Purchase of Plot only for Subsequent Construction:

Financing of plot is allowed only in case where it is followed by subsequent

financing fo construction thereupon. A realistic construction schedule has to be
provided by th< applicant before allowing disbursement of the initial loan limit for
the purchase of plot.

The collective equity for both the purposes i.e. purchase of plot & subsequen
construction, on appraised value of property shall be taken upfront from the
custome:
before disbursement Q£ laarv fee t^vurelsss**. o£-*^e*_

The total financing for both the plot and construction thereon shall not exceed
t\ maximum limit of Rs. 10.0 million, which is the maximum limit permissible
under SB Prudential Regulations.

Note: Financing purely for the purpose of buying plot/land is strictly not allowed, as
pi SBP's Prudential Regulations.

6.4 Renovate : The equity, in case of Renovation/ Expansion shall be the

propen itself being offered for renovation/ improvement wherein financing
shall be extende on 50% of the assessed value of the property.

6.5 BTF : In case of a BTF request, the borrower's equity contribution

towards th loan has already been Wi'i't to the extent of:

(a) Borrower's Equity (b) Repayments

Prime Bank's exposure of financing shall only be limited

upto:

(i) Maximum of 70% of the Assessed Value of the property

(ii) Premature Termination Value of the debt advised by the previous
Financie
Institution/Housing Company.
Or
Whichever of above (i) & (ii) is lower.
MARK-UP RATES
Markup rates on Home Finance have been devised to suit the requirements of
the borrower. Two options of markup rates are as follows:

7.1 Fixed Markup Rates

Under the Fixed Rate basis the mark-up is paid at an agreed rate on a set period of

time. The Fixed Rate shall be as follows:

No. of Years Mark-up
For 1 year 7.0% p.a.
For 2 years 8.0% p.a.
For 3 years 9.0% p.a.

a) 30 days prior to the end of the fixed rate period, the borrower shall have
the
options either to accept fresh fixed offered rate for the next term(s) or opt for
the
floating rate prevailing at that time.

b) If no response is received by the end of the period, the fixed rate shall
change to
one year fixed rate prevailing at that time.

c) In order to monitor the Due Date for revision of markup rate for each
borrower, a
Due Date Diary shall be maintained by the concerned staff.

7.2 Floating Markup Rate

Under floating markup system, the rate is to be pegged with the discount rate of
State Bank of Pakistan. Change in the base rate shall have a bearing on the future
installments

With floating mark-up rate, the markup is revised every 12 months and SBP discount
rate is used as an index.
a) A spread of 1.0% to be maintained over the prevailing State Bank of Pakistan
Discount Rate.

b) While the floor rate limit (minimum) will be maintained at 7% p.a., with no cap.

c) In order to monitor the Due Date for revision of markup rate for each borrower, a
Due Date Diary shall be maintained by the concerned staff.
 7.3 Special Rates for Balance Transfer Facility (BTF) Loans:

A rebate of 0.5% is to be offered upon the prevailing adjustable/floating mark up rate

as well as upon fixed rates for all three tenures.

Fixed Mark-up Rates

Mark-up for BTF loans

No. of Years

For 1 year 6.5%

For 2 years 7.5%
For 3 years 8.5%

a) 30 days prior to the end of the fixed rate period, the borrower shall have
the
options either to accept fresh fixed offered rate for the next term(s) or opt for
the
floating rate prevailing at that time.

b) If no response is received by the end of the period, the fixed rate shall change
to
one year fixed rate prevailing at that time.

c) In order to monitor the Due Date for revision of markup rate for each borrower, a
Due Date Diary shall be maintained by the concerned staff.

Floating Markup Rate

a) With floating mark-up rate, the markup is revised every 12 months and
SBP
discount rate is used as an index.

b) While the floor rate limit will be maintained at 6.5% p.a. with no cap.

c) In order to monitor the Due Dates for revision of markup rate for each borrower, a
Due Date Diary shall be maintained by the concerned staff.

DOCUMENTATION
A complete list of documents required from each category of the customer is
appended
below:

8.1 Common Documents

1. Copy of National Identity Card

2. Two recent passport size photographs
3. Bank Statement for last one year
4. Copies of last 3 months paid bills: (a) electricity, (b) telephone, (c) Sui gas and
(d)
credit cards (i£ available) (e) children education

5. Copies of tax returns for last 2 years.

6. Details of the dependents (age, classes, educational institution etc.)
7. Copy of property documents for which loan is required

8.1 (a) For Salaried Individuals:

Q Copy of last salary slip duly attested by the Human Resource Department
of the employer.

? Employment Certificate from the employer stating the date of

joining of
employee, designation, gross salary, deductions & provident fund balance (if
the
PF policy exists in the company).

? Other regular income should also be taken into account and properly
recorded if
the take home salary is falling short of the eligibility criteria.

(Other income may include the monthly rent being received from self-owned
residential/commercial property, monthly/quarterly profits from the
saving certificates, income remitted by nonresident family member settled
outside Pakistan).

□ Salary details of spouse/ family member wherein the salary of borrower's

spouse /family member is taken into account to determine the repayment
capacity.

8.1 (b) For Self Employed & Businessmen

Q Bank Certificate stating details on applicant maintaining Business Account
such as account title, date of account opening, business entity, name and
address of authorized signatory.

Q Copy of Professional Degree (if applicable)

a Copy of current professional association/ trade body if any
□ Registered Partnership Deed (if applicable)
Q Articles & Memorandum of Association & Attested copy of Form A/29 of the
company whose director is an applicant (if applicable)

? Attested copy of Audited or Management accounts (if audited not available)

for
last three years of the corporate entity, whose proprietor/partner/director is
an
applicant.

?Copy of rental/ purchase agreement for office premises.

Q Income details of spouse/ family member wherein the income of borrower's
spouse/family member is taken into account to determine the repayment
capacity.

Documents such as NIC, Utility Bills and Rental/ purchase agreements should
be checked in original by the bank official.

{Income estimation is mandatory for self-employed, businessmen and

salaried customers who have other sources of income)

8.2 Property Documents to be obtained

The following property documents will be required from the applicant at the time
of initial screening of application.

1. Copy of title deed of property

2. Non encumbrance certificate
3. Approved building plan
4. Site plan
5. In case of Construction and Renovation etc, an estimated plan on the
letterhead of
registered architect/engineer/construction company with authorized signatures
and
company stamp.
6. Any other documents required on case to case basis
PROCESSING DOCUMENTS
The application form comprising of all the relevant information to be filled in by
the applicant and loan agreement to be duly signed by the borrower would be the
mandatory tools. The other stationery pertaining to the processing and execution of
loan applications are as follows: (attached as annexure)

1) Installment Calculation Sheet

2) Signature verification form
3) Request for Bank Statement verification
4) Borrower's Basic Fact Sheet
5) Undertaking
6) Credit Scoring Matrix
7) Approval Checklist
8) Regret Letter
9) Offer/Acceptance Letter
10) Form for Balance Transfer Facility Details
11) Letter to the bank releasing property under BTF transaction.
12) Disbursement Memo
13) Repayment Schedule
14) Amortization Schedule
15) Credit & Security file checklists

CO-BORROWING

Co-borrowing is done where the income of spouse or immediate family member is

being clubbed with the income of borrower to enhance the loan amount eligibility.

OR

If the proposed property papers are in the name of spouse/mother/father who does
not qualify the eligibility criteria, he/she can be treated as a Co-borrower.

9.1 Co-Borrowing with Spouse

 (a) To Club the Income of

Spouse

The income of husband who is a salaried or a businessperson is not sufficient to meet

the income eligibility criteria for the loan limit required, however, his wife is also
earning as a salaried or business individual and draws a reasonable income.

Solution

The take home income of wife will be clubbed with the take home income (after
deduction of all monthly loan/lease obligations) of husband to arrive at a combined
income in order to avail an enhanced loan amount, depending on the purpose for
which loan is being required. Thus, the wife and husband will jointly sign all the
finance documents. If the property is in name of wife, she will execute mortgage
documents individually in favour of the Bank.

In case of house purchase, the house should be in name of both the co-borrowers
in which case the mortgage documents shall be executed by both the co-borrowers.
In case of house purchase, where co-borrowers want the house to be in name of
one the parties, the finance documents shall be executed by both the parties,
however t mortgage documents shall be executed by the borrower in whose
name the house r. been purchased.

Note: For a co-borrowing application where income is being clubbed to

enhance ti loan amount eligibility, same set of documents as listed in chapter 8 will
be required fro the co-applicant as well.

(b) For Title of Property in name of Spouse

The Property papers are in the name of wife who is a housewife and does not
qualify th eligibility criteria for Prime Home Financing, whereas her husband
wants to apply for home loan and stands eligible to qualify the requirements.

Solution

Above case will qualify under a co-borrowing case where the wife can become
co-applicant for home finance although she does not qualify for loan. She can
become a co-applicant for purposes of being a mortgagor in the finance.
 Documents relating to the mortgage shall be executed by the wife only, whereas
documents relating to the finance shall be executed jointly by the wife and the husband.

9.2 Co-Borrowing with Father

The property papers are in the name of father who does not qualify for home
loan in terms of age, whereas his son. wants to apply fox construction on the land
or renovation on the house since he fulfills the eligibility criteria.

This scenario is somewhat similar to the aforesaid scenario dealing with the wife. In
the above case the wife did not qualify for finance because she was not drawing the
eligible income whereas in this case the ineligibility of the father arises due to his
age.
Hence, the father can be a co-applicant and execute documents of finance jointly
with son, whereas the mortgaged documents will only be executed by father in his
capacity of co-applicant/mortgagor.

In case of co-borrowing with father, it is advisable to approach with caution after

strict due diligence in such a transaction when the father has children other than the
applicant son, because if the father expires during the loan tenure, the mortgaged
property will devolve on the legal heirs though encumbered with the mortgage.

Co-Borrowing Undertaking

For all co-borrowing cases, an undertaking will be obtained from the co-
borrowers stating that in case of death of any one of the co-borrowers, the other
shall inform the Bank of such death along with Death Certificate and a list of
surviving legal heirs with copies of their National Identity Cards/Passports and latest
addresses.

Copy of undertaking is attached herewith.

UNDERTAKING
This undertaking is given at Lahore on this day of _, 2004 by:
ABC son of Mr. resident of having National
Identity Card No. _
XYZ son of Mr. resident of having National
Identity Card No. _
(The aforesaid shall hereinafter collectively be referred to as the "Co-Borrowers" which
expression shall wherever the context so permits include their legal heirs and successors-in-
interest).
 WHEREAS

The Co-Borrowers have availed the___________________ _' Facility from Prime Commercial Bank
and executed all finance
Limited,_________________Branch for a sum of Rs._____
agreements and security documents in this regard.

NOW, THEREFORE, THIS UNDERTAKING WITNESSETH AS FOLLOWS:

The Co-Borrowers undertake and agree with the Bank that in the event of death of one of
the Co-Borrowers the surviving co-borrower shall inform the Bank within fifteen (15) days
of the event of death about the occurrence of death along with Death Certificate and a list
comprising the legal heirs of the deceased co-borrower along with copies of their National
Identity Cards and where applicable copies of passports.

2. This Undertaking shall be considered as an integral part of the finance agreement dated
________executed by the Co-Borrowers in favour of the Bank and breach of the aforesaid
Undertaking shall be deemed the breach of the Agreement entitling the Bank to all remedies
available to it under the same.

This Undertaking has been given by the Co-Borrowers out of their own free will and
volition without any coercion by the Bank and shall abide by the obligations contained
herein in good faith.
 AB XYZ
C NIC No.
NICNo.
WI TNESSES
2.
Name Name
Address Address
, NIC No. NIC No.
 Please incorporate the nature of Home Finance Facility.

CREDIT CONTROLS

10.1 LEGAL APPRAISAL

The branch's home finance staff will be required to seek legal opinions pertaining to the
property from one of the lawyers/ law firms listed on PCBL's approved panel.

Following criteria is to be followed in selection of lawyers/ law firms:

• Professional Reputation
• Relevant experience
• Integrity of the lawyer/law firm
• Profile and client base of lawyer/law firm
• Any other pertinent information

The Bank's approved legal counsel will be responsible for checking all the property
related documents for authenticity, property title verification and ensure that the customer
signs all the required legal documents. The lawyer will be one primary contact with the
customer and will perform following functions:

• Check all the related documents for authenticity and validity

• Verification of property title and search certificates
• Ensure proper stamping, signatures, attestation and witnessing
• Delivery of a pay-order to the seller in case of ready property
• Ensure equitable mortgage, where applicable, to be created
• Verification of lease period of property
• Issuance of final legal opinion as to the completion of legal documents formalities
as required under law and in terms of loan sanctioned.
The process flow of legal formalities will be bifurcated into following three stages:

STAGE 1: Property Title Document Audit

STAGE 2: Signing of charge Documents
STAGE 3: CO Perfection / Registration of GPA & Property Title Doc's

(ii) Disbursement The legal fee shall

be charged at actual to the customer.

102 PROPERTY APPRAISAL

The main pre-requisite for approval of a Home finance facility is the valuation of the
proposed property.

The valuation shall be carried out by professional valuators appearing on the

approved list of the bank. The detailed valuation report shall be obtained by the
relevant branch covering all aspects of property valuation and realistically completed.
The report shall include the following minimum details:

y Complete details of property and the basis of valuation

> Valuation of land and construction
> Negative and positive points pertaining to the property
y Market and forced sale value of property
y Check for approval of site and completion plans
y Photographs of property
> Any other information, which in the opinion of valuator is considered to be
of
significance to the Bank.

The same agency preferably, shall also be responsible for undertaking surveys
and inspections of the houses under construction or renovation.

Financing by Prime Bank shall be based on the Assessed Value of the property.

The valuation fees shall be charged at actual to the customer.

10.3 INCOME ESTIMATION

A panel of Income estimation agencies shall be appointed by the Consumer Banking

Div. Head Office for the purpose of assessing the income of the self-employed
professionals, business class individuals, and salaried individuals having sources of
income in addition to salary. This task is performed through the help of proofs
submitted by the customer along with his/her personal data and from the available
records. The Bank staff provides all the relevant documents to the agency to facilitate
their necessary action on income assessment of applicant.

The steps involved in determining the income of the applicant are as follows:
 Stepl
On receipt of application by the estimators, the documents are checked with the
checklist and short falls identified. In this regard, the agency's representative personally
visits the customer for their necessary investigation and fulfillment of missing
documents.

Step2
Verification of the ownership and proofs thereon.

Step3
Checking the income from the records available and by using different management
tools. In case of short of record, co-relation process is adopted keeping in view the
business activities of the borrower.
| The income is estimated by using the customer's personal, financial and business
data which covers his/her

i) Sources of income
ii) Business receipts & revenue stream
iii) Ownership of assets
iv) Standard of living
v) Personal expenses
vi) Children education expenses etc.

The charges for income estimation will be charged to the customer at actual and
the average turn around time will be 4 days after receipt of all information as
j>er the
checklist.

Income Estimation requirement is mandatory for self employed and business class
borrowers. Also applicable to salaried individuals having other sources of income
Waiver for Income Estimation requirement:
At the discretion of branch head, waiver for income estimation requirement will only be
allowed to customers of high networth enjoying a strong deposit/borrowing relationship
with Prime Bank over at least 6 months with a clear track record.

The waiver will be recommended by the Branch/Chief Manager and presented to the
Regional Head for his approval, followed by final approval from Head of Consumer
Banking.

While recommending the waiver to the approving authorities, it is mandatory to

attach the supporting documents depicting the applicant's networth and financial
position along with a solid justification from the recommending authorities for request
of waiver.

The charges for income estimation will be charged to the customer at actual and the
average turn around time to be taken by estimators will be 4 days after receipt of
necessary documents and information.
 104 VERIFICATION

Verification agency shall be appointed by the Consumer Banking Division Head

Office to carry out verification services for home finance applications. This investigation
will be carried out pertaining to the information provided by the client in the
application form and also by obtaining other references in addition to the information
provided.

Following categories may be exempted from verification at the discretion of the

approving authority:

1. Customers having a satisfactory relationship of past one year with Prime Bank.
1. Customers whose verifications have already been conducted and reported positive
during last one year while availing car finance facility. (If the customer's office or
residential particulars have been changed, a fresh verification is required)

However, verification for new customers is imperative.

The verification agency would submit the report to the Bank within a time period
from two days to a maximum of four days, lest there are irregularities during the
verification process like the unavailability of the customer, geographical distances of
customer's official or residential premises or occurrence of any unforeseen events or
public holidays.

Documents to be provided to verification agency:

• Copy of completely filled and signed application form by the customer

• Copy of N.I.C. of customer
• Original Bank statement
• Specimen signatures of the customer
• Copies of utility bills

Any of the below documents on case to case basis:

• Salary slip/employer's certificate (in case of salaried individuals)

• Copy of the partnership deed or Form A & 29
• Copy of the rental deed (if required)
• Copy of Tax returns

105
 10.5.1 Property Insurance

It is mandatory that the mortgaged property shall be insured against fire and its allied
perils comprising of shock, lightening, explosion, riot strike & damage, earthquake,
malicious damage, aircraft damage, impact damage & atmospheric damage.

The customer will have choice to arrange insurance from one of the insurance companies
on Bank's approved list, or otherwise the concerned staff will assist the customer in
arranging insurance of mortgaged property.

10.5.2 Life Insurance of borrower

Life insurance of the borrower is optional, wherein the insured amount has to be
equivalent to the total financed amount of the loan facility.

The borrower shall provide the insurance policy with premium paid receipts with Prime
Bank as sole beneficiary. For subsequent years, renewal of Insurance is the responsibility
of the borrower.

CREDIT ANALYSIS CRITERIA

11.1 DEBT BURDEN RATIO

Debt burden is the key credit criteria for accepting or refusing a loan request. This helps
the bank in securing against fluctuating markups whereby the repayment capacity of a
customer can be judged on a higher rate at the time of extending the loan, while
foreseeing his future repayment capacity.

> Debt burden of the borrower shall be calculated at the maximum mark-up rate of 12%
in order to mitigate the risk of Bank's exposure against fluctuating mark-up
rates.

The installment calculated at the maximum rate of 12% will be used to calculate the
debt burden of the borrower to meet the stipulated Eligibility Criteria under
DSR.(below)

The installment is applied to Item # 1 of Credit Scoring Matrix for scoring of points
under Income, instead of the installment at the actual rate on agreed tenure by the
borrower.
 However, the repayment schedule for the remaining tenure shall be calculated at the
maximum rate of 16%, thereby securing the bank's risk in case of increase in mark-up.

112 DEBT SERVICING RATIO (DSR)

DSRis one of the key credit criteria for accepting or refusing a loan request, which is the
installment percentage to take home income. Accordingly, the borrower's repayment
installment (calculated at the rate under Debt Burden), to income should not exceed 55%
of Net Take Home Income of the borrower.

However deviation could be entertained on the merit of the case duly cleared through the
segmented verification and approval grid.

y "Repayment installment should not exceed 55% of take home income"

However, deviation may be entertained on the merit of the case duly cleared through the
segmented verification and approval grid.

CREDIT SCORING MATRIX

The concerned staff shall strictly follow the bank's approval procedures as laid out in the
Home Finance SOP, which stems to the "Credit Scoring Matrix" given below. This
matrix is a credit risk evaluation tool to determine the eligibility of the borrower for
qualification of a house loan. The matrix lays emphasis on borrower's income & his
repayment capacity, property details, documentation obtained, professional & business
history, equity contribution, age factor, his creditworthiness and track record of his
relationship with Prime Bank, and CIB report from State Bank of Pakistan.

To qualify for a home loan, the customer has to score a minimum of 70 points on this
matrix and scoring below 70 is considered unacceptable credit risk.
 t
(In Percentage) ed
as at Profes
CR Favorable Credit Risk% ma
EDI to
Satisfactory Credit Risk xim s
tak um
T Acceptable Credit Risk
e rat i
RA
Marginal Credit Riskho e
o
TIN m us
G Unacceptable CrediteRisk ed
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ye H
k e
d)
ars
e b) i
h Ins
Be
o tall s
tw
m m
ee
e en t
n
i t
51
n as o
-
c %
55
o to r
ye
m tak
ars
e e y
c)
a ho
Be
s m
tw
p e
ee
e e) M
n
r Ins
41
e tall a
-
v m
50
i en x
ye
d t
ars
e as i
d)
n %
Be
c to m
tw
e tak
ee
a) e u
n
in ho
25
st m m
-
al e
40
l *
ye
m Ca
ars
e lcu
lat
P
n
 Equity Scored
o
Contribution
i % by Borrower

n Maximu
m Points
55%
t a) Mini 5
mum as 7
45% 9
s 40% per
35% requireme 5
nt
30%
b) Contr
or less
ibution
10% 34
more 5
than
12 Minimum
Requirem
ent
c) Contr
ibution
20%
more
than
10 Minimum
Requirem
a) ent
Salaried Persons Total Employment: Min. 5 Years, WITH Latest
Permanent Employment Status: Atleast 1 Year
Location of Current Experience Min 5 Years
Businessmen/Professionals:
Property
b) Salaried Persons Total Employment: Over 5 Years Upto 10 Years,
Latest Permanent Employment
Maximu Status: Atleast 3 Year
Businessmen/Professionals:
m Points
Upto 10 Years a) Avera
ge
c) Salaried Persons Total Employment:
Location Over 10 Years, WITH
Latest Permanent Employment
b) GoodStatus: Over 3 Year
OR Location
Businessmen/Professionals:
c) Prime
Location
NOTE:
For
"Selectio
n of
Area/Loc
ation"
and its
Classific
ation
Criteria
as (a, b,
& c)
refer
overleaf.

Points
Allocated
Documentation Ava ilability & Verification
Maximum Points
a) Property Title Deed - Clear
b) Copy of NIC (Original Seen & True Copy Attested)
c) Recent Bank Statement For Last One Year
a) Current Salary Certificate (Attested by the HR Dept. of Current
Employer) for Salaried Individuals/ Proof of Business for Self
Employed Professionals/Businessmen/ Businesswomen
d) Reference of Two Reputable Individuals Acceptable to the Bank
e) Certificate/Admitted True Copy of NTN/Tax Return/Wealth Statement

CIB Report

Maximum Points
a) Satisfactory / Not applicable 40
b) Unsatisfactory - (Need Investigation) (50)
c) Negative CIB - DEDUCTIBLE POINTS

Co-Applicant
Maximum Points
a) Principal & Secondary Earners - Jointly 1
b) Principal Earner - Singly 2
Account Relationship with PCBL
- Active Over Last 1 Year
- Satisfactory Conduct of Account
Maximum Points
a) Deposit Account Relationship 1
b) Borrowing Account Relationship 2
c) No Account Relationship 0
Life Insurance of Borrower
2

Maximum Points
a) Insurance Coverage Satisfactory Report 2

Other Commitments
Commitment (Expenses) in relation to earnings
For "NORMAL" & "Non-Applicable" Spending Allocate '1 Point'
"ABNORMAL" Spending Allocate '0 Point'
Maximum Points Normal
a) Utilities Bills Up to 12% of Take Home Income Up 1
b) Children Schooling to 17% of Take Home Income Up to 1
c) Club Membership 04% of Take Home Income i-Full 1
d) Credit Cards payment of bill every month ii- 1
DEDUCTIBLE POINTS Revolving of credit over 3 months (6)
Applki j "fed at
POINTS SCORED TOTAL

The above matrix will form an integral part of the credit file of house loan, which would
require the concerned staff to assign the points to each section factually by cross linking to
the documentary evidences/reports obtained and finally deriving at an accurate total score.
The matrix will be completely attended and signed by the recommending officer before
forwarding the file to the branch head.

The Branch Head will be responsible for carefully examining the scorings assigned and upon
his satisfaction, will sign the scoring matrix.

In case of approval beyond the branch's limit, the original signed matrix will be attached with
the proposal for review of competent authorities to approve the loan facility.

SECURITY & RISK MANAGEMENT

On approval of the facility, an Offer letter duly signed by the concerned Branch Head
stating all the details of the loan together with the repayment schedule shall be sent to the
borrower in duplicate for acceptance.

The main securities obtained in the home financing transaction shall be:

1) Equitable/Registered Mortgage over the property acquired, constructed or

renovated.
2) Title must be in the name of borrower
3) Third party Guarantee (case to case basis)
4) Insurance of the property - with Prime Bank as sole beneficiary.
5) Life Insurance of borrower - optional
6) Any other security/documents required by the bank on advice by the lawyer.

12.1 SECURITY DOCUMENTS AFTER APPROVAL

Security documentation will be the Bank's standard set of charge documents for Home
Finance Scheme to be executed/ provided as per bank's legal advisor's opinion, including but
not limited to the ones as listed below:
 1. Account Opening Form
This establishes a current account with a debit block for the customer.
2. Know Your Customer Form (KYC)
3. Conditional Offer Letter
4. Agreement for long term financing on Markup basis
5. Agreement to mortgage
6. Application for the appointment of local commission
7. Authority letter for collection of original transfer letter
8. Demand Promissory Note
9. Irrevocable General Power of attorney
10. Letter of Authority for charges relating to registration of sale deed.
11. Letter of Continuity
12. Memorandum of deposit of title deeds
13. Undertaking for intent of creating an equitable mortgage

12.2 RISK MANAGEMENT

The primary risks in the home financing are centered in the title of property,
valuation, creation of enforceable mortgage and erratic price fluctuation in the real estate
market. In order to control and mange the quality, operational, credit related risks, security
risks, following stipulations but not confined to the same shall be considered:

y Verification of the borrower's income and other facts given in the applications.

y Establish consistent income flow by undertaking income estimation through

services of professionals (for businessmen/ self-employed)

y Cash inflow to be verified from the Bank statement of the borrower whether salary
or business account.

y High risks areas/location be identified and excluded

> Where the amount of advance exceeds Rs. 500,000/ CIB report of the borrower
should be obtained from SBP and checked for the exposure with other financial
institutions and any default situation.

> Incase of applicant being partner in a partnership firm or a director in a private

limited company, CIB report of corporate entity to be obtained.

y Finance should not be provided to high risks professions and businesses. y Realistic

valuation report from the bank's approved valuator to be obtained.

 > Surveyors'/ architect's report on estimated cost of completion of house in case of
construction stage or renovation stage etc.
y There should not be any restriction on transfer of title in the property.

> Evacuee property and property on agricultural land shall not be accepted.

y All standard documents relating to finance and security (including finance

application) should be vetted by the bank's approved legal counsel.

y All original property documents should be checked by Bank's appointed lawyer to his
entire satisfaction prior to the disbursement.

> The Ownership of property offered for mortgage shall be in the name of the
borrower or owned by the borrower and spouse jointly

y The finance and mortgage documents in case of co-borrowing with spouse/parents

should be checked in terms of signatures by both the co-borrowers.

y The title documents should be registered properly with the concerned authority/
society and must be appearing in their record.

y The decision to create either equitable or token registered mortgage shall be based on
lawyer's recommendation.

APPROVAL MATRIX
The approving authorities and their limits for approving Home Finance are set out below:
1. Processing
Application Processing to be undertaken in accordance with Credit Controls, Credit Scoring,
Approval Matrix as per Policy Guidelines /SOP
2. Recommending/Approving Authority Matrix
Group A Branches
Financing Limits Recommending Authority Approving Approving Authority for Credit Cycle
Authority Deviations from Policy/ Management
SOP and Recovery
Stage Stage (1) Regional Head and/or of Past Due/
Head of Consumer Delayed
Banking (2) Head of Payments/
Credits/Central Default
I II Credit Committee (CCC)

. Financing upto 3ranch's Head Branch's Branch's Chief Regional Head/ Head of

Rs. 5.00 M. of Credit Chief Manager Consumer Banking, Head

Administratio Operations Development of Credits/Central Credit
Department Jointly with Committee (CCC) HO. or
Branch's Head of
his assignee may or may Risk
Credit Marketing
not approve any minor Management
exceptions / deviations Group H.O.
racing over Branch's Head Branch's Regional from the policy / SOP, duly and/or
Rs. 5.00 M upto of Credit Chief
Manager Head/Head of recommend by Branch CM designated Out-
!Rs. 7.5 M. Administratio Business Consumer on pure merit for business sourcing
ointly with Development Banking Division considerations without (Recovery
Branch's Chief Jointly with compromising Prudential Agencies)
Manager Branch's Head Regulations and/or any
Operations of Credit other internal controls and
Marketing without undertaking undue
i financing over Branch's Chief Regional Head of
{Rs. 7.5 M upto Manager Head/Head of Credits/Central
Rs.10.OM, Business Consumer Credit Committee
Development Banking (CCC)
Jointly with Division
Branch's Head
of Credit
Marketing

Group B Branches
Financing

1 '
 Group-"B" Branches
■ , . ■

L Financing upto Rs. Branch's Head Branch's Branch Chief

1
. . . . . . . ■

2.50 M af Credits Operations Manager with

Dept. Manager corporate title of
■

atleast AVP Regional Head/Head of

otherwise RH Consumer Banking, Head
approval is also of Credits/Central Credit
required Committee (CCC) H.O. or
• Financing over Rs. Branch's Head Branch's Branch Chief
his assignee may or may
not approve any minor
RidV
rt l\ rt v\ o fTOrtl /\11 "f"

2.50 M upto Rs. of Credits Operations Manager with exceptions / deviations ivianagcmeni
4.00 M. Dept. Manager corporate title of from the policy / SOP, Group H.O. or

|! atleast VP duly recommend by designated Out-

otherwise RH Branch CM on pure merit sourcing
P approval is also
required
for business considerations
without compromising
(Reco very
Agencies)
I ■ Prudential Regulations
Financing over Rs. Branch's Head Branch Chief Regional and/or any other internal
koOMupto of Credits Manager Head/Head of controls and without
Rs. 7.5M. Dept. jointly Consumer undertaking undue risks
■ ■ ■ ■

with : Banking Division

Operations
Manager
i Financing over Rs Branch Chief Regional Headof
P.5 M upto Rs. Manager Head/Head of Credits/Central
|10.0M Consumer Credit Committee
Banking (CCC)
Division

Group C Branches

11/ I Financing Limits Recommending Authority Approvin Approving Authority for Credit Cycle
g Deviations from Policy/ Management
Authority SOP and Recovery
Stage of Past Due/
Stage (1) Regional Head and/or
Delayed
Head of Consumer
Payments/
Banking
Default
(2) Head of Credits/Central
Credit Committee (CCC)
II
Group-"C" Branches
 p. Financing uptoRs. 3ranch's Head Branch's Branch Manager
,50M of Credits Operations with corporate
Dept Manager title of atleast
AVP otherwise
RH approval is
also required
p. Financing above branch's Head Branch's Branch Manager
is.l.50Mupto of Credits Operations with corporate
is. 2.50 M Dept Manager title of atleast
otherwise RH
approval is also
required
. Financing above 3ranch's Head Branch's Branch Manager
B lRs.2.50Mupto of Credits Operations with corporate
Rs.4.6M Dept Manager title of atleast
1 GVP otherwise
RH approval is
also required
I
1 k Financing over Branch's Head Branch Regional
fo.4.00Mupto of Credits Manager Head/Head of
Ks.7.5M. Department Consumer
Pv. ■
/Operations Banking
Manager
i Financing over Branch Regional Head of
p. 7,5 M upto Manager Head/Head of Credits/Central
fc. iO.OM Consumer Credit
Banking (CCC)
I Division

The approving authorities should satisfy themselves in complying with the following
aspects:

• Credit sustaining capacity of the borrower

• Bank's laid down policies in the Standard Operating Procedures
• State Bank of Pakistan's Prudential Regulations for House Finance
• Information given in the application has been fully investigated/ verified/
documented.

Prior written approval of the concerned approving authority shall be obtained for
any deviation and for not obtaining any documents, which in the opinion of the lawyer
would not jeopardize the banks exposure.

3. Approval in absence of Chief Manger

The approval for home loans rests with the Regional Head of the
respective region in the absence of the Branch/Chief Manager of any
branch under that
 region.

Index
C P
h r
a o
p c
t e
e ss
r F
lo
1 w
4
 I . ...............—...................................... 1

Credit Scoring
----------------------------------------------------------
3

r^fjfJt v/VCIi

*r

Stage II-------------------------------------------------------

4- 5

Safe keeping of Documents

----------------------------------------------------------
5

Stage III

Disbursement of Home Finance facility— 5 - 6

Transfer of Title & Registration of General
Power of Attorney
----------------------------------------------------------
7

Turn Around Time

------------------------------------------------------------------
7

PROCESS FLOW
 Once the branch receives loan application from a customer along with
relevant documents, the loan request goes through various credit review processes.

The concerned officer will assess the customer's requirements. The property
proposed to be purchased/ constructed/ renovated by the customer will be discussed
in detail, and the Officer will ensure that it complies with the policy guidelines of the
bank and in case of any discrepancy, the customer will be advised to provide the
same.

b) The prospective borrower shall complete and sign the application form for home
finance facility.

The concerned officer shall ensure that the application form has been duly
filled and required documents are attached.

Eligibility criteria are satisfied as per policy guidelines.

Where the salary/income of borrower's spouse/family member is taken into

account to determine the repayment capacity, the same set of documentation
will be obtained from that individual and his/her personal guarantee is mandatory.

Applicant should be asked to provide detailed information about his financial

position and source of income, repayment capability with supporting
documents as required by the policy. The approval will be subject to legal
opinion, valuation of property, verification, income estimation and reputation
of geographical location of property.

Complete process flow of loan execution is illustrated in the flow chart as

follows:

Process Flow

RECEIPT OF LOAN
APPLICATION
With proc charges and supp docs
 Loan Appraisal

n
Credit evaluation, screening of docs for
further processing
Verification
of customer
Property Income Legal
Valuation Estimation Opinion

Q
i SANCTION OF LOAN
Issue and acceptance of offer letter along with fee
obtained in advance
SECURITY DOCUMENTATION, Preparation of SUBMISSION OF TITLE DOCS, Registration
injuring agreement and other charge documents^ of GPA, Legal appraisal
signage by customer alongwith PDCs
 DISBURSEMENT OF LOAN
IN PARTIAL / IN FULL PAYMENT

REPAYMENT OF LOAN
Payment of EMIs

14.1 STAGE 1

a) The next step is to obtain a legal opinion from the lawyer to ascertain the
status of the property, which in case of a positive opinion facilitates further processing of
the application by the Bank or else a negative opinion from lawyer leads to rejection of
the loan request. (LEGAL OPINION 1)

b) After receiving a positive opinion from the lawyer, the officer would
| instruct the valuator to arrange evaluation of the property being offered for mortgage.
The property will be evaluated in accordance with the valuator's prescribed procedure.
(VALUATION)

c) The income of the customer would be determined through the services of the
Bank's appointed income estimation agency for self-employed and businessmen, as well as
for salaried individuals having other sources of income. (INCOME ESTIMATION)

d) The personal and other details of the customer are verified through the appointed
verification agency. The agency conducts a detailed and indepth of the customer's
office and residential particulars, family, education, Kcounts/credit card details with
banks, inquires the customer's reputation from outside wees and obtains references.
(VERIFICATION)

! above procedures in steps numbering 14.1.a,b,c & d are being undertaken by

ourcing through independent professional agencies appointed by the Bank/Branch
i don the approved list of PBA.

U.l.i CREDIT SCORING MATRIX

ition to meeting the above requirements, the concerned staff shall strictly follow nk's
approval procedures, which also includes the "Credit Scoring Matrix". This i a credit
risk evaluation tool to determine the eligibility of the borrower for tion of a house
loan and it encompasses all the aspects narrowing down from the rts as in 14.1 a-c,
 with emphasis on borrower's income & his repayment , property details,
documentation obtained, professional & business history, J contribution, age factor,
his creditworthiness and track record of his relationship MM Bank, CIB report from SBP.

for a home loan, the customer has to score a minimum of 70 points on this wd
score below 70 is considered unacceptable credit risk.
14.1.2 APPROVAL

The Branch's Head of Credit Dept. subsequent to fulfilling all the above requirements forwards
the completed file to the Branch's Operations Manager for his recommendation. The Operations
Manager prudently checks the file along with property documents, legal opinion, verification and
income estimation reports and any other relevant documents attached in support. If he finds the
file in order, he recommends for approval to the Chief Manager/ Branch Manager, or as per
guidelines stipulated in the Approval Matrix under the head of "Approving Authorities".

The approving authorities should satisfy themselves as to the compliance of following:

• Credit sustaining capacity of the borrower

• Bank's laid down policies in the Standard Operating Procedures
• State Bank of Pakistan's Prudential Regulations for House Finance
• Information given in the application has been fully investigated/ verified/
documented.

Prior written approval of the concerned approving authority shall be obtained for any
deviation and or not obtaining any documents which in the opinion of the lawyer would not
jeopardize the banks exposure.

14.2 STAGE II

a) On approval of the facility, an Offer Letter duly signed by the concerned Branch Manager
mentioning all the details of the approved loan together with the repayment schedule
should be sent to the applicant in duplicate for acceptance.

I b) Obtain duly accepted Offer Letter signed by the customer.

Filling of Charge documents by concerned officer and signing by the customer. Signed
documents to be finally vetted by the lawyer. (Final Opinion of lawyer is obtained)

Once the duly executed charge documents are received, they shall be checked
thoroughly to ensure the following :

iega\ opinion is obtained

All documents (including Account Opening Form and Account Opening

Documents) are complete in all respect.
^ All spaces filled in correctly & completely. •I Fiscal stamps of appropriate value, as per
local laws, are affixed. / Cutting and alterations are authenticated by the authorized
signatory. ^ Complete Standard Documentation for Home Finance against credit &
security
 checklist.
The signature of the customer on all documents must be verified with the
signature verification form duly verified by the borrower's Bank. Insurance of the
property should be arranged from one of approved insurance companies of Prime Bank.

14.2.1 SAFE KEEPING OF DOCUMENTS

/ All documents including the security documents shall be kept under the dual
control at the Branch/CPU as applicable. / Details of security and charge documents
should be entered in Safe in/Safe out
register. / Packet containing all security documents shall be cross referenced with
the
register.
/ Safe in the above packet. ^ Post dated cheques shall be kept in Safe In and placed
in the vault at the
branch/CPU as applicable.

14.3 STAGE III

,14.3.1 DISBURSEMENT OF HOME FINANCE FACILITY

The respective branch shall make disbursement in conformity to lawyer's final opinion and
after fulfilling all the formalities as prescribed in the Bank's Standard Operating Procedures as
well as SBP Prudential Regulations.

I Incase of financing for purchase of a built house or purchase of plot only for subsequent
construction, the customer is required to put in their 50% equity contribution before the
disbursement of loan, as explained in Chapter No. 6.

Depending on the purpose for which the Home finance is required, the disbursement of finance
shall be as follows:

j
PURPOSE DISBURSEMENT
Purchase One time
Construction In Tranches Foundation
20% Ground & upper floor
20% Electric & Plumbing
25% Finishing
35% Total (% of total loan amount)
100%
I 3. Renovation One time Tranches depending on the scope of
expansion
4. Purchase of Plot only for a) Purchase of Plot-Onetime b)
subsequent construction Construction - In Tranches
Foundation 20%
Ground & upper floor 20%
Electric & Plumbing 25%
Finishing 35%
Total 100% (% of total
construction amount)
5. Balance Transfer Facility One Time

For fresh construction of house on plot, the disbursement shall be carried out in tranches as
per percentages of the approved loan amount and construction is to be completed within
one year from the date of disbursement of first tranche.

An estimated construction plan from an established and reputed

architects/engineers/contractors indicating the estimated costs for respective tranches
along with each tranche's expected date of disbursement, shall be obtained. For preparing
the repayment schedule of construction loan, minimum of one month interval between
the disbursement of each tranche is necessary and it should be ensured that disbursed
amount for each tranche should match to the respective percentages as prescribed above.
I
The
disburs
ement
2" tranche

EMI will be
for calculated
constr for the
uction amount
will be arrived at
structu by adding
red as principle
follow outstanding
of previous
s:
tranche to
the current
Repayment
tranche
D
amount.
i
s
b
u
r
s
e
m
e
n
t

B
r
e
a
k
-
u
p
!l

tranche
Equal
Monthly
Installment
(EMI)
comprising
principle +
mark-up
amount to
be
calculated
on
disbursed
amount
 For the 3rd and 4th / final tranches disbursement, the same methodology as above will be
undertaken to calculate Equal Monthly Installment.
Thus, EMI amount would keep increasing with the disbursement of each tranche till the
last tranche, after which a constant EMI for remaining installments on booked tenure
Iwill berecovered.

me Finance shall be parked at the initiating branch of Prime Bank. However,

bursement plan is to be flexible based on the nature of the transaction and as
I negotiated /agreed upon with the borrower.

14.3.2TRANSFER OF TITLE & REGISTRATION OF GENERAL

POWER OF ATTORNEY (GPA)

This course of action shall be conducted through the Bank's appointed lawyer, in the
presence of the borrower and Bank's appointed officer.

TURNAROUNDTIME

After receiving all required documents, the turn around time shall be 3-4 weeks.
However, the bank assumes no responsibility for delays due to non availability of certain
documents on account of applicant.

Index
Chapter 15 Fees & Charges

Processing Charges-----------------------------------------------------1

External Agencies Charges-----------------------------------------------1

Prepayments---------------------------------------------------------------2

Partial Prepayment----------------------------------------------------2

Full Prepayment-----------------------------------------------------2

Late Payment Charges--------------------------------------------------2

Cheque Return Charges------------------------------------------------2

FEES & CHARGES

The fees & charges will remain subject to revision, at the discretion of Consumer
Banking Division Head office in line with the industry practice and regulatory authority
guidelines.

15.1 Processing Charges

The bank's processing charges corresponding to the tiers of loan amounts are as follows:

• UptoLoan Amount of Rs. 1.5 mil : Rs. 1,500

• Over Rs. 1.5 mil upto Rs. 2.5 mil : Rs. 2,500
• Over Rs. 2.5 mil upto Rs. 5.0 mil : Rs. 3,000
• Over Rs. 5.0 mil upto Rs. 10.0 mil : Rs. 4,000

15.2 External Agencies Charges

The external agencies include the lawyer, income estimation, evaluation and verification
etc. and their fees shall be charged at actual to the customer and will not be refunded if
the assignment has been initiated by the agency.

Government levies i.e. stamp duty, registration fee, duties, taxes etc. will be borne by the
customer at actual.
All charges will be paid directly to Prime Bank. Please note that the bank's application
processing charges are non-refundable in case of refusal of loan request.
15.3 Prepayment
15.3.1) Partial Prepayment

Allowed once per year with NO penalty/charges, provided a lump sum repayment is
effected ranging from an equivalent of minimum 6 installments to a maximum of 12
installments.

153.2) Full Prepayment

The prepayment penalty vary in terms of tenures as follows:

Tenure Fee on Principal Outstanding

• Within first 2 years • 3.5%

• Over 2 to 4 years • 3.0%
• Over 4 to 8 years • 2.0%
• Over 8 to 10 years • 1.0%
• Over 10 to 20 years • Nil

15.4 Late Payment Charges

Applicable as per Bank's prevalent schedule of charges.
Currently, Rs. 100/- per day will be charged from the due date in case of delay in payment
of the installment.

15.5 Cheque Return Charges

Applicable as per Bank's prevalent Schedule of Charges.
Currently Rs. 200/- per returned cheque will be charged as cheque returning charges.

Index

Chapter 16 Repayment

Mode of Repayment
--------------------------------------------------
1-2
 Installment Due Date
--------------------------------------------------
2

REPAYMENT

The Home Finance shall be payable in Equal Monthly installments

(principal + mark-up) payable in advance as per Repayment Schedule
advised to the borrower and duly accepted and acknowledged by
him/her/them through signatures.
1 M
o
d
e
O
f
R
e
p
a
y
m
e
n
t
 (a) Post dated cheques completely filled and duly signed by the borrower in favour of Prime
Commercial Bank Ltd., corresponding to the monthly installments as per repayment
schedule for the booked mark-up tenure, to be received in advance before the
disbursement.

(a.i). While obtaining post-dated cheques drawn upon joint account

(having account operating instructions as "Anyone to sign singly"), an NOC from
the co-joint account holder should also be obtained confirming payment of home
installments from their joint account against post-dated cheques signed singly by
the borrower i.e. the other co-joint account holder.

(a.ii) A signed note by the customer should be obtained confirming the

details of all the duly filled- in post-dated cheques by
himself/herself/themselves along with the drawee bank/branch's name, which must
be safely recorded and retained on file.

(b) Irrevocable Standing Instructions addressed to Prime Bank for deduction of

outstanding amount from the account of the customer. Only for valued clients of Bank.

c). In case of Prime Bank staff, direct payroll deduction of monthly installment at source
from the monthly salary of the concerned employee.

The Branch shall issue revised repayment schedules at the time of revision in the mark-up rates
and obtain acknowledgement of the same from the borrower, to become an integral part of
credit & security file.

16.2 Installment Due Date

As per Bank's approved policy, installment dates for Home Financing loans are scheduled
as 5th and 20th of each month.

a) For loans disbursed from 26 l to l0 f of a month, the installment shall

become due on 5th of each subsequent month till the maturity of the loan
tenure.

b) For loans disbursed from 11 th to 25th> of a month, the installment shall

become due on 20th of each subsequent month till the maturity of the loan
tenure.

(Convenience of customers in selecting one of the above due dates for repayment of
installments should be given due weightage)
Index

Chapter 17 Monitoring

Portfolio Management--------------------------------------------------1 - 2
Default Management-----------------------------------------------------2

MONITORING

The lending branch will be responsible for the monitoring and will keep a regular follow up
with the client for the recovery of monthly installments on due dates.

Due date diary should be maintained at the branch to recover installments on due date and log
the relevant post dated cheques in clearing.

In the event of overdue situation in the payment of installment and / or cheque returned unpaid,
the customer should be immediately contacted until the installment is received. The borrower
under overdue status should be closely followed up at the Branch level for the recovery of
installments.

Appropriate steps should be considered as mentioned below with the assistance of lawyers and
approval of approving authorities/Risk Management to safeguard the interest of the bank.

S To recall the outstanding Home Finance

S Sale of mortgaged property
S Take legal action for recovery of the overdue installment
17.1 Portfolio Management
Product portfolio will be monitored at both client/account level and product level by the help of
following techniques:
Remedial Management for overdue receivables upto 90 Days Past Due(DPD)
(a) Preventive Approach

(b) Curative Approach

(a)
Preventive Approach
It will be aimed at identifying the account level problems by learning from the repayment
behavioral patterns and taking pre-emptive actions to prevent the customers from repeating
irregularities. Constant follow-up by advance reminders, notifications and offering
incentives such as waiver of prepayment penalty on full/partial payments etc. subject to
regular repayment of installments will encourage the customers to be prompt and regular in
their payments and prevent them from defaulting.
(b) Curative Approach
It will target delinquent clients through sales staff. Front-end sales teams will remain
responsible for client counseling and securing and tracking promises-to-pay. Since
accounts will not be rescheduled unless updated lending approach is fully implemented and
previous portfolio is settled, the bank will negotiate settlement either through partial
collections, executing personal guarantees, or setting client deposits. Litigation will be used
in extreme cases where results are expected without disturbing the current portfolio.
17.2 Default Management
This unit under RMG will have the responsibility for monitoring Account level delinquent
portfolio (of over 90 DPD critical delinquencies), coaching of sales teams on delinquency
management techniques, and investigations.
Default Management for over 90 DPD critical delinquencies
Downgrading/ classification
inline with SBP PR
Revisiting Remedial Strategy V at
Corrective Measures RMG
Legal Measures level
J
Write - Off

Index

Chapter 18 Reporting

Weekly Activity Report-----------------------------------------

Monthly MIS Report--------------------------------------------

Month End Report-----------------------------------------------

REPORTING

18.1 Weekly Activity Report

This report shows the weekly progress being made in terms of

applications received, processed, approved and disbursed by the
Concerned staff at the branch level.
The concerned officer is required to fax/e-mail this report to the
Consumer Banking Division Head Office on last working day of each
week.
18.2 Monthly MIS Report

Through this report, the entire data comprising the financing details,
customer information, details of outsourced agencies assigned for each
customer, are captured.

The concerned staff is required to furnish this report to the Consumer

Banking Division at the end of each month.
18.3 Month End Report

This report provides the primary database of the total home

loans portfolio disbursed during that month in terms of type
of finance, equity wise, tenure, mark-up rates, financing
limits and premature terminations.

The concerned staff is required to furnish this report to the

Consumer Banking Division at the end of each month.

18.4 DPD Report

This report shows the delinquency vintage (overdue

position) of borrowers with delinquent repayments from
over 30 days past due. The report may classify the DPD
position in segments of:

(i) Over 30DPD (ii) From 31 upto 60 DPD

(iii)From 61 upto 90DPD (iv) From 91 upto 180 DPD

(v) From 181 upto 360 DPD (vi) Over 361 DPD
 However if there is no overdue installment by any
borrower, the officer shall mark Nil on the report, otherwise
number of delinquent accounts alongwith their overdue
amount, and principal outstanding of delinquent accounts will
be stated in the report.

This report shall be furnished to the Consumer Banking Division at the end of each
month.

It is imperative that all the above reports are essentially furnished to the Consumer
Banking Division on the stipulated periodic basis, to facilitate consolidation of the MIS
generating from all the branches of Bank operational in Home Financing on Pan Pakistan
basis.
All the above mentioned reports are attached as Annexures.

Index

Chapter 19 Accounting Procedures

Product Routing
----------------------------------------------------------------------
1

General Ledger Accounts to be Opened

----------------------------------------------------------------------
1

Receipt of Application
----------------------------------------------------------------------
2

Payment to Suppliers
----------------------------------------------------------------------
2
 Disbursement of Loan
-----------------------------------------------------------------------
2

Mark-Up Accrual----------------------------------------------- 2

-3

Monthly Installment--------------------------------------------

3-4

Late Payment Charges---------------------------------------------

Premature Termination of Loan

-----------------------------------------------------------------------
4

Insurance Premium
--------------------------------------------------------------------
4-5

ACCOUNTING PROCEDURES

Products to be opened in the Auto Banker System

1. HOME - Purchase
2. HOMC - Construction
2. RHOM - Renovation / Expansion
3. THOM - Take over from other financial institutions (BTF)
4. PLOT - Purchase of PLOT (only for subsequent construction
& not stand alone)
Product
Routing
Debit A/c. 9163000X PRIME HOME FINANCE SCHEME MARKUP
Reserve Asset Dr A/c.9225301X RECV. ON PRIME HOME FINANCE MKUP
Income A/c. 7030401X EARNED ON PRIME HOME FINANCE
Product Capitalization Frequency = Monthly

General Ledger Accounts to be Opened

A/c. 9163000X -
A/c. 9225300X -
A/c. 9225301X -
A/c. 7030400X -
A/c. 703 040IX -
A/c. 7640202X -
A/c. 76403 02X -
A/c. 7640102X -
PRIME HOME FINANCE SCHEME MARKUP RECV. ON PRIME HOME FINANCE
MARKUP RECV. ON PRIME HOME FINANCE MKUP EARNED ON PRIME HOME
FINANCE MKUP EARNED ON PRIME HOME FINANCE PREMATURE
SETTLEMENT HOME LATE PAYMENT CH - PRIME HOME PROCESSING FEE -
PRIME HOME

Receipt of Application

Debit : Cash Local Rs. xxxxxx

Or
Debit : Customer's Current / Savings A/c.
(in case of existing customer)

Credit : Processing Fee - Prime House As per loan amount

Credit : Payable to Supplier (SPC) - Legal Actual
Credit : Payable to Supplier (SPC) - Surveyor Actual
Credit : Payable to Supplier (SPC) - Verification Actual
Credit : Payable to Supplier (SPC) - Income Estimation Actual

Payment to Suppliers e.g. Legal, Surveyor, Verification, Income Estimation

& Insurance etc.
D P ble to Supplier - Income
D a S Estimation Pay Order
D y u
D a r Current / Savings A/c of the Suppliers maintained
C
O b v with the Bank
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- a
Disbursement of Loan
Open a Customer's Current A/c (with Debit Block), Customer's Loan A/c. and his
Markup A/c. While disbursing the loan pass the following entry:

Debit : Customer's Prime Home A/c.

Credit : Customer's Current A/c.

In case of disbursement in tranches same entry will be repeated when disbursing a new
tranche.

Markup Accrual

System will accrue markup on Prime Home Finance on daily product basis, which will be
different from the actual markup to be recovered from the customer according to the
repayment schedule. Branches are advised to pass the necessary adjusting entries at the

time of recovering / settling the loan installments. Please note that this problem will be
resolved after the implementation of Auto Credit Module in the branches.

While accruing the markup system will pass the following entry

Debit : Markup Receivable on Prime Home A/c. 9225301x

Credit : Markup Earned on Prime Home Finance A/c. 703 040 lx

At the time of capitalization system will pass the following entry

Debit : Markup on Finance Facilities

Credit : Markup Receivable on Prime Home A/c. 922530lx
Adjustment of mark-up receivable according to the
repayment schedule. In case of excess accrual pass the following
entry

Debit : Markup Earned on Prime Home Finance A/c.

703040lx

Credit : Customer Markup A/c

In case of short accrual pass the following entry

Debit : Customer's Markup A/c.

Credit : Markup Earned on Prime Home Finance A/c.
7030401x

Monthly Installment
1. For customers already having an account with us. (only for
valued clients on selective basis)
Debit
Customer's Current /
Credit
Savings A/c.
Credit
Customer's Prime
Home A/c.
Customer's Markup
A/c.

2. For customers maintaining account with another Bank

Receipt of funds from another bank

Debit : State Bank of Pakistan (In case of main branch)

(If proceeds are received in clearing, SBP
Cheque or TT)
Credit : Customer's Current A/c.

Debit Due from Branches PKR

Credit
(In case of sub branch, proceeds received in clearing)
Customer's Current A/c.

Recovery of Installment
 Customer's Current / Savings A/c.
Debit
Customer's Prime House A/c.
Credit
Customer's Markup A/c.
Credit

Late Payment Charges

Debit : Customer's Current / Savings A/c.
Credit : Late Payment Charges
T Premature Settlement of Loan
Debit :
Credit :
Cash Local
Customer's Current / Savings A/c.
(funds received for early settlement of the loan)

If the termination is within 2 years pass the following entry:

Debit : Customer's Current / Savings A/c.

Credit : Customer's Prime House Loan A/c.
Credit : Customer's Markup A/c
Credit : Premature Settlement Charges A/c. 7640202x
(@______on principal outstanding as per policy)
Insurance Premium
In case customer maintains a relationship with the Bank.

Debit : Customer's Current / Savings A/c.

Credit : Payable to Supplier - Insurance Co XYZ

In case customer maintains a relationship with any other bank

Debit : State Bank of Pakistan (in case of main branch)

(If proceeds are received in clearing (PDC), or T.T or SBP Cheque)
Credit : Payable to Supplier - Insurance Co. XYZ

In case of sub branch

Debit : Due from Branches PKR

Credit : Payable to Supplier - Insurance Co. XYZ

PROVISIONING & WRITEOFF

In accordance with the approved budgets by the CEO and senior management, a general
provisioning of 5% of the average balances of total Home Finance Portfolio, which is in
conformity to State Bank of Pakistan Prudential Regulations.

The house loans shall be classified and provided for, in compliance with the SBP
Prudential Regulations for Housing Finance in the following manner:

CLASSIFIC DETERMINANT TREATMENT OF PROVISIONS TO BE MADE*

ATION INCOME
(1) (2) (3) (4)
1. OAEM Where mark- Unrealized mark- No provision is required
(Other Assets up/interest or principal up/interest to be put in
Especially is overdue (past due) Suspense Account and
Mentioned) by 90 days from the not to be credited to
due date Income Account except
when realized in cash.
2. Substandard Where m a r k - As above Provision of 20% of the difference resulting
up/interest or principal is from the outstanding balance of principal
overdue due by 180 less the amount of liquid securities and
days or more from the forced sale value of mortgaged property as
due date valued by valuers on the panel of PBA.
3. Doubtful Where m a r k - As above Provision of 50% of the difference resulting
up/interest or principal from the outstanding balance of principal
is overdue by one year less the amount of liquid securities and
or more from the due forced sale value of mortgaged property as
date. valued by valuers on the panel of PBA.
4. Loss Where m a r k - As above Provision of 100% of the difference
up/interest or principal resulting from the outstanding balance of
is overdue beyond two principal less the amount of liquid
years or more from the securities and forced sale value of
due date. mortgaged property as valued by valuers on
the panel of PBA.
* these specific provisions will be in addition to general reserve maintained under Prudential Regulation 4.

The debt write-off initiative may be undertaken after 2 years of overdue and once the loan is fully
provided for in line with governing SBP Prudential Regulations, as per the above stated table.

The authority to write-off a debt rests as per the following grid:

(i) For a debt upto Rs. 7.5 million t . , ■ ■ ^> Head of RMG jointly with Central
Credit Committee (CCC)

(ii) For a debt over Rs. 7.5 million azn^> CEO's approval required upon joint
upto Rs. 10.0 million recommendation of Head of RMG &
CCC.

RMG and CCC, however, must ensure the following before recommending/approving a debt write-off:

a) That the write-off proposal should clearly spell out any deviations from the
product credit policy, any slackness or irregularity that occurred during the
disbursement, documentation, operation and securitization of an advance, the
names of official responsible for lapses in handling the advance and the action
taken against them.

b) That the write-off proposal is duly audited by the Internal Audit department and
the auditors verify the facts as put forth by the concerned department.

c) That for the cases involving write-off of Rs. 1.0 Mil & above, the latest valuation
of the mortgaged property indicating present market value as well as the forced
sale vale by an approved surveyor, is produced. No write-off should be allowed if
the forced sale value of the property is more than the outstanding amount.

d) That in general impression the borrower has no means of repayment.

e) That no criminal mis-appropriation of the mortgaged property by the borrower is

 involved.

Moreover, the bank is required to follow the SBP regulations on the subject. These rules are subject to
change by the authorities concerned and it is, therefore, mandatory for all branches to keep themselves
fully conversant with the regulations in force at all times.