PRIME COMMERCIAL BANK LIMITED

CAR FINANCING

Preamble

At a time when retail or consumer banking is the mainstay of every

financial institution, it becomes imperative that products tailor made
to the requirements of the customers be formulated and offered in the
market. No financial offering, whether a liability or an asset product,
can survive in the long run, if it does not take into account specific
customer needs. The idea of consumer financing in Pakistan has
gained momentum as both the consumers as well as commercial
banks have responded favorably.

At present consumer financing being undertaken by the banks can be

divided into a few core categories comprising financing of consumer
durables, office equipment, automobiles, and housing. Most of the
financial institutions are more actively involved in car financing as
compared to other consumer finance products.

Declining interest rates and increased auto financing through banks,

leasing companies and Mudarabas have played a vital role to boost up
the auto sales like never before. In turn, it has helped enhance the
overall auto production because financing make up over 45 per cent
of total car sales today.

Banks enjoying an unprecedented liquidity find auto loan a highly

receptive market offering attractive returns in a comparative short
period of time. The availability of easy credit and the falling interest
rates have made financing a viable option for many. The base of auto
credit has witnessed an expansion never dreamt possible before
allowing the banks to find a lucrative market to invest the excess
liquidity.
In line with Prime Bank’s vision for a modernized banking and to
introduce innovative products in the market, the Bank has placed
greater emphasis on Consumer Banking with the launch of its first
consumer finance product of Car Financing Scheme, under the brand
name of “Prime Car”.

BRAND NAME
The brand name for Prime Bank Car Financing Scheme is “Prime ear”.

FEATURES

Purpose
For borrowers personal, official use only

Eligible Vehicles
All local assembled brand new vehicles
All foreign assembled brand new vehicles
All local used vehicles, not older than 1 year
(Date to be checked from the sale invoice issued by manufacturer)
All foreign assembled used vehicles, not older than 5 years
(Date to be checked from the original import papers of vehicles)
Maximum Financing Limit
Rupees 1,500,000
Minimum Financing Limit
Rupees 100,000
Down payment
20% of the ex-factory price
Financing Period
1-5 years (12, 24, 36, 48, 60 monthly installments payable in advance)

Processing Fee
Rupees 3,000
Processing fee will be charged as per the approved schedule of
charges, which is inclusive of verification charges and stamps
for charge documentation.

Verification charges to be received in advance with the receipt

of application from the customer and are non refundable in
case of refusal of loan facility

For the processing of used cars applications, any external

agency charges for evaluation of the used car shall be charged
 at actual to the customer and will be non refundable in case of
refusal of loan request

Turn Around Time

Turn around time for each application from the time of receipt
till the time of its approval is 4 working days

Internal rate of return

8.5%

Insurance
Comprehensive insurance policy of vehicle in the name of
customer and Prime bank as sole beneficiary is a mandatory
requirement of Bank’s car financing scheme.

Insurance criteria for car finance is describe as under:

i. Insurance coverage must be obtained on the full price of

vehicle
(Full price is the sum of borrower’s equity and banks
financing amount)
ii. 1st year insurance premium to be received up-front
iii. For the remaining tenures, premium to be built into the
monthly installments at depreciated value of cars as
follows:
2nd year 90%
3 year
rd
85%
4th year 80%
5 year
th
75%

Insurance Rates
3.25% Shaheen
4.75% EFU
Premium Financing
Maximum of Rs. 50,000

The premium amount over and above the invoice value of vehicle to be
financed is fixed up to a maximum of Rs. 50,000/. The percentage of
premium amount will be deducted from the equity of 20% on price of
vehicle, thereby reducing the down payment.

The premium to be financed is bifurcated for vehicle types as follows:

1. For vehicles from 800cc to 1000cc horsepower Maximum of
Rs. 25,000 premium
2. For vehicles above 1000cc Maximum of
Rs. 50,000 premium

The above arrangement of premium financing is an optional facility, for

customer and should only be accepted at the request of customer in the
application form. However, in all circumstances, the equity percentage
should not fall below 15% of price of vehicle.

As a matter of risk evaluation, it should be discouraged to offer this

option to walk-in customers or new customers having mediocre net
worth and creditworthiness with their banks. The existing
accountholders and employees of reputable organizations should be
preferred for this facility.

Loan Transfer Facility

Allowed

If the customer has availed a vehicle loan facility from any other Bank
or Leasing company during last 2 years at the then prevalent rates
ranging between 15 to 20%, and repaying the rentals regularly, his
loan/lease facility may be transferred to our. Bank if he/she decides to
terminate the facility from that bank. Prime Bank will book the loan at
the termination value subject to proven track record of the customer
with that bank.

The equity in the above transaction will be nil, as the customer has
repaid monthly installments in addition to its initial equity deposited
with that bank. The loan tenure should not exceed a maximum of 4
years. Under the security documents, balance transfer agreement will
be signed by the customer in place of Agreement for financing, on
Mark-up Basis, along with the same set of remaining legal documents.

Premature Termination
Allowed after at least 6 months of extending the loan facility along with
5% of the outstanding balance as termination charges
Partial Prepayment
Allowed after at least 6 months of extending the loan facility, as per the
Bank’s policy subject to 5% charges of the pre-paid amount as pre-
payment fee

TARGET MARKET

The Bank’s target market for Car Financing Scheme~ is clearly defined
as:

o Salaried Individuals; Private & Government sectors

o Corporate Employees
o Professional Individuals such as Doctors, Teachers, Architects,
Engineers etc.
o Self Employed Individuals (Businessmen & Businesswomen)
o Business Entities (Proprietorship, Partnership, Private/Public
Limited Companies)

ELIGIBILITY CRITERIA

All salaried, self-employed businessmen and professional individuals are eligible to apply for
Prime Car if they are:
 Pakistani National
 Aged between 25 years to 60 years (60 years at the time of
maturity of loan)
 Earning a monthly take home income in excess of three times of
monthly installment.

Salaried/Professional Individuals:
 Employed for at least 1 year with a reputable organization and
presently a confirmed employee
 Take home monthly salary of minimum Rs. 20,000/.

Businessmen & Self-Employed

 Runnings own business or a partner or director in the business
entity for at least 2 years.

Proprietorship/Partnership/Private/Public limited companies

 Business operational for a minimum period of 3 years with
profitable financial statements (Audited/Management Accounts)

LIST OF DOCUMENTS REQUIRED

A complete list of documents required from each category of the
customers are given below

Common Documents -
 1. Two recent passport size photographs
2. Copy of National Identity Card
3. Bank Statement for last six months
4. Copies of Utility bills or mobile phone bills or credit card bills
for last 3 months
5. Copies of Income Tax Returns for last 2 years or Undertaking by
the customer.
6. Copy of the Driving License (optional)

Salaried Individuals

 Recent Salary Slip duly attested by the employer.

 Letter from employer, stating the date of joining of employee,
designation, gross salary, net salary & provident fund balance.

For Business Class/ Self Employed/ Professional

 Evidence of income
 Bank Certificate stating applicant’s business duration and
creditworthiness.
 Copy of rental / purchase agreement of the business premises.
 Copy of Professional Degree (if applicable)
 Copy of Membership of evidence in case the applicant is a
member of any professional organization. (if applicable)
 Copy of partnership deed if the customer is a partner in a
partnership firm.
 Copy of form A/29 if the customer is a director in a limited
company.

For Proprietors! Partnership/Private Limited Concerns

 Certificate of Incorporation
 Articles & Memorandum of Association
 Copy of Partnership Deed
 Audited! Management Accounts (if audited not available) for last
2 years
 Copies of Tax Returns of business concern for last 2 years

Documents such as NIC, Utility Bills and Rental/purchase agreements

should be checked in original by the bank official.

VERIFICATION
Verification Charges Rs. 1,000

The charges of Rs. 1,000/ is fixed for all branches in Lahore, Central
and Northern regions, regardless of the actual charges payable to the
verification agency by PCBL.

The verification charges have to be received from customer once he

submits the signed application form along with pertinent documents to
Bank’s officer.

These charges are non-refundable in case of rejection of loan request.

The verification agency would submit the report to the Bank within a
time period from one day to a maximum of two 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.

In order to offer prompt services to the customers, the Bank may

advise the verification agency to fax the verification reports to the Bank
as and when they are finalized and mail the original ones later.

Documents to be provided to verification agency:

 Copy of completely filled and signed application form by the

customer
 Copy of N.J.C. of customer
 Original Bank statement
 Specimen signatures of the customer

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
 Copy of the rental deed (if required)
 Copies of the tax returns
 Income evidence

Expiry of Verification Report:

The verification report’s authenticity will be relied upon for a period of

one month, and will be considered as expired thereafter. This condition
applies when a customer due to any reasons whatsoever has failed to
avail the loan facility approved to him during one month from the
official approval announced to him. Henceforth, if the same customer
applies for a different vehicle after a month or wants to avail the
already approved finance facility, it is advised that a fresh verification
report to be sought. The decision to obtain a fresh verification or use
the previous one hinges on the credentials of the customer and the
officer’s comfort level with the customer or at the discretion of the
Chief Manager.

MATERIALS/ PROCESSING OF APPLICATIONS

The application form comprising of all the relevant information to be

filled in by the customer and loan agreement to be duly signed by the
client would be a mandatory tool. The other stationery pertaining to
the processing and execution of loan applications are as follows:
1. Installment Calculation Sheet
2. Signature verification form
3. Request for Bank Statement verification
4. Borrower’s Basic Fact Sheet
5. Form for Balance Transfer Facility Details (in case of BTF request)
6. Regret Letter
7. Approval Checklist
8. Offer/Acceptance Letter
9. Undertaking for Personal use of the Motor vehicle
10. Letter addressed to the previous Bank/leasing for issuance of
documents (for BTF loans)
11. Form for Insurance details to arrange insurance policy of vehicle (to
be obtained from branch offices of approved insurance companies)
12. Purchase Order (Revised)
13. Delivery Order (Revised)
14. Disbursement Memo
15. Certificate in favour of the client authorizing him to drive the
vehicle.
16. Motor Registration Authority Letters for registration purposes.(to
be obtained from the local registration office)
17. Repayment Schedule

PROCESS FLOW

The processing time from the receipt of a loan application to the

disbursement is set out to be three to four clays (3-4 days).

A detailed process flow entailing all the steps involved is as follows:

DAY 1

 Application form along with pertinent documents received by the

Officer-Consumer Banking at Prime Commercial Bank Ltd

 Due diligence of documents attached with the application and

assessment of its eligibility for verification.

 Verification report to be sought regarding the customer’s official

 and residential details through the services of appointed
verification agency

 Incase of application by an account holder, the verification

requirement is to be decided by the Chief Manager, in light of the
track record and relationship of the customer with the Bank.

 Incase of a new customer, the Officer Consumer Banking

scrutinizes the documents, evaluates the application prudently
and counterchecks the authenticity of the office and residence
telephone numbers by calling at the numbers furnished by the
customer in the application form.

 If the attached documents with the loan application meet the

eligibility criteria, the Officer holds the file with himself and
awaits the verification report.

 If the loan amount is for Rs. 500,000 and above, the CIB report
has to be essentially obtained in compliance to the State Bank’s
prudential regulations. Before seeking approval, the requisition
for CIB report is routed through the Credit Department, who e-
mails the data to the Karachi Office to obtain online CIB reports.

DAY 2 & 3

 Whether the verification report is received on the 2nd or 3rd day,

the same process follows there after as elaborated below. In case
of a report being negative, the customer is informed through
verbal regrets on telephone or a regret letter is sent to him and
the file is closed.

 If the verification report is positive, the Officer compiles the approval file comprising of all
the documents obtained from the customer along with installment calculation sheet,
verification report and CIB report and prepares an Approval Checklist signed by himself.
This file is forwarded to the Manager Operations for his recommendation, who
subsequently presents the file to the chief Manager for final approval

 The Chief Manager ensures that the documents marked on the

checklist are attached in order and must read the findings of the
verification report. He may raise any queries or identify any
discrepancies, which need to be redressed by the concerned
Officer in Consumer Banking at earliest and to the entire
satisfaction of the Chief Manager upon which the final approval is
sanctioned by him.

DAY4
 The Officer announces the approval of loan to the customer and
requests him to fulfill the documentation formalities on the same
day.

 The documentation formalities mainly comprise; Acceptance of

offer letter, Opening of non checking current account, deposit of
the total down payment, signing of loan agreement, placing
purchase order for booking or delivery order for immediate
delivery of required vehicle from the car dealer and arrangement
of insurance policy from one of the Bank’s approved insurance
companies.

 First year insurance premium is received up-front by the client

whereas for the remaining loan tenure, the insurance premium at
the depreciated values of the vehicle is built in the monthly
installment and the policy is arranged by the Bank itself under its
contracts with the authorized insurance companies.

 Issuance of Purchase order if the vehicle is not available in the

market and customer wants to book the vehicle. The Purchase
Order is issued to the car dealer who gets the order form filled
and signed by the Bank against the vehicle to be booked.

 The prevailing payment practice for all brands of vehicles is

uniform these days except for the-Toyota cars i.e. 100% advance
payment via pay order/ demand draft has to be made to the
supplier along with the purchase order in order to book the
vehicle.

 For the booking of Toyota cars, the customer initially deposits

only the processing fee of Rs. 3,000/ and Rs. 100,000/ for booking
of vehicle with PCBL, which subsequently books the vehicle on
behalf of the customer by issuing a D.D. of Rs. 100,000/ in favour
of Indus Motor Co. Ltd. Thus, the customer remains legally
committed to PCBL and doesn’t have to deposit the total down
payment before the arrival of vehicle.

 When the vehicle arrives at the showroom, the dealer intimates

its arrival to the Bank’s officer and simultaneously to the
customer, instructing them to take delivery of the vehicle at
earliest. Upon this intimation, the officer obtains the particulars
of the vehicle from the dealer to arrange the insurance. An
insurance form comprising the details of vehicle is faxed to the
insurance company with an advice to conduct the pre delivery
inspection of vehicle at the car showroom and to provide the
insurance cover note to the Bank.
 For immediate delivery of the vehicle available in the market at
On-price, any the payment for premium above the invoice value
up to the extent of upon his Rs. 50,000 may also be adjusted by
deducting the same amount from the customer’s equity, upon his
written request
  If the desired vehicle is available and the customer is willing to
pay the premium amount above the invoice value from his own
pocket, the officer obtains the particulars of the vehicle from the
dealer to arrange the insurance. An insurance form comprising
the details of vehicle is faxed to the insurance company with an
advice to conduct the pre delivery inspection of vehicle at the
car showroom and to provide the insurance cover note to the
Bank.

 As soon the insurance cover note is received by the Bank

through fax copy or original whichever is quicker and
convenient, the Officer prepares Delivery Order (DO) and gets it
signed by the Chief Manager. The stamped and signed Delivery
Order should essentially be handed over to the customer and
acknowledgement of his receipt on a copy of the Delivery Order
to be taken. In case, the customer is unable to personally collect
and receive the Delivery Order, prior instructions from him both
verbal and written in the form of authorization letter in favour of
his nominated person to receive the D.O. must be held. The
Officer must thoroughly read the authorization letter and checks
the name and NIC number of the authorized person. It is
imperative to match the signatures of the customer in the letter
to his signature verification form attested by his Bank earlier.

 Subsequent to the complete fulfillment of above formalities, the

disbursement is carried out by consumer’ banking officer and
cheque/demand draft is issued to the dealer in favour of the
Supplier. The disbursement should preferably be made the same
day or otherwise in next 2 days essentially as per terms with the
dealer. 1-lowever credit of 2-3 days is extended by dealers under
a routine practice.

Follow on Process

 The dealer after receiving the payment, issues the original sale
invoice of the vehicle directly to the Bank, which then arranges
the registration of the vehicle through its appointed registration
agency. Immediately after the delivery of vehicle, the dealer is
asked to duly sign and stamp the Delivery Acceptance Form,
which is part of the security documents. The registration
charges of the vehicle have already been recovered from the
customer as part of tile total down payment at the time of
signing tile loan agreement. In addition to the papers, tile dealer
delivers the duplicate key of tile vehicle to the Bank, which is
also a mandatory security requirement.

 The officer hands over tile original papers of the vehicle to tile
Bank’s authorized registration agent along with necessary forms
and letter in favour of Motor Registration Authority by tile Bank.
 The agent arranges the registration of tile vehicle in the name of
the customer with the Bank’s lien marked on it and delivers the
original registration book along with original papers to the Bank.
The concerned officer at the Bank retains a copy of the book in
the customer file and hands over the original book to the
customer by taking his acknowledgement on the copy of book.

 Repayment schedule of the finance facility is to be essentially

furnished to the customer after the approval of tile loan facility.

SECURITY DOCUMENTS (AFTER APPRO VAL)

The security documents of tile Car Loan are a set of legal papers, to
serve as the security of the Bank and a tool to be used against the
defaulting customer during court proceedings, if that is the last
resort. A set of loan agreement of a car comprises the following
documents:

1) Account Opening Form

This establishes anon checking account for tile customer.
2) Know Your Customer Form (KYC)
3) Car Financing Account
4) a. Agreement for financing Motor Vehicle on Mark up Basis Or
b. Balance Transfer Facility Agreement
5) Letter of Hypothecation of Motor Vehicle
6) Irrevocable Power of Attorney
7) Authorization to take possession of Motor Vehicle.
8) Delivery Acceptance Form
9) Open Transfer Letter
10)Demand promissory Note
11)Document Checklist for Disbursement

SECURITY:

The vehicle itself is the security, which will be hypothecated in favour

of the Bank and a lien will be marked with the registrar. Apart from
vehicle being the primary security itself, supplemented by the legal
documents listed under Security Documents, the asset is secured by
strict compliance of following measures:

10.1 Registration of the vehicle in the name of customer under lien by

the Bank.
10.2 Comprehensive Insurance Policy.
10.3 Original Sale Invoice and papers vetted by Motor Registration
Authority
10.4 Post Dated Cheques as per the repayment schedule for the entire
loan term.
10.5 Duplicate Key of the car to be kept with Bank.
10.6 Incase of Pre-Approved Customers, Irrevocable Standing
Instructions addressed to Prime Bank for deduction of outstanding
amount from the account of the customer/post-dated cheques for the
amounts corresponding to the installments.

CREDIT LIMITS

The Chief Managers of the branches would be delegated approval

limits to sanction car loans up to a limit of Rs. 1.5 million without
seeking prior approval from Head office that will subsequently
endorse the proposals.

• Chief Manager Business Development For “A” group

branches
• Chief Manager For “B” group branches
• Branch Manager For “C” group branches

Approval limit: Rs. 1.5 Million

(For both the existing accountholders of the Bank & new
customers)

It is recommended that while extending repeat loan facility to the

same customer, an interval of at least 3 to 6 months should be
maintained to observe the repayment behavior of the client and
extend another facility on the basis of his previous track record with
the Bank.

Discretionary Powers of Chief Manager

Authority to waive the verification condition in case of an existing

account holder of Bank or case-to-case basis

Authority to reduce the 5% premature termination charges by 1-3%,

subject to very strong credentials and excellent repayment behavior of
the client.

Exception approval to be obtained from the Head Office for any

deviations from the prescribed guidelines in the manual e.g. age limit
above 60, lack of proof of income, discrepancies in the documents
submitted by the customer, inability to fully comply to the eligibility
criteria, premature termination before the stipulated time period of 6
months etc.

Approval in absence of Chief Manager

For Lahore Branches

The approval of car financing applications rests with the
 Manager Operations in the absence of the Chief Manager and a
post facto approval to be obtained from the Chief Manager after
he resumes office.

For Central & Northern Branches

The approval of car financing applications rests with the Regional Heads of the
respective region in the absence of the Chief Manager of any branch under that region.

LATE PAYMENT CHARGES

As per Bank’s prevalent schedule of charges (Currently Rs. 100/- per
day will be charger! after one week from the due date in case of delay
in payment of the installment.)
CHEQUE RETURN CHARGES
As per Bank’s prevalent Schedule of Charges, (Currently Rs. 200/- per

returned cheque will be charged as cheque returning charges.)

INSTALLMENT DUE DATE

5th and 20th of each month

For loan disbursed from 25t1~ to 10th, the next installment shall
become due on 5th of each month till the maturity of the loan tenure.

For loan disbursed from 11th to 25th the next installment shall become
due on 20th of each month till the maturity of the loan tenure.

MODE OF REPAYMENT OF FINANCE

Through post dated cheques of monthly installments for the entire

loan tenure, to be received in advance at the time of disbursement.

COMPREHENSIVE INSURANCE

The vehicles to be financed must be comprehensively insured from

one of the Insurance Companies on the approved panel of the Bank.
The insurance policy should essentially bear complete particulars of
the vehicle (Client’s name and address, vehic1e’s Engine & Chassis
number & its registration number. Thus, a comprehensive insurance
policy entailing the above details, along with Premium Paid Receipt
are ought to be obtained before the final disbursement.

In cases, where the vehicle is being booked against 100% advance

payment of invoice value to the supplier, the insurance policy will be
issued without the registration number but duly comprising other
particulars such as engine and chassis numbers of the vehicle, along
with Insurance Premium paid Receipt.

The Bank has enlisted the following two insurance companies on its
approved panel for the insurance of vehicles under the Bank’s Car
Financing Scheme:
1). Shaheen Insurance Company Limited

Insurance Premium Rates

• 3.25% without tracker
• 3.0% with tracker

2). EFU General Insurance Company Limited

• 4.75% without tracker
• 4.0% with tracker

For Toyota Corolla 2.OD

• 4.00% with tracker
• Not insured without tracker

For 4X 4 vehicles: 6.5%

Selection of Insurance Company

1) Low Risk Customers & Vehicles up to 1000cc
Shaheen Insurance Company Ltd

2).High Risk Customers + Toyota Corolla 2.OD & Vehicles above

1000cc
EFU General Insurance Co. Ltd

Payments to the outsourced agencies and Insurance Companies

Payments to the insurance, verification and registration companies by

the Prime Bank, These companies will open accounts at the branches
to enable transfer of their payables to each company during a
mutually settled date of each month and a consolidated payment of all
the branches would be credited to the account of each company.

REGISTRATION OF VEHICLES
The vehicle would be registered in the name of the borrower and
account of Prime Commercial Bank Limited.

Registrations of the financed to be outsourced through PCBL’s appointed professional

registration agency or through dealer, the registration charges would be borne by the client and
received from him in advance, prior to the final delivery of vehicle.

A letter to ascertain the enforcement of Bank’s lien should be

dispatched to the Registration Authority. Photocopies of the
registration book with the evidence of the Bank’s lien should be
obtained and kept on record.

The concerned officer must see the Bank’s name on the book in
original before handing over the book to the customer.

The payment to this agency would be made after receipt of original

registration book with the Bank’s lien marked on the book and “Hire
Purchase “ stamp on it.

MONITORING

Due date diary should be maintained in the system or on registers

with the consumer banking officers and the relevant Post Dated
Cheques should be promptly logged in clearing for installment
recovery.

In the event of any installment cheques returned unpaid, the borrower

should be immediately contacted or telephoned and requested to
arrange for the installment payment.

If the borrower cannot be reached within 3 days on telephone, a 7 day

notices to be issued.
In case of 60 days overdue installment, repossession notice of the
vehicle should be initiated.
RESPONSIBILITIES OF THE OFFICER CONSUMER BANKING

(FOR CAR FINANCING OPERATIONS)

 Generate Business.
 Meet the targets assigned
 Prudent scrutiny of the documents furnished by the customer
 Due diligence in evaluation of the Loan Applications and their
recommendation to the Approving Authorities
 Prudent documentation of the credit and legal papers with the
assistance of the processing officers
 Keep a constant co-ordination with the Head Office and
reporting of daily business activity and recovery position and
other matters relating to Car Financing
 Monitoring of the disbursed 1~ans by following up with the
customers for irregular installments recovery.
 Maintain a congenial environment at the office and uphold the
Bank’s image and reputation.

NON-ELIGIBLE (NO-GO AREAS)

  Lawyers
 People belonging to media (actors, actresses, celebrities,
singers)
 Film/ drama production houses
 Rent a car companies.
 Public transportation

General

CIB Report: To be obtained for financing above Rs. 500,000/

through online reporting at your branch or through Head Office

ISSUANCE OF LOAN (ACCOUNTS HOLDERS ONLY)

Car financing (account holder only)
Issuance of loan (new client only)
Car financing (new client only)
Car Registration and Insurance