CORE FUNCTIONS OF COMMERCIAL BANKS

Accepting deposit
Lending
Investment (Debt Securities, Equity Securities, Money Market, Other)
Borrowing (Inter-bank, SBP, internationally)
Assume Risk
Management of Risk (Credit, Reputation, Default, Market Risk, Operating,
Liquidity)
Manage Bank’s Capital,
Protect Depositor
Trade Facilitation / Intl Facilitation
Financial Intermediation
Corp Governance
Financial Integrity (AML / CFT)
INDIRECT LENDING TO GOVERNMENT
HELP TURN WHEEL OF ECONOMY
SAFETY, SECURITY, LIQUIDITY
FOREIGN TRADE
TRANSFER OF FUNDS
CAPITAL ASSETS MANAGEMENT
Assurance / Guarantee
Basic Benchmark to Establish Commercial Bank
Initially PKR 250M (1992)
BASEL I, II, III (Liquidity, Leverage, Capital Adequacy, Risk Management)
Minimum Capital Requirement (MCR): PKR 10 BILLION (Absolute measure)
For foreign banks PKR 3Billion (1-5 Br)
 PKR 6Billion (6-50 Br)
PKR 10Billion (51 or more Br)

Minimum 200 Branches for commercial Banks. (Financial Inclusion)

Capital Adequacy Ratio (2013): 10.25% and then 12.5% by 31-12-19
BASEL III
Capital >= 12.5% of your risk weighted assets
Total Eligible Capital >=12.5%
Credit RWA + Market RWA + Operational RWA

Let say Credit Risk 10 billion 60%

Customer Loan Rs 1M Security: Property PKR 0.6M. Fixed Deposit

Certificates PKR 0.4M

Assigned 60% weightage to your credit risk

Credit RWA reduce from PKR 1M to PKR 600,000
1 M x 60% = PKR 0.6 M or PKR 600,000/=

Dev Fin Ins: PKR 6B.

MicroFinBanks PKR 1B (Nation-wide),
PKR 500M: Province
PKR 400M: Region
PKR 300M: District.
MFB CAR: 15%

BANKER – CUSTOMER RELATIONSHIP

By opening banks account
Honor cheque Section 31, Negotiable Instrument Act 1881
Right of Lien Right to retain as asset until debt paid (Section 171
Contract Act 1872)
Right of Set Off Adjustment a loan amount (Dr Balance) against Cr Bal
Right to Services Chgs Schedule of Charges 6 Monthly SBP Approval
Calendar Year (Jan-June) (July-Dec)