Mishail Imran

Fa07-BBA-059

“THE BANKING COMPANIES ORDINANCE, 1962

ORDINANCE No. LVII OF 1962”
{7th June, 1962}

SUMMARY

This ordinance was formed and presented by President on 7th October 1958 that was to
consolidate and amend the law related to the banking companies. It had several parts two of
which are “Preliminary” and “Business of Banking Companies”

The Part I discusses about the following points

Ordinance is named as “Banking Companies Ordinance 1962, will be extended to whole

Pakistan be in force at once.

All other laws and their applications will remain there and the provisions of this ordinance will
be in derogation of the company’s ordinance 1984 and with all other laws present at that time.

It would have limited application to cooperative banks, and (1) to certain financial institutions.
Some provisions with modifications will be applied to Pakistan Industrial Credit and Investment
Corporation, the National Development Finance Corporation, the Bankers Equity Limited such
other companies, corporations or institutions or class of companies, corporations or institutions
as Federal Government will specify. (2) All notifications which are inconsistent with previous
section shall be cancelled such as those with respect to National Development Leasing
Corporations, Leasing Companies and Modaraba Companies

The Federal Government may by notification in Official Gazette suspend the operation of all or
provisions of Ordinance for some period (but not exceeding 60 days), it can also extend
suspension period from time to time (not exceeding 60 days at one time ) whereas total time
must not exceed 1 year. Also the copy of this notification will be laid on the table of the Federal
Legislature within 3days of issue (if in session) or as soon as it meets (of not in session)

This also includes definitions regarding (a) Approved securities, (b) banking, (c.)banking
companies, (d) branch or branch office, (dd) creditor,
(e) company, (ee) debtor, (f) demand liabilities, (ff) family members, (ffa) foreign banking
company, (g) gold, (gg) loans, advances and credit, (h) managing director, (i) prescribed, (j)
private company, (k) registrar, (l) scheduled bank, (m) secured loan, (mm) securities, (n) state
bank, (o) substantial interest including “control”, “person” and “undertaking”.

This provisions of this ordinance was to supersede the memorandum whereas any provision
contained in the memorandum, articles, agreement or resolution shall, to the extent to which it is
repugnant to the provisions of this Ordinance, become or be void, as the case may be.

The Part II focuses on the following:

The forms of businesses in which the companies may engage, (a) the banking companies can
engage in business such as borrowing, raising, or taking up of money; the lending or advancing
of money either upon or without security; the drawing, making, accepting, discounting, buying,
selling, collecting and dealing in bills of exchange and investment of all kinds whereas (aa) the
financing resources will be as in Banking Tribunals Ordinance, 1984, also discusses about (b) the
acting agents, and (bb) the companies acting as modarba companies under provision of
Modaraba Companies and Modaraba Ordinance, 1980, (c.) contracting about public and private
loans, (d) effecting, insuring, guaranteeing, underwriting, participating in managing and carrying
out loans, (e) carrying on and transacting every kind of guarantee and indemnity business, (ee)
purchase or acquisition, (f) managing, selling and realising any property, (g) acquiring and
holding and generally dealing with any property or any right, title or interest, (h) undertaking and
executing trusts, (i) undertaking the administration of estates as executor, trustee , (j) establishing
and supporting or aiding in the establishment and support of associations, institutions, funds,
trusts and conveniences, (k) the acquisition, construction, maintenance and alteration of any
building or works necessary, (l) selling, improving, managing, developing, exchanging, leasing,
mortgaging, disposing of or turning into account or otherwise dealing with all or any part of the
property and rights of the company, (m) acquiring and undertaking the whole or any part of the
business, (n) doing all such other things as are incidental or conducive to the promotion or
advancement of the business of the company, (o) any other form of business in which it is lawful
for a banking company to engage. The companies will not engage in any other business except
discussed in this section.

Every company only those carrying on the business of banking in Pakistan shall use the word
“bank”. This will not apply to (a) subsidiary of a banking company formed for one or more of
the purpose mentioned above and (b) any association of banks formed for the protection of their
mutual interests and registered under Companies Ordinance 1984 sec 42 but the State bank may
authorize the company to use name of bank under some conditions.

no banking company shall directly or indirectly deal in the buying or selling or bartering of
goods (any kind of movable property) or engage in any trade or buy, sell or barter goods for
others, otherwise than in connection with bills of exchange received for collection or negotiation.

no banking company shall hold non banking assets for any period exceeding seven years from
the acquisition thereof or from the commencement of this Ordinance, whichever is later and such
property shall be disposed of within such period or extended period, as the case may be.
Provided that the company (within 7years) deal or trade in any such property for the purpose of
facilitating the disposal. Also the State bank can extend its period (but not exceeding 5 years)
and such extension would be in the interests of the depositors of the banking company