WORKING PAPER REGARDING CREATION OF BANK’S

VEHICLES CONTINGENCY FUND(BVCF) FOR BANK’S

OWNED VEHICLES.

In order to offset losses on account of damages caused to Bank’s owned vehicles;

a Fund titled “Bank’s Vehicles Contingency Fund” (BVCF) has been created with the
approval of competent authority. The fund shall become functional with immediate
effect. It will be a Fund Account within the bank’s books, and shall be governed by
BVCF Loss Assessment Committee.

SCOPE OF FUND: -

The BVC Fund shall meet losses/damages occurring to bank owned vehicles
excluding vehicles under CLDP in the following contingencies:

i) Major accident.
ii) Fire, external explosion, self ignition (short circuiting).
iii) Theft.
iv) Malicious act.
v) Damage due to Riot, Strike.
vi) Flood, Hail, Hurricane etc.
vii) Snatching at gun point etc.

PROCEDURE TO LODGE CLAIM: -

The procedure mentioned in Establishment Manual may be followed to lodge

claims, however after the incident the following documents shall be required to process
the case: -
i) A copy of FIR (where required).
ii) Map of accident (drawn and approved by Police, where required)
iii) Estimate for repair/ quotations.
iv) Detail of driver along with his driving license.
v) Exact time & location of accident and detail of incident.
vi) Photographs in case of contingencies except theft/snatching.
vii) Incidence Inquiry report in case of theft & snatching only.
viii) Survey report of Audit Zone/ I &C Unit.

Committees Constituted vide circular no. Estab/comn/189, dated 02.10.1989 for

repair & purchase of Bank’s vehicles already functioning in the field shall remain
functional in case of BVCF, with slight change in financial power, after the creation of
BVCF the sanction power of repair of vehicle shall rest with BVCF Loss Assessment
Committees. TOR of these committees has already been defined in the said circular.

The cases of field offices complete in all respects and duly recommended by the
Field Committee shall be forwarded to Head Office, BVCF Loss Assessment Committee
within one month of happening of incident.
 :- 2 -:

BVCF LOSS ASSESSMENT COMMITTEE:

A new four member committee by the name of BVCF Loss Assessment
Committee shall be constituted at Head Office.
i) SVP (Insurance) Member/ Secretary/Convener.
ii) SVP (GSD) Member
iii) SVP (Field Audit) Member
iv) SVP (Budget & Fund) Member

General Services Department (GSD) shall prepare the cases of HO after thorough
examination and shall submit report to BVCF Loss Assessment Committee, for
consideration/ approval.

TOR OF BVCF LOSS ASSESSMENT COMMITTEE:

i) The committee shall scrutinize, examine and approve the cases of both HO
and field.
ii) The BVCF Loss Assessment Committee shall have full power to sanction the
amount, and accord Administrative approval. Hence forth both financial and
administrative powers to full extent shall rest with the Committee.
iii) Annual budget demand shall be ascertained and recommended to F&A
Division for release of amount.
iv) The meeting of committee shall be convened as and when required.

PAYMENT/ SETTLEMENT OF CLAIMS:

All the payments (both HO & field) shall be released on the recommendation of
above stated committee. In cases of theft & snatching at gun point, the amount shall be
compensated equivalent to the book value of vehicle/s. GSD will obtain approval from
the Board of Directors/ competent authority to write-off and Head Office Accounts
Department shall pass the required entries and release the payment. The accounting
procedure and GL Heads allocated for the purpose is attached at Annexure-A.

 *************

Submitted for approval on 08.08.14

 AGENDA REGARDING INSURNACE OF BANK’S VEHICLES

1. During ECC Meeting held on 16.11.2011 (F/A), it was decided that a separate
fund “Titled Bank Vehicle Contingency Fund” (BVCF) may be created
instead of arranging comprehensive insurance of Bank Vehicles by paying
premium to the Insurance Company to mitigate the risk.

2. Keeping in view the historical losses and cost benefit analysis of Bank’s
owned vehicles, it was decided that a fund may be created equal to an amount
of premium with an addition of an appropriate amount on annual basis. The
approval of the same had been accorded by the ECC in its meeting dated
08.03.2012 (F/B). However the fund could not be created because approval
was not granted by the BOD rather advised to place the agenda before BAC.

3. Therefore, the issue placed before BAC during its meeting held on 11.08.2014
for approval but the Committee advised to obtain legal opinion from external
legal advisor (F/C).

4. Hence, the issue was referred to Legal Advisors and both the Legal Advisors
have agreed with the proposal of Banks Vehicles Contingency Fund
comments are attached (F/D).

5. Moreover during BAC meeting the CFO has shown certain reservation on
creation of said fund. Therefore, comments from Central Accounts
Department were also obtained and given below:
“There is no legal restriction to create such type of contingency fund yet to
mitigate the risk especially in the prevailing law and order situation in the
country and also the observations highlighted by the auditors during the
course of audit, third party insurance is beneficial. Prudence concept also
demands that the risk mitigation through third party insurance is much
more effective than the self insurance”

6. But we are of view that third party insurance does not cover all major risks,
i.e. accident, theft, burglary & flood etc. It also does not serve the purpose as
SBP and External Auditors have raised observations during the course of audit
that bank has not obtained insurance coverage for their fixed and other assets.

7. It is the considerate opinion of this department that the vehicles having model
2013, 2014 & 2015 should be insured to cover the risk in the prevailing law
and order situation of the country. At present bank has a fleet of 676 vehicles
(F/E). There are 316 vehicles of model 2013, 2014 & 2015 (F/F). Out of 316,
48 vehicles have already been got insured. If remaining 268 vehicles are
insured with National Insurance Company Limited on purchased price @
2.5% premium per annum, than an amount of Rs. 7,854,416/- (approx) against
sum insured Rs.268,526,882/- will have to be paid on account of insurance
premium (F/G).

8. Therefore, ECC is requested to accord approval for comprehensive insurance

of 268 Banks vehicles of Model 2013, 2014 & 2015 for the purposes.

Submitted to ECC, Zarai Taraqiati Bank Limited

Amended on 09-07-2015
 AGENDA FOR CREATION/ ESTABLISHMENT OF FUNDS
BY THE NAME OF BANK’S VEHICLES CONTINGENCY
FUND (BVCF)

Bank has a fleet of 743 vehicles out of which 100

vehicles are already insured. If the remaining 643 vehicles are insured
with NICL on current market value/ purchased price @ 2.5%
premium + tax /per annum, then an amount of Rs.17,691,677/- will
have to be paid on account of insurance premium. Keeping in view
the cost benefit analysis, historic expenses in case of major accident /
theft and high cost of premium payable to Insurance Company, a fund
on the name of Bank’s Vehicles Contingency Fund (BVCF) may
please be proposed to ECC for approval equivalent to the insurance
premium amount.

Legion opinion by the Legal Services Department has

already been obtained from Bank Legal Advisor as far as External
Legal Advisor both the Legal Advisors had agreed with the proposal
of Bank’s Vehicles Contingency Fund (F/F).

In view of the above the ECC is requested to accord

approval.

Submitted to ECC, Zarai Taraqiati Bank Limited

Prepared on 30.05.2016