Fixed Assets Disposal Policy

-.
NBP
National Bank of PakistOn
Version No. 001 Effective Date:

NATIONAL BANK OF PAKISTAN

FIXED ASSETS DISPOSAL POLICY

 Fixed Assets Disposal Policy
I%J
Natonal Sank of Pakistan
Version No. 001 Effective Date:

Table of Contents

A. General ................................................................................................................3

B. Policy Statement for Disposal of Fixed Assets...................................................6

C. Criteria for Disposal of Fixed Assets .................................................................6

D. Auction Committees for Disposal of Fixed Assets............................................8

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 Fixed Assets Disposal Policy

to I%J BP National Bank of Pakistan

Version No. 001 Effective Date:

A. General

I. Purpose

Purpose of this policy is to:

a) establish basis and procedures for disposal of fixed assets under the concept of useful
life-cycle.

b) achieve the best possible outcome for the Bank by gaining the best available net
return when selling a disposable asset.

c) ensure asset disposal decisions, and the reasons for taking them, are documented and
verifiable for the purpose of audit and other examinations.

d) encourage the user groups to dispose-off assets in accordance with the procedures set
Out in this policy.

e) promote probity, fair dealing and openness as the assets shall be disposed-off
through a public competitive process i.e. advertised auctions open to the public.

ensure that disposal of an asset is effected at the most opportune time when the asset
is underperforming or when the benefits accruing from the asset are less than the
Costs of operation and maintenance.

g) ensure that prudent decisions are made under this policy for assessment of market
value or fixation of the minimum reserve price of a disposable asset.

h) ensure that Bank's record of fixed assets is always updated and maintained correctly
in the Fixed Assets Management System "FAMS".

II. Definitions

The following terms are used in this Policy with the meanings specified:

a) Fixed Asset, under this policy, means an item of tangible property, plant and
S equipment held with the intention of being used for the purpose of executing
business activities and is not held for sale in the normal course of business;

b) Acquisition Cost is sum of expenditure incurred on account of fixed assets in the

course of construction or acquisition;

c) Disposable Assets are the assets that qualify for being disposed-off as per the
prescribed criteria for disposal;

d) Gross Book value of a fixed asset is its historical cost or other amount substituted
for historical cost in the books of account or financial statements;

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 • lJBP
Nedonal Sank orPokWan
L Fixed Assets Disposal Policy
Version No. 001 Effective Date:

e) Net Book Value is the Gross Book Value shown net of accumulated depreciation;

0 User Group is the office where an asset is parked and being used;

g) High Value Assets include the assets having an acquisition cost of PKR 5.0 Million or
above e.g. HVAC plants, PowerGen Plant, R.O. Plants, I.T. Servers etc..

III. Custody

This policy shall remain in the permanent custody of Financial Control Group "FCG".

IV. Retrieval

This Policy shall be accessed through NBP's intranet.

V. Responsibility of Dissemination

This is a Bank-wide policy that is to be adopted and followed across the Bank. Therefore,
ensuring dissemination to and adherence by personnel of the Bank will be the responsibility of
the respective Group Chiefs, Group Heads, Divisional Heads, Principal Staff Colleges, Regional
Heads, Branch Managers, Regional Executive Internal Control & Service Excellence
Implementation and Audit & Inspection Chiefs. Failure to comply with this policy may form the
grounds for disciplinary actions as per Employee Discipline Policy.

VI. Confidentiality

This policy is for internal use of National Bank of Pakistan employees only. Any act of
divulgence to third parties shall be viewed as a breach of discipline and may warrant disciplinary
actions as per policy in vogue.

VII. Records & Revisions

a) This policy is being recommended for the first time and shall be subject to a review
every three years by the Financial Control Group. If there is no change required in
the Policy, a note to the same shall be distributed to all relevant Groups for their
review and sign -off. A "No Change" memo shall also be presented to BoD in this
regard.

b) Any change in the policy during the year due to regulatory requirements of State
Bank of Pakistan, Security & Exchange Commission of Pakistan and any other
statutory body shall be communicated to all concerned and shall become an integral
part of this Policy.

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 Fixed Assets Disposal Policy
NBa,i,P
N.tt.a,.J fPokIs.
Version No. 001 Effective Date:

VIII. Authority of the Management Committee

The Management Committee shall be authorised to:

a) Approve any interim changes in this policy upon recommendation of the FCG for
which ratification of the BoD will be sought by the FCG within a maximum period
of 90 days.

b) Amend, as and when deemed necessary and so recommended by the FCG, the
procedures for disposal of fixed assets, accounting and recording in the Fixed Assets
Management System "FAMS" as given in Annexure-I of this Policy.

c) FCG, before recommending any interim changes to the Management Committee,

shall communicate the same to all the relevant stakeholders and obtain their
concurrence on the same.

IX. Transitioned Implementation

a) This policy shall be implemented with due care in a phased-out manner. Any asset,
0 although eligible for disposal but in use at the time promulgation of this policy,
should be disposed-off in phases over a period of 2 years subject to satisfactory
replacement arrangements being made.

b) It is encouraged that during the transitionary period of 2 years from implementation

of this Policy, replacement of asset(s), particularly for the IT peripherals and
Electrical Appliances, should not be requested immediately for the asset(s) that may
reasonably be used for a further period without compromising the work place /
customer service quality.

X. Distribution

This policy is to be distributed to the following:

Board of Directors
President Office
All Group Chiefs / Group Heads / Divisional Heads / Audit & Inspection Chiefs
All Regional Heads
All Regional Executives Internal Control & Service Excellence Implementation
All Branch Managers
Principal Staff Colleges

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 Fixed Assets_Disposal_Policy
NB
Notional Bank of Pakistan
Version No 001 Effective Date

B. Policy Statement for Disposal of Fixed Assets

a) All fixed assets covered under this Policy becoming filly depreciated, or redundant,
shall be disposed-off through open auction as per the Criteria and Procedures
provided in this document. This policy will supercede all previous instructions &
procedures.

b) Land and Buildings under utilisation of the Bank shall be disposed-off subject to a
prior approval by the BoD on case to case basis;

c) This policy shall be applicable on domestic operations of the Bank and will not cover
the following:

(i) Disposal of asset(s) re-possessed against any financing scheme by the bank.
Repossessed assets shall be disposed-off as per the mechanism provided in the
approved financing scheme of respective product;

(ii) Sale of asset(s) to the staff as per entitlement under employment contract /
remuneration package.
40
(iii) Un-utilised Land & Buildings shall be disposed-off as per the Policy approved
by the BoD in its 118th meeting held on 26th March, 2004 and as amended
subsequently from time to time;

(iv) Vehicles will be disposed-off as provided in the Transport Policy as approved by

the BoD in its 127" meeting held on November 12, 2004 and subsequently
amended by the BoD in its 137d'held on December 02,2005;

(v) Disposal of assets acquired under Debt-Property-Swap arrangements is not

covered in this Policy in terms of the Recovery Policy in vogue;

(vi) Antiques and Arms & Ammunition shall be disposed-off only subject to a prior
approval of the Management Committee upon recommendations of LSG and
FCG.

C. Criteria for Disposal of Fixed Assets

Assets of the Bank covered under this Policy will be disposed-off under following
circumstances:

I. Assets Becoming Fully Depreciated

Unless otherwise declared redundant under Criteria-II stated below, fixed assets becoming
fully depreciated shall be disposed-off only after lapse of minimum usage time period from
the date of acquisition as below:

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 Fixed Assets Disposal Policy

to I%J BP National Bank or Pakistan

Version No. 001 Effective Date:

Minimum Usage
Asset Type before Disposal
High value assets e.g. HVAC plant* / PowerGen plant / R.O. plant, I.T.
Servers etc. having an acquisition cost of PK.R 5,000,000/- or above.
(Subject to a prior approval of the Management Committee obtained by 10 years
Logistics Support Group /oint/y with Gmup Chief/Head-IT in case of IT related
assets).
Auto Teller Machines
Air Conditioners, Generators
Furniture & Fixtures
5 years
Photocopiers, Scanners, Shredders, Cash Counting Machines.
Geysers, Fans, Electrical Motors and Pumps.
Other Office Equipment & Appliances.
Desktop Computers, Monitors, LEDs, Printers, CCTV Cameras, CCTV
4 years
Monitors. (These assets, f in use, shall be disposed-off on/y subject to availability f
replacement)-
Laptop Computers (The user in possession shall be allowed to purchase at 10% of
the purchase price. These assets, if in use, shall be disposed-off only subject to availability 3 years
of replacement).
Mobile Phones / Tablets (the user in possession shall be allowed to purchase at
book value of the asset). 2 years

*HVAC (hearing, ventilation and air conditioning)

II. Assets Becoming Redundant

(i) Retirement of an asset due to a significant malfunction that diminishes its remaining
useful life to NIL (or redundant) e.g. occurrence of an irreparable physical damage,
asset becoming technologically obsolete / incompatible; Or, where the replacement
is required for any other plausible reason to be recorded at branch / regional office /
head offce & allied building.

(ii) In case the user /office in possession of a disposable asset(s) decides to continue
using the asset(s) for a further period, and accordingly notified to the FCG despite
the completion of useful life of asset shall remain in list of fixed assets till its disposal
by the concern authorities.

A (iii) Redundancy of assets shall be validated by the user/office group only.

(iv) The fact that an asset has become redundant shall be documented with reasons by
the administration department of the user Group/Division and shall be approved as
tabulated below.

No. Book Value Approving Authority

Less than PKR
10,000 To be approved jontly by the Manager, Branch Operations Managers and
1. Regional Executive Internal Controls.
Per Asset
Less than
2. PKR. At Head Office & Allied Buildings: Jointly by concerned Divisional Head-

Ii
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 Fixed Assets Disposal Policy
I%JBP
Nfl.,,& B.,k .(P&d,,,
Version No. 001 Effective Date:

100,000/- LSG and Wing Head-Admin of user Group under intimation to the respective
PerAsset Group Chief/Head;

At Regions: Regional Head jointly with Regional Executive Operations and

Regional Executive Support services or Internal Control & Service Excellenace
Implementation under intimation to the Group Chief/Head-CRBG and Group
Chief/Head-LSG.
3. FIR 100,000/-
to FIR To be approved at Head Office by the concerned Divisional Head -LSG upon
1,000,000/- recommendation of the user Group Chief; Or the Regional Head (under
PerAsset intimation to the Group Chief/Head-CRBG).

4. Above FIR To be approved by the Management Committee upon recommendation of the

1,000,000/- Logistics Support Group (in case of IT related servers, equipment and peripheral,
PerAsset jointly with Group Chief/Head-ITG).

In all the cases above, for Information Technology Peripheral & Equipment, the concerned Divisional Head
I.T. (at Head Office); or the Regional Head or Branch Manager.(as the case may be) shall issue an inspection
certificate to endorse that the asset has become obsolete and is neither usable nor repairable..

2 Auction Committees for Disposal of Fixed Assets

Assets eligible for disposal as per criteria speficied in Section-C above shall be auctioned by the Auction
Committees as per broader guidelines & procedures as follows:

1. Formation of Auction Committees

Auction of assets at various levels shall be conducted by the Auction Committees comprising of members
as tabulated below:

Level Formation of Committee

Head Office &

(1) Divisional Head Logistics Support Group - Chairman
Allied Buildings
(ii) Executive from Financial Control Group - Member
(iii) Executive from Compliance Group - Member
(iv) Executive from Operations Group - Member
(v) Executive from LSG to function as Secretary of the Committee
/ -
Gronp Chief Head LSG shall form the Committee npon nomination of a
member by concerned Group chiefs/Head.

Regional Office Category-A Region Category-B Region Category-C Region

(Conventional and (4 Members) (3 Members) (3 Members)
Islamic) Regional Head - Regional Head - Regional Head -
Chairman Chairman Chairman
Regional Executive Regional Executive Regional Executive
Support Services - Internal Control & Internal Control &
Member Service Excellence Service Excellence -
Implementation - Member
Member
Regional Executive Regional Executive Regional Executive

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 a U%JBP
NJe'.W SnI, fPfrJn
Fixed Assets Disposal Policy
Version No. 001 Effective Date:

Level Formation of Committee

-
Operations Member Operations and or / Business, Operations
Support Services - and Support Services
Member - Member
Regional Executive
Internal Control &
Service Excellence
Implementation -
Member

Regional Auction Committees will only auction the disposable Assets of

Regional Office and the Assets surrendered to it by the Outstation offices.
In case any item having acquisition cost of Rs. 1.0 million or above, or
aggregate acquisition cost of all items being Rs. 10.0 million or above,
intimation shall be sent to the Group Chief/Head-LSG who shall
nominate a representative of LSG as an additional 'Member' of the
Committee.

Branch Level
(i)
..
-
Branch Manager Chairman
Branch Operations Manager (where no Operattons Manager zsposted the
(Co iwenkonal and
Islamic)
-
Head Cashier to assume respons:bthy) Member
(iii) A representative from the Region Office (looking after support
services or Internal control) as deputed by the Regional Head -
/
(Member Secretary).
This Committee will only auction the Assets of the Branch subject to a
prior approval of the Regional Head. In case any item having acquisition
cost of Rs. 1.0 million or above, or aggregate cost of all items being Rs.
10.0 million or above, intimation shall be sent by Regional Head to the
Group Chief/Head-LSG who shall nominate a representative of LSG as
an additional 'Member' of the Auction Committee.

Corporate (i) -
Head Corporate Centre Chairman
Branches (ii) -
Branch Chief Manager Member
(iii) -
Branch Operations Manager Member
(iv) -
Head Corporate Coordination Wing Secretary

This Committee will only auction the Assets of respective Corporate

Branch subject to a prior approval of Group Chief/Head-CBG. In case
any item having acquisition cost of Rs. 1.0 million or above, or aggregate
cost of all items being Rs. 10.0 million or above, intimation will be sent to
the Group Chief/Head-LSG who shall nominate a representative of LSG
as a 'Member' of the Auction Committee.
Outstation Outstation Offices e.g. Audit & Inspection Group, Risk Management
Office Group (Regional CAD offices), Credit Management Group, Staff Colleges,
Bank Houses etc. having a regional presence with a direct reporting at
Head Office level will coordinate with Regional Office of their Geographic

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 Fixed Assets Disposal Policy

No I%J BP 8n fPkIs..n
Version No. 001 Effective Date:

Level Formation of Committee

jurisdiction to surrender their disposable assets to the Regional Auction
Committee for auction under this policy. The assets surrendered should be
reported to relevant Group for onward submission to FAMS department
at FCG, Head Office.

*for the purpose of meeting the quo ,wm, on/y one member maybe allowed a permission of leave by the Chairman of Committee.

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 Fixed Assets Disposal Polic
I%JBP
National Bank of Pakistan
Version No. 001 Effective Date:

Annexure-I.
Procedures & Guidelines for Disposal of Assets
Procedure to be observed in respect of open auction of disposable assets will be as under:

(i) All disposals / auctions shall be conducted as per applicable rules & regulations including PPRA
etc.

(ii) On a semi-annual basis, LSG, ITG (for IT related Equipments only) and FCG will document a
list of the assets that have become fully depreciated and have completed the minimum usage
period as specified in Section-C above, or have been declared redundant and marked for disposal.
This function shall be executed jointly by LSG / ITG and FCG.

(iii) For Head Office & Allied Buildings - The fact that an asset has become redundant shall be
communicated by the respective user, (along with copy of the approval by the competent
authority as provided in section C (H) to the FCG for being 'Marked for Disposal' in Fixed
Assets Management System "FAIvIS". For Region/Branch - Regional officer user of FAMS
will facilitate the process.

• (iv) LSG and FCG will, on a semi-annual basis, present to the Mancom details of assets declared
redundant during the period.

(v) FCG will advise, on a semi-annual basis, the above list of disposable assets to each respective
Group / Regions / Corporate Branches and Outstation offices. The information provided shall
include, but not limited to, date of acquisition, acquisition cost, total useful life, period under
utilisation, book value etc.

(vi) The asset may be used even after attaining expiry of life or fully depreciated, the same may be
continued to be used until it is declared redundant.

(vii) Upon receipt of the list of disposable assets from FCG, Chairman of Auction Committee at each
level will initiate the process for Auction. Ideally auction should be conducted on a semi-annual
basis, but no less than once a year.

(viii) Auctions under this policy shall be conducted on 'as is where is' basis. In case where the Branch/
Regional Offices are located in the same premises or in closer vicinity, the auctions, although held
separately, may be held at same premises on same day, if so economically feasible and lead to
lower auction costs (particularly advertisement) and higher auction proceeds.

is (ix) Where a member of the public and a member of staff or his/her spouse / dependant childems
offer an equal price, the item shall be sold to a member of the public.

(x) Auctions will be held at a secured place for prior inspection of assets by prospective bidders.

(xi) The Auction Committee will meet and decide terms & conditions of the auctions including the
following-
Date, time and venue of auction.
• Finalization of Notice/Advertisement of Auction.
• Selection of "Auctioneer" who would be a license holder/registered for
conducting the auction.
• Reserve price of each assets and mode of payment.

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Version No 001 Effective Date

Delivery shall be allowed only against full payment.

In case of branch auction 3 bidders call for bidding of branch assets which
are less than PKR 10,000 book value.

(xii) The Auction Committee should take into consideration the original purchase price, the age of the
equipment, an assessment of the usefulness of the equipment and of its possible market value.
Consultation with Logistics Support Group or Information Technology Group (in the case of IT
equipment) is also recommended.

(xiii) For each auction a notice /advertisement with necessary details will be published in at least two
locally reputed newspapers at least seven days before the auction date an case of branch auction
3 bidders call for bidding of branch assets which are less than PKR 10,000 book value).

(xiv) Auctions will be conducted in presence of interested bidders and all members of the Auction
Committee. Regional Head / Chairman of the Committee may however grant permission of leave
to a maximum one member of the Committee.

(xv) Each Group / Region /Branches / Corporate Branches/Outstation Office shall be responsible
to match, on a semi-annual basis, its physical existence of assets with the Fixed Assets record as
appearing in centralised FAMS at FCG. Any difference shall be recorded and immediately
communicated to the FCG.

(xvi) Audit & Inspection Group, during the audit, shall check, on a sample basis, that Groups /
Regions /Branches / Corporate Branches/Outstation Offices etc. have reconciled their Fixed
Assets records with FAMS, and discrepancies, if any, have been noted for prompt rectification. In
case of any discrepancies observed, Audit & Inspection Group will report the same to FCG in a
timely manner.

(xvii) After each auction, Chairman of the respective Auction Committee shall make sure that disposal
of Assets has been intimated to the FCG and also recorded, by respective user Group of the asset
into the FAMS.

(xviii)Reporting of redundant, obsolete and disposable items shall be submitted to the FCG on such
format as instructed by the FCG from time to time.

(xix) Financial Control Group will complete the financial transaction at Head Office, by due
verification of the supporting documents and recovery of sale proceeds; thus permanently writing
the assets off the FAMS.

(xx) Auction Committees will ensure compliance with any applicable Tax Laws & Rules as advised by
• the Head Office from time to time.

(xxi) Necessary forms & formats related to fixed assets disposal will be circulated at Bank level by
FCG in consultation with the relevant Groups / Divisions.

(xxii) For timely appropriation of Auction Proceeds, the Financial Control Group will:

(a) Advise procedure for transfer of sale proceeds to the Head Office;
(b) Complete accounting records as per applicable accounting policies & standards;
(c) Ensure compliance of all tax related matter.

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