BANKING LAW AND PRACTICES IN PAKISTAN

Chapter # 16

Presented to:
Professor Dr. Ashfaq Ahmad

By:
MC-19-067 Muhammad Arzam Hussain
BANK NOTES

According to Section 2 (d) of State Bank of Pakistan Act, 1956: “Bank notes means
notes made and issued by the bank in accordance with section 24 and include
currency notes of the Government of Pakistan issued by the Bank.”
Section 24 (1) :
The bank shall have the sole right to issue Bank Notes made payable to bearer on
demand in Pakistan in accordance with provisions hereinafter made provided that the
currency notes of the Government of Pakistan supplied to the Bank by the
Government maybe issued by it for a period which shall be fixed by the federal
government on the recommendation of the Central Board.”
Section 25 (A) :
Every Bank Note shall be legal tender at any place in Pakistan for the amount
expressed therein and shall be guaranteed by the Federal Government.”
DIVIDEND WARRANT

A Dividend Warrant is a draft issued by a Company, directing its bankers to pay are
named member of the company his share of the divisible profits they may be crossed but
are not frequently negotiable they must be signed by the person to whom they are made
payable but per Pro signatures are not valid unless submitted to and approved by the
issuers of the warrant.
- Signature of any of from joint payee can discharge playable Dividend Warrant
- Warrants if not presented for payment within a specified time should be returned to
company for revalidation.
 POSTAL ORDERS

Postal Orders aren’t like cheques, these are drawn

by a Post Office on the Post Master of another Post
Office.
Not Negotiable (nobody else is entitled to
receive the amount if stolen or lost)
Section 45 Post Office Act 1898 provides that,
“Federal Government may authorize issue of Postal
Orders for certain fixed amounts and may make
rules regarding rate of commission to be charged
thereon”
INTEREST WARRANTS

Interest Warrants are drafts for the payment of fixed interest due on
government stocks and debentures issued by a municipality or public
authority, etc.
- Signatures of joint payees required
- Per pro indorsements not accepted
 COUPONS

Coupons are detachable certificates for the payment of

interest on bonds, debentures etc.
- Separately numbered
- Place of payment
- Due dates for payment with 6 months interval
- Shouldn’t be credited until advised
Examples: WAPDA Bonds and Special Saving
Certificates
DRAWN BONDS

These are bonds redeemable by drawing at

a named prize on the number of bonds
drawn, being advertised in certain
newspapers.
Example: Prize bonds.
TRAVELLERS CHEQUES

They are generally issued for the

convenience of persons traveling abroad,
also used within country.
Travellers Cheques are for fixed amount
and are treated as Order Cheques payable
only to the purchaser whose specimen
signature appears on Travellers Cheque
itself.
LETTER OF CREDIT

Earl Cairns said, “The essence of this letter of credit is that the person taking bills on the
face of it is to have the absolute benefit of the undertaking in the Letter, and to have it in
order to obtain the acceptance of the bills which are Negotiable Instruments payable
according to their tenor and without reference to any collateral or cross claims”. (Agra
and Marleuman’s Bank 1867).

Letters of credit state the limit of the credit and time during which it is held at the
disposal of the grantee, but they are neither negotiable nor transferable.
KINDS OF LETTERS OF CREDIT

Revocable and Irrevocable Letters of Credit

Confirmed and Unconfirmed Letters of Credit
 Revolving Credit
COMMON POINTS OF LETTERS OF CREDIT
Name and address of beneficiary must be given in full.
The amount of credit should be stated.
The tenor of the credit must be clearly indicated.
It should be made clear whether the drafts are to be drawn on the customer opening the credit or on the bank.
Should clearly indicate that credit is irrevocable.
Exact instructions must be given regarding the documents against which payment is to be made.
The details of goods covered by the credit should be kept to the minimum.
Instruction regarding part shipment and trans shipment should be fully stated in the credit.
Instructions should state whether the shipment is to be F.O.B
Instruction should be obtained from customer whether the credit is to be advised by air mail or cable or by any other
method.
 This form should be signed as an agreement by a competent person.