BNK601 Official Handouts

Table of Contents · Table of Contents · Table of Contents · Table of Contents

LESSON 1 ............................................................................................................................................................................................. ii

....................... 1

LESSON 2 ............................................................................................................................................................................................ 6 LEGAL SYSTEM OF PAKISTAN ................................

............... 6

LESSON 3 .......................................................................................................................................................................................... 12 FINANCIAL SYSTEM & BANKING ................................

........ 12

LESSON 4 .......................................................................................................................................................................................... 16 FINANCIAL INSTRUMENTS & BANKING LAWS & PRACTICES ................................

................................. 16

LESSON 5 .......................................................................................................................................................................................... 21 EVOLUTION OF BANKING ................................

................. 21

LESSON 6 .......................................................................................................................................................................................... 27

......................... 27

LESSON 7 .......................................................................................................................................................................................... 32 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 32

LESSON 8 .......................................................................................................................................................................................... 37 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 37

LESSON 9 .......................................................................................................................................................................................... 44 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 44

LESSON 10......................................................................................................................................................................................... 48 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 48

LESSON 11 ......................................................................................................................................................................................... 53 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 53

LESSON 12......................................................................................................................................................................................... 58 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 58

LESSON 13......................................................................................................................................................................................... 63 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 63

LESSON 14......................................................................................................................................................................................... 70 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 70

LESSON 15......................................................................................................................................................................................... 76 BANKING COMPANIES ORDINANCE, 1962 ................................

............................ 76

LESSON 16......................................................................................................................................................................................... 84 STATE BANK OF PAKISTAN ACT, 1956 ................................

... 84

LESSON 17......................................................................................................................................................................................... 92

... 92

LESSON 18...................................................................................................................................................................................... 101 PAKISTAN BANKING AND FINANCE SERVICES COMMISSION ACT, 1992..................

.................. 101

LESSON 19...................................................................................................................................................................................... 111 MICROFINANCE INSTITUTIONS ORDINANCE, 2001 ................................

............. 111

LESSON 20 ..................................................................................................................................................................................... 126

............................... 126

LESSON 21...................................................................................................................................................................................... 130

............................... 130

LESSON 22 ..................................................................................................................................................................................... 135

............................... 135

LESSON 23 ..................................................................................................................................................................................... 141

............................... 141

LESSON 24 ..................................................................................................................................................................................... 147

................................ 147

LESSON 25 ...................................................................................................................................................................................... 151 NEGOTIABLE INSTRUMENTS ................................

.......... 151

LESSON 26 ...................................................................................................................................................................................... 154 NEGOTIABLE INSTRUMENTS ................................

.......... 15

LESSON 27 ...................................................................................................................................................................................... 160 NEGOTIABLE INSTRUMENT ................................

............ 160

LESSON 28 ...................................................................................................................................................................................... 167 NEGOTIABLE INSTRUMENTS ................................

.......... 167

LESSON 29 ...................................................................................................................................................................................... 171 PARTIES TO PROMISSORY NOTES, BILLS AND CHEQUES ................................

..... 171

LESSON 30 ...................................................................................................................................................................................... 181 PRINCIPLES AND FORMS OF LENDING ................................

............................. 181

LESSON 31 ...................................................................................................................................................................................... 185 PRINCIPLES AND FORMS OF LENDING ................................

............................. 185

LESSON 32 ...................................................................................................................................................................................... 191

........................ 191

LESSON 33 ...................................................................................................................................................................................... 197

........................ 197

LESSON 34 ...................................................................................................................................................................................... 201

........................ 201

Lesson 35 .......................................................................................................................................................................................... 206 FLOW CHART OF LETTER OF CREDIT—REVISITED ................................

............ 206

LESSON 36 ...................................................................................................................................................................................... 216 UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS ....................

.................... 216

(UCP 600) ................................

........ 216

LESSON 37 ...................................................................................................................................................................................... 225 DESIGNING LEGAL DOCUMENTS ................................

..... 225

LESSON 38 ...................................................................................................................................................................................... 232 PRUDENTIAL REGULATIONS OF SBP ................................

................................ 232

LESSON 39 ...................................................................................................................................................................................... 237 PRUDENTIAL REGULATIONS OF SBP ................................

................................ 237

LESSON 40 ...................................................................................................................................................................................... 240 PRUDENTIAL REGULATIONS OF SBP ................................

................................ 240

LESSON 41 ...................................................................................................................................................................................... 244 PRUDENTIAL REGULATIONS OF SBP ................................

................................ 244

LESSON 42 ...................................................................................................................................................................................... 251 PRUDENTIAL REGULATIONS OF SBP ................................

................................ 251

LESSON 43 ...................................................................................................................................................................................... 263 GUIDELINES FOR BANKS BY SBP ................................

...... 263

LESSON 44 ...................................................................................................................................................................................... 268 THE FINANCIAL INSTITUTIONS (RECOVERY OF FINANCES) ORDINANCE, 2001 .....

..... 268

LESSON 45 ...................................................................................................................................................................................... 273

.................... 273 · LESSON LESSON · LESSON · LESSON 1 · Objectives

This course has been designed with the view to focus special emphasis on the following aspects: Developing interpretational skills and clear understanding of the students regarding prevalent banking and ancillary laws in Pakistan. Developing professional skills so as to apply these laws in real life situations. Enabling them to manage legal requirements pertaining to banks and banking transactions.

The entire course would comprise of the following modules, detail of the topics covered under these modules is also given hereunder:

Module 1 It would cover the following topics:

Introduction to legal system of Pakistan Introduction to Banking Laws

Module 2

Financial system and banking: it would cover the following topics/contents: Financial institutions Financial markets & Financial instruments Evolution of Banking: it would cover in detail the following topics/contents: Historical background Nationalization of banks

Following topics shall be covered at length in this module:

Direct finance, indirect finance, Foreign exchange market, Stock markets, Bond markets, Financial Intermediaries including: Commercial Banks, Credit Unions, Savings and Loan Associations, Mutual Saving Banks, Mutual Funds, Finance Companies, Pension Funds etc. Key Services Provided by Financial Institutions like Risk Sharing, Liquidity Information services. We shall also discuss concept and scope of Debt and equity markets, Primary Markets and secondary markets, Exchange markets and over-the-counter markets (OTC), including Forward contracts and future markets. money market Instruments and Capital market instruments.

Module 3

Some important statutes regarding banking-- This would cover the following statutes: Banking Companies Ordinance, 1962: it would comprise the following topics/contents: Introduction of the ordinance Important statutory definitions Forms of business in which banking companies may engage

Election of new directors Cash reserve Powers of State bank to control advances by banking company Licensing policy of State Bank of Pakistan Guidelines by State Bank Accounts & balance sheet Power of State Bank to remove directors