Consumer BankingConsumer Banking

Project on Types of loans offered by the banks

Group MembersGroup MembersUMBRIN SHAHIDSAMIA MEHMOOD

AQSA AKBAR

OMER ATIQUE

BANKING SECTORBANKING SECTOR

IntroductionIntroductionA Bank is a financial institute. It deals

in other’s people money. It borrows money from one person and lends it to other person. Banks play very positive and important role in the overall economic development of the country. They are the pipe lines through which the economy is in or out of the country. In a country like Pakistan which is still in the initial stages of the development, a well organized banking system is needed and Banks are playing a great role in the development of country.

Definitions of BankingDefinitions of Banking

1. “Banking means the accepting for the purpose of lending or investing of deposits of money from the public repayable in demand or otherwise and withdraw able by cheque, draft order or otherwise” - (Banking Companies Ordinance 1962)

Bank LoanBank LoanIntroduction As we know that the banks

accepts deposits from different people. They don’t keep this money with themselves. A major portion of these deposits is led by banks to different people and from that money they earn profit.

BorrowerBorrower

Borrower means a person on whom a bank/DFI has taken any exposure during the course of business.

Types of customersTypes of customers

Public Limited CompanyPrivate Limited CompanyPartnership FirmSole ProperietorshipIndividualGovernment owned entity

Procedure of taking loanProcedure of taking loanCustomer comes to bank & meets the

Relationship Manager. Customer & RM discuss the business of the

borrower, credit requirements of the customer and security that the customer will provide against credit facilities.

Customer gives the written request for obtaining loan to RM.

RM calls the CIB report to check the credit history of the borrower.

RM prepares the credit proposal if he satisfied with the credit history of the borrower

Procedure of taking loanProcedure of taking loanRM asks the customer to provide all the pre

approval documents. All the pre approval documents are discussed below in detail.

RM gives proposal to Credit Administration Department (CAD) for routing the proposal to credit committee along with all the pre approval documents.

CAD after checking the proposal and all the pre approval documents routes the proposal to Credit Risk Management (CRM)

CRM analysis the proposal, financials, cash flows etc and gives their decision on proposal i.e. Approved or Rejected.

Procedure of taking loanProcedure of taking loanBusiness after receipt of approval prepares

the Offer Letter and issue Offer Letter to customer.

After acceptance of Offer Letter, RM will ask the CAD to prepare the borrowing documents for execution from customer.

After execution of documents RM will provide all the required documents as per CAD checklist and security collateral with legal opinion to CAD.

CAD will check all the documents and if found in order CAD will issue Disbursement Authorization Certificate (DAC).

CREDIT FACILITIESCREDIT FACILITIES

Credit Facilities (Short Term/For Credit Facilities (Short Term/For Exporters/For Importers/Non Funded Exporters/For Importers/Non Funded Facilities)Facilities)

1. Cash Finance/ Running Finance/ Overdraft

2. Export Refinance Finance Part - I (ERF-I)3. Export Refinance Finance Part - II (ERF-II)4. Finance/Loan Against Packing Credit

(FAPC/LAPC)5. Foreign Bills Purchased – (FBP – A)/ FAFB6. Foreign Bills Purchased – against L/C

(FBP) & FBP (Disc)7. FE – 25 ($ Financing) for Exporters8. Letter of Guarantee9. Letter of Credit- Sight

Credit Facilities (Short Term/For Credit Facilities (Short Term/For Exporters/For Importers/Non Funded Exporters/For Importers/Non Funded Facilities)Facilities)10.Letter of Credit- Usance11.Inland Letter of Credit- Sight12.Inland Letter of Credit- Usance13.Finance / Loan against Trust

Receipt (FATR / LATR)14.Finance / Loan against Imported

Merchandise (FIM/LIM)15.FE – 25 ($Financing) for

Importers

Long Term Credit FacilitiesLong Term Credit FacilitiesAll Credit facilities approved for

tenors greater than one year with a fixed repayment schedule are defined as long term credit facilities.1. Demand Finance / Term Finance

SECURITIESSECURITIES

Securities held by the banks Securities held by the banks against credit facilitiesagainst credit facilities1. Mortgage Property2. Hypothecation of stocks 3. Pledge of stocks4. Charge on current assets of the

company5. Charge on fixed assets of the

company6. Pledge of DSC/ SSC/RIC7. Pledge of TDR/FDR8. Account under lien

Securities held by the banks Securities held by the banks against credit facilities against credit facilities (con’t)(con’t)9. Shares10.Cash margin11.EE Statement12.Import document under lien13.Lien on export

documents/contracts/Firm orders

14.Trust Receipt15.Personal Guarantee

LOAN LOAN DOCUMENTATIONDOCUMENTATION

Standard Documents Standard Documents Required Before Sanction of Required Before Sanction of LoanLoan• Individual Customer

• Customer Request• CIB• BBFS• Appropriate utilization of loan• CNIC of Individual• NTN of Individual

Standard Documents Standard Documents Required Before Sanction of Required Before Sanction of LoanLoan• Sole Proprietor

• Sole Proprietorship Undertaking• Customer Request• CIB• BBFS• Appropriate Utilization of Loan• Financials• CNIC of Proprietor• NTN of Company

Standard Documents Standard Documents Required Before Sanction of Required Before Sanction of LoanLoanPartnership Firm

Partnership Deed Partnership Mandate Form-C Customer Request CIB of Partners CIB of Company BBFS Appropriate Utilization of Loan Financials CNIC of Partners NTN of Company and Partners

Standard Documents Standard Documents Required Before Sanction of Required Before Sanction of LoanLoanPrivate Limited Company

Board Resolution Memorandum and Articles of Association Certificate of Incorporation Customer request CIB of company BBFS Appropriate Utilization of Loan Financials CNIC of directors NTN of Company

Standard Documents Standard Documents Required Before Sanction of Required Before Sanction of LoanLoanPublic Limited Company

Board Resolution Memorandum and Articles of Association Certificate of Incorporation Certificate of Commencement of Business Customer request CIB of company BBFS Appropriate Utilization of Loan Financials CNIC of sponsoring directors NTN of Company

CONCLUSIONCONCLUSION

ConclusionConclusionPakistan is basically an agro based economy. In the beginning the circumstances were very unfavorable. But with passage of time the country made rapid advancements. Banking sector developed very rapidly and helped all other sectors in the process of development and growth by providing necessary finance and economic assistance. Banks played an important role in the development of industry, trade, commerce and other sectors of the economy.

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