Cheque Clearing & Nift Processing

Banking

1. UNIVERSTY OF KARACHI KARACHI UNIVERSITY BUSINESS SCHOOL MBA Banking & Finance 2014 Semester II

2. ABOUT ASKARI BANK Askari Bank Ltd (formerly Askari Commercial Bank) is a commercial and retail bank in Pakistan It was founded on October 9, 1991, as a Public Limited Company. On June 21, 2013 the bank was acquired by Fauji Group. It is a branch of Army welfare organization. (AWT). The Bank is listed on the Karachi, Lahore & Islamabad Stock Exchanges

3. ABOUT ASKARI BANK Askari Bank has expanded into a nationwide presence of almost 250 Branches, and an Offshore Banking Unit in Bahrain. A shared network of over 3000 online ATMs covering all major cities in Pakistan supports the delivery channels for customer service. As on December 31, 2013, the Bank had equity of Rs. 9 billion.

4. CLEARING The transfer of fund from a branch of bank to the other bank on which the instrument is drawn, without involving cash through “state bank’s clearing house”.

5. TYPES OF CLEARING Inward clearing Outward clearing

6. INWARD CLEARING “Inward clearing means cheques received by the bank from other bank”

7. INWARD CLEARING The inward clearing process decreases the deposits of the bank. The main operational task done by the banks were: Validation of customer account with the “CORE BANKING SYSTEM”(CBU). Searching the physical instrument or return in. Archival of all the physical instrument.

8. OUTWARD CLEARING “Outward clearing means cheques sent for collection”

9. OUTWARD CLEARING OR “The cheque of other bank, which the account holder deposit in their account” Outward clearing increases the deposits of the bank.

10. DIFFERENT FORMS OF INWARD / OUTWARD CLEARING LOCAL CHEQUE CLEARING (within the same geographical/clearing zone) INTERCITY CHEQUE CLEARING (drawn on a bank outside the local clearing zone) FOREIGN CHEQUE CLEARING (drawn on a bank/location outside the country of the collecting bank)

11. EXAMPLE When we receive inward clearing we have to debit our customer account and when we receive outward clearing we have to send it to relevant bank for payment. For example: A cheque drawn on “HBL” deposited in “MCB” bank is an outward cheque for “MCB” & is an inward for “HBL”

12. INWARD In inward we are the paying banks OUTWARD In outward we are the collecting banks on behalf of the customers & will launch the instrument in clearing DIFFERENCE

13. CLEARING INSTRUMENTS Cheques Demand draft Pay order Travelers cheques

14. ROLE OF NATIONAL INSTITUTIONAL FACILITATION TECHNOLOGY (NIFT) IN CLEARING

15. ABOUT NIFT NIFT - National Institutional Facilitation Technologies (Pvt.). Ltd. was incorporated in September 1995 as joint venture between a consortium of six banks and entrepreneurs from the private sector. All commercial banks and all of their branches in major cities avail NIFT services. As of January 2014, 38 commercial banks and their 8382 branches in 273 major cities, and towns utilize NIFT services through 28 Data Centers.

16. ROLE OF NIFT IN CLEARING NIFT commenced its ACH(automated clearing house)operations in 1996, after signing an agreement with THE STATE BANK OF PAKISTAN. ACH is computer based clearing & settlement facility for interchange of electronic debits & credit among Financial Institution.

17. NIFT SERVICES OVERNTGHT CLEARING overnight clearing included return cheques processing (24 hour clearing cycle) SAME DAY / HIGH VALUE CLEARING Same day/high value clearing included return cheque processing(3 hour clearing cycle)

18. NIFT SERVICES INTERCITY CLEARING Intercity clearing included return cheque processing (48 hour clearing process) COUNTRY WIDE LOCAL US DOLLAR CLEARING Countrywide local US $ dollar clearing included return cheque processing (5 day clearing cycle)

19. MICR SPECIFICATION MICR  (magnetic ink character recognition) is a technology used to verify the legitimacy or originality of paper documents, especially checks. Special ink, which is sensitive to magnetic fields, is used in the printing of certain characters on the original documents.

20. MICR SPECIFICATION

21. OUTWARD CLEARING PROCESS

22. Outward Cheques deposited Scrutiny of cheque & deposits slip Stamping Posting Separate deposits slip & cheque Make bundle of 50 cheques per list Send to NIFT Bundle cover Final voucher prepared

23. INWARD CLEARING PROCESS

24. Inward Cheque withdrawals Scrutiny of cheque & stamps Posting Cancelation Send to account dept Returns marked Attach return memo Return voucher prepared Send to NIFT Transfer stamp

25. REASONS OF CHEQUE RETURN BY BANK

26. CHEQUE RETURN MEMO

27. ITEMS NECESSARY FOR CLEARING INSTRUMENTS Crossing stamps Clearing stamps Date(which should be current) Endorsement stamp on back side Amount in figures & words should be matched Signature verification

28. REQUIRED STAMPS

29. REQUIRED SLIPS

30. DEPOSIT SLIP

31. ONLINE TRANSFER SLIP

32. CLEARING PROCESS BY NIFT

33. RECEIVING OF INSTRUMENTS & SEND TO NIFT

34. PROCEDURE AT NIFT

35. NORMAL CLEARING CYCLE CUSTOMER OF BANK A NIFT CUSTOMER OF BANK B Day 1 5:30 pm Day 2 4 pm Day 2 12 pm Day 2 9 am

36. SAME DAY CLEARING CYCLE CUSTOMER OF BANK A NIFT CUSTOMER OF BANK B Day 1 10:30 am Day 1 4 pm Day 1 2 pm Day 1 12 am

37. SPECIAL CLEARING CYCLE GOVT. BANK NBP NIFT DRAWEE BANK Day 1 10 am Day 1 7 pm Day 1 4 pm Day 1 12 am

38. INTERCITY CLEARING CYCLE KHI BANK NIFT KHI OFFICE TCS LHR BANK NIFT LHR OFFICE

39. ADVANTAGES TO BANK Central repository Sound management Cuts cost Shorter cycle Saves employees effort No loss of cash Convenient

40. ADVANTAGES TO CUSTOMER Short cycle Responsive Safety Simplicity