Professional Documents
Culture Documents
General Banking
Foreign Trade
Advances
History - Clearing
Started in Florence by A.D. 800
Perfected in Lyons by 1463
Use was widespread in 18th-century Europe
Types of Clearing:
a) Outward Clearing:
Collection of funds of local cheques deposited by the
customer drawn on other Banks.
b) Inward Clearing:
Clearing
Any instruments which are drawn on
our branches and other banks in
same city thats instruments are
called clearing.
We affix clearing and date stamp on
these instruments.
Section 58 provides
That no person is entitled to receive the
amount of the instrument for following cases:
A person is finder of instrument lost by
another
Has obtained it from the maker, drawer,
acceptor, or holder thereof by means of an
offence or fraud or for an illegal
consideration.
Any person who claims it through such
person who is not entitled to receive its
amount.
Overview:
Clearing of Bank Instruments includes collection and payment of:
Cheques,
Demand Draft,
Payment Order,
Dividend Warrants etc.
Cheques
Demand Draft
Payment Order
Dividend Warrants etc.
Parts of a cheque?
Drawer, the person or entity who makes the
cheque
Clearing means?
debiting payer's account & crediting
payee's account.
Kinds of Clearing
NORMAL CLEARING
SPECIAL CLEARING
INTER CITY CLEARING THROUGH NIFT
stamp on cheques/instruments.
Scrutiny of cheques/instruments.
Signature Verification on cheques.
Types of Clearing
Outward Clearing?
Collection of funds of local cheques deposited by the
customer drawn on other Banks.
Types of Clearing
Inward Clearing?
Payment of cheques of our customers drawn on us
Clearings
The banking function in which
negotiable instruments of the other
member banks are collected in customer
accounts.
Collections
Collection of funds among cities.
Transfers
Collection of funds with in same
bank/same branches
ROLE Of SBP/NBP
SBP/NBP (where SBP is not
available) act as the clearing
agent.
All banks have their accounts
with SBP/NBP
The clearing process is carried
out by NIFT on approval
organization by Govt./SBP.
NIFT
National Institutional facilitation
Technology.
Clearing House
In the big town of Pakistan many commercial
banks operate.
As there are various banks so are there
Clearing House
Mr. Zaid has an account in the ABC Bank
Clearing House
The bankers clearing house therefore, is an
Clearing House
Here, banks compare debts which are in the
Collection means?
Collecting Banker:
Collecting Banker:
A collecting banker is the one who has assumed duty of collecting the
proceeds of an instrument for the customer or for himself. When Bank
collects the proceeds for the customer, he acts as his/her agent, whereas
in case of collecting for himself, he is holder for value by virtue of the fact
that:
He either has already made the payment before collection of
proceeds or,
The Cheques are received for adjustment of any liabilities.
A collecting banker has no legal obligation to collect cheques drawn on
other bank for the customers. Negotiable Act Section 181 relating to
crossed cheques (Account Payee) says that where a banker in good faith
and without negligence receives payment for a customer of a cheque
crossed generally or specially to himself, and the customer has no title or
defective title thereto, the bankers shall not incur any liability to true owner
of the cheque by reason only of having received such payment.
COLLECTION OF INSTRUMENTS
WHEN INSTRUMENTS PERTAIN TO
THE DIFFERENT CITIES, THESE ARE
COLLECTED/PROCESSED IN THE
COLLECTION.
Transfer
Any instruments which are drawn on same
branch.
We affix
Transfer Delivery
Any instruments which are drawn on other
these instruments.
In which cities where NIFT works there is no
Transferability
In simple transferability, even an innocent
Coverage
3
NIFT & ITS FUNCTIONS
NATIONAL INSTITUTIONAL
FACILITATIONAL TECHNOLOGIES
financial instruments
Automated System of
over in Pakistan
B.
over in Pakistan
C.
over in Pakistan
D.
Clearing Cycle)
Customer
Customer
Sends
Sends
Cheque
Cheque
Supplier
Supplier(payee)
(payee)
.
receives
receives
check
check
Supplier
Supplier
deposits
deposits
check
check
Check
Check
forwarded
forwarded
Suppliers
Suppliersbank
bank
isis
credited
credited
Suppliers
Suppliers
account
accountis
is
credited
credited
Check
Checkis
is
presented
presentedfor
for
payment
paymentto
to
customers
customers
bank
bank
Customers
Customers
bank
bankaccount
accountisis
debited
debited
Clearing
Clearingagent:
agent:
on-us,
on-us,
or
orcorrespondent,
correspondent,
or
orclearinghouse
clearinghouse
Kinds of Clearing
NORMAL CLEARING
SPECIAL CLEARING
INTER CITY CLEARING THROUGH NIFT
stamp on cheques/instruments.
Scrutiny of cheques/instruments.
Signature Verification on cheques.
i.
Resolution of Discrepancies
Resolution of Discrepancies
Resolution of Discrepancies
Signature Differ
Resolution of Discrepancies
Other cases:
All Call Deposit Receipts - CDRs issued by
branches
Speed Cash, Remit Express Drafts
Foreign DDs drawn on Global Transaction Banking
Branch
Un-signed/singly signed bank drafts
Revalidation required: stale dated bank drafts
iv. Mention the Name of the collecting Bank to whom branches will return the
cheque.
v. Mention the return reason (should be as per approved return reason list by
SBP )
As per the SBP directives banks are not allowed to give ambiguous reasons like Refer to
Drawer when a cheque is returned unpaid by them for insufficient funds or for any other
reason. As a result, the beneficiary of the cheque is not in a position to take action against the
issuer of the cheque under the provisions of relevant laws. Hence, branches must give
definite and clear reasons while returning the cheques to the beneficiary (Whether on Cash
Counter or Clearing/Collection).
Common Irregularities
Demand Draft
Pay Order
Internal Funds Transfer
Rupee Travelers Cheques
ATMs
Virtual Banking
b.
CROSSING OF CHEQUES
Conversion of CC into OC
Conversion of a Crossed Cheque into Open Cheque:
A crossed Cheque can be converted into an open cheque by writing,
Please pay Cash near the crossing with full signature of the drawer.
The drawer can cancel the crossing. However, the banker can cancel
the special crossing.
Who can cross the cheque?
1. The drawer.
2. Holder, where the cheque is uncrossed.
3. Holder may cross a cheque especially where the cheque is
crossed generally.
4. A cheque crossed specially to one banker may be crossed specially to
another banker.
5. Where an uncrossed cheque or cheque crossed generally is sent to a
banker for collection may cross it especially to himself.
Advantages of Crossing
Crossing has the following advantages:
1)Minimize the risk of loss or forgery.
2)Direction to the paying banker to pay the money generally
ENDORSEMENT
Definition of Endorsement:
When the maker or holder of a negotiable instrument
signs the same otherwise than as such maker for the
purpose of negotiation on the back or face thereof or on
a slip of paper annexed thereto, or so signs for the same
purpose a stamped paper intended to be completed as
a negotiable instrument, he is said to endorse the same
and is called the Endorser.
of a negotiable instrument.
Can be given also on the face of an instrument.
Has no particular form of words.
Can also be given on a piece of paper annexed to a negotiable
instrument. The annexed piece of paper is called Alonge.
Should be given for the purpose of negotiation, which has been
defined
in the Section 14 of the Negotiable Instrument Act 1881 as under:
Classification of Endorsement:
There are mainly five kinds of endorsement:
Classification of Endorsement:
d) Partial Endorsement: It is an endorsement, with purpose to
transfer to the endorsee a part of the amount payable on a Bill of
Exchange or promissory Note. It is not valid endorsement.
Principals of Endorsement:
1. The name of the endorser must appear exactly in the
same spellings as written in the instrument as payee.
Principals of Endorsement:
4. Endorsement made in type writing or printed form is not
treated as valid unless, the payee gives satisfactory
evidence about its genuineness
Collecting Banker:
A collecting banker is the one who has assumed duty of collecting the
proceeds of an instrument for the customer or for himself. When Bank
collects the proceeds for the customer, he acts as his/her agent, whereas
in case of collecting for himself, he is holder for value by virtue of the fact
that:
He either has already made the payment before collection of
proceeds or,
The Cheques are received for adjustment of any liabilities.
A collecting banker has no legal obligation to collect cheques drawn on
other bank for the customers. Negotiable Act Section 181 relating to
crossed cheques (Account Payee) says that where a banker in good faith
and without negligence receives payment for a customer of a cheque
crossed generally or specially to himself, and the customer has no title or
defective title thereto, the bankers shall not incur any liability to true
owner of the cheque by reason only of having received such payment.
Overview
Advantages of EPS
efficient
effective
Current E-payment
methods
Fedwire
small volume,banks
Clearing House Interbank Payments System
(CHIPS)
small volume, large amount for corporations
Conventional payment
process
Seller transfer goods or services to buyer and
Seller
Seller bank
Deposit cash or
payment
information
Payment
goods
Withdraw cash or
payment information
Buyer bank
Buyer
information)
intermediaries required(credit card company
Characteristics of Epayment
Lack of face to face interaction
lack of trust
require intermediaries to provide security,
Types of E-payment
Non-sensitive Transfer system
no sensitive info is passed over the network
only seller /buyer id, amount, item
intermediary is the centralized commerce
enabler, verify seller/buyer id and do the rest
maintain membership and payment info
Settlements
Payment requests and confirmation
Seller bank
seller
Intermediary
Buyer bank
ID number
buyer
Goods
Settlements
Payment information
seller
Seller bank
Payment clearing
services(PCS)
goods
Payment info
Buyer bank
offline
buyer
online
Notational Funds Transfer System
Settlements
Inside money flow
Seller bank
seller
Intermediary
ID number
Buyer bank
buyer
Goods
Properties of digital
currencies
Monetary value
exchangeable for payment
storable and retrievable
not be easy to copy
provide convenience
provide Security
adequate protection standards are needed
Authentication
can not be physically examed
use digital signature
Non-refutability
cash: receipt is good for non-refutability
E-cash: append all transaction record
Mondex
smart card
peer to peer
offline -such as prepaid phone card, copy
card
online like Ecash
like a portable hard drive with a build in
Ecash Mint
unlike debit card: just in time pay card
Thank you