1

Revise Lecture 27

2

•Deposit Account

3

Banker and Customer

Deposit Account• The main banking activities consist of acceptance of

deposit from the public for the purpose of lending to businessmen and others who may seek loans.

• Actually, the money deposited in any bank is mostly the saving of the people.

• Money may be needed in future for various purposes such as medical treatment, marriages and for other events.

4

Banker and Customer

Deposit Account• So people keep their savings with someone

where it will both be safe and earn a return.• A bank is a such place where money once

deposited remains safe and also earns profit.

5

• Types of deposit account

6

Banker and Customer

Types of deposit account• Bank deposits serve different purposes for

different people.• Some people cannot save regularly, they

deposit money in the bank only when they have extra income.

• Some, mostly businessmen, deposit all their income from sales in a bank account and pay all business expenses out of the deposits.

7

Banker and Customer

Types of deposit account

• Keeping in view these differences, banks offer the people the facility of opening different types of deposit accounts to suit their purpose and convenience.

8

Types of deposit account• Accordingly, bank deposit accounts may be

classified as;1. Savings bank account2. Current deposit account3. Fixed deposit account4. Recurring deposit account5. Salary account

9

• Withdrawal from deposit account

10

Banker and Customer

Withdrawal from deposit account

• Customer deposit his savings for use in future.

• The need for money may arise any time. So customer should know how to get back your money from the bank.

11

Banker and Customer

Withdrawal from deposit account

Money can be withdrawn by using;1. Withdrawal form2. Cheque3. ATM card

12

Types of Accounts Holders

• Banks are custodians of public money.• Basically, the money is accepted as deposit for

safe keeping. • A bank account is a monetary account with a

banking institution recording the balance of money for a customer.

13

Types of Accounts Holders

• Opening an account is the most common and the first service of the banking sector.

• There are different types of bank accounts in the Pakistan banking sector;

1. Bank savings account2. Bank current account3. Bank term deposits account4. Bank online account

14

Types of Accounts Holders

• The due diligence process that the banker should follow will involve providing documentation verifying the customer’s identity, address, and information on his occupation or business and source of funds.

• A part of the due diligence process, the bank may also require an introduction from a person acceptable to the banker if they so deem necessary, and may need the customer’s recent photographs.

15

Types of Accounts Holders

• The bank reserves the right, at its sole discretion, to open any account and, at such terms, as the bank may prescribe from time to time.

• A bank has to deal with different types of account holders which are the following;

16

Types of Accounts Holders

1. Individual2. Joint account holders3. Illiterates4. Minors5. Married women6. Non-resident accounts7. Sole proprietorship8. Partnership firms

17

Types of Accounts Holders

9. Joint stock company 10. Clubs, Associations and Societies11. Trusts12. Government departments13. Local authorities

18

Types of Accounts Holders

•Payment of Pension

19

Types of Accounts Holders

Payment of Pension• Banks make pension payments on behalf of

the government to the retired employees of Central and State Governments, Defence services, Railways and others.

• All prnsion payments are subject to rules and procedures prescribed by the government, SBP and concerned departments / organizations from time to time.

20

Types of Accounts Holders

Payment of Pension• A pensioner can open an account with cheque

book facility and also give nomination in his pension account.

• Once the account is opened, no credit other than pension is permitted in the account.

• Pension accounts are allowed 50% concession in minimum balance requirements as well as in service charges.

21

Types of Accounts Holders

Payment of Pension• If the family pensioner is a widow, at the time

of first payment of pension, a certificate to the effect that she has not re-married and an undertaking to the effect that if she re-married later, she will intimate the fact promptly to the pension-paying branch is required.

22

Types of Accounts Holders

Payment of Pension• The pension usually credited by the branch to

the pensioner’s saving or current account during the last four working days of the month.

• Income tax at the prescribed rate is deducted from the pension amount, and net amount is payable to the pensioner’s account.

23

• Merchant Banking

24

Merchant Banking – An Overview

• The financial services sector is an important

constituent of the financial system and plays a significant role in the realm of economic development of a country.

• Merchant Banking is a prominent component of the financial sector of our country.

25

Merchant Banking – An Overview

• Merchant Banking provides specialist services including portfolio management, project financing and counselling, issue management and underwriting, mergers, acquisitions, venture capital financing, leasing and so on.

26

Merchant Banking – An Overview

• Merchant banking, although a non-banking financial activity, resembles banking function.

• The function of merchant banking which originated, and grew in Europe, was enriched by American patronage, and these services are now being provided throughout the world by both banking and non-banking institutions.

27

Merchant Banking – An Overview

• The word ‘Merchant Banking’ originated among the Dutch and the Scottish traders, and was later on developed and professionalized in Britain.

28

Merchant Banking – An Overview

• A set of financial institutions that are engaged in providing specialist services, which generally include the issue and underwriting, project financing, mergers, acquisitions, venture capital financing, acceptance of bills of exchange and other banking services, are known as ‘merchant bankers’.

• A merchant banker may specialize in one activity and take up other activities, which may be complementary or supportive to the specialized activity.

29

Merchant Banking – An Overview

• In the U.S., investment bankers cater to the needs of business enterprises carrying out merchant banking functions. The main functions of merchant banking are the following;

1. Corporate counselling2. Project counselling3. Pre-investment studies

30

Merchant Banking – An Overview

4. Capital restructuring5. Credit syndication and project finance6. Issue management and underwriting7. Portfolio management8. Working capital finance9. Acceptance creat and bill discounting10. Mergers, Amalgamations and takeovers

31

Merchant Banking – An Overview

11. Venture capital12. Lease financing13. Foreign currency finance14. Fixed deposit broking15. Mutual funds16. Relief to sick industries17. Project appraisal

32

•Public Issue Management

33

Public Issue Management

• The management of securities of the corporate sector offered to the public on a regular basis, and existing shareholders on a rights basis, is known as ‘public issue management’.

• Issue management is an important function of merchant bankers and lead managers.

34

Public Issue Management

• The management of issues for raising funds through various types of instruments by companies is known as ‘issue management’.

• A fast growing economy like Pakistan offers tremendous scope for issue management and the merchant bankers provide their skills and expertise to companies in the management of capital issues.

35

Public Issue Management

The general functions that form part of the capital issues management functions of merchant bankers as follows;

1. Obtaining approval for the issue from SECP2. Arranging for underwriting the proposed issue3. Preparation of draft and finalization of the

prospectus and obtaining its clearance from the various agencies concerned

36

Public Issue Management

4. Preparation of draft and finalization of other documents such as application forms, newspaper advertisements and other statutory requirements

5. Making a choice regarding registrar to the issue, printing press, advertising agencies, brokers and bankers to the issue and finalization of the fees to be paid to them.

37

Public Issue Management

6. Arranging for press conferences and the investors conferences

7. Coordinating printing, publicity and other work in order to get everything ready at the time of the public issue

8. Complying with SECP guidelines after the issue is over by sending various reports as required by the authorities.