Banking Operations (MAIN TOPICS)

8/10/2019 Banking Operations (MAIN TOPICS)

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ASSIGNEMENT

BANKING OPERATIONS

SUBMITTED BY

NAME: M. Saqib Shahzad

COURSE: International Banking

REGISTRAION NUMBER: 1552-113031


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TABLE OF CONTENTS

Financial Credit Institutions in Pakistan (page-2)

TYPES OF BANK FUNDS (page-4)

PARTNERSHIP ACCOUNT (page-6)

Silent Features of a Joint Stock Company (page-9)

SILENT FEATURES OF ACCOUNTS OF TRUSTS (page-11)

Silent Features of ACCOUNTS OF CLUBS (page-24)

MORTGAGE (page-25)

LENDING IS CRITICAL (page-27)

HISTORY OF EVOLUTION OF BANKING (page-31)

INDORSEMENTNATIONALIZATION OF BANKS AND ITS EFFECTS (page-32)

ASIAN DEVELOPMENT BANK (ADB) (page-36)

IMF (page-37)

PLEDGE (page-38)


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HYPOTHECATION (page-41)

MONEY PAID BY MISTAKE (page-42)

CLASSES OF ENDORSEMENTS (page-43)

Q-1 Detail Note

Financial Credit Institutions in Pakistan

BANKS

A bankis a commercial or state institution that provides financial services, including

issuing money in various forms, receiving deposits of money, lending money and

processing transactions and the creating of credit.

Central Bank

Its primary responsibility is to maintain the stability of the national currency and money

supply, but more active duties include controlling subsidized-loan interest rates, and

acting as a lender of last resortto the banking sector during times of financial crisis

Commercial Banks

A commercial bank accepts deposits from customers and in turn makes loans, even in

excess of the deposits; a process known as fractional-reserve banking. Some banks

(called Banks of issue) issue banknotes as legal tender.

Investment Banks


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Investment banks help companies and governments and their agencies to raise money

by issuing and selling securities in the primary market. They assist public and private

corporations in raising funds in the capital markets (both equity and debt), as well as in

providing strategic advisory services for mergers, acquisitions and other types of

financial transactions.

Saving Banks

A savings bankis a financial institution whose primary purpose is accepting savings

deposits. It may also perform some other functions.

Micro Finance Banks

For the purpose of poverty reduction program, such kind of banks are working in the

different countries with the contribution of UNO or World Bank.

In Pakistan 7 Micro Finance Banks are providing services under the SBP prudentialregulation.

Islamic Banks

Islamic bankingrefers to a system of banking or banking activity that is consistent with Islamic

law (Sharia) principles and guided by Islamic economics. In particular, Islamic law prohibits

usury, the collection and payment of interest, also commonly called ribain Islamic discourse

Specialized Banks

ZTBL

The Zarai Taraqiati Bank LimitedIt is also known as Agricultural Development

Bank of Pakistan(ADBP).

It is the premier financial institution geared towards the development of the

agricultural sector through the provision of financial services and technical know-

how.

Specialized Banks

IDBP

Industrial Development Bank of Pakistan is one of Pakistan's oldest development financing

institution created with the primary objective of extending term finance for investment in the

manufacturing sector and SME Sector of the economy.

Specialized Banks

SME Bank

Promote the business.


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Positive impact on Financial environment.

Financing of projects.

Tell revenue generation schemes to entrepreneurs.

Non-banking financial company

Non-bank financial companies(NBFCs) also known as a non-bankor a non-bank bank,

are financial institutions that provide banking services without meeting the legal

definition of a bank, i.e. one that does not hold a banking license.

Non-bank institutions frequently acts as suppliers of loans and credit facilities,

supporting investments in property, providing services relating to events within peoples

lives such as funding private education, wealth management and retirement planning

however they are typically not allowed to take deposits from the general public and

have to find other means of funding their operations such as issuing debt instruments.

In India, most NBFCs raise capital through Chit Funds.

Investment company

An investment company invests the money it receives from investors on a collective

basis, and each investor shares in the profits and losses in proportion to the investors

interest in the investment company.

Leasing Companies

A leaseor tenancyis the right to use or occupy personal property or real property given

by a lessor to another person (usually called the lessee or tenant) for a fixed or

indefinite period of time, whereby the lessee obtains exclusive possession of the

property in return for paying the lessor a fixed or determinable consideration (payment)

Q-2

TYPES OF BANK FUNDS

Checking account


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A checking account offers easy access to your money for your daily

transactional needs and helps keep your cash secure.

Customers can use a debit card or checks to make purchases or pay bills.

Accounts may have different options or packages to help waive certain monthly

service fees.

To determine the most economical choice, compare the benefits of different

checking packages with the services you actually need.

Savings account

A savings account allows you to accumulate interest on funds youve saved for

future needs.

Interest rates can be compounded on a daily, weekly, monthly, or annual basis.

Savings accounts vary by monthly service fees, interest rates, method used to

calculate interest, and minimum opening deposit.

Understanding the accounts terms and benefits will allow for a more informed

decision on the account best suited for your needs.

Certificate of Deposit (CD)

Certificates of deposit, or CDs, allow you to invest your money at a set interest

rate for a pre-set period of time.


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CDs often have higher interest rates than traditional savings accounts because

the money you deposit is tied up for the life of the certificatewhich can range

from a few months to several years.

Be sure you do not need to draw on those funds before you open a CD, as early

withdrawals may have financial penalties.

Money market account

Money market accounts are similar to savings accounts, but they require you to

maintain a higher balance to avoid a monthly fee.

Where savings accounts usually have a fixed interest rate, these accounts have

rates that vary regularly based on money markets.

Money market accounts can have tiered interest rates, providing more

favorable rates based on higher balances.

Some money market accounts also allow you to write checks against your

funds, but on a more limited basis.

Individual Retirement Accounts (IRAs)

IRAs, or individual retirement accounts, allow you to save independently for

your retirement.

These plans are useful if your employer doesnt offer retirement benefits or

you want to save more than your employer-sponsored plan allows.

These accounts come in two types: the traditional IRAand Roth IRA.


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The Roth IRA is popular because the funds can be withdrawn tax-free in many

situations.

Others prefer traditional IRAs because these contributions are tax-deductible.

Both accounts have contribution limits and other requirements you may need

to discuss with your tax advisor before choosing your account.

Q-3

PARTNERSHIP ACCOUNT

FEATURES

I have written some main features of partnership account below:

1. Agreement

There must be agreement between the parties concerned. This is the most important

characteristics of partnership. Without agreement partnership cannot be formed. "No

agreement no partnership." But only competent persons are entitled to make a contract.

There are some provisions contained in the partnership agreement. These are determined

clearly before the commencement of business. But it differs from business to business. This

documents may be written or oral. But it must be written so that disputes may be settled

according to the provisions of agreement.

2. Number of Partnership

There should be more than one person to form a partnership. But there is restriction for the

maximum number of partners. In case of ordinary business, the partners must not exceed 20

and in case of banking must not exceed 10 (before nationalization).

3. Business

The object of the formation of partnership is to carryon any type of business. It may be

manufacturing or merchandise type small or large scale business. But it should not be illegal

business in the country concerned.

4. Profit motive


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The basic motive of the formation of partnership is to earn profit. This profit is distributed

among the partners according to agreed proportion. If there is loss it will be sustained by all

partners except the minor.

5. Conduct of Business

The business of partnership is conducated by all the partners or any or them acting for all. Buteach partner is allowed to participate in the management by law.

6. Entity

It has no separate entity apart from its members. It is not independent of the partners. Law has

not granted it any legal entity.

7. Unlimited liability

This is the prominent feature of partnership that the liability of each partner is not limited to

the amount invested but his private property is also liable to pay the business obligations.

8. Investment

Each partner contributes his share in the capital according to the agreement. Some persons

become partners without investing any capital to the business. But they devote their time,

energy and ability to their business instead of capital and receive profit.

9. Transferability of share

There is restriction to transfer the share from one partner to another person without the

consent of existing partners. So the investment in the partnership remains confined into few

hands.

10. Position

One partner is an agent as well as principal to other partner. He can bind the other person byhis act. In the position of an agent he can make contract with another person or parties on

behalf of his concerned firm.

11. Mutual Confidence

The business of the partnership cannot be conducted successfully without the element of

mutual confidence and cooperation of partners. So the members must have trust and

confidence in each other.

12. Free Operation

There are no strict rules and regulations to control the partnership activities in our country i.e.

no restriction for the audit of accounts, submission of various reports and other copies to anygovernment authority. So this organization may operate freely without any interference.

Q-3 (ii)

Silent Features of a Joint Stock Company


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The important characteristics of a Joint Stock Company are as follows:

Incorporated association

A company is called an incorporated association because it comes into existence only

after registration.

Whereas in other forms of business ownership sole proprietorship and partnership

registration is not compulsory.

Minimum Number of Members

Forming a public company at least 7 persons and for forming a private company at least

2 persons are required.

If not registered it would be treated as illegal association.

Artificial legal person

A company is a creation of law and is called an artificial person.

It exists only in the contemplation of law, and therefore, has no physical form.

However, law grants it the right to act as a natural being through a board of directors

elected by the shareholders.


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Distinct legal entity

A company is regarded as an entity separate from its members because a shareholder of

a company

(i) in his individual capacity cannot bind the company in any way.

(ii) Can enter into contract with the company and can be an employee of the company,

(iii) cannot be held liable for the acts of the company even if he holds the entire share

capital.

Likewise, the company has

(i) the right to own the property in any way it likes.

(ii) Can sue and be sued in its own name by its members as well as outsiders, (iii) life of

the company is independent of the life of its members.

Perpetual succession

A company has unending life quite independent of the life of its members.

The death, insolvency, or exit of any shareholder has no effect on the life of a company.

During the war all the members of one private company, while in general meeting,

were killed by a bomb.

But the company survived; not even a hydrogen bomb could have destroyed it.


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However, sole proprietorships and partnerships do not enjoy uninterrupted life.

The proprietary business almost comes to an end if anything happens to the proprietor.

Even when it is passed on to the successors, they may not be competent to operate it.

Partnership, for instance, comes to an end on the death, lunacy, or insolvency of a

partner.

A partner can also put an end to partnership by retirement.

Common Seals

Requires that a company must have a common seal with its name engraved on it.

Any document bearing the common seal of the company, and signed by two directors,

legally binds the company.

Transferability of shares

The capital of a company is divided into parts, called shares.

There shares of the company are transferable.

In a public company this right of transfer is absolute.

In a private accompany, however, some restrictions on the right of transfer of shares are

imposed through its articles.


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Limited liability

The liabilities of a shareholder of a company are usually limited.

For satisfaction of the debts of the company, the personal property of the shareholder

cannot be used. A shareholders liability is limited to the amount unpaid on their shares,

irrespective of the magnitude of losses suffered.

In case of a guarantee company, however, the members are liable to contribute a

specified agreed sum in the event of the company being wound-up.

In case of sole proprietorship and partnership the positions different.

In sole-proprietorship, the liability of the owner is unlimited, that is, even to the extent

of his personal possessions. The nature of partners liability is also the same.

The liability of partners is both individual and collective.

Q-3 (iii)

Silent Features of ACCOUNTS OF CLUBS

First 10,000 cash paid in or withdrawn each month at our counters is FREE

200 FREE transactions per month

No monthly account fee

Convenience of a debit card

Online and telephone banking

Free transactions in Europe Monthly statements

FREE presentation cheques for special occasions


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Q-3 (iv)

SILENT FEATURES OF ACCOUNTS OF TRUSTS

(1) Bank Account

Bank account for the project funds shall be opened only in a nationally recognized bank

or any other bank authorized by the central bank of the country.

Necessary authorization to open any bank account or alter its manner of operation

would need to be got in writing from the necessary authority.

Separate bank account can be opened depending upon the project need.

(2) Authorized Signatories

Every check/instrument is signed by at least two signatories

A staff that has access to bank account and cash account is not entitled to be an

authorized signatory.

(3) Authority to Sign

The authority to sign should lie with selected executive members of society.

The bank is authorized to undertake any written instructions, signed by two of the

signatories, for transacting any financial business from time to time.

(4) Closing of Bank Accounts

Any bank account not required to be operated must be closed immediately.

The Finance/Accounts person has to take the matter with the Competent Authority and

procure in writing the obtaining necessary resolution.

When it is decided to close a bank account, the following actions should be completed:


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Transfer balance in the account (leaving the minimum amount required) to the

other bank account.

Surrender all the check leaves to the bank under a receipt.

After receipt of the resolution, deliver it to the bank under receipt and transfer

the balance to another account.

Confirm closure of the bank account and transfer of balance to the competent.

Q-4 Detail Note

MORTGAGE

Definition:

Mortgage is a loan taken to purchase property and guaranteed by the same property

example of a mortgage is the loan you took out when you bought your house.

Types:

Option 1: Fixed vs. Adjustable Rate

As a borrower, one of your first choices is whether you want a fixed-rate or an adjustable-rate

mortgage loan. All loans fit into one of these two categories, or a combination "hybrid"category. Here's the primary difference between the two types:

Fixed-rate

mortgage loans have the same interest rate for the entire repayment term. Because of

this, the size of your monthly payment will stay the same, month after month, and year

after year. It will never change. This is true even for long-term financing options, such as


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the 30-year fixed-rate loan. It has the same interest rate, and the same monthly

payment, for the entire term.

Adjustable-rate

mortgage loans (ARMs) have an interest rate that will change or "adjust" from time totime. Typically, the rate on an ARM will change every year after an initial period of

remaining fixed. It is therefore referred to as a "hybrid" product. A hybrid ARM loan is

one that starts off with a fixed or unchanging interest rate, before switching over to an

adjustable rate. For instance,the 5/1 ARM loancarries a fixed rate of interest for the

firstfiveyears, after which it begins to adjust every oneyear, or annually. That's what

the 5 and the 1 signify in the name.

Option 2: Government-Insured vs Conventional Loans

So you'll have to choose between a fixed and adjustable-rate type of mortgage, as explained in

the previous section. But there are other choices as well. You'll also have to decide whether you

want to use a government-insured home loan (such as FHA or VA), or a conventional "regular"

type of loan. The differences between these two mortgage types are covered below.

A conventionalhome loan is one that is not insured or guaranteed by the federal government

in any way. This distinguishes it from the three government-backed mortgage types explained

below (FHA, VA and USDA).

Government-insured home loans include the following:

FHA Loans

The Federal Housing Administration (FHA) mortgage insurance program is managed by the

Department of Housing and Urban Development (HUD), which is a department of the federal

government. FHA loans are available to all types of borrowers, not just first-time buyers. The

government insures the lender against losses that might result from borrower default.

Advantage: This program allows you to make a down payment as low as 3.5% of the purchase

price. Disadvantage: You'll have to pay for mortgage insurance, which will increase the size of

your monthly payments.

VA Loans

The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members

and their families. Similar to the FHA program, these types of mortgages are guaranteed by thefederal government. This means the VA will reimburse the lender for any losses that may result

from borrower default. The primary advantage of this program (and it's a big one) is that

borrowers can receive 100% financing for the purchase of a home. That means no down

payment whatsoever.

USDA / RHS Loans
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The United States Department of Agriculture (USDA) offers a loan program for rural borrowers

who meet certain income requirements. The program is managed by the Rural Housing Service

(RHS), which is part of the Department of Agriculture. This type of mortgage loan is offered to

"rural residents who have a steady, low or modest income, and yet are unable to obtain

adequate housing through conventional financing." Income must be no higher than 115% of the

adjusted area median income [AMI].

Option 3: Jumbo vs. Conforming Loan

There is another distinction that needs to be made, and it's based on the sizeof the loan.

Depending on the amount you are trying to borrow, you might fall into either the jumbo or

conforming category. Here's the difference between these two mortgage types.

A conforming loan

is one that meets the underwriting guidelines of Fannie Mae or Freddie Mac,particularly where size is concerned. Fannie and Freddie are the twogovernment-

controlledcorporations that purchase and sell mortgage-backed securities (MBS).

Simply put, they buy loans from the lenders who generate them, and then sell them to

investors via Wall Street. Aconforming loanfalls within their maximum size limits, and

otherwise "conforms" to pre-established criteria.

A jumbo loan, on the other hand, exceeds the conforming loan limits established by

Fannie Mae and Freddie Mac. This type of mortgage represents a higher risk for the

lender, mainly due to its size. As a result, jumbo borrowers typically must have excellent

credit and larger down payments, when compared to conforming loans. Interest rates

are generally higher with the jumbo products, as well.

Reference link: (http://www.homebuyinginstitute.com/mortgagetypes.php#ixzz3I5oHqCcM)

Q-5 Detailed Note
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LENDING IS CRITICAL

REASONS

Character

We always check to see how well you have managed your personal debt in the past.

Personal references, business experience and work history can sometimes substitute,

but a strong personal credit history proves that you have the willingness and the

discipline to repay past debts and future obligations.

Credit

Wells Fargo uses a credit-reporting agency to look at your payment history with trade

suppliers and other business obligations. We also look to see that your payments to

other financial institutions are current.

Cash Flow

Wells Fargo is a cash flow lender. That means we look at the cash flow of your business

as the primary repayment source for the money we lend you. How do we compute cash

flow? A company's cash flow is its net profit, plus its non-cash expenses depreciation

and amortization. Our rule of thumb is that for every $1 in total loan payments, yourbusiness must generate $1.50 in cash flow.

Capacity

We wants to know how you would be able to repay your loan in case there was a

sudden downturn in your business. Do you have the capacity to convert other assets to

cash, either by selling them or borrowing against them? Your ability to do this could

include real estate holdings, certificates of deposit, stocks and other sources of savings

that can be liquidated quickly.

Collateral

we make both secured and unsecured loans. With a secured loan, you pledge something

that you own as collateral. It might be personal assets like certificates of deposits or

stocks, or business assets like real estate, inventory, equipment or accounts receivable.


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PRINCIPLES OF LENDING:

Principal decision-maker

If you are, we will ask you to complete and submit the loan application. If there are

multiple owners of your business, at least two of them will need to submit their

information with the application.

Financial Performance

Your financial performance over time is usually a pretty good measure of where you've

been and where you're going. To get conventional bank financing from Wells Fargo, it

helps to have been in business for at least three years.

Bankruptcy

If either you or your business has declared bankruptcy within the last 10 years, chances

are Wells Fargo will not lend to you unless you have repaid all of your creditors. The

best way for you to re-establish a good credit record is to repay your creditors as soon

as possible.

Consistent payments

We use a consumer credit-reporting agency to see how you have handled your personal

debt. While an occasional late or missed payment is understandable, if you consistently

pay late, you may not qualify for business credit. Sometimes you just need to set up anaccounting system to ensure that you pay all your bills on schedule. If you find that you

are consistently running short of cash, then you should take steps to trim expenses,

increase sales revenues or raise equity for your business.

Legal judgment

In the case of a tax lien or a legal judgment against you or your firm, the beneficiary of

any settlement stands first in line for payment. The best thing to do before you apply for

business credit is to pay and release all liens and judgments, and settle all suits.

Sources

Credit cards, lines of credit and loans are a key part of every individual's credit record. A

strong credit history proves you have the willingness and discipline to repay debts. Lack

of a credit record makes it much more difficult to borrow money. If you do not have

credit today, secure credit soon and use it wisely. Good places to start include trade

credit, credit cards, auto loans, home equity and lines of credit.


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Profitability

Tax returns are a quick way to determine if you've shown a profit in the last few years. If

your business is not profitable, it may be difficult for you to make the payments on your

credit line or loan. So, if your business is not profitable, examine your expenses for

opportunities to cut back and look at your sales for opportunities to increase revenues.Maybe you can sell more to a current customer. Or you might need more customers.

Cash flow

Wells Fargo looks at the cash your business generates as the primary repayment source

for the money we lend you. We compute the cash in your business by adding non-cash

expenses (such as depreciation and amortization) to net profits. If your business doesn't

generate $1.50 in cash for every $1 in debt payments, then you will need to look for

ways to decrease expenses or increase sales to boost the cash in your business

Q-6 Detail Note

HISTORY OF EVOLUTION OF BANKING

Religion and banking: 12th - 13th century

The Christian prohibition on usury eventually provides an opportunity for bankers of

another religion.European prosperityneeds finance. TheJews,barred from most other

forms of employment, supply this need. But their success, and their extreme visibility as

a religious sect, brings dangers.

Bankers to Europe's kings: 13th - 14th century

During the 13th century bankers from north Italy, collectively known as Lombards,

gradually replace theJewsin their traditional role as money-lenders to the rich and

powerful. The business skills of the Italians are enhanced by their invention ofdouble-

entry book-keeping.Creative accountancy enables them to avoid the Christian sin of

usury;interest on a loan is presented in the accounts either as a voluntary gift from the

borrower or as a reward for the risk taken.
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The Fugger dynasty: 15th - 16th century

At the start of the 15th century the Medici are Europe's greatest banking dynasty, but

their political power later distracts them from the highly focussed business of makingmoney. After the reign of Lorenzo the Magnificent thebank's financesare in a perilous

state.

Banks and cheques: from the 16th century

In 1587 the Banco della Piazza di Rialto is opened in Venice as a state initiative. Its

purpose it to carry out the important function of holding merchants' funds on safe

deposit, and enabling financial transactions in Venice and elsewhere to be made

without the physical transfer of coins.

National banks: 17th - 18th century

Venice, after being possibly the first city to found a bank for the keeping of money on

safe deposit and the clearing of cheques, is also a pioneer in the involvement of a bank

with state finances. In 1617 the Banco Giro is established to solve problems

encountered by the earlierBanco della Piazza di Rialto,which has got into trouble

through the making of unsecured loans.

Bank notes: 1661-1821

Paper currencymakes its first appearance in Europe in the 17th century. Sweden can

claim the priority (as also, a few years later, in thefirst national bank).

The Rothschild dynasty: 1801-1815

William IX, ruler of the German state of Hesse-Kappel and possessor of a vast fortune,

has for some years consulted in a private capacity his friend Mayer Amschel Rothschild,

a Jewish banker and merchant of Frankfurt. He values Rothschild's advice both on

matters of finance and on additions to his art collection. In 1801 he formally appoints

him his court agent, and encourages him to offer his financial skills to other European

princes in these troubled years whenNapoleonis unsettling the continent.
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Q-7 (a)

INDORSEMENT

Definition:

The act of the owner or payee signing his/her name to the back of a check, bill of exchange or

other negotiable instrument so as to make it payable to another or cashable by any person

TYPES:

General endorsement

If the instrument is payable to John Smith, the endorsement in blank is his simple signature

without additional words, i.e., John Smith. It specifies no particular endorsee, and thereafter is

payable to bearer and may be negotiated by delivery alone.

Special endorsement

Also known as direct endorsement and endorsement in full. This endorsement specifies the

person to whom or to whose order the instrument is payable and the endorsement of such

endorsee is necessary to the further negotiation of the instrument.

Conditional endorsement

This is a form of endorsement in which the endorser imposes some condition upon the

transferee, e.g., Pay Adam Smith upon the satisfactory performance of his contract, (signed)

Jane White. Where an endorsement is conditional, a party required to pay the instrument may

make payment to the endorsee or his transferee, whether the condition has been fulfilled or

not; but any person to whom an instrument so endorsed is negotiated will hold the same, or

the proceeds thereof, subject to the rights of the person endorsing conditionally.


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Qualified endorsement

Without Recourse, or similar wording.

The qualified endorsement does not destroy the negotiability of the instrument. The without

recourse endorser makes the limited warranties found in Section 3-417, Uniform Commercial

Code. A qualified endorsement is one directing it to be paid to a specific person or to be

otherwise restricted, such as an indication of "for deposit only".

Restrictive endorsement

A restrictive endorsement is a blank or special endorsement accompanied by words which

either (1) prohibit the further negotiation of the instrument; or (2) constitute the endorsee the

agent of the endorser; or (3) vest the title in the endorsee in trust for or to the use of some

other person.

Q-7 (b)

FEATURES OF INDORSEMENT

Payee

The payee, of course, is the first to authorize action with a signature.

Nine-digit routing number

The endorsement of the depository bank appears below this so that the nine-digit

routing number, legible in dark purple or black ink.


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Date

The endorsement of the depository bank appears below this so that the date, legible in

dark purple or black ink.

Name of the bank

The endorsement of the depository bank appears below this so that the name of the

bank are legible in dark purple or black ink.

Branch identification

A branch identification and sequence number often times accompany the endorsement.

Collecting Bank

The collecting bank then finalizes the transaction

Q-8 (i) Short Notes

NATIONALIZATION OF BANKS AND ITS EFFECTS

Bank nationalization


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Bank nationalization, in the most practical form, means giving the U.S. government the

power to control banks. That could mean taking control of the public shares, to the power to

pick and install new management and boards of directors, and set corpotate strategy. The

shocks of the credit crisis last fall spurred lawmakers to semi-nationalize the banking sector;

nearly 314 institutions have already signed over some of their shares and other securities to

the Treasury in return for $350 billion in government aid.

IMPACTS

In Western countries, bank nationalization is largely used as an emergency method to

prop up banks during tough times, which includes ??a lending to small and medium-

sized businesses and restructuring burdensomeloans to consumers.

It can help big banks avoid immediate insolvency.

Proponents of bank nationalization argue that current government solutions to the

financial crisishave failed, in part because lawmakers have committed as much as

$8.5 trillion to support programs without seeing a significant difference in the health

of banks, public confidence, or an expansion of lending.

Q-8 (ii)

ASIAN DEVELOPMENT BANK (ADB)

Asian Development Bank was established on August 22, 1996. It was ratified by 15 countries. It

started functioning in December 1996. Its headquarter in Manila.

Members :-


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Members of ADB are more than 48. Thirty members are from Asian cou8ntries. Membership

of ADB is open for all the members of UNO or its any specialized agency. USA,UKand 15 West

European countries are its members.

Sources :-

1.Ordinary capital sources.

2.Special Funds.

Ordinary sources are those which are paid in capital by the member countries. Bank has

borrowed from the world market and its income from investment. On other hand special

funds are contributed by the developed countries. Income from special funds, investment and

transferred amount from the ordinary sources is also its main source.

Management :-

A board of governors manages its operation. There are 12 directors in the board of governors.

President of the bank the chairman of the board. Each director of the board holds the office

for 2 years.

Objectives :-The objective of ADB is to increase the rate of economic growth in the Asian member

countries.

ADB has established the various other funds like Asian Development Fund (ADF). Multi

purpose special fund (MPSF) nad agricultural special fund (ASF) provide technical assistance on

priority basis

Q-8 (III)

IMF
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Background

The IMF was the outcome of Bretton woods conference of 1944. The main purpose of IMF

were to provide exchange stability, temporary assistance to countries falling short of foreign

exchange and take international measure for curing the adverse balance of payment. IMF is a

pool of central bank reserves and national currencies which are available to its members

under certain conditions.

Objectives

a). To promote international monetary co-operationamong the different countries.

b). Adopt different measures to promote international trade.

c). Adopt measures to reduce restrictions on international tradeimposed by the different

countries.

d). To helpthe member countries in receipt and payment.

e). Provide short term loansto correct the adverse balance of payment.

f). To promote exchange stabilityand maintain orderly exchange arrangements and avoid

exchange depreciation.

Q-8 (iv) short note


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PLEDGE

Definition:

A bailment of goods as security for the payment of a debt or performance of a promise. The

bailer is called the pawnor or pledgor and the bailee is called Pawnee or the pledge.

Pledge distinguished from Bailment and Mortgage

A pledge is thus distinguishable for an ordinary bailment: (i) in a pledge, the bailment made as

security for the due discharge of a legal obligation. In ordinary bailment, there is no such idea.

(ii)On a bailment of goods, what passes to the bailee is right of possession of goods bailed; on a

pledge, the pledge obtains a special property in the goods pledged (c). (iii) A bailee has a right

of lien on the goods bailed, but no right of sale. A pledge has such a right under certain

circumstances. The above points also distinguished a pledge for a lien.

A pledge must also be distinguished for a mortgage of movable. There is no specific statutory

provision either in the Contract Act or in the transfer of Property Act, for a mortgage of

movable (also some time known as hypothecation). Such transactions however are not on that

account invalid (d). A mortgage of movables is distinguished from a pledge as follows:

(i) a mortgage of movables transfer to the mortgagee, the ownership of the property, with only

a right of redemption left in the mortgagor. A pledge transfer to the pledge only a right of

possession and a qualified right of sale.

(ii) A pledge requires delivery of possession in order to valid, a mortgage of movables does not

require delivery of possession as an essential pre-requisite.

(iii) a mortgage of movables has the rights of foreclosure and sale, the pledge has only the

limited right of sale. Notice that a mortgage of movables doesnt require either writing orregistration to be effective in law but can been made orally. In the last mentioned case Beamen

J. pointed out the difficulties which this anomaly gives rise to. Though such a mortgage is valid

without transfer of possession a subsequent dishonest pledge of the same property by the

mortgagor would give the pledge a priority over the mortgage, if the pledge has acted in good

faith and without notice of prior mortgage.


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Pledge should been distinguished from what is known as hypothecation. In the first case,

possession of goods is actually delivered to the creditor or Pawnee. In the second case, it

remains with the debtor, with the right or power to the creditor, to cause the goods to be sold,

in order to be paid his claim out of the proceeds. In both case however, the property cannot be

transferred to a third party without the express consent or permission of the creditor.

Q-8 (v)

HYPOTHECATION

Basics

When investors need money but cannot secure a traditional loan, they use their first mortgage

as collateral to get the money they need. The investor retains ownership of the mortgage note

and there is no title transfer to the lender.

Advantages

Generally, hypothecations carry a higher interest rate, but save investors moneywhen they

don't have to sell their first mortgage at a steep discount. Additionally, many investors use

hypothecation of mortgages for a short period of time. The higher interest-rate payment ends

up being far less than the loss they would take if they sold the mortgage at a steep discount.

Disadvantages

When investors hypothecate a mortgage, the lender basically puts a lien on the mortgage note.

This means that if the investors fail to make the payments on the hypothecated mortgage note,

the lender can sell the noteto cover losses.


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Q-9 Detail Note

MONEY PAID BY MISTAKE

Are you a tenant of commercial premises who has discovered that you seem to have been

paying service charges which the lease did not entitle the landlord to claim? Or a landlord

whose tenant is claiming repayment of such charges?

Until the House of Lords decision in 1999 in the case of Kleinwort Benson v Lincoln City Council,

it was a general principle of English law that money paid by someone under a mistake of fact

could be recovered but that money paid under a mistake of law could not.

The decision in Kleinwort Benson removed that distinction: money paid under mistake either of

fact or of law may, in principle, be recovered.

This type of claim is a claim under the law of restitution. It is usually brought as a claim for

money had and received i.e. money which the defendant has had from the claimant which has

unjustly enriched the defendant. An example would be where a bank mistakenly credits a

customer's account. In principle it would be unjust for the customer to keep this money.

There are, however, circumstances in which the law will not order that the money be repaid,

primarily where it would not be unjust for the defendant to keep the money.

While the claim is now possible, it is not axiomatic that the person who has paid under the

mistake will be able to recover his money. There are various possible defences which the

landlord may be able to use to resist repayment but this depends on the facts of the case.

Possible defences to such a claim include:

That the defendant, acting in good faith believing that he has the right to the money,

has changed his position since the overpayment e.g. the defendant has given the money

to charity

estoppel: the claimant is barred from claiming the money back because he has done

something such that it is inequitable for him to recover the money

the money was paid as a gift or pursuant to a valid obligation


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the defendant has delayed inordinately in discovering the mistake (laches)this is the

equitable equivalent to statutory limitation periods

the time for bringing the tenant's claim has expired under the Limitation Act 1980: the

limitation period is 6 years from when the claimant discovered the mistake or could,

with reasonable diligence, have discovered it. The cause of action for a claim inrestitution arises when the payment under the mistake is made; each subsequent

payment under the same mistake, therefore, gives rise to a fresh cause of action. Thus,

the limitation period may have expired for some earlier payments but not for later

payments. This defense must be raised by the defendant (landlord). It is not automatic

that a claim is held to be statute-barred.

Q-10 Detail Note

CLASSES OF ENDORSEMENTS

TDouble/Triples: T endorsement is required if the vehicle being driven requires a Class A

CDL and is towing more than one trailer.

PPassenger/Transportation: P endorsement is required if the vehicle being driven requires

a Class A, B or C CDL and is transporting passengers. Applicants or holders of a public passenger

endorsementmust have an acceptable driving record.

NLiquid Bulk/Tank Cargo: N endorsement is required if the vehicle being driven requires a

Class A or B CDL and is designed to haul a liquid or liquid gas in a permanently mounted cargo

tank rated at 119 gallons or more or a portable tank rated at 1,000 gallons or more. A tank

endorsement is also required for Class C vehicles when the vehicle is used to transport

hazardous materials in liquid or gas form in the above described rated tanks.

HHazardous Material: H endorsement is required if the vehicle being driven requires a

Class A, B or C CDL and is transporting hazardous materials which are placarded.

XHazardous Material and Tank, Combined: X endorsement is required if the vehicle beingdriven requires a Class A, B or C CDL and is transporting hazardous materials via a tank.

SSchool Bus: S endorsement is required before operating a school bus. P endorsement

is also required. Applicants or holders of a public passenger endorsementmust have an

acceptable driving record.
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VStudent Transportation Vehicle: V endorsement is required for operation of a student

transportation vehicle; transporting students to and from school, including vehicles

transporting special education students. Applicants or holders of a public passenger

endorsementmust have an acceptable driving record.

AActivity Vehicle: A endorsement is required prior to operating a student transportation

vehicle (or other vehicle that requires a F endorsement) used in connection with school

sponsored events and activities, but not used to transport students to and from

school. Applicants or holders of a public passenger endorsementmust have an acceptable

driving record.

FTaxi, Livery, Service Bus, Motor Bus or Motor Coach: F endorsement is required for

operation of a taxi, livery vehicle, service bus, motor bus or motor coach. Applicants or holders

of a public passenger endorsementmust have an acceptable driving record.
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Banking Operations (MAIN TOPICS)

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