CENTRALIZED CLEARING AND AGENCY SERVICES

Submitted by: Sana Siddiqi

CENTRALIZED CLEARING AND AGENCY SERVICES

TABLE OF CONTENTS

Particulars Introduction Day 1: Issuance of Cheque Book Day 2: Bankers Cheque Day 3: Foreign Currency Notes & Centralized NIFT Charges Day 4: USD Outward & Inward Clearing & SBP Returns Day 5: Public Investment Department & Collection Unit

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CENTRALIZED CLEARING AND AGENCY SERVICES

INTRODUCTION
Some of the main functions of the Centralized Clearing and Agency Services (CC&AS) department are: Issuance of cheque book Clearing of Bankers cheque Inward and Outward clearing The following report is a brief synopsis of my one week training at the CC&AS department at HBL. The report gives a daily account of my training and my understanding of the processes.

Sana Siddiqi

CENTRALIZED CLEARING AND AGENCY SERVICES

DAY 1: ISSUANCE OF CHEQUE BOOK

CENTRALIZED CLEARING AND AGENCY SERVICES

ISSUANCE OF CHEQUE BOOK
Prior to 2008, all cheque books used to be issued to customer via the bundle system. Today, HBL has an automated system through which the process of cheque book requisition and issuance is executed. This automated system has been established and is being monitored by National Institutional Facilitation Technologies (NIFT). Of the 1,450 branches of HBL 822 have the automated system installed and have the Cheque Book Requisition (CBR) option whereas the remaining are batch branches having CBR for NIFT. The process of cheque book issuance has been divided into the following two levels: Branch Level CC&AS

BRANCH LEVEL
In order for a customer to attain a cheque book, he/she must fill out a requisition form for the same. This form includes the signature of the account holder. On submission of the requisition as an initial step the bank representative verifies the signatures through an automated system. The system matches the holders signature on the requisition slip with the signatures on the account opening form. After verification, the requisition slip is signed and stamped by the bank representative. The representative then enters the details required for the issuance of the cheque book via the Cheque Book Requisition (CBR) option on the system. For the banks which are not online they utilize Simex for CBR. Following table illustrates the type of account and the number of leaves in a cheque book the account holder has an option of requesting: Account Type Saving Current Acronym SB 1 SB 2 CD 1 CD 2 CD 3 No. of Pages 10 25 25 50 100

All saving accounts account numbers end with 01 whereas the current accounts end with 03. The branch representative verifies the data on the system in reference to the cheque book issuance and enters the requisition for the cheque book. Upon entering the requisition two accounting entries are simultaneously created by the system these are: Recording Income in Branch account Debit: Customer Account Credit: Income Account

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ISSUANCE OF CHEQUE BOOK

Recording Expenditure in Branch account Debit: Expenditure Account (Printing and Stationary) Credit: Collection Account (Payable to printer) The cost charged to the customer per page is PKR 6 / leaf, whereas the expenditure account is charged PKR 2.457 including 17% sales tax. The branch issues three reports in relation to the issuance of cheque book, these are as follows: Cheque Book Charges Report: Contains the charges related to the issuance of the cheque book Cheque Book Issuance Report: Contains the details of the cheque books issued including the requisition slips containing the account holder signature Cheque Book Error Report: This is generated in case an error occurs in issuing a cheque book. In case an error occurs the cheque book doesnt get issued until the error is corrected

Some of the common errors which occur are: Title of account that is the name of the account holder exceeds 30 characters Occurrence of invalid characters (, - ( ) &) Customer has insufficient funds in the bank, that is he / she cannot pay the charges of the new cheque book CNIC has not been verified by NADRA that is the CNIC has pending verification. Under this circumstance the account will be appearing as blocked A customer can only request for one cheque book in one day. However, in the case where a customer requires more than one cheque book then a special requisition via email is sent to the Centralized Clearing and Agency Services (CCAS) for the same. The CCAS then requests the printers for a direct printing order. Among the above mentioned errors the three most common errors which incur are insufficient funds, blocked accounts and invalid character.

CC&AS
At day end all NIFT covered branches data regarding CBR are gathered through Misys at the Head Office (HO). Next morning CC&AS receives the file of CBR containing requisitions from all branches. These are segregated into regions and sent to NIFT which are then sent it to the printers. The printer then delivers the requested cheque books in their regional NIFT centers which are then dispatched to their relevant branches.

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CENTRALIZED CLEARING AND AGENCY SERVICES

ISSUANCE OF CHEQUE BOOK

All this process takes 3 working days. In addition to facilitating the transaction NIFT also generates the following reports: Cheque Book Error Report Cheque Book Audit Trail Cheque Book Printing Report Cheque Book Issuance Report Cheque Book Changes Report Summary of reconciliation with NIFT Pakistan The entire process of issuing the cheque takes place within 3 working days of the branch sending in the CBR.

Payment to Printer
CC&AS receives the invoice (bill) from the printer on fortnightly basis. CC&AS makes payment after reconciliation with NIFT and HOK reports with CC&AS records. Following is the basis on which the bill: Cost of cheque book Sales tax @ 17% Withholding tax @ 3.5%

A process flow of issuing a cheque book is presented on the following page

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CENTRALIZED CLEARING AND AGENCY SERVICES

ISSUANCE OF CHEQUE BOOK

Gives requisition for issuance of Cheque Book

The requisition is verified and then entered into Mysis via Cheque Book Requisition.(CBR) At day end all CBRs are sent to HO

HO complies the CBRs and emails them to CC&AS

Customer
Customer receives the cheque book after third working day

Branch

Head Office

Branch

CC&AS

CC&AS downloads the CBR file and forwards the CBR file to NIFT

NIFT

Printer

NIFT

NIFT dispatches the cheque books to the required branches

Upon printing the cheque books are sent to the regional NIRT centers

NIFT separates the CBRs regionally and sends them to the printer

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CENTRALIZED CLEARING AND AGENCY SERVICES

DAY 2: BANKERS CHEQUE

CENTRALIZED CLEARING AND AGENCY SERVICES

BANKERS CHEQUE
A banker's cheque is a cheque where the funds are withdrawn directly from a bank's funds, not from an individual's account. Bankers Cheques were introduced on 12 January 2009 by HBL. It is a replacement of Payment Orders (could be used only within the city of issuance) and Demand Draft (could be used in the city other than its issuance, intra city). A Bankers Cheque is payable at any HBL branch throughout Pakistan. A predefined format is printed through the NIFT which assigns a code to each paper, these appear on the Banker Cheque as MICR coded number. Once printed and are sent to the branches and there are designated as bank security stationary and are always kept under lock and key. A Bankers Cheque is divided into the following three portions: 1. Top Portion (Is the Bankers Cheque) 2. Middle Portion (Customers Copy) 3. Bottom Portion (Banks Copy)

In order to make a Banker Cheque the customer fills out a requisition form for the same providing the required details (name of beneficiary, amount etc. and signs it) and gives the bank representative the amount for which the cheque is to be made along with the relevant charges for making the cheque. Bank charges for making the Banker Cheque are: For walk in customers For an amount less and or equivalent to PKR 100,000 bank charges are PKR 350 For an amount greater than PKR 100,000 bank charges are PKR 600

For HBL customers Standard / Flat rate of PKR 60 for all amounts of Bankers Cheque made

The bank representative fills out the Bankers Cheque with the details provided in the form. A Bankers Cheque must include the following information: Date of Issuance Amount in figures and in words Beneficiary name Issuing branch name and code

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CENTRALIZED CLEARING AND AGENCY SERVICES

BANKERS CHEQUE
Authorized signature of two individuals who have the power of attorney given by the bank to sign the cheque including their stamp (must contain their name and personal number) Currently there are two modes by which this information is being filled, either through Cashier System (automated system) or by batches. Following entries are made when the branch makes the Bankers Cheque: If Cash is paid by the customer Debit: Cash Credit: Centralized Cheque Payable Account (A/c Number: 00019903902586) If payment is made through account Debit: Customers Account Credit Centralized Cheque Payable Account Once the Bankers Cheque is made the customer is given the cheque and customer copy whereas the bank retains the banks copy of the same. Upon the presentation of the Bankers Cheque by the beneficiary to the branch, the cheque is cleared. In event the beneficiary is a HBL customer then the clearing takes place at the branch however, if the beneficiary is the customer of another bank and has presented the cheque in some other bank then the cheque is sent through NIFT to the Centralized Clearing and Agency Services (CC&AS) of HBL There are two types of clearing Outward Clearing: Bank is the receivable Inward Clearing: Bank has to make the payment

At day end all inward and outward clearings for each bank are balanced to see the net amount standing, this is carried out by the treasury department who then settle the net amounts through RTGS. In addition to receiving the Bankers Cheque CC&AS also receives a scroll containing the amounts and other related information of the cheques by the NIFT. Following steps are carried out for the clearance: 1. The instrument is tallied with the scroll sent by NIFT

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CENTRALIZED CLEARING AND AGENCY SERVICES

BANKERS CHEQUE
2. The appearance tenor of the Bankers Cheque is checked this includes, checking the following: i. Bank clearing stamp ii. Date (Issuance date should be not more than 6 months if its the cheque becomes stale and is returned back to the branch) iii. Amounts (figure and word) iv. Signatory v. Bank endorsement vi. Issuing branchs name and code 3. Check whether the account (centralized cheque payable) is credited 4. Posting the entry 5. Authorization

If any appearance tenor is not present on the Bankers Cheque, the instrument is returned back to NIFT. After posting and authorization, the instruments are cancelled and two individuals initial the cancellation of the instruments. Bankers Cheques after cancellation are permanent records of the bank and are always kept with bank. For three years they are kept at the custodian after which they are shifted to the godown.

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DAY 3: FOREIGN CURRENCY NOTES & CENTRALIZED NIFT CHARGES

CENTRALIZED CLEARING AND AGENCY SERVICES

FOREIGN CURRENCY NOTES
Centralized Clearing and Agency Services has under its umbrella the centralized Foreign Currency Notes (FCN) unit. This unit is responsible for FCN transactions in Pakistan. All branches in Balochistan and Sindh fall under it whereas its sub units are responsible for the following: The Mall Road Lahore Punjab CDA in Islamabad - Islamabad and Peshwar branches In the event a branch runs out of FCNs, the branch sends a requisition for FCN through email to their region CC&AS unit, which arranges the FCN and gets the FCN delivered to the branch. CC&AS has the following options for arranging the required funds: 1. 2. 3. 4. Ask another branch within a close proximity to the requisite FCN to the branch CC&AS sends the FCN CC&AS purchases the FCN from another local bank CC&AS purchases the FCN from State Bank of Pakistan (SBP)

When CC&AS wants to purchase FCN from SBP they have to inform SBP one day prior to the purchase. In case the branch has surplus FCN then these are sent to CC&AS. FCN is sent in bundles of same domination and the flapper on each bundle contains the branch code and name (only HBL Currency Exchange deposits AED currency).

When the FCN is received at CC&AS they are recounted and bundled. CC&AS then deposits the surplus currency with SBP. It is SBPs requirement that deposit submitted should be equivalent or greater than the following limits: GBP: 400,000 Euro: 400,000 USD: 400,000 AED: 600,000 CC&AS has to inform SBP one day before the deposit regarding the amount it will be depositing along with its denominations and currency. The same information is provided to the treasury office. SBP has a pre defined requirement stating the manner in which the FCN is to be surrendered. FCN should be bundled into rims containing the similar currency. One rim of currency should have 10 packets and each packet should comprise of 1,000 notes. The notes in one packet

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CENTRALIZED CLEARING AND AGENCY SERVICES

FOREIGN CURRENCY NOTES
should be of the same denomination (e.g. packet of USD 100). Each packet should be bound by a flapper. The flapper should contain the name of the branch from where the notes were sent and the branch code including the date on which the money is being surrendered to SBP. FCN is transferred via an armed security van to SBP; two cashiers from HBL CC&AS accompany the cash when it is transferred to SBP. The notes are recounted and placed in a transparent bag provided by SBP. The bag is sealed in the presence of HBL and SBPs representatives and signed by them. SBP on receipt of the FCN, credits the nostro account of HBL. In the event if the FCN bag contains a counterfeit note. A copy of the note is sent to CC&AS and the treasury is notified accordingly. CC&AS checks the branch code and name from where the notes were sent and informs them. The branch is responsible for counterfeit notes and therefore would have to reimburse CC&AS for the same. CC&AS prepares a monthly return of FCN to submit to SBP. In addition the above, CC&AS is responsible for supplying Riyal brought in from Bahrain (by HBL) throughout Pakistan. This exercise is conducted just for Haj and it lasts 2 months.

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CENTRALIZED CLEARING AND AGENCY SERVICES

CENTRALIZED NIFT CHARGES
Prior to December 2008, NIFT charges were paid by branches independently. NIFT used to send the invoice for the charges along with relevant scroll sheet to the branches at month end. The branches used to make vouchers and Inter Bank Credit Payment (IBCO) and send it to their respective regional heads. The regional head office used to compile the payments received from all the branches under their umbrella and used to forward the payment to NIFT. The entire process was manual, required too much paper work and could lead to delay in payments if the branches did not send in their payments within the specified date. Today, NIFT charges system is centralized. CC&AS is responsible for making the payments for all 21 regions. NIFT sends the invoices to CC&AS by CD. CC&AS on receipt of the CD downloads the file and runs it. Upon running the file the system generates two vouchers and the following entries are made: Debit: Expense Account (BBBB 9912010586) Credit: NIFT Main Account (07867900287001) (maintained at HBL plaza) CC&AS informs the relevant personnel at NIFT via email that their account has been credited. Subsequent to this following reports are generated: Branch Summary Account Region wise Billing Report At day end CC&AS emails the RGMs their relevant branch summary accounts and asks them to forward it to the respective branches. Further instructions are given by the CC&AS the branches should tally the amounts and upon confirmation/verification of the amounts in the summary and daily scroll they should keep the records for audit purposes. Some of the benefits arising due to the centralized NIFT clearing system have been listed as follows: Payment of charges is easier If required CC&AS can flow up with the branches and NIFT much faster Manual work has been eliminated Monitoring has been made easier Expense Analysis (Fluctuation in charges)

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CENTRALIZED CLEARING AND AGENCY SERVICES

DAY 4: USD OUTWARD & INWARD CLEARING & SBP RETURNS

CENTRALIZED CLEARING AND AGENCY SERVICES

USD OUTWARD & INWARD CLEARING
Centralized Clearing and Agency Services (CC&AS) is responsible for all the inward and outward clearing of USD cheques in Pakistan. Clearing of both outward and inward USD cheques takes place on Monday and Thursday. OUTWARD CLEARING: Outward clearing USD cheques are receivables of HBL. These are deposited by HBL customers in their respective branches and are drawn on other banks. CC&AS receives the cheques from all branches through courier. On receiving these cheques CC&AS staff verifies the instrument so as to ensure that the presence of the following items: Branch Stamp and crossing Branch endorsement Date of the cheque Whether payable and drawn in Pakistan Amount in figure and words Upon verification and confirmation the CC&AS staff signs and stamps endorsement of our branch confirmed. The cheques are then entered in the Outward Lodgment Register and a copy of each cheque is made. NIFT has provided the following documents which are to be filled and sent to them along with the cheques: Add list Bundle cover Delivery report These documents are filled after making the entry in the register. Add List is filled by stating the amount of each cheque which is being sent and their sum total both in value and number. The amounts in the add list are stated in USD. Bundle Cover is drawn stating the total number of cheques and the total amount of these cheques and a Delivery/summary report is made. All three documents along with the original cheques are placed in a leather bag which is then sealed. The leather bag and seal are also provided by NIFT. The bag is then dispatched to NIFT whereas the photocopies of the cheques are retained by CC&AS for documentation purposes.

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CENTRALIZED CLEARING AND AGENCY SERVICES

USD OUTWARD & INWARD CLEARING
On the next clearing day, CC&AS is informed of the realized and returned cheques. In the event that a cheque is returned CC&AS makes an entry in the Cheques Return Register. The returned cheque is then sent back to the branch. For realized cheques, CC&AS places reference numbers on the cheques and enters them into the system using the reference numbers. The following entry is made: Debit: Nostro Account (8888 0111010770) Credit: Treasury Account (8888 0117018170) The above mentioned nostro account is maintained at SBP. It is used for the purpose of settlement and is a consolidated account (after all debit and credit entries are made). Subsequent to this the relevant branch gets informed of the realization. Upon receipt of this information the branch makes the following entry: Debit: Treasury Account Credit: Customer Account INWARD CLEARING Inward clearing are payables by the bank. USD cheques along with scroll sheets are received by CC&AS. These cheques are drawn on HBL by its customers and are payable to another bank. After carrying out its verification with the scroll sheet a photocopy of each cheque is made. CC&AS then makes a memo which is sent to the branch along with the cheque and NIFT Bank Transfer Scroll. Photocopies of the cheques are retained by CC&AS. The memo which is sent to the branch contains the following information: Instrument Number Date Amount Presenting Bank (bank to which the payment is to be made) Favoring (The Beneficiary) In addition to the above, CC&AS also informs the branch in the memo what entry it has to make on receiving the cheque.

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CENTRALIZED CLEARING AND AGENCY SERVICES

USD OUTWARD & INWARD CLEARING
Subsequent to this CC&AS makes the required posting in the system. Upon receiving the documents the branch makes the following entry: Debit: Customer Account Credit: Treasury Account (8888 0117018170)

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CENTRALIZED CLEARING AND AGENCY SERVICES

SBP RETURNS
CC&AS is responsible for carrying out the SBP returns of the following, inward and outward clearing: Intercity Normal Same day Branches send NIFT the data relating to all the above transactions, at day end NIFT compiles the data of all branches and emails it to CC&AS. A data file by the name Jotting Data File is downloaded and saved by the CC&AS. Software is run copying all the data from the file into the system. Both outward and inward are netted off and any remaining balance is settled with SBP. At day end there should be no remaining balance in the inward and outward clearings.

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CENTRALIZED CLEARING AND AGENCY SERVICES

DAY 5: PUBLIC INVESTMENT DEPARTMENT & COLLECTION UNIT

CENTRALIZED CLEARING AND AGENCY SERVICES

PUBLIC INVESTMENT DEPARTMENT
The Public Investment Department (PID) of HBL acts as an agent on behalf of State Bank of Pakistan (SBP) to sell the Defense Saving Certificates (DSC) and National Saving Certificates (NSC) to the public. These certificates are investment instruments offered to the public at a predefined rate for a fixed tenor. Tenor for DSC is 10 years and NSC is 3 years. HBL sells these instruments to the public; the customer is required to fill in a form and provides required documents. Customer has to submit the required cash for the certificates which is accumulated in the collection account. PID has a separate collection account for each type of investment that is DSC and NSC. On receiving the cash the bank representative issues a deposit slip to the customer. The customer is asked to collect his/her certificates along with the coupons after a few days. During this time the bank prints and prepares the bonds and coupons (these are provided to HBL by SBP). The bank has to inform SBP of the sale within 72 hours. Sale proceeds are remitted to SBP via the treasury department whereas the required documentation along with the certificate numbers is sent by PID to SBP. On maturity or when the payment of coupon becomes due and PID is required to pay the customer, it does so through the miscellaneous account. The following entry is made by PID: Debit: Miscellaneous Account Credit: Customers Account PID informs SBP about the payment. SBP then debits the nostro account of HBL maintained at SBP (Treasury Account). Subsequent to this the treasury department makes the following entry: Debit: Treasury Account Credit: Miscellaneous Account In addition to the above, PID also sells and repurchases the units for National Investment Trust (NIT) and HBL Income Fund. PID however, does not issue the certificates that process is carried out by NIT and HBL Income Fund.

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COLLECTION UNIT
CC&AS carries the process of clearing for the upcountry branches who have received cheques drawn on other banks whose branches are in Karachi. On receiving these cheques CC&AS staff verifies the instrument so as to ensure that the presence of the following items: Cheque Number Branch Stamp and crossing Branch endorsement Date of the cheque Amount in figure and words Upon verification and confirmation the CC&AS staff signs and stamps endorsement of our branch confirmed. The cheques are then entered in the Lodgment Register and a copy of each cheque is made.

NIFT has provided the following documents which are to be filled and sent to them along with the cheques: Add list Bundle cover Delivery report These documents are filled after making the entry in the register. Add List is filled by stating the amount of each cheque which is being sent and their sum total both in value and number. The amounts in the add list are stated in PKR. Bundle Cover is drawn stating the total number of cheques and the total amount of the cheques and a Delivery/summary report is made. All three documents along with the original cheques are then sent to NIFT via courier whereas the photocopies of the cheques are retained by CC&AS for documentation purposes. NIFT informs CC&AS of the realized and returned cheques. In the event that a cheque is returned CC&AS makes an entry in the Cheques Return Register. The returned cheque is then sent back to the branch. For realized cheques, CC&AS places reference numbers on the cheques and enters them into the system using the reference numbers. The following entry is made: Debit: Collection Account Credit: Sundry Assets

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COLLECTION UNIT
Subsequent to this the relevant branch gets informed of the realization. Upon receipt of this information the branch makes the following entry: Debit: Sundry Assets Credit: Customer Account

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