GROUP MEMBERS

Muhammad Bilal F08B003Adeel Ishaq F08b038Faryal Ayub F08B028Asif Shan F08B127M.Umair Muzaffar F08B116

CLEARANCE AND

CLEARING PROCESS IN NIFT

Exchange Of moneyInsecure cash Transactions Withholding TaxProblem Of Carrying large amounts Importance Of Cheques

Background

Cheque:

Cheque or Check is a document (usually a piece of paper) that orders a payment of money.

The person writing the cheque, the drawer, usually has a chequing account where their money is deposited.

The person in favor of which, cheque is written is known as payee.

Information Available On Cheque

The drawer writes the various details on cheque including the money amount, date, and a payee on the cheque, and signs it, ordering their bank, know as the drawee, to pay this person or company the amount of money stated on the cheque.

Clearing:

The word clearing has been derived from the word “Clear” and is defined as “ a system by which banks exchange checks and other negotiable instruments drawn on each other within a specific area and thereby secure payment for their clients through the Clearing House at specified time in an efficient way”.

Clearing House:

The clearing house helps in transfer of funds from one bank to another for the purpose of facilitating the payment of cheques, demand drafts and other financial instruments.

Part Of State Bank Of PakistanCommercial banks(Members Of Clearing

House)Representatives Of All Banks

Clearing Process in clearing house

• cheques are received by UBL that are drawn on United Bank along with deposit slip

• stamp for cheque received for collection• cheques are scrutinized and are then entered

in clearing register • handed over to clearing officer• Clearing officer checks and verifies title of all

the cheques

Clearing Process in clearing house

Special crossing, endorsement and clearing stamps

Cheques of each bank are sorted and arranged branch wise

All the cheques are then entered into the clearing system of bank

Clearing schedule

Clearing Process in clearing house

Cheques are delivered to the respective banks in clearing house of SBP between 10.00 AM

Clearing house schedule handed over to the officer clearing house SBP

Cheques received in clearing are given to the officer cash department

Officer cash department pays these cheque by canceling

Returns:

cheque return memo contains reason for return

cheque is entered into the cheque returned register and bank charges are deducted

at 2:00 PM delivered to the same bank in second clearing

give schedule of clearing figure to the officer-clearing SBP

Settlement Process In Clearing House

Members of clearing house maintain accounts with State Bank of Pakistan by debit and credit

If on a particular day, a bank delivers cheques and other negotiable instruments worth more than the total amount of cheque received by it those bank accounts with State Bank of Pakistan will be credited with the differential amount.

Settlement Process In Clearing House

On the other hand, if the total amount of cheques and other negotiable instruments draw on a certain bank by other bank is more than the total amount received by it from other banks, then this bank’s account will be debited on that day.

Disadvantages

This system was very costly. Because all the banks appointed the peon for the collection of cheques and after the collection the cheques were sent to clearing house

Person who was sitting in clearing house was facilitating by giving medical facility and other facilities.

National Institutional Facilitation Technologies was incorporated in September 1995 .

All banks in Pakistan, a total of 42, are participating members of NIFT with branches spread throughout the country.

NIFT:

In Karachi alone, the number of participating branches is a total Of 800.

NIFT commenced its ACH(account clearing house) operations in 1996, after signing an agreement with the State Bank of Pakistan to oversee clearing operations rendered to all banks and their branches.

NIFT Today:

cheques clearing‘return’ (unpaid) cheques processingsame day clearing (express – 2 hrs. clearing

service)intercity clearing branch & inter bank settlement

Value added services:

Utility Bill Payment Both gas distribution companies of Pakistan

(SSGC and SNGPL), Telecommunication Company (PTCL), Cellular companies (Mobilink and Telenor)oil refinery, insurance companies

Settlement Process of NIFT

NIFT collects cheques, demand drafts etc. from all the branches of different banks and send them to the branches on which these are drawn for clearing.

NIFT prepares a sheet for each branch showing the number for instruments and amount in its favor and drawn on it and sends it to each branch. A similar sheet for each bank is also sent to clearing house of SBP where accounts of banks are settled in the same manner.

Different Types of Clearing:

Regular clearing/ Cash ClearingInter Branch ClearingDirect ClearingOutward Clearing Inward clearing

Regular clearing/ Cash Clearing: If the cheques is for the same bank, and drawer

and the payee both have the account in the same bank and also in same branch’ the simple bank stamp is used.

Inter Branch Clearing: If the cheque is for same bank but different

branches, transfer delivery (TD) stamp and clearing stamp is used.

Direct Clearing: The type of clearing in which cash clearing is

done with the co-operation of both banks . There is no role of stat bank or UBL or NIFT. Usually direct clearing is done in rural or backward areas where there is no network of clearing house and only few commercial banks are operating.

Outward Clearing

Outward Clearing:When cheques and other negotiable instruments drawn upon other banks like MCB, ABN-AMRO etc. are presented in UBL to deposit them in the respective payee’s accounts, these instruments are lodged in outward clearing.

When an instrument is accepted at the counter to be presented in outward clearing, officer takes the following points into consideration; Instruments plus deposit slip received from the

customer.The instruments are received carefully by

checking like :The name of the branch appears on its face

where it is drawn.It should not be stale or post dated or without

date. Amount in words and figures does not differ..

Signature of the drawer on the instrumentInstrument is not mutilated. No material alteration, if so, it should be

properly authenticated.Any other bank’s clearing stamp is cancelled

by the same bank.The amount of the instrument is same as

mentioned on the deposit slip and counterfoil.

Instrument is stamped and counter foil is returned to the customer.

Document number is written on the deposit slips.

Instrument is separated from the deposit . Bunches of instruments are made.

A summary receipt (bundle cover) of each bunch showing no. of instruments, total amount with branch stamp and authorized signatures.

About 3:00 the instruments, along with summary receipts, are sent to NIFT.

Stamps put on the Cheques:When the cheques are presented in the branch to be deposited in their respective payee’s accounts, different stamps are put on cheques before their lodgment in outward clearingCrossing StampClearing StampBank’s Discharge Stamp

Crossing Stamp:

“Crossing means two parallel transverse lines, drawn across the face of the cheques with or without words written in between them”.

In clearing cheques are crossed specially, Cheques are stamped with bank’s name between two transverse parallel lines to constitute special crossing.

ADVANTAGE OF CROSSING:

Basic advantage of crossing is to save the instrument from illegal hands.

Clearing Stamp:

Clearing stamp is put on the cheques and deposit slip, with the following day’s date, as these cheques would have to be presented in their concerned drawer banks on the subsequent day.

Bank’s Discharge Stamp:

Banker’s discharge stamp is also known as endorsement stamp

This stamp is on the back side of the instrument

The cheques are endorsed by putting the stamp with words describing “Payee’s account Credited for UBL, Lahore” plus the authorized signatures.

Inward Clearing:

The mechanism and system of paying the

Cheques and other instruments drawn on the UBL by branches of other banks within city or within clearing networks.

HBL UBL

NIFTInward clearing

B ACheque

Cheque

Inward Clearing

Clearing at the BranchInstruments are received from NIFT in the

morningThese Instruments verified like– Instrument is drawn on the same branch– The instruments should not be stale or post

dated

Inward Clearing

Clearing at the Branch

– Clearing stamp should be of the same date– If more than one clearing stamps then these

should be properly canceled– Instrument is not damage – Instrument bears the signatures

Inward Clearing

Posting of Cheques into the system

– Leaf of the check is verified by UV lamp– Signatures are verified from the scanned SS(social

security) card– Status of account , should be an active one– Balance is available in the account

Outward Clearing Returns:Unrealized instruments with objection memoCheque returned RegisterCharges Rs. 100 per instrumentInstrument returned to the customer

Returns In Inward Clearing: Any returns, unrealized instruments, in the inward clearing

are forward to NIFT along with the objection memo.

The objection memo describes the reason of being unrealized due to certain reasons. i.e. Amount Date Instrument Number Signatures

All returns are recorded into ‘inward checks returned register ’ and then returned to NIFT representative.

Clearance Timings

Net Position Time

1. Main Inward clearing 9:00 am **2. Clearing reports & Returns 11:00 am**3. Outward Clearing 3.00 pm **

Advantages of Clearing

Clearing does not involve any cash.Risk of robbery is totally eliminated.Minimum cash is required on counters.Time, cost and labor are saved.Provides an extra service, so more customers

attracted towards banking.

OUTWARD BILLING Collection(OBC)

UBLlahore

HBLswat

B A

courier UBLswat Dire

ct cle

aring

Where NIFT is not Available:(if the branch of UBL is in swat)

UBLlahore

HBLswat

B A

courier

Demand DraftD.D

HBLLahore

Where NIFT is not Available (if the branch of UBL is NOT IN swat)

THANK YOU