Types of Banker’s Funds &
Banker Customer Relationship
Learning Objectives
Students will be able to:
 Understand forms of bank capital
 Know the different types of accounts a bank can
offer.
 Understand how banks maintain relationship
with its customers.
 Comprehend duties & responsibilities of bank
and customers
 Describe termination conditions of bank and
customer.
Banker’s Funds
Bank’s Capital
The Reserve
Fund
Liquid Assets
Current
Deposits
Fixed & Term
Deposits
Saving
Deposits
Bank’s Capital
Nominal & Authorized
Capital
Paid Up
Capital
Subscribed
Capital
The Reserve Fund
Section 21 of the Banking Companies Ordinance, 1962, has
made it obligatory for every banking incorporation in Pakistan
in Pakistan to create a reserve fund in the following manner:

At least 20% of the balance of Profit in each year
Liquid Assets
According to the section 29(1) of the Banking Companies
Ordinance, 1962, every bank in Pakistan is under legal
obligation to maintain liquid assets in Pakistan.

This amount should be such percentage of the total
demand & time liabilities of the bank as may be
notified by the State Bank of Pakistan from time to
time.

Liquid assets are all cash on hand & balances.
According to State Bank of Pakistan the liquid asset
requirement should be maintain at 15%.

Nature of Deposits
Fixed & Term
Deposits
Savings
Deposits
Current
Deposits
Current Deposits



Current account is a running account which is continuously in operation.
Who is interested to open Current account?
 Wish to have working capital in their custody
 Interested in keeping their money liquid & safe
 Like to receive & make payment usually through cheque
 Utilize the agency services of banks frequently
 Take full advantage of other services provided by the bank
Facilities provided to the current account holder
 The bank collects properly indorsed cheque, bills etc on behalf of
the current account holders.
 The bank may allow the facility of overdraft on prior arrangements
to the trustworthy customers.
 Loans & advances may be sanctioned to the credit worthy current
account holders with ease.
 A depositor can withdraw sums from the account by means of
cheque and ATM cards supplied by the Bank.
 Current account is opened with a minimum initial deposit as
prescribed by the bank from time to time.
Fixed & Term Deposits
The deposits that can be withdrawn after a
specified period of time are referred to a fixed
or term deposits.
 Period for which bank kept money is three
months to five years.

 Payment of Fixed/Term deposits before maturity
 Law of Limitation
 Attachment by Court
 Term Deposits account in Joint Names
Saving Deposits



Introduced In England
In Pakistan Saving Deposit account with very small
amount & issued a cheque book.
No restrictions on withdrawals
Profit & Loss Sharing Account

Rules for Profit and
 Opened by sharing account
 Opened with initial minimum deposit
 It may be opened in the name of individual or jointly in the names two
or more persons
 All money to be deposited that should be accompanied by a pay-inslip showing the name and the number of account
 Withdrawal from the account by cheque
 Application for cheque book should be made on printed requisition
book
 Bank have right to make investment of credit balances and deposited
 Profit payable and loss recoverable on PLS
 The joint account may be operated singly by anyone of them
 Accountholder wishing to close the account must be present pass
book and unused cheque
Foreign currency account

Salient features
 Only designated branches authorized to deal
 Foreign currency can be accepted
 Deposit can be accepted from residence and non residence
 Minimum requirements 1000 US dollars
 Monthly rate of return given
 It enjoy protection of economic reform act 1992
 Foreign currency or Pakistan rupee at the discretion of the depositor
 Exemption from the account as levy of wealth tax for 6 years, income
tax, dedication of zakat
 Gov. of Pakistan will not make inquiries about there sources
Use of Funds

The bankers in Pakistan use their funds
profitably in the following categories:
Short Term loans repayable at short notice
 Investment in Government & other stock
exchange securities
 Loans & advance to trade, commerce and industry
 Purchase & Discounting of Bills
 Financing imports & Exports trade

Opening a
Bank Account
Formal Application
Introductory Reference
Specimen Signature
Opening the Account
Closing of the Account
Banker-Customer
Relationship
Meaning of Banker
Dealer in Capital
 Dealer in Money
 Intermediary party b/w Borrower & Lender
According to the Banking ordinance 1962,
Banking has been defined as
“ Accepting Deposits for the purpose of
lending or investment of deposits of money
from the public, repayable on demand or
otherwise & withdrawals by Cheque, Draft,
Order or otherwise.”

Meaning of Customer
Should have an account with the Bank
 Deal with the bank in its nature
 Deal with the bank without consideration of
the duration & Frequency of operation of his
account

A customer is a person who maintains
an account with the bank without
consideration of the duration &
frequency of operation of his account.
Relationship
Between
Banker & Customer
General Relationship
Special Relationship
Principle & Agent
Debtor
&
Creditor
Bailer & Bailment
Pawner & Pawnee
Trustee & Agent
Mortgager & Mortgagee
Executor, Attorney & Guarantor
Rights & Duties of a
Customer
to
Towards Banker

Rights a customer

Duties of a customer
Rights & Duties of a
Banker to Towards
Customer


Duties or obligation of a
banker towards customer
Rights of banker
Termination of Contract Between a Customer
& a Banker


Termination of relationship by a customer
 Change of Place
 Not satisfied with operations
 Death of Customer
Termination of relationship by a Banker
 If customer Repeatedly present s cheque after the business
hours
 Intimation of the death of a customer
 Insanity of Customer
 On receipt of notice of insolvency
 Company is wound up by the order of the Court
 Assigns his total credit balance to third party
 Garnishee order for the whole account
 Changes in constitution of the Firm
Reasons for Dishonoring a Cheque by a Bank
A cheque is not in Proper Form
 When a Banker is Justified in refusing Payments

Thanks