Clearing and Collection Process Explained
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Clearing and Collection Process Explained

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Questions and Answers

What is the process of clearing?

Settlement of banks payment instruments on behalf of customers with other banks.

Which of the following are types of instruments collected in the clearing process? (Select all that apply)

  • Cheque (correct)
  • Credit Card
  • Demand Draft (correct)
  • Pay Orders (correct)
  • Inward clearing refers to cheques drawn on other banks.

    False

    What does NIFT stand for?

    <p>National Institutional Facilitation Technology</p> Signup and view all the answers

    What is the frequency of transactions for NIFT's clearing house?

    <p>Daily</p> Signup and view all the answers

    The threshold limit for Call Back Confirmation for Clearing Inward (Non-centralized Branches) is _____ PKR.

    <p>500,000</p> Signup and view all the answers

    What type of transactions require CBC, according to the document?

    <p>Both A and C</p> Signup and view all the answers

    What is required on a deposit slip?

    <p>Title and account number, matching amount in words and figures, unauthorized alterations authenticated, and depositor's contact information.</p> Signup and view all the answers

    Use of WHITO or any CHEMICAL is allowed on a cheque.

    <p>False</p> Signup and view all the answers

    Study Notes

    Clearing and Collection Explained

    • Clearing is a process of settling bank payment instruments for customers with other banks. Collection and payment are categorized as outward and inward clearing respectively.

    Types of Clearing

    • Inward clearing involves cheques drawn on the bank but deposited at other branches.
    • Outward clearing refers to cheques drawn on other banks' branches and sent for collection of proceeds.

    Clearing Process Overview

    • Cheques drawn on the same branch are handled directly without external clearing.
    • Cheques drawn on other branches within the clearing house are sent to the clearing house for settlement.
    • Cheques drawn on outstation branches of MCB/other banks require specialized procedures for collection.

    Instruments Collected

    • Cheque: Most common payment method.
    • Pay orders: Written instructions to a bank to pay a specific sum to a beneficiary.
    • Demand Drafts: A written order by a bank payable on demand by the payee.
    • Banker’s Cheque: A cheque guaranteed by the issuing bank.
    • SBP/NBP cheque: Cheques issued by the State Bank of Pakistan (SBP) / National Bank of Pakistan (NBP).
    • Dividend Warrants: Documents authorizing payment of dividends to shareholders.
    • Call Deposit: A type of deposit that can be withdrawn on demand.

    NIFT (National Institutional Facilitation Technology)

    • A joint venture between six major banks and the private sector in Pakistan.
    • Responsible for establishing and managing automated clearing house facilities.
    • Plays a key role in modernizing Pakistan's payment systems.
    • All commercial banks are members of NIFT's clearing system.
    • SBP monitors NIFT's clearing operations.

    NIFT Objectives

    • Support the financial industry in modernizing payments within Pakistan.
    • Facilitate automated solutions for payment transactions, including utility bills, tax collection, and government receipts/payments.

    NIFT Services

    • Provides services to commercial and microfinance banks in Pakistan.
    • Over 12,000 branches of 43 banks utilize NIFT services through 27 processing centers.

    Call Back Confirmation (CBC)

    • Used for transactions exceeding specific threshold limits.
    • Transaction Type: Inward clearing (non-centralized branches), Inward clearing (centralized branches), Same day clearing, Internal/online funds transfer, Instrument issuance.
    • Threshold Limits: Vary based on transaction type and range from PKR 500,000 to 1 million.

    Deposit Slip Requirements

    • Separate slips for local cheques drawn on bank branches and other banks.
    • Outstation cheques from different areas or banks should be listed on separate slips.

    Scrutiny of Deposit Slips

    • Title and Account number should be mentioned.
    • Amount on the deposit slip must match the cheque amount in both words and figures.
    • Unauthorized alterations, if any, should be authenticated.
    • Depositor's signature and contact number are mandatory.
    • Use of WHITO or any chemical is prohibited on the cheque.
    • All required information must be properly filled in.

    Scrutiny of the Cheque

    • Particulars should be written in permanent ink, preferably blue or black.
    • Amount in words and figures needs to match.
    • Endorsement, if any, and special crossing should be in order.
    • No indication that the payee is not entitled to receive the amount.
    • Cheque crossing should comply with regulations, e.g., "Payee A/C.onl..."

    Standardized Cheque Layout

    • The SBP has issued instructions for using standardized cheque layouts through PSD Circular # 1 and # 2.

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    Description

    This quiz covers the essential concepts of clearing and collection in banking. It delves into the types of clearing, including inward and outward processes, and provides an overview of how cheques are processed. Whether you're a student or a finance professional, this quiz will enhance your understanding of bank payment instruments.

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