Things To Consider Before Availing Personal Loan

Availing Personal Loan from bank is getting common and even easier now a days, there was a time when it takes more than 1 month, but now you can avail it on your finger tips through your smartphone, Personal Loan can cover your short term as well as long term needs. So if you are dreaming for your brand new mobile or you are little short from your brand new car you can avail your personal loan from your bank quick and easy.

Personal loan can be avail for Home Renovation, Weeding, Medical, Purchasing Home Appliances, Vacation, etc. For above purposes you can avail Personal loan of Up to Rs 3,000,000/=. Facility of Personal loan is offering by most of the banks in Pakistan under the guide lines of SBP.

Currently Banks are offering personal loan to only salaried individuals with the age restriction of 21 years and time limitation of up to 5 years. But yes there some microfinance banks in Pakistan who is also offering personal loan to self employed (Business owners) under some conditions. 

If you want to avail Personal loan you need to carefully assess and consider the conditions on which you are Availing personal loan from your bank, because if you don't know the term and conditions the result will be problematic. So lets discuss what are the things we should consider before Availing Personal loan from bank.

Time:

Time factor is very important to consider for personal loan, because it will multiple your mark-up charged by bank against the finance amount you borrow from bank. For example, if you avail Rs 100,000/= from bank for 1 years the total EMI will cost your around Rs 120,000/= in one year, and if the same Rs 100,000/= you borrow from same bank for 5 years then total Sum of EMI in 5 years will around Rs 215,000/=. So you have to select the time frame very carefully as per your need and capacity to pay

Fixed Interest Rate Or Variable Interest Rate:

Bank deals in both Fixed Interest Rate and Variable interest rate you need to ask your banker that interest rate of my personal loan will be fixed or variable, In Fixed Interest Rate EMI( Every Month Instalment) will remain same, and in Variable interest rate EMI will fluctuate as per KIBOR and Prevailing interest rate of bank. As per my suggestion Fixed Interest Rate is most feasible one. And your goal should be ask your banker how much you are charging interest rate and compare the same with other bank interest rate and make decisions accordingly. 

Insurance:

The is the most important thing to consider, ask your banker before availing availing Personal loan that whether my personal loan is insured or not. For example if you avail Rs 1million from bank and you died in 2 month, who will pay the loan or instalment amount? So for this banks are offering now a days Personal loan with life insurance coverage in which loan amount will be waived off in condition of death. But keep one the in mind that secured loan is costly as compare to unsecured loan.

Finance Amount:

Always avail Personal loan as per you need amount, don't avail the loan amount excessive of your need, if you avail excess amount this thing will distribute your life financially, For example your need amount is Rs 200,000/= but you avail Rs 500,000/= , as in high loan amount you have to pay high EMI, So this will disturb your monthly budget. So don't do this.

Processing Fees:

Ask your banker, what will be the processing fees for personal loan of my desired amount and compare it with other bank processing Fees. As some banks charge fixed amount and some banks are charging on percentage basis.

Late Fees Penalty:

It happens when you forget to pay your EMI on due date, and banks are charging amount against Late Payment of Emi, So ask your banker before Availing Personal loan that what will be Late Fees Penalty if i forget to pay my EMI. 

Prepayment/ Early Settlement Penalty:

This is a Penalty for Early settlement of your personal loan, for example, You avail Personal loan of Rs 500,000/ but in 2 year you wants to settle outstanding finance amount so for settlement of that amount bank charge some penalty, some banks charge Rs 5,000 and some Charge Rs 7,000/ on per Rs 100,000/=. And some banks are charge the penalty on percentage basis. So ask your banker that what will be the early settlement Penalty. Also ask the question regarding Full payment and Partial Payment Facility and Its Penalty 

Ability To Pay EMI:

As your self that how much amount you can pay easily on every month, the best way the decide this is analyse how much salary you can save after all the expenses,  so select EMI amount option a according to your budget.

Alternate:

Before Availing personal loan it is better to analyse the alternate options of personal loan just like if you are government employee you may go for Advance Provided Fund loan, likewise you can also avail gold loan, Loan against insurance through which you can avail Up to 90% of your cash value and you don't need to pay any mark-up against loan. So my advice is if you want to avail personal loan you should need to analyse each option one by one.

If we summarize the things and get conclusion, Personal Loan may full fill your need but you need to analyse the factors which is discussed in this article, and ask one question from yourself that is it  really worth full to avail personal loan, is there no any option left for you rather to avail personal loan, if this is the condition you are facing than you may avail personal loan. And also try settle your loan as soon as you can because as the time increases your amount of mark-up increase also.

Fraud Indicators In Banking

The Exposure of Fraud In banking sector will always remain high due to financial products offered by bank, Management always try to focus more in avoidance of fraud, despite of high focus chances of fraud will always be there, Actually management learn the tactics through the past experience and create their internal polices and procedures according to them. So through this article we discuss some Red flags/Indicators of fraud briefly for knowledge purpose, and believe me each one of them may create high reputational as well as financial risk.

Habitual Late Sitting:

Most of the bankers may disagree with that, but as per research Top management always show negative perspective regarding Habitual Late Sitting, the question is why it is included in Fraud Indicator, The answer is why there is a need of Habitual Late Sitting, You have official banking hours to finalize your work. It means you are hiding something from other branch employees and waiting for late hours for finish work which may deals in fraudulent activities.

Password Sharing:

In Banking Password sharing comes under the umbrella of Zero-Tolerance, Management may never think twice to fire/ terminate you if you commit this crime in any stage of your career, Password Sharing in banking is a Red flag because if you are a authorizer in branch and you share your password with your cashier, He / She may post any entry and Supervise the same with your password, in result will be big financial loss/Fraud for bank   

Providing Incomplete Information To H.O/Management:

It is also a Red Flag Indicator of Fraud, because in this employee is concealing the facts from Management, in this way employee is also breaching the trust of employer for his personal financial benefits which leads toward fraud.

Not Availing Mandatory Leaves:

Employees who perform any fraudulent activity will not take mandatory leave, the reason behind this they don't want to leave their table for new comer because when any employee go for annual leave their backup employee will take charge for certain Mandatory leave period, and in this period he/ she can be exposed for the fraud the he commit.  So if any employee never show interest for annual leave this may lead for Fraud Indicator Or Red Flag.

Unreconciled Entry Since Long:

Reconciliation is very important in banking, If Management found any Unreconciled entry in bank suspense GL, This thing may trigger the chances of Fraud Activity, That is the reason Head Office always send reminders to branches to keep Suspense GL Balance and Error Free.

Flying Entry:

Flying entry is very suspicious in banking and it may leads toward the big fraud / Financial loss is not traced timely, Actually Flying Entry is the transaction without any justification or record. So it is also one of the fraud indicator in banking.  

If we focus above Red Flags Fraud Indicator in our career this is for sure that we can make our life easy and save our self from any fraud activity. and for Middle level management it is very good indicators for them to keep their employees on track and guide them accordingly to keep them away from Fraud, and if Found any employee doing above any activity it is their responsibly the report top management/ Senior Management Timely.       

Precautions To Be Taken At The Time Of Cash Payment

In Banking one the most risky thing is Cash Payment, Cash officer need to active, alert and vigilant while doing cash payment to customer, as once you give extra cash to customer the maximum chances will be you need to pay it from your own pocket, So the risk of financial damage is very high in Cash payment, However if we observe certain precautions at the time of Cash Payment, we can save our self from big financial damages.

• Always keep yourself Calm while performing any cash payment transaction, there is no any need to doing transaction in hurry.
• Examine the Instrument ( Cheque ) Carefully, following are the things you need to examine in cheque before processing it on system, 1. Open Or Crossed 2. Bearer or Ordered 3. Date 4. Overwriting 5. Signature 6. Mutilated 7. Word and Figure Should be matched . So in this way you need to carefully examine these major thing before processing it on system.
• Confirm Genuineness of Cheque in UV Lamp if the cheque is Above RS 100,000/=
• Confirm Genuineness of Cheque Through IV Marker if the cheque is Above RS 1,000,000/=
• Copy Of CNIC Should be Originally Seen, 
• Always Ask Copy Of CNIC From Customer For Online Cheque (Other Branch Cheque) Irrespective of amount.
• Signature Should be carefully checked and verified from concern branch staff.
• Always conduct CBC (Call Back Confirmation) From Customer If the Cheque amount is more than Rs 100,000/= or banker May conduct CBC if he found something wrong in cheque, So For confirmation banker may conduct CBC.
• Photo Account Signed / Thumb Should be in the presence of Bank/Branch Officer. 

  These are major precaution to be followed at the time of Cash Payment, As these things may safe you big financial loss.

Precautions To Be Observed While Account Opening

Customer-Banker relation starts with Account Opening, and believe me this is a point where banker need to be very much careful and vigilant. Currently regulator are imposing huge penalties on FDI, Banks due to non compliance in account opening especially, therefore special care should be taken from banker while doing account opening in order to avoid penalties.

So in this article we will discuss exactly what precautions to be taken at the time of account opening, whether you are in HBL, Bank Islami, Bank Al Habib, Meezan Bank, Alfalah Bank or any other being a Account Opening Staff you have to follow these precautions in order to avoid penalties.

• To me Account Opening Should be start with the most important thing in banking which is KYC (Know your Customer), Always try to obtain maximum information from customer so you can give best product as per his/her requirement, In this stage we should not wait for the customer to tell himself about the basic information but being a banker we need to ask from customer to tell the basic information. i,e, About customer geographic, Income, Source of income ETC
• Most of The time banker do not fill the Account Opening Form Properly, which create problem for him as well. So While doing Account Opening banker should need to fill Account Opening Form Properly and error free, and do not skip the things, always try to fill it completely because each and every information of customer is important.
• Signature of the customer should be same as on SS Card and AOF and all the signature should be matched as per Customer CNIC, if customer signature is different from CNIC, Always obtain Signature Different From CNIC Undertaking.
• Always obtain Photo Account undertaking for Photo Account.
• While Opening Customer account banker need to be very much careful while inputting customer address as the address should be as per customer cnic, If Customer address is different from cnic always ask Utility bill for address verification or rent agreement.
• Always Verify customer Business address by means of Physical verification, Business Staff should go out for physical verification of business, for verify whether is customer business is really exist or not, if physical verification found satisfactory process the account.
• PEP Confirmation, Politically exposed persons accounts should be treated on high priority and processed after high management approval

These are basic precautions which are very important to be follow during account opening, as these simple precaution could save banker from big penalities.       

Cheque Clearing and Its Process In Pakistan

Most of beginners who newly hired in banks always have a questions in their mind that what does Cheque Clearing Means?, What is the Cheque Clearing Process In Pakistan? How long does it takes? And How does the whole process Works?, Is there any limit of amount in Clearing?, What is Cross Cheque? So don't worry today through this article you will learn the basics regarding cheque clearing in Pakistan. In banking terminology Cheque Clearing is the process of payment settlement of cheque between two different banks, and the settlement is done through a third party who is actually transactional facilitator house named NIFT (National Institutional Facilitation Technologies Pvt Ltd), Keep one thing clear in mind that there is no any involvement of cash in clearing, Process of clearing is Highly Safe, Secure, Fast and reliable.

Role of Clearing in banking sector is very important and crucial, one can not think banking without clearing just because it facilitate you to transfer funds from one bank to other bank irrespective of amount, you may transfer 1Rs from your one bank account to other bank and you can also transfer 1billion on the same time, So there is no any limit of amount in clearing, But you need to present your cheque before 4PM, as the clearing timing is From 9AM to 4PM.

Lets talk about cheque clearing process works in Pakistan, Process of clearing starts when a customer visits the branch and present his/her own/party Cross cheque which means A/C Payee Only(A Cross Cheque can only be transfer from one account to other bank account) and ask you that I want to deposit this cheque into my bank account which is in your bank, you as a banker simply collect the instrument and start the scrutiny of the the instrument, i,e First you will cheque date, Cheque should not be post dated or stale in both cases you will not accept the instrument. Second most important thing while doing scrutiny is both word and figure should be match, Third thing which is most Signature of customer should be their on the face of cheque, Also there are soo many other factors that we should look while doing scrutiny, As you find the cheque (Instrument) is genuine and comply with banking SOPs, you will Process the instrument in your system and in the day end you send instrument to NIFT Office and on the next day bank will receive the amount against the instrument and bank will credit that amount to customer account.

Now lets understand the clearing process of cheques in Pakistan with example. Ali is the proprietor of M/s ABC, Ali is maintaining account in HBL Karachi main branch, Ali receive a cross cheque from one of his counterparty who is maintaining account in Al habib Karachi main branch, As Ali has bank A/C in HBL Bank he goes to his bank (HBL) and present the cheque of Al habib karachi main branch which he received from his counterparty, his branch(HBL) receive the cheque along with deposit slip, and post the instrument in system as per SOP's and Deposit Slip, and handover the carbon copy of deposit slip, and in day end branch send the instrument to NIFT, Next day morning NIFT will send cheque (Instrument) to concern bank branch for release/Process of payment and till evening HBL will receive the payment if there was no any discrepancy found in cheque by counterparty bank

Above one is the simplest example of clearing process, but it may be vary if type of clearing changes. I.e In Same day Clearing Settlement of funds will be done on same working day, In normal Clearing it takes one working day (T+1) time in normal clearing, In Intercity Clearing It takes around two working days (T+2) but it can take up to Five working days. We will learn all above types in next articles step by step, as these articles will help you in your daily banking, IBP exams specifically JAIBP Exams