2. Foreign Exchange Banking in PK (Guide)

CHAPTER - II

Foreign Currency Accounts

Opening of Foreign Currency Accounts

Accounts other than Pak Rupees are Foreign Currency accounts. Foreign currency account can be opened only in those branches that have been permitted by SBP to deal in Foreign Exchange. Rules related to foreign currencies are given in SBP’s Foreign Exchange Manual chapter VI. Prudential regulation M-1 to M-5 and all CDD/KYC and AML rules and regulations applicable to Pak rupees accounts are also applicable to Foreign Currency accounts. Further procedure for opening the account and documentation required for different type of accounts are same, that a Pak rupee accounts.

For accounts opened against special permission, in addition to normal documentation SBP approval shall also be made part of documentation 

According to the SBP Foreign Exchange Manual, (chapter VI) following private foreign currency accounts can be opened without prior approval from SBP:

1. Pakistani national resident in or outside Pakistan, including those 

having dual nationality.

2. All foreign nationals residing abroad or in Pakistan.

3. Joint account with resident and non-resident

4. All diplomatic missions and their diplomatic officers.

5. All international organizations in Pakistan.

6. Companies established in Pakistan including foreign share holdings

Charity trust, foundations etc. which are exempted from Income Tax.

8. Branches of foreign firms and companies in Pakistan.

9. Non resident Exchange Companies even if owned by a bank or financial 

institution.

10. All foreign firms, corporations, other than the banks and financial 

institutions owned by the banks, incorporated and operating abroad, 

provided these are owned by persons who are otherwise eligible to 

open foreign currency accounts. 

Foreign Currency accounts whose general permission is given in above cases; should not be fed by:

1. Foreign Exchange borrowed under any general or specific permission 

given by SBP, unless permitted.

2. Any payment for goods exported from Pakistan.

3. Proceeds of securities issued or sold to non residents.

4. Any payment received for service rendered in or from Pakistan.

5. Earning of profit of the overseas offices or branches of Pakistani firms 

and companies including banks,

6. Investment of resident Pakistani abroad.

7. Any foreign exchange purchased from an authorized dealer in Pakistan

for any purpose.

Corporate or legal bodies can not generate funds from the kerb market for deposit in their foreign currency accounts. Foreign currency accounts can be fed by:

A. Remittance from abroad.

B. Travelers cheques issued outside Pakistan (whether in the name of 

foreign currency account holder or any other person).

C. Foreign currency notes.

D. Foreign exchange generated by encashment of securities issued by 

government of Pakistan.

The above accounts are freed from all foreign exchange restrictions except foreign currency account existing as on 28 May 1998 and restrictions were issued vide FE circular No12 of 1998. Accounts covered under FE 12 are transferable from one bank to other. The main points of FE  circular No12 of 1998 were:

I. Withdrawals in foreign currencies from the then existing foreign currency 

accounts – whether maintained by the resident or nonresidents were 

temporarily suspended.

II. Withdrawals were allowed in Pakistan rupees if so desired by the 

account-holders. Payments in such cases could be made at the rate 

of Rs. 46 per dollar and for other currencies, at the rate crossed with 

New York's closing mid-rate for the previous working day.

The facility of foreign currency account is NOT available to the following:

a. Airlines. Shipping companies operating in / through Pakistan or collecting 

passage, freight in Pakistan.

b. Investment banks.

c. Leasing companies/ Modarba companies including those which have 

been granted permission to deal in foreign exchange.

Special Foreign Currency (FC) Accounts for Private Power projects

Banks & DFIs can open special Foreign Currency accounts for private power projects in Pakistan against special permission from SBP. This special permission shall be available as per agreement entered by these companies with Private power and infrastructure board (PPIB) Government of Pakistan. The account will be allowed to maintained, during construction and operation of the project for the following purposes:

1. FC Account in or outside Pakistan for deposit of foreign equity and FC 

loan.

2. FC insurance account for payment of insurance premium and receiving 

insurance claims.

3. Offshore FC control account as per conditions of the agreement signed

with PPIB for operating the project.

4. Offshore FC operating account for meeting operation & maintenance 

of the project.

5. Offshore FC account for meeting disputed payments with the condition 

that the balance will be remitted to Pakistan once dispute is over.

6. Offshore FC account for debt service/ payment.

7. Offshore debt service reserve account, with the condition that the 

maximum balance in this account would not exceed next 12 months 

debt service payment.

8. Offshore FC account for maintenance of reserve, with the condition 

that, permission will expire with the expiry of the agreement and 

account will hold maximum US $ three millions at a time.

9. Offshore FC account for remittance of dividend.

Special permission for foreign currency accounts

SBP on request in writing may issue special permission for opening FC account to the following:

1. Foreign mineral/ oil exploration companies, foreign contractors and 

their sub contractors, subject o the condition that they will meet all 

their expenditure in Pakistan, including salaries of foreign nationals 

in pak rupees, even if it is received from their head office, an the 

conversion shall be on interbank market rates.

2. Firms and companies raising foreign equity or foreign currency loan, 

for receiving and retaining foreign funds. These funds can be used as 

per terms of SBPO FE Manual e.g. imports, consultancy and which 

are related to the business for which account is opened.

Authorized banks / DFIs must submit monthly statement in prescribed format (appendix V-5) along with related documents (import documents, invoices, agreement etc).

Surrender of Foreign Exchange

All citizens of Pakistan and other persons residing in Pakistan continuously for six months or more and posses’ foreign exchange whether in Pakistan or abroad are required to sell such foreign exchange to authorized banks within three months from the date of its acquisition except:

I. Foreign Exchange held abroad by Foreign Diplomats, foreign nationals 

employed by embassies, missions of foreign countries.

II. Foreign exchange held by Foreign National & foreign business houses 

except that foreign exchange which represents business conducted 

in Pakistan or services rendered while in Pakistan. 

III. Foreign exchange held by resident in Pakistan in countries other than 

India, Bangladesh, Afghanistan and Israel provided amount in these 

accounts does not exceed US dollar 1000 or equivalent in that currency.

IV. Afghan currency whether held in Pakistan or outside Pakistan.

V. Foreign national are not allowed to make payment on behalf of Pakistani 

or foreign national residing in Pakistan against pak rupees. This

includes foreign currency accounts maintained by foreign national in 

Pakistan.

Other important points

• Pakistani nationals resident in Pakistan are  allowed to open and 

maintain F C account outside Pakistan except in Afghanistan, India, 

Bangladesh and Israel, provided the balance maintained in these 

accounts should not exceed US $ 1000 or equivalent.

• Interest paid by the banks to the foreign currency account holders 

shall be reported as sale on the monthly exchange return

F.E. 25 Schemes

Amount of Foreign Exchange accepted out side SBP forward cover scheme i.e. under the provision of SBP F.E. Circular No.25 of 1998 Foreign Exchange is not required to be surrendered to SBP. The banks that accepted such deposits are free to lend, invest money in or outside Pakistan on the rates of currency not exceeding LIBOR (London Interbank Offer Rate) of such date. Main features of the scheme are:

Foreign currency deposits, mobilized under FE 25 Scheme, after netting-off deposits utilized to finance trade relate activities, such as financing against import and export, should not at any point exceed twenty percent (20%) of the local currency deposits of the bank / DFIs at the close of business of the last working day of the preceding quarter. In 2004 SBP has made certain changes in the policy of settlement of FE -25 Loans for Export vide FE circular No16 of 2004, which says that “FE-25 loans against intended exports shall only be settled through realization of export proceeds or remittance from abroad, of FE-25 Loans for Export maturing after Nov 2nd 2000.

Import financing against import bills under FE-25 Scheme can be allowed from the date of import payment by creating foreign currency loan against importer for a maximum period of six months. The repayment can be made by purchasing foreign currency from interbank market on prevailing rate on the date of repayment. The banks can purchase foreign currency from interbank market to cover interest amount and the same should be reported to SBP by submitting “M” form along with monthly foreign exchange returns.

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1. Foreign Exchange Banking in PK (Guide)

CHAPTER - I

Definitions

Exchange control

The restrictions imposed by the government of a country on conversion of its currency for another, with the purpose to improve its balance of payments position is called exchange control.

Exchange position

Foreign exchange position is the balances of bank foreign exchange assets and liabilities that generate the risk of obtaining additional revenues or expenditures upon the modification of exchange rates.

Foreign Exchange

Any currency other than the local currency which is used in settling international transactions can be termed as foreign exchange. This includes, instruments, such as, draft, cheques etc. and paper currency, used to make payments between countries.

Foreign exchange contract

It is a commitment to buy or sell a specified amount of foreign currency on a fixed date and rate of exchange. Such contracts are used by the importers as a hedge against exchange rate fluctuations.

Foreign exchange earning

It includes, proceeds from the export of goods and services of a country, and the returns from foreign investments, denominated in convertible currencies.

Foreign Exchange Market

The foreign exchange market deals in trading currencies. The purpose of the foreign exchange market is to help international trade and investment. It helps businesses convert one currency to another. For example, it permits a Pakistani businessman to import European goods and pay Euros, even though the business's income is in Pak rupees. 

The foreign exchange market is the largest and most liquid financial market in the world. Traders include large banks, central banks, currency speculators, corporations, governments, and other financial institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Daily turnover is over US$3.00 trillion. Central banks 

play an important role in the foreign exchange markets.

Foreign exchange rate

This is the conversion rate of one currency into another. This rate depends on the local demand for foreign currencies and their local supply, country's trade balance, strength of its economy, and other such factors. Exchange rates can be fixed or floating.

Fixed rates is the system in which the value of a country's currency, in relation to the value of other currencies, is maintained at a fixed conversion rate through government intervention.

Floating rate is a system in which a currency's value is determined by the interchange of the market forces of demand and supply, instead of by government intervention. However, all central banks  try to control these rates within a certain range by buying or selling their country's currency as the situation warrants.

Terms used in money market

Annualized

Extrapolates the behavior of an element (such as volatility) from a certain time period to a full year.

Ask

The price at which sellers offer currencies to buyers.

Base currency

Usually the currency of the home market in which a trader or investor is buying or selling.

Bid

The price at which buyer offers to buy currencies from sellers.

Currency pair

Exchange rate relationship between two currencies, where one currency is expressed in terms of the other. For example, USD-EUR (US dollar against Euro) is a currency pair.

Dollar rate

The exchange rate of a foreign currency as quoted against the US dollar (USD). Some currencies are typically only quoted against the US dollar, such as the Arab Emirates Dirham (AED) Pak Rupees (PKR). The exchange rate of the Arab Emirates dirham and PKR will be thus computed from AED-USD and PKR-USD.

Exchange rate

The number of one currency needed to buy another.

Exchange rate risk

The potential loss that could be incurred from a movement in bid/ask prices, or exchange rates. For traders, risk is measured by the open currency position.

Exposure

The risk which an investor accepts when buying and selling in foreign currency-hedged financial instruments.

Filtering data

Some data may be "bad," stemming from such causes as a market maker incorrectly typing a price, or entering the correct price but in the wrong format. All data used by OANDA is filtered using its own sophisticated algorithms.

Financial institution

An organization primarily established to offer and perform financial services. 

Examples of financial institutions include brokerages and banks.

Forecast

A statistical analysis of the markets whereby a percentage chance is assigned to a given price movement occurring. A forecast of the foreign exchange markets is similar to a weather report in that both assign a 

probability to the occurrence of an identified market or climatic change. 

FX or Forex

An abbreviation for foreign exchange.

Hedging

A transaction strategy used by traders and investors in foreign exchange to protect an investment or portfolio against currency price fluctuations. A current sale or purchase is offset by contracting to purchase or sell at a specified future date in order to defer a profit or loss on the current sale 

or purchase. In this way risk is offset due to currency price fluction.

Interbank prices

Currency prices that reflect market rates among financial institutions for transactions typically over US $1 million. Interbank prices are different from retail prices.

ISO

The International Standards Organization, a worldwide standard-setting 

body. We use ISO 4217 currency codes in all of our services.

Long position

A market position where a trader has bought a currency he previously did not own. A long position is normally expressed in terms of the base currency.

Market maker

A financial institution or individual making consistent buy and sell quotations

in selected currencies. A market maker must hold or have ready access to the amounts quoted, that is carry an inventory.

Overbought

Situation where price movement has risen 150% faster or stronger than normal, rising too far in response to net buying. A price movement that becomes overbought is expected to soon make a corrective move. In other 

words, the price of the currency pair is expected to fall soon.

Oversold

Situation where price movement has fallen 150% faster or stronger than normal, declining too far in response to net selling. A price movement that becomes oversold is expected to soon make a corrective move. In other 

words, the price of the currency pair is expected to soon rise.

Portfolio

A selection of securities held by an investor or financial institution. Portfolios are designed primarily to spread investment risk.

Price / basis point, or pip

One basis point = one paisa (0.01)

Price movement

The change in the price of a currency over a specified time period.

Retail prices

Currency prices which reflect commissions and special charges that a bank or exchange agency demands to convert currencies for no corporate customers. These commissions and special charges vary among countries, banks, and exchange agencies. 

Risk

The potential loss that an investor accepts when he makes an investment. Risk can also be defined statistically as the annualized standard deviation of returns. See exchange rate risk.

Short position

A market position where a trader has sold a currency he does not previously own. A short position is normally expressed in terms of the base currency.

Spread

The difference between the bid and the asking price of a currency.

Stop-buy

A buy order for a currency price that is above the current "market," or current price, that becomes a market order when the specified price is reached. Stop-buys are used by traders to establish positions in markets which they perceive to be rising in value.

Stop-loss

A price specified by a trader at which he closes his position ,buys or sells currencies to exit the market, to ensure that in case of a loss he is able to keep his loss in line with his risk profile.

Time horizon 

The period of time over which a forecast of the foreign exchange markets is made. Traders generally look at forecasts over several time horizons before making a trading decision. Typical time horizons presently used in financial services are:

• one day (24 hours) 

• five days 

• three weeks 

• three months 

Vendor or supplier

An financial organization which collects, packages, and distributes up-to-

the-minute price quotes from banks and other financial institutions.

Volatility

A measure by which an exchange rate is expected to fluctuate or has fluctuated over a given period. Volatility figures are often expressed as a percentage per annum.

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24. (Y & Z) Basic Banking Guide A to Z

Y

Yearly

Yearly tenancy

Yield

Yield gap

Yours

Z

Zero budgeting

Zero coupon Bond

Zero rating

Zone

Zoning

Zoological certificate

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23. (W) Basic Banking Guide A to Z

W

Wire transfer
A transfer of funds from one point to another by wire or network such as online transfer . in this mode of transfer funds are transferred on real-time bases.

Wage

Wage drift

Wage freeze

Waiver

Warehouse

warehousing

warrant

warranty

war risk insurance

wasting assets

waybill

white paper

wholesale

wholesale banking

wholesale cost

will

wind bill

windfall

window-dressing

withholding tax

without prejudice

without recourse

with particular average

with recourse

witness

working capital

working day

work-in-progress

world bank

writ of attachment

writ of execution

writ of possession

writ of summons

write down

write off

write-up

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22. (V) Basic Banking Guide A to Z

V

Vacant possession
Property not occupied, or with no tenant in possession.

Valid
An agreement, document authorized by law or otherwise having legal effect or force.

Validate
To make any document, instrument, legally effective. In banking a cheque becomes state after six months of its issuance, after that it requires validation.

Validity
The period for which an agreement, negotiable instrument, bid, offer ,claim, document, letter of credit, guarantee etc remains in force.

Value
It refers to the monetary worth of an asset, business entity, goods sold or service rendered, or liability or obligation acquired.

Value added cost
It refers to the resources consumed in enhancing the value of a goods or services.

Value added tax (VAT)
This is a consumption tax which is levied at each stage of production based on the value added to the product at that stage.

Value date
The date on which an account holder can use the funds from deposited cheques that have passed through the bank's clearing cycle, the date on which a deposit starts to earn profit.

Variable cost
This is the cost which varies, more or less, with the increase/ decrease in production or the sales revenue of a company, e.g.  raw material, energy usage, labor (wages), distribution costs, etc.

Variable rate
Any interest/ profit  rate or dividend that changes on a periodic basis.

Variance
Difference between an expected and actual result, such as between a budget and actual expenditure.

Vault
An area, in a bank or  financial institution, which is a safe and secure place for storing items of value. Bank vaults must meet a series of safety regulations, required under their own policy as well as regulators. Vaults are generally used to keep cash, as well as customers' safe deposit lockers.

Vendor
This refers to the manufacturer, producer, or seller who are in the approved list of a company to provide certain items.

Vested
This refers to any thing guaranteed as a benefit, privilege, or right, immediately or in future.

Vested interest
It refers to the personal stake, or expectation of personal gain, that underlies a strong commitment to maintain or influence an action

Veterinary certificate
A certificate issued by competent authority, which is required to indicate that livestock is free from specified diseases

Viable
This refer to any thing according to the requirement, or practical, For example, a company is looking for a substitute of a manufacturing item, it will consider viable alternative that would provide a similar benefit at a reasonable cost.

Visa
This is a certificate issued or a stamp marked on the applicant's passport by the immigration authorities of a country to indicate that the applicant's credentials have been verified and he or she has been granted permission to enter the country for a temporary stay within a specified period. This permission, however, is provisional and subject to the approval of the immigration officer at the entry point

Void
Agreement which is absolutely null, without legal force and legal effect, such as an agreement for an immoral consideration.

Voidable
This is the agreement which is capable of being set aside by a court or rescinded at the option of one of the involved parties. For example agreement caused by coercion, undue influence, misrepresentation

Vostro accounts
This is a local currency account maintained by a local bank for a foreign (correspondent) bank. For the foreign bank it is a nostro account.

Voucher
This is a written instrument that confirm for some fact such as a transaction. It indicates that goods have been bought or services have been rendered, authorizes payment, and indicates the ledger account(s) in which these transactions have to be recorded.

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21. (U) Basic Banking Guide A to Z

U

Ullage certificate
This is a certificate issued for removal of liquid (oil etc) from the tanker. For example palm oil is imported by three parties and on port it is stored in one tanker and oil is released through measurement.

Ultimate balance
Balance arrive after combining all accounts.

Uncleared effects

Ultimo
It refers to in or of the month preceding the current one, such as on the 15th ultimo.

Ultra vires
It refers to some thing beyond the legal power or authority of a company association or officer, etc.

Ultra violet
The purplish-blue light which highlights un-visible fields .It also refers to, producing, or utilizing light having such wavelengths such as an ultraviolet lamp that are used to detect fake currencies etc.

Unauthorized signature
Forged signatures, or signature on behalf of any person company, firm  or association etc  without any lawful authority.

Unbanked area
Under develop areas where banking facilities are not available. As per SBP policy banks must open atleast 20% of new branches in unbanked areas.

Unclaimed deposits/ bills
All banks and DFIs operating in Pakistan are required to surrender to SBP all deposits including foreign currency deposits, inoperative bills payable out-standing in the books of banks and DFIs for 10 years and more and where no transaction has taken place, no statement of account has been requested or acknowledged, shall be classified as unclaimed deposit / instrument except deposits / instruments in the name of, Government Accounts, Minor Accounts, Court of Law.

Uncleared effect
These are the cheques, pay order, drafts and similar instruments, that have been deposited by a bank's customer but have not completed the bank's clearing cycle or the proceeds have not been credited to the customer's account
Uncollected funds: A portion of a deposit balance that has not yet been collected by the depository bank.

Undated cheque
This is refers to a cheque which is without date. Date is the material part of the cheque, and the drawee bank will not honor an undated cheque

Under capitalization
It refers to a situation where a business does not have sufficient,  funds for its size of operations. An undercapitalized firm does not have enough cash to carryout its functions and as such does not qualify for  loans due to its high loan-to-equity ratio.

Under custom bond
If for some reason, the importer does not pay the duty, he/she may keep imported goods under custom bond with the BOND COMPANY. The importer can release goods after payment of duty and bond company’s charges.

Under ground economy
Unrecorded business dealings (without payment of taxes) that are not reflected in a country's gross domestic product (GDP) computations. Though it is illegal and even criminal methods, it is a survival practice in suppressive tax regimens or where legitimate business activity is made unnecessarily difficult by difficult/ unpractical regulations.

Under reserve
It refers to a situation in which a bank credits the amount of a cheque or draft to the depositor's account before it is cleared. If dishonored, an 'under reserve' item's amount is debited from depositor's account.

Under stock
It refers to stock which is less than the desirable number or quantity

Undertaking
It can be termed as a guarantee, promise, or clause in a contract that creates an obligation.

Under the counter
Any thing done, sold, given, secretly in an unlawful or unethical way. Under-the-counter payments are a form of bribery and extortion. Also called under the table.

Underwater loan
It refers to a loan that has gone under its book value e.g. it is non-performing,  its interest rate is below the current market rate,  the market value of its collateral has decreased to less than the amount of the outstanding loan balance.

Underwriter
This is an entity who  is in the business of evaluating and taking over other people's risk for a fee /commission, interest, premium, or underwriting spread,

Un-discharged bankrupt
This is a bankrupt person who is not granted an 'order of discharge' by a court or  the person whose loan is written off due to the non payment. An undercharged bankrupt is, in general, disqualified from holding certain public  offices such as member of national, provincial assemblies’ senate or of a director in a company.

Undue influence
It refers to mental, moral, or physical domination that deprives a person of independent judgment and substitutes another person's objectives in place of his or her own. Exercise of undue influence is exercised  by excessive insistence, or pressure applied due to authority, position, or relationship in relation to the strength of the person submitting to it. Consent obtained for a contract, relationship, or transaction is voidable if it can be shown that an unfair advantage has been taken of an involved party.

Unearned income
It refers to the income received before a good is sold or a service is provided. Unearned income is classified as a current liability on the balance sheet until it is recognized as earned income during the accounting cycle.

Unemployment
This means the total number of men and women of working age looking for paid work. Unemployment statistics vary according to how unemployment is defined and who is deemed to be part of the workforce. Generally it is determined by taking sample sizing.

Unencumbered
It refers to the asset or property that is free from debt, and clear of any legal defect in its title and, therefore, can be easily sold or mortgaged.

Uniform custom s and practice (UCP)
The Uniform Customs and Practice for Documentary Credits is a set of rules on the issuance and use of the documentary credit. It is utilized by banks / financial institutions, as well as traders, in more than 175 countries world wide. This practice has been standardized by the ICC by publishing the very first UCP in 1933 and subsequently updating it throughout the years. The UCP 600 is the revised version of the Uniform Customs and Practice for Documentary Credits The UCP rules were first promulgated by the International Chamber of Commerce 76 years back and today they have attained almost universal acceptance by practitioners in countries worldwide

Uniform Gift to Minors Account (UGMA)
This is an American law that provides a child under the age of 18 (a minor) a way to his / her own investments. The money is in the minor's name, but the custodian (generally the parent) has the responsibility to handle the money in a prudent manner for the minor's benefit. The parent cannot withdraw the money to use for his or her own needs.

Uniform rules for collection (URC)
These are standards of cheques draft, bills collection practices proposed by the International Chamber Of Commerce (ICC) for the financial institutions. Provisions of URC are not legal requirement but serve to establish common understanding of the collections terminology and expectations.

Unilateral
It refers to some thing which is one sided.

Unilateral change
Any change made in the provisions of a contract without the consent of the all parties involved.

Unilateral contract
It is a type of contract in which only one of the contracting parties is under an enforceable obligation. For example, under an insurance contract, only the insurer makes a promise

Unit
It refers to the definitive quantity adopted as a standard of measurement and exchange.

Unit cost
It refers to the expenditure incurred in producing one unit of a goods or service, computed usually as average cost. Total cost/ number of units= unit cost

United Bank Limited (UBL)
United Bank Limited came into existence on 7th November 1959. It is the second largest private commercial bank in Pakistan with over 1100 branches and has an international presence in 10 countries. It has assets of over Rs. 550 billion and a solid track record of fifty years - in addition to the convenience of over 1112 branches serving you throughout the country and also at several overseas locations.

Unlimited company
These are those companies ,where there is No limitation to the liability of the owners/ share holders, for the debts/ liabilities of the company e.g. proprietorship, partnership

Unlimited liability
Unlimited extent of liability to pay a company's debts or obligations, extending beyond the investments of the company's owners to their personal assets. This extent of liability is assumed in an unlimited liability company such as a sole-proprietorship or a  partnership.

Unlimited risk
This refers to an  investment where loss  potential is unlimited. Examples include short selling (satta) and futures trading. This is opposite of limited risk.

Unlisted securities
Ordinary shares or other securities of a company not listed (traded) on any official stock exchange. In the Pakistan, unlisted securities are traded informally in the trade circles on personal contact basis, in the UK they are traded on the Alternative Investment Market. These securities are issued by smaller or new enterprises who cannot or do not wish to comply with the listing requirements of an official Stock exchange.

Unquoted shares
Refer unlisted securities

Unsecured creditors
Debtors who have no specific security, they can have claim against general assets of the debtors/ company.

Unsecured facility
Facility not secured by collaterals but allowed only against integrity of the borrower.

Update
The actions to bring/adding in a book, figures, or in any document, any  information with the purpose  to date, or making corrections.

Upset price
This is the lowest price at which a person is permitted to bid for something being sold at auction.

Usance
This is the length of time allowed in a trading transaction for payment of a foreign bill for example Usance letter of credit where documents drawn under L/C are delivered against acceptance and payment is made after predetermined period (generally from 30 to 360 days).

Usury
This is the practice of lending money and charging the borrower with profit/ interest, at an exorbitant or illegally high rate. Generally private money lenders, charge interest/ profit.

Usury rates
The maximum rate of interest lenders may charge from the borrowers. The usury rate is generally set by the regulators

Utter
To put in circulation, e.g. to utter  forged notes into circulation

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20. (T) Basic Banking Guide A to Z

T

TA
The term is generally used for travelling allowance which is paid by the organization for official trips.

Tangible assets
This refers to the assets such as cash, , machinery, equipment,  plant, property anything that has physical existence or is acquired for use in the operations of the business and not for sale to customers.  Tangible assets, unlike intangible assets, can be destroyed by fire , disasters or accidents. However, they can be used as collateral to raising  loans, and can be readily sold to raise cash in case of emergencies.

Target
It refer to the objective or goal of an individual, persons or organization

Tariff
It is a published list of fares, freight charges, prices, rates, duties etc. e.g. import tariff, custom tariff etc.

Tax
It is the compulsory monetary contribution to the state's revenue, assessed and imposed by a government on the activities, enjoyment, expenditure, income, occupation, privilege, property, etc., of individuals and organizations.

Taxable income
It refers to the  income from which standard deductions and permissible allowances have been subtracted. this is the income on which taxis paid by the tax payer.

Tex return
This is the standard form provided by the tax authorities on which a taxpayer reports taxable income with permitted deductions and exemptions, and computes his or her tax liability & file on or before due date.

Tax year
It refers to the standard 12 month period (such as a calendar year or a fiscal year) used for computing a tax payer's liability. In Pakistan Tax year starts from 1st July and ends on next  30th June.

Telegraphic transfer
It is a method of transferring funds through a telegraph or telex link. Also called wire transfer, it has now become obsolete, and has been replaced by secure cable and wireless telecommunications networks.

Telex
This is a form of wire transfer of message through telex machine . In banks these messages used to be authenticated by the use of code (test key) numbers.

Teller
This is an employee of a bank, or an institution, whose job includes the responsibilities of helping the bank customers with their banking needs, such as depositing a cheque or making a withdrawal.

Temporary overdraft
This is a clean overdraft allowed by the branch management on single transaction bases against customers request, which should be adjusted within three days.

Tender
This refers to sealed bid or offer submitted in response to a request for tenders and containing detailed information on requirements and terms associated with a potential contract.

Tenor
Description of the payment terms of a bill of exchange, such as 'Due when presented’ (payment at sight) or Due on date ...  (Usance).

Term deposit
Refer Time deposit

Term loan
This is a short-term (generally for one to five years) loan payable in a fixed number of equal installments over the term of the loan.

Terms
The period of time and the interest rate arranged between creditor and debtor to repay a loan.

Theft
This is the criminal act of dishonest assumption of the rights of the true owner of a tangible or intangible property by treating it as one's own, whether or not taking it away with the intent of depriving the true owner of it.

Third party
This is the party other than the principals directly involved in a transaction or agreement . It is someone who may be indirectly involved but is not a principal party to an arrangement, contract, deal, lawsuit, or transaction.

Through bill of lading
This is the B/L issued for containerized door-to-door shipments that have to use different ships and/or different means of transportation from origin to destination.

Time deposit
A time deposit (also known as a term deposit) is a money deposit at a bank that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn, or it can be held for another term. The longer the term, the better shall be rate of return on the money. Generally, there are significant penalties for early withdrawal.

Title
The legal rights of ownership, possession, and custody, evidenced by a legal document such as a  sale deed, or title deed. A legal title empowers its holder to control and dispose of the property and serves as a link between the title holder and the property itself.

Title deed
This is the legal document (instrument) executed and acknowledged under the seal and in the presence of a registrar of property, evidencing the right of ownership to a property described therein.

Token
This is a piece of metal or other composition used as a substitute for currency in canteens, or in banks as an acknowledgement of receipt of cheque for cash payment.

Token money
This refers to the coins of regular issue whose face value is greater than their production cost.

Token payment
This refers to the small payment binding an agreement or acknowledging a debt.

Trade
the act or process of buying, selling, or exchanging commodities, at either wholesale or retail, within a country or between countries

Trade cycle
This is recurring fluctuations in economic activity consisting of recession and recovery and growth and decline.

Trade discount
This is a discount, from the list price of goods, granted by a manufacturer or wholesaler to a retailer.

Trade gap
This is the difference in value over a period of time of a country's imports and exports of merchandise; "a nation's balance of trade is favorable when its exports exceed its imports"

Trade mark
This refers to any name, symbol, figure, word, or mark adopted and used by a manufacturer or trader in order to designate his or her goods and to distinguish them from others. It is a proprietary term that is usually registered with the Patent and Trademark Office to assure its exclusive use by its owner.

Trade union
A labor union of craftspeople or workers in related crafts, as distinguished from general workers or a union including all workers in an industry.

Trading account
Trading accounts are traditionally thought to hold only stocks, but a trading account can hold cash, foreign cash, securities and a number of other types of investments .This is an account similar to a traditional bank account, holding cash and securities, and is administered by an investment dealer, on behalf of the investor.

Transaction
It refers to an act, process, or instance of transacting, an action or activity involving two parties or things that reciprocally affect or influence each other. Transaction can be financial or non financial. Financial transactions are those where fund movement is involved, non financial transactions are those where funds transfer is not directly involved, such as issuance of cheque book, ATM card etc

Transferable credit
This is L/C with two (only two) successive beneficiaries. In this arrangement, the first can assign part or whole of the L/C amount to a second beneficiary To be transferable, the L/C must be so marked by the issuing bank on the instructions of the buyer or importer. On the instructions of the first beneficiary the advising bank can transfer it to the second beneficiary but not any further.

Transfer deed
This is the document (instrument) by which ownership of a registered property (such as land building or  shares/securities) is conveyed from its seller to its buyer.

Transit trade
The act or process of causing to pass or transit of the goods through a country. e.g. Afghan Transit Trade (ATT). Pakistan signed an agreement 37 years ago with Afghanistan to facilitate foreign trade of its land-locked neighbor. The agreement has been extremely abused by the dishonest elements.

Travel agent
This is a person who owns, operates, or works for a travel agency.

Travel cheque
This is a preprinted, fixed-amount cheque designed to allow the person signing it, to either receive value him / her selves or make payment to someone else as a result of having paid the issuer the value. It can be replaced if lost or stolen, provided the owner still has the receipt issued with the purchase of the cheque. American Express was the first company to develop a large-scale traveler' cheque system in 1891 and is still the largest issuer of traveler's cheques today by volume.


Treasurer
This is the person responsible for running the treasury of an organization. He/she is responsible for liquidity management, cash management, matters related with foreign exchange (inflow/outflow_ and interest rate risk hedging, management such as Purchase, repurchase (Repo) of securities.

Treasury bill
This is a short-term redeemable financial security issued by the State Bank of Pakistan. Treasury bills (TB) are issued for three months, Six months & 12 months maturity  period, and are sold at a discount to par, and do not carry interest. They are generally bought by banks, DFIs and large companies in competitive tenders. These TB can be resold in the discount market, generally to commercial banks or DFIs. These bills can also be discounted with SBPs for overnight for meeting immediate liquidity requirement.

Trial balance
This is a statement of all the open debit and credit items, made preliminary to balancing a double-entry ledger. If the entries in the general ledger were correctly posted, the total of all the debit balance should be equal to all the credit balance; otherwise some error has occurred some where in the entry posting process.

Triplicate
This refers to the requirement of three identical copies.

Trust
It refers to the, reliance on the integrity, strength, ability, surety, etc., of a person/ company.

Trust account
A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies.

Trust administrator
A person or institution that manages trust accounts.

Trust deed
It is a formal document which outlines the terms of a trust agreement

Trustee
This is an individual who holds or manages assets / affairs of the trust as per by laws of the trust deed.

Trust estate
All real or personal assets owned by the trust or transferred to the trustee(s) under a trust agreement as object of the trust are called estates of the trust.

Trust receipt
This is a method of financing where a bank allows an importer to take delivery of imported goods under trust with the arrangement  that importer shall sell goods and will pay off the outstanding financing against trust within specified period.

Truth in Lending
The Truth in Lending Act is a American Federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. In general, lenders must provide information on, what credit will cost the borrowers, when charges will be imposed, and what are the borrower's rights as a customer. SBP has also issued similar type of instructions to the banks & DFIs to declare in clear wording all Terms & conditions rules and regulations declared and hidden costs to the borrower.

Turn key contract
This is a type of project that is constructed by a developer and sold to a buyer in a ready-to-use condition.This also refers to the contract in which the project is ready to produce cash flow upon completion.

Turnover
In banking it refers to the amount of business transacted during a given period of time.

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19. (S) Basic Banking Guide A to Z

S

Safe deposit vault
A type of small boxes usually located inside a bank vault (locker room) and rented to customers for their use in storing valuable items.

Safe custody
Article of value deposited in bank for safe keeping, bank can not exercise right of lien on the items deposited for safe custody, except recovery of charges.

Safekeeping
A service provided by banks where securities and valuables are protected in the vaults of the bank for customers.

Safe deposit locker
These are storage containers maintained in the vault area of a bank and rented to bank customers for safekeeping of valuables. These boxes are covered by the insurance policy where risk is covered according to the size of locker, provided customer is agreed to pay the premium. Access to individual locker is through two different keys, one kept by the customer, the other by the bank as master key which is common for all lockers.

Salvage
It refers to the value of a property that has value in excess of its value as a scrap.

Same day clearing
NIFT is providing special clearing facility for the branches situated within five miles radius of clearing house. Cheques of Rs 500(K) and above in Karachi & Lahore & Rs 200 (K) & above in other cities received up to cut time in the morning are eligible to be lodged in same day clearing against charges. The proceeds of these cheque are credited in customers account by 3 PM.

Sample
Item given or sold to a buyer that represents all such items pertaining to a deal, or transaction. A sample establishes a standard of quality by which the rest of the items are judged.

Sanction
In banking it refers to the formal approval or authorization.

Satisfaction of mortgage
A document issued by a mortgagee (the lender) when a mortgage is paid in full.

saving account
It is an account from where withdrawals can be made, (2) profit accrues on the account balance, (3) does not have any maturity date, and (4) zakat is deducted as per law if zakat declaration is not submitted.

saving certificate
Refer national saving schemes

schedule of bank charges (SOC)
It is a small document issued by the banks on six monthly bases wherein product wise charges of all domestic and international banking are given. As per SBP instructions banks are required to display a copy of the same on notice board.

Seal
It is a metal stamp that makes it impossible to remove (raised) impression on paper, lead, or sealing wax and is used as a security device and as a mark of authenticity on legal documents.

Search certificate
It is a certificate issued by the registrar for verifying clear title of the property offered by the mortgager to the banker/ lender. the certificate indicates existing charges over the property offered

Secondary market
A market on which an investor purchases an asset from another investor rather than an issuing corporation. All stock exchanges are part of the secondary market, as investors buy securities from other investors instead of an issuing company.

Second mortgage
Loan secured by the property that is already mortgaged. Second mortgages are subordinate / secondary to the first mortgage and, in case of a foreclosure sale, the bank holding second mortgage shall be paid out only after the full satisfaction of the first mortgage.

Secrecy
This is One of the conditions of the relationship between a bank and its customers  that the customers' dealings and financial affairs will be treated as confidential. This rule, however, does not apply to the customers' credit information which is shared among banks. Due to certain laws of Pakistan such as anti-terrorist and anti drug-trade and tax evasion, banks must release specific information to help government to fight terrorism and illegal trade, and prevent tax-evasion and money laundering.

Secured creditor
Banks who holds legally enforceable claim on a borrower's asset(s). Secured creditors are entitled to receive the proceeds of the foreclosure sale of the pledged asset(s) and, in case of a bankruptcy, must be satisfied before the unsecured creditor(s).

Secured debenture
These debentures are secured by a specific asset of the issuing company.

Securities
These are investment instruments bought and sold in financial markets, such as bonds, debentures, notes, shares and warrants.

Security & Exchange commission of Pakistan (SECP)
This is a government agency whose purpose is to develop a modern and efficient corporate sector and a capital based on sound regulatory principles, in order to foster economic growth and prosperity in Pakistan. It is an attached department of Ministry of Finance

Sellers market
This is a situation where demand is high in comparison to the supply, therefore sellers can dictate prices to take full advantage of the market conditions. This is just opposite of buyers' market.

Services
Intangible products that are not goods tangible products, such as accounting, banking, cleaning, consultancy, education, insurance, medical treatment, transportation. No transfer of possession or ownership takes place when services are sold, and they (a) cannot be stored or transported, (b) are instantly perishable, and (c) come into existence at the time they are bought and consumed.

Service charge
A charge assessed by a bank or DFI for processing transactions and maintaining accounts.

Settlement day
A specified day(generally falls after two weeks) in the stock exchange on which accounts of previous accounting periods are settled.

Several liability
This is a liability which is separate from the liability of others. In case of a dispute, a plaintiff may start legal proceeding only against a particular defendant, without involving other party or parties.

Shadow cost
This is the cost / price that bank management is willing to pay for utilizing surplus resources of a branch. This is the Contribution  that could be earned by the branch. This amount so paid is called shadow cost. A shadow cost is, in a way, an opportunity cost which is paid to the branches having surplus funds and recovered from branches who utilized these surplus funds.

Share
This is an evidence of ownership that represents an equal proportion of a company's capital. It entitles its shareholder to an equal claim on the company's profits and an equal obligation for the company's debts and losses.

Share capital
This is invested money that is not repaid to the investors in the normal course of business. It represents paid up capital generated through purchase of the company's ordinary shares. Its value is computed by estimating the current market value of everything owned by the company from which the total of all liabilities is subtracted. This is also called equity financing .

Share certificate
This is a legal document issued as proof of ownership in a company. In the modern stock markets, the 'paper' share is now being replaced by the 'electronic' share.

Shareholder
These are Individuals, group, or organization that holds one or more shares in a company, and in whose name the share certificate is issued.

Share premium
This represents excess amount received by a company over the par value of its shares. This amount forms a part of the reserves which usually can be used only for purposes specified under corporate legislation.

Shipment
This represents cargo transported under the terms of a single bill of lading or air waybill, irrespective of the quantity or number of containers, packages, or pieces. This is also called consignment.

Shipped bill of lading
This is a B/L which certifies that the specified goods have been received in apparent good order and condition from the named shipper /consignor, and have been taken on board in the named ship on the stated date.

Shipping agency
This is a company who arranges shipment of goods, and guide about whole process of shipment such as how a customer can ship his/her excess baggage quickly and at the lowest price to chosen destination against payment of nominal fee

Short term asset
In general, it refers to an asset whose lifespan is estimated five years or less.

Short form bill of lading
This is a B/L which is without the terms and conditions of carriage printed on its back. Otherwise, in size, it is not different from the long form B/L. The shipper and the carrier are bound by the conditions of carriage whether printed on the B/L or not.

Short position
It refers to a situation were projected outflows of a currency exceed its projected inflows.

Short selling
This refers to “bear” tendency where, profiting is made  from an anticipated drop in the price of a commodity, financial instrument, or shares / securities.  The seller counts on buying the item at a cheaper price to return or deliver it with a higher price.

Short term investment
Investment that matures in, or is held for, 12 months or less.

Short term liabilities
It refers to the liabilities which are required to be repaid between one to five years.

Short term policy
Insurance policy which covers risk of short period.

Sight bill
Bill of exchange payable on the day it is presented to the drawee. Also called at sight or sight draft.

Sight credit
It is a type of letter of credit whose payment becomes due on the day its documents are lodged by the L/C opening bank. Also called at sight L/C

Sight deposit
Alternate term of demand deposit.

Signature card
A card signed by each depositor and customer of a bank which may be used as a means of identification. The signature card represents a contract between the bank and the depositor.

Single entry accounting
An accounting method in which transactions are recorded as a single entry, rather than as both a debit and a credit as in double-entry bookkeeping. When using single entry bookkeeping, taxable income is just the difference between cash expenses and cash receipts over the relevant time period.

Sinking funds
Reserved created by periodically setting aside certain sums in a special account  for future replacement of an asset or repayment of a liability.

Sleeping partner
It is a partner who shares risks and rewards of an enterprise are with other partners, but does not take part in its day-to-day management. He is also called silent partner.

Slump
Please refer depression

Society for worldwide interbank telecommunication (SWIFT)
Society for Worldwide Interbank Financial Telecommunications. it is a  global communication network that facilitates 24-hour secure international exchange of payment instructions between banks, central banks, multinational corporations, and major securities firms. A member owned cooperative organized in 1977 under Belgium law, it now includes over 6,500 participating members from more than 180 countries which together process in excess of 300 million messages every day.

Soft currency
It refers to the currency belonging to small, weak, or wildly fluctuating economies which are not attractive for foreign exchange dealing.

Software
It consists of carefully-organized instructions and codes, that programmers write in a language that hardware can understand and act upon. Software is divided commonly into two main categories: (1) System software. (2) Application software

Sole proprietorship
It is the simplest, oldest, and most common form of business ownership in which only one individual acquires all the benefits and risks of running an enterprise.

Sorting (cash)
Separation of currency notes into issuable and not issuable portion. As per SBP cash monitoring policy only issuable notes can be pushed back for circulation. Non issuable notes are those which are very old, soiled or torn.

Special crossing
When a cheque bears across its face an addition of the name of the bank, either with or without two parallel lines is called special crossing. Where a cheque is crossed specially, the banker on whom it is drawn shall pay it to the banker to whom it is crossed or his agent for collection

Special drawing rights
SDRs are allocated by the IMF to its member countries and are backed by the full faith and credit of the member countries' governments

Special Indorsement
Endorsement that names the endorsee to whose order a negotiable instrument is payable. For example "Pay to the order of ABC & company."

Special resolution
It is a resolution which is adopted for some very important decision such as for altering the terms of the articles of association or the memorandum of association, or making some other major or fundamental changes in an organization of the company. A special resolution  requires (1) 21 days notice to the members,  share holders of the intention to propose the resolution, (2) not less than three-fourth of the votes of the members present in person or by proxy for approval, and (3) to be filed with the competent authority (such as the registrar of companies in Pakistan), within 15 days of being approved.

Specific reserve
This reserve is created for settlement of definite liability, such as tax, dividend etc

Speculation
This is calculated assumption of above average short-term risk of financial loss, in expectation of above average gain from an anticipated change in prices.

Spot price
This refers to the cash price of goods traded on a spot market and available for almost immediate delivery.

Spot rate
This is foreign exchange market price at which a currency will be delivered on the spot date. Spot rate is the starting point for all foreign exchange transactions.

Spread
This is the difference between the buying and selling price of the same commodity.

Stale cheque
A cheque is said be stale when it has not been presented by the payee within the stipulated time set aside by the financial institution. The period are usually 6- 12months of issue. But it all depends on the country. in Pakistan period is six months, after this period cheque require revalidation.

Standards and poor
Standard & Poor's is the world's leading provider of independent credit ratings. They provide risk evaluation, investment research, and data. They supply investors with the independent benchmarks they need to feel more confident about their investment and financial decisions.

Standby letter of credit
Standby letter of credit is basically a guarantee of payment, which is used as a substitute for the commonly used performance bonds. This type of letter of credit may be issued to cover non-trade transactions and to guarantee performance of a contractor as supplier. It is a guarantee of payment issued by a bank on behalf of a client, that is used as "payment of last resort" if the client fail to fulfill a contractual commitment.

Standing instructions
This is a type of pre-authorized payment under which an account holder authorizes a bank to pay a fixed amount such as mortgage payment or rent or variable amounts such as those called for in bills or invoices, directly to a landlord, bank, supplier or utility company at regular intervals.

Standing order
Refer standing instructions.

State bank
 A bank that is organized under the laws of a State and chartered by that State to conduct the business of banking.

State bank of Pakistan
Before 14 August 1947, the Reserve Bank of India was the central bank for un-divided India. On 30 December 1948 the British Government's commission distributed the Bank of India's reserves between Pakistan and India  with ratio of 30 percent for Pakistan and 70 percent for India. In May, 1948 Government of Pakistan took steps to establish the State Bank of Pakistan and as such it commenced operation on July 1, 1948. State Bank of Pakistan operates as the Central Bank of Pakistan under the State Bank of Pakistan Act 1956.

Statement of Account
This is summary of all transactions with a customer or a supplier that occurred over the previous month, quarter, etc., and their effect on an open-account balance.

Statement of affairs
It refers to the written record in the form of an statement regarding, the current condition, position, or status of a branch, area, region or bank as a whole. It contains balances of all General ledgers (GL) including contra items. The sum total of both debit and credit side should be equal.
Statistic
This is a branch of mathematics, which is concerned with collection, classification, analysis, and interpretation of numerical facts, for drawing inferences on the basis of their quantifiable likelihood (probability). It is subdivided into descriptive statistics and inferential statistics.

Statutory obligation
Obligation that does not arise from a contractual relationship but is created under the law of the land.

Statutory requirement
Legally mandated requirement that must be complied with by the party to which it applies such as approval, license, permit, etc., required for performing  certain activity

Sterling
Short name for the UK currency Pound Sterling (£) as distinct from other currencies named 'pound.'

Stipend
A source of funds that is provided to an individual, such as through a scholarship, which allows the individual to pursue a particular interest, such as an internship.

Stock
It represents proportional part of a company's equity as capital raised by fully paid up shares.

Stock broker
This is a person who serves as an agent or intermediary in commercial negotiations or transactions in stock exchange. They are licensed professionals in their fields. Their rate of compensation called brokerage  is determined generally, higher the value, lower the percentage.

Stock exchange
This is an organized and regulated financial market where securities bonds and  shares are bought and sold at prices governed by the forces of demand and supply. Stock exchanges basically serve as (1) primary markets where corporations, governments, and other incorporated bodies can raise capital by channeling savings of the investors into productive ventures; and (2) secondary markets where investors can sell their securities to other investors for cash, thus reducing the risk of investment and maintaining liquidity in the system.

Stock in trade
This is the value of materials and goods held by a company/ firm for sale or customer service such as merchandise, finished goods. It is often the largest item in the current assets category, and must be accurately counted and valued at the end of each accounting period to determine a company's profit or loss.

Stock taking
It refers to the physical verification of the quantities and condition of items held in an inventory.

Stop payment instructions
This is a notice by an accountholder to a bank not to honor a specified cheque drawn on his or her account balance. Banks  require a written instruction following an verbal request and, in case of a cashier cheque , pay order or a demand draft, bank require a clearance from beneficiary.

Straight bill of lading
This is a B/L used where the goods have been paid for or do not require payment. Under this B/L, the shipping company delivers the shipment to its consignee on presentation of identification.

Straight line method of depreciation
This is the method of computing depreciation in which the depreciable cost  of a tangible  asset is reduced by an equal amount in each accounting period over the asset's estimated useful life.

Student loan:
Loans made, insured, or guaranteed under any program authorized by the regulators or any other competent authority authorized by the govt. Loan funds are used by the borrower for education purposes.

Sub branch
A sub branch is a conduit of a branch to which it is affiliated. Banks can not convert an existing branch into a sub branch. However a booth can be converted into a sub branch, a sub branch into a full branch under their ABEP after approval from SBP.A sub branch is not empowered to open an account including allotment of account number. Completion of Know Your Customers (KYC) and exercise of due diligence, before account opening, is also to be performed by the controlling branch.

Sublease
Lease from one lessee to another is called sub-lessee. The agreement between the allotment authority (the Lessor) and the first lessee remains in force and governs the terms of the sublease. A sub lease can be registrar.

Subordinated debt
Subordinated debt generally refers to debt that has a secondary or lesser claim priority to the issuer's assets than more senior debt, in case the issuer default on its obligations. There are also levels of subordinated debt, with senior subordinated debt having a higher claim to repayment than junior subordinated debt.

Subscribed capital
It refers to the individual subscribed share value and liability of the total share capital of a company.

Subsidiary company
This is a company whose controlling interest is owned by another company.

Subsidy
This is a grant made by a government to some individual or business or on certain goods  in order to maintain an acceptable standard of living or to encourage economic growth.

Summon
This refers to the call to appear at a specified place, esp. before a court.

Sum payable
This is the amount that a borrower, debtor or purchaser must pay to satisfy an obligation.

Sundry creditors
This is an account where miscellaneous small receipts are credited. In other words this is an account where individual receipts are not assigned individual ledger accounts but are classified as a group. Bank must maintain entry wise record of this account.

Sundry debtors
This is similar to the sundry creditors bur in this accounts debits transactions are recorded

Superannuation
This refers to the age of retirement. Companies make retirement plans for the benefit of its employees. These types of plans use funds deposited by the company or by the employee  or by both with the purpose that funds will grow in value until the employee retires.

Suppliers credit
This refers to the goods or services received on deferred payment terms.

Surcharge
It refers to the amount added on to a usual charge for a specific product, purpose, or service .

Surety
This is a person or company (such as a bank) that agrees to be primarily liable for the conduct, obligation, or performance of another.

Surety bond
This is a formal, contract between a first party (the principal debtor), a second party (the customer creditor), and a third party (the surety, such as a bank) where the surety guarantees payment of a specified maximum amount, the  against damage or loss caused by the actions or a failure to perform of the creditor. Generally surety bond is issued for a specified period

Surplus
It refers to the leftovers of an appropriation account after all expenditures.

Surrender
It refers to voluntary giving up of a legal claim, interest, or right.

Surrender value
This is the amount which the holder of a life insurance policy is entitled to receive, on its surrender/ cancellation before the death of the insured or before the policy matures. This sum is based on the insurance premium paid up to the surrender date less surrender fee. It may be used as a collateral for borrowing from the insurance company or from a bank.

Suspense account
This is a temporary parking account created to record, disbursements  related with unconcluded transactions until their ending, or discrepancies between totals of other accounts until their rectification or correct classification. This is also called other Assets account. According to the PR O-3 all entries parked in suspense accounts must be settled within 30 days from the date of origination.

Swap
It refers to exchange of one type of asset, for another. Common types of swap include,(a) Currency swap, simultaneous buying and selling of a currency. (b) Debt swap, exchange of a loan between banks. (c). Debt to debt swap, exchange of an existing liability into a new loan, usually with an extended payback period.

Switching
It refers to the moving of money from one mutual fund to another or fron one investment scheme to another.

Syndicate
This is a temporary association of two or more banks to finance  some specific venture or project such as large scale real estate development or large scale project. The purpose of syndication is to share the risk involved.

System analyses
It refers to the use of investigational approach in understanding the behavior of a business, product, economy, market, or even an event where mathematical analysis techniques are inadequate or unfeasible

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18. (R) Basic Banking Guide A to Z

R

Railway receipt
Railway receipt is issued against receipt of goods consigned & also against payment. The persons claiming the delivery is required to produce the receipt granted to the sender at the forwarding station and the same should be taken back from him before delivery of goods. Goods are not to be delivered to any person other than the invoiced or endorsed consignee.

Rate
It refers to the amount of a charge or payment with reference to some basis of calculation for example interest/profit rate.

Rate of exchange
It refers to the ratio at which a unit of the currency of one country can be exchanged for that of another country.

Rate of interest
It refers to the rate of profit which is charged or paid for the use of money. An interest rate is generally expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal.

Rate of return
It refers to the rate of profit on an investment, which is usually expressed as a percentage of the total amount invested. Rate of return is generally, but not always, calculated annual basis.

Ratification
Acceptance or confirmation of an act or agreement that was signed (executed) by the authorized party itself. For example, a treaty, is not enforceable or valid until the ratification process is complete.

Ratio
It refers to the result of one number or quantity divided by another and provides meaningful comparison.

Rationalization
It refers to remove unreasonable elements for improving, production, trade and profitability.

Raw material
Material before being processed or manufactured into a final form.

Ready money
Liquid cash, money that is in hand or may be obtained quickly or easily.

Real cost
It refers to the cost of producing goods or services, including the cost of all resources used and the cost of not employing those resources in alternative uses.

Real estate
It refers to the Land, including all the natural resources and permanent buildings on it.

Real income
It refers to the income of an individual or group after taking into consideration the effects of inflation on purchasing power. For example, if a person received a 5% salary rise over the previous year and inflation for the year was 8%, then his real income would have shrunk by 3%. wages".

Real investment
It refers the purchase of assets such as land, real estate, plant and machinery as opposite to the acquisition of shares and securities.

Realizable value
This is a method of determining what an asset would be worth (its present value) if its present owner sold it in the current market or at a near future date. This is considered assuming that the loan against the asset became past due what will be realizable value of the asset. Also refer forced sale value FSV.

Realization account
This is an account which is opened when a business is winding up, for example dissolution of Partnership.

Realized profit
Realized profit is profit that comes from a completed trade transactions. Realized profit Realized profit is included in the account balance in trading account statements. Unrealized profit is profit that comes from a currently active trade at a future date.  Unrealized profit will change with each price change, so it can be reduced to zero or loss.

Real property
Land and all the things that are attached to it are real property. Anything that is not real property is personal property. A house is real property, but a bed room set is not Real property. It is of a permanent and immovable nature and rights are transferred through execution of deed.

Real time
This is a computer term which refers that the data in the computer is up dated instantly. For example online transfer of money is a system by which money is transferred on real time basis.

Rebate
It refers to the deduction or return (an amount) from a payment or bill.

Receipt
It is a written acknowledgement that a specified article or sum of money has been received as an exchange for goods or services.

Receive for shipment bill of lading
This document serves only as a receipt for goods accepted for shipment on a named ship. This is issued  where the goods arrive at the port of departure before the arrival of ship. This type of B/L is not considered a complete B/L and is replaced by a shipped on board bill of lading when the goods do go onboard.

Receiver
This is an independent and  impartial party appointed by a court to receive, manage, and preserve  a disputed property which is the subject matter of a court case, pending final disposition of the case.

Recession
It refers to the period of general economic decline which result into high unemployment, stagnant wages, and fall in retail sales. a recession generally does not last longer than one year and is much milder than a depression. Although recessions are considered a normal part of a capitalist economy, there is no unanimity of economists on its causes.

Reconciliation
The process of analyzing two related records and, if differences exist between them, finding the cause and bringing the two records into agreement. Example: Comparing an up-to-date cheque book with a monthly statement from the financial institution holding the account.

Recourse
It refers to the legal right of a bank to seek repayment of the loan from the borrower's and/or the guarantor's unpledged personal property, in addition to the property pledged to the banker as collateral.

Rectification
It refers to the correction of  mistake already committed, or express of the true intention of the parties in a case it differs with the expression which was not expressed in the original version.

Red clause
This is  special provision in documentary credit where the beneficiary( seller) is authorized to obtain an advance from the bank on an unsecured basis. The liability for default is assumed by the buyer through the issuing bank. This clause is generally written in red ink, hence it is called Red clause.

Redeemable debenture
These debentures are issued under an agreement in which a company issuing debenture agrees to repay the borrowed sum on a specified date or after a specified period of notice.

Redeemable preference shares
This is a type of shares that is liable to be bought back by the issuing company on a specified date or after a specified period of notice.

Re-export
It refers to the imported good exported by the importing country.

Refer to drawer
This is one of the reasons used by the bankers to return cheques due to the lack of funds. The inspectors  State bank of Pakistan do not accept this reason as valid (ambiguous) because ordinary customers do not understand meaning of this reason.

Refinance
It refers to finance again. In order to support genuine exporters, SBP has introduced certain export refinance schemes. Export refinance scheme is divided in to Part-I and Part-II. SBP Banking Services Corporation (BSC) manages all operational matters of EFS. Banks and DFIs are required to first provide finance to the exporter and after financing, file claims with SBP BSC for refinance. The financing facility is provided to direct exporters up to 180 days and to indirect exporters for up to 120 days.

Refund
An amount paid back because of an overpayment or because of the return of an item previously sold.

Registered capital
This is alternate term of authorized capital which refers to the maximum value of shares that a company can legally issue. This number is specified in the memorandum of association when a company is incorporated, but can be changed later with shareholders' approval.

Registered charge
Charge which is registered with the registrar of the property & in case of limited company,its registeration with the registrar of the company.

Registered post
If you need proof that your Letter-post item arrived at its destination, purchase an Advice of Receipt card at the time of mailing for an extra fee. The Advice of Receipt card is attached to your Registered Mail item. Your recipient signs and dates the card, and returns it to you in the mail. This card is your proof that the recipient received your Registered Mail

Registrar
Government official appointed officer to maintain a register in which transactions of a specific nature are recorded for public knowledge.

Registrar of companies
Under the Pakistani corporate law, the registrar is responsible for recording and maintaining certain details of the new and existing companies within his or her jurisdiction. He or she also controls the formation of new companies, and renewal of or changes in the existing ones.

Registration
It refers to the entering information relating to assignments, deeds, contracts of sale, judgments, mortgages, new securities, automobiles etc., in a public record book.

Registration of charge
In case of limited companies in addition to the completion of documentation formalities, banks and DFIs are required to get registered charge with the registrar of the companies in relation to the credit facilities allowed.

Regulator
It refers to an independent body that determines and maintains the operating parameters of a system, generally within certain prescribed or preset regulations. For Example State bank of Pakistan is the regulator of banking industry.

Reimbursement clause
It is a clause which relates to the amount to be refunded or paid for costs incurred or expenses paid or payment of the bill drawn against letter of credit by the correspondent bank.

Release of lien
 To free a piece of real estate from a mortgage.

Remittance
Transfer of funds,  from one place to another, for example  by a buyer to a distant seller, through some instrument of transfer such as a cheque, draft, Telegraphic transfer bankers cheque or through online transfer. Funds so transferred are called remittance.

Remote
It refers to the service available to the client computers over a network.

Remuneration
It refers to the Reward of employment as pay, salary, or wage, including allowances, benefits such as company car, medical plan, pension plan, bonuses, cash incentives, and monetary value of the non-cash incentives.

Renewal
The act or process of renewing such as, renewal of credit facilities, renewal of term deposit renewal of the copyright, renewal of lease agreement. In banking it refers to a form of extending an unpaid loan in which the borrower's remaining unpaid loan balance is carried over (renewed) into a new loan at the beginning of the next financing period.

Rent
It refers to the  payment made periodically by a tenant to a landlord in return for the use of land, a building, an apartment, an office, or other property.

Rental
It refers to the income arising from rents received.

Represent
It refers to present again e.g. paying banker of a cheque may ask collecting banker to represent cheque.

Representative
Authorized to act as an official delegate or agent, standing or acting for another through delegated authority in official capacity.

Repurchase agreement (repos)
This is a contract between a buyer and a seller whereby the seller agrees to repurchase the item sold on a designated date, for which the investor/ buyer receives a fixed return.

Rescheduling of debt
It refers to the extending the repayment period of an existing loan.

Reserve currency
One of the national currencies or IMF's special drawing rights (SDR) used by a country to hold its foreign currency reserves and gold for settling international trade transactions and other obligations.

Reserve fund
This is a fund seta side from profit of the company to meet some extra ordinary expenses.

Reserve price
It refers to the minimum price set by the seller below which no offer is accepted.

Residual interest
Interest that continues to accrue on your credit card balance from the statement cycle date until the bank receives your payment. For example, if your statement cycle date was January 10 and the bank received your payment on January 20, there were ten days for which interest accrued. This amount will be posted on your next statement.

Residual value
It refers to the estimated scrap value of an asset at the end of its economic or useful life.

Resolution
This is a proposition put before a meeting of shareholders directors or members of a company or association for discussion, approval or adoption. Resolutions are generally of four types: (1) Elective, (2) Extraordinary (3) Ordinary and (4) Special.

Resolution to borrow
This is an authority granted to the officers of a company, through a resolution passed by the shareholders, to obtain financing fund based or non fund based. In order to protect institutional interest it is advisable that banks / DFIs should provide a Performa resolution which the borrower completes and signs.

Respondent
It refers to the  defendant against whom a petition or complaint is filed in a court.

Restrictive Indorsement
Indorsement which limits further negotiability of a negotiable instrument. For example, the words 'accounts payee Only' on the face (in the Pakistan, India & UK) or 'For deposit only' on the back in the US of a cheque block its cashing over the counter

Retail banking
Retail banking is a banking service that is meant primarily towards individual consumers. It focuses consumer markets a wide range of personal banking services, including offering savings and checking accounts, bill paying services, as well as debit and credit cards. In Pakistan, many retail banking products are also extending to small and medium sized businesses. All branches except corporate branches falls under the ambit of retail banking. It is the biggest funds generating unit and its excessive funds are utilized by corporate banking .

Retention money
Generally this is money that is held back that would otherwise be paid, until the other party performs some service or task. Take example, of the construction business, where it is common that a series of payments are made over time, with the requirement that for example 10% of the payments is withheld until the job is complete. This way, the contractor can be paid his costs during construction, but obviously doesn't get the entire amount until the job is done.

Return cheque
Cheque / instrument which is returned by the paying bank either presented on counter or in clearing.

Return item
A negotiable instrument—principally a cheque—that has been sent to one bank for collection and payment and is returned unpaid by the sending bank.

Revaluation
It refers to the adjustment in the value of currency with respect to another currencies or a benchmark rate of exchange. It also refers to the readjustment of assets or liabilities in foreign currency according to the latest market value in local currency.

Revenue
It refers to the amount generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of the company before any costs or expenses are deducted.

Revocable credit
It is an L/C that may be amended or canceled any time by the buyer (the account party) without the approval of the seller (the beneficiary). Since it does not provide any protection to the seller, it is rarely used.

Revolving credit
A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due. Also called a open-end credit.

Revolving letter of credit
This is an L/C which contains a clause that credit will again be available to the seller after reimbursement of the credit availed. There is no limit of turnover, but value of the bill drawn under the L/C is clearly defined.

Right of setoff
Bank's legal right to seize a borrower's any accounts credit balance except a sub-account balance in the same bank to apply it towards the borrower's any over due loan . In some countries this right is not applicable to consumer and credit card payments.

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