Money & banking Presentation

Members
• Uzair Ayub
• Shabab Hashim
• Abdullah Ayub
• Ameer Hamza
• Basharat Ali
• Abdullah Zafar
Uzair Ayub
BE-19-67
Introduction
I. Lending is the core business of the
banks
II. Banks need to take calculated risks.
III. Lending activity requires some pre-
requisites.
IV. Lending can be divided into 2 segments:

1. Individual
2. Activity
Safety
I. The safety of funds is another principle
of lending.
II. The borrower should be able to
repay the loan on time without default.
III. Repayment depends upon the nature of
the security, character of the borrower
and his capacity to repay.
IV. Like other investment banks the degree
of risk varies.

This Photo by Unknown author is licensed under CC BY-SA.

Diversity

I. Another most important principle

of lending.
II. Banks should not invest its
surplus funds in a
particular type of securities
III. Banks should choose the
shares and debentures of
different types of industries
situated in the country.
IV. The state and local bodies should
also follow the same principle.
V. It minimizes the risk for the bank.
VI. "Do not keep all eggs in
one basket"
Liquidity

I. Banks should not lend the money to

customers where lending may get
lock for long time. It will hurst their
liquidity.
II. An asset is said to be a liquid where it
can be converted in to
cash into cash in short notice.
III. As the bank is lending the
depositor's money, it has to
take precaution while doing so.
IV. The depositor may demand
his money back any time.
Malik Shabab
BE-19-1834
Stability

I. The bank should invest in those

stocks and securities which possess
high degree of stability in their
price.
II. Bank can't afford any loss on
the value of its securities.
III. Bank should invest in
reputed companies shares where
the possibility of decline in their
prices is remote. Such
as Govt bonds & etc.
IV. Their value change with change in
the market rate of interest.
Profitability

I. This is the cardinal principle for

making investment by a bank. It must
earn sufficient profits.
II. It should therefore invest in
such securities which was sure a
fair stable return on investment.
III. The earning capacity of securities
and share depends upon the
interest rate and the dividend rate.
IV. It is largely the govt. Securities of the
centre, state and local bodies.
Security
I. Bank should ensure that the
borrower has the ability to repay his
loan.
II. Banker should carefully consider the
margin of safety offered by the
concerned and possibilities of
fluctuation in its value.
Abdullah Ayub
BE-19-45
Secured Advances

I. Cardinal principle of sound banking is

to ensure safety of funds lent by
banker to his customers.
II. The banker therefore relies on
primarily on the 3c's of borrower.
III. Secured advances are those advances
which provide absolute safety to the
banker.
Modes of creating
charge lien

I. The banker is empowered to ensure all

securities of the customers.
II. The ownership of stock securing is
not transferred from the customer to
the banker.
Negative Lien

I. Borrower gives the declaration to the

bank about his assets.
II. An undertaking is given to
bank against his asset.
III. Borrower cannot dispose-off the
assets without the consent of
the bank.
Ameer Hamza Haneef
BE-19-44
Pledge

I. A solemn promise or undertaking.

II. Pledge is used when the lender
takes actual possession of assets.
III. For example Certificates and goods.
IV. Securities and goods are movable.
V. The person who offer security is known as –
Pledger.
VI. To whom it is offered is called- Pledgee
Hypothecation

I. It is used for creating charge against the security of movable

assets.
II. Here the possession of the security remains with
the borrower itself.
III. Example can be car loans.
IV. In the case borrower defaults, bank will take the possession
of the asset.
V. Other examples are loans against stocks and debtors.
VI. If borrower tries to cheat, the bank can convert
the hypothecation to pledge.
Basharat Ali
BE-19-29
Mortgage
I. It is used for creating charge against
immovable property such as land and
building.
II. For example Housing loan. House will
be mortgaged and possession
will remain with borrower.
III. In this case transfer is
called "Mortgager".
IV. Transferee is called 'Mortgagee".
V. Principle money and Int. Thereon is
called "Mortgage money".
VI. Instrument is called "Mortgage Deed".
Forms of Mortgage

I. Simple Mortgage.
II. Mortgage by condition sale.
III. English Mortgage.
IV. Mortgage by deposit of title deed or
equitable mortgage.
V. Anomalous mortgage
 Differences
between
Mortgage,
Pledge &
Hypothecation.
 Pledge Hypothecation Mortgage

Type of security Movable Movable Immovable

Possession of the Remains with Remains with borrower Usually remains

security lender with borrower

Example of loan Gold Loan, Car/ Vehicle loans, Adv Housing Loans
where used Advance against against stocks and
NSCs. debtors
Abdullah Zafar
BE-19-68
Forms Of
lending
Cash Finance

I. It is very common form of

borrowing.
II. A certain limit of cash finance
is allowed.
III. It is easy to borrower. It
allows only paying a mark-up
service that is only utilized.
Overdrafts

I. An overdraft lets you borrow

extra money through your
current account.
II. For example, if you have no
money left in your account
and you spend £30, your
balance would be -£30. This
means you’re using an
overdraft.
III. An overdraft is a form of debt
and is repayable on demand.
Loans term
finance
I. In case of loan, the banker
advances a lump sum for a certain
period at an agreed rate of
interest.
II. The Loan can be used by
the borrower.
III. It may be repaid in instalments
over a certain period of time.
IV. A loan once repaid in
full cannot be withdrawn.
Two categories
of loan
• Secured And Unsecured
Hire purchase and
leasing finance

I. When purchaser has not sufficient

funds to purchase a vehicle.
II. Banks provide finance to hire
purchase or lease the needed good.