THE BANKER FUNDS AND DEPOSITS:

1. BANKERS FUNDS
A bank is a financial institution. Deposits of account are its main source of fund. There are two primary
functions of commercial banks i.e.
Receiving deposits
Advancing loan
Bank collect fund from different sources to make their profitable use, consists of the following:
1. Banks own capital
2. Reserve fund
3. Liquid assets

Banks own capital

At the time of formation the bank collet capital by selling its shares to general public, which is registered
with the registrar of the J.S.coknown as share capital, registered capital or Authorized. It is further
divided into:
Paid up capital------which the banking co. has received form public
Subscribed capital------that part of issued capital which is applied by the public (including shares issued
to promoters).
(Under banking company ordi.200 sub.sec.(2)
(Act 1962(14)
No banking co can carry out business until the following satisfactions:
1. Subscribed capital is not less than of authorized capital and paid up capital is not less than
of subscribed capital.
2. Capital of the company should consist of ordinary shares
3. Voting right of shear holders should strictly proportion with shareholder contribution to the paid
up capital.

The reserve fund

The amount set aside for contingences and unusual call upon the bank resources, consists of the profit
yearly earned by the bank i.e. ----dividend-----reserve
Dividend is divided among shareholders whereas reserve to meet any deficiency in future. By this the
accumulated reserve fund becomes huge amount and good source of further investment.
Under banking co ordinance 1962 every banking company
Create a reserve fund in the following way:
a. If the amount of res. Fund with share premium amount is less than paid up capital the banking
co. will maintain 20% of balanceof profit before the declaration of dividend.
b. If the amount of res. Fund with share premium amount is equal/more than paid up capital the
banking co. will maintain 10%of balance of profit before the declaration of dividend.

Liquid assets:
Every bank in Pakistan is bound to maintain liquid assets under banking co. ordinance1962 sec.29 (1).
Amount should with such % of total demand and liabilities of the bank, notified by the state bank of
Pakistan. It should be maintaining as cash in hand balance with state bank;

Money at call and short notice, Bill discounted, Gold,

Debentures, Securities by semi-govt. agencies and
Approve foreign exchange.
Normally the requirement can be changed, the bank are bound to maintain 18% presently.
Under banking Co. ordinance 2000 sec. 29(3)
Liquid assets are to be maintained at the close of business day and have to inform/report state Bank
before the close of the month in the shape of monthly return.

2. DEPOSITS
In the modern age of business, there arefew enterprise which are carrying business with their own
capital. Now to borrow funds is essential part of businesswhereas banking system is based on it.
Borrow funds are more than own capital which are mostly in the form of depositsand are lent to others.
Larger the deposits---larger fund available for business and
Larger will be the profit of the bank.
So we can saythat deposit refer life blood of a bank.
The relationship between the customer and banker as debtor (liabilities)creditor (assets).
Bank may use it but ultimately it is payable by the bank on demand after particular period.

Types of deposits
Deposits are of different classes, its classification is based on their Duration and purpose for which the
deposits are to be kept at bank;
1. Current deposits
2. Saving deposits
3. Fixed and term deposits
4. Foreign currency deposits
Current deposits: (Also known as running or active account)
This account is operated by the businessman private or public firm and companies. It is payable to
customer any time on demand. This deposits treated as current liability of bank and no profit is allowed
on it rather than bank recovers incidental chargers for services rendered,----(when customer maintain
minimum deposit)
Bank provides overdraft facility to the account holder and charges interest. There will be deduction of
zakat and account will continue even in case of full withdrawals.

Saving deposits:
These were introduced by trustee saving banks formed under trust-saving Act 1863----in England ---to
receive money without any benefit from trustee. These were established to promote saving in women
(household), children who could deposit then small savings.
In India these bank were established in Bombay, Calcutta, and Madras----in 1835/1870, also in the shape
of post office saving banks.
In Pakistan these account can be opened with small amount profit is given on yearly basis, can draw
money through cheque, discover age unnecessary withdrawals.
After that jan1, 1981 PLS sharing account was introduced by the Govt. of Pakistan. Return paid on this
depositor is called profit. Same rules of saving bank, except only deduction of Zakat on 1stRamzan.

Fixed or term deposits:

The deposits which are maintained for specific period of time
1. With high rate of interest
2. Nocheque book will issue
3. No withdrawals before the maturity but one can draw and no interest of remaining period will
be given.

4. Rate of interest depends upon duration of deposit. It can be maintained as term deposit-too-and till the term deposits remain with bank, bank earns more than the return to the depositors.
--bank issue F.D.R to depositor.
=Some time withdrawals are possible before the maturity, but customer have to forego the interest
=Under re Dillon (Act) 1980 fixed or term deposit receipts is not a negotiable instrument..
=but can be transferred to 3rd party and gets no-right to the bank in his own name till maturity.
=term deposits many be with joint name 2 or more but payment made through authorized person.

Foreign Currency Account:

State Bank of Pakistan has introduced number of reforms to foreign exchange control. The main object
to introduce these reforms is to strengthen foreign exchange reserves to cover the import bills of the
country and to boost remittances---mobilize foreign exchange resources.
=any individual or firm or co. can open this account + also can maintain jointly.
= deduction of zakat is exempt but 10% withholding tax.
= oversees Pakistani can Spenser their parentand relation for Hajj for making payment in foreign
exchange currency account.
= stat Bank asked to all banks that be vigilant about the sources of this account to avoid money
laundering and other illegal purposes.
State bank himself monitor these account regularly use of fund:
All the banks use funds on profitable level in the following way: Short term loan repayable at short term notice 1 week to 4 week or 3 days to 7 days.
Investment in Govt. and other stock exchange Securities.
Loaning to commerce, trade and industry.
Discounting of bill.
Financing to importers and exporters.