INTRODUCTION

The Bank of Khyber was established in 1991 through Act No. XIV, passed by the Provincial Legislative Assembly of the KHYBER PAKHTUNKHWA Province of Pakistan. It was awarded status of a scheduled bank in September 1994. The Bank of Khyber enjoys a unique position, and stands out amidst the other banks operating within Pakistan, and has the privilege of being bracketed amongst the only three government banks in the country. Currently the bank has a total branch network of 50 Branches plus 4 sub branches throughout the country. At present, 21 of its branches functioning as dedicated Islamic Banking Branches, whereas 29 branches are conventional banking branches.

MISSION STATEMENT
To increase shareholders' value and provide excellent service and innovative products to customers through effective corporate governance, friendly work environment, and contributing towards an equitable sub-economic growth.

OUR VISION
To become a leading Bank providing efficient and Dynamic Banking Services in both Islamic and Conventional Sectors.

TYPES OF LOAN PRODUCT

We select two types of loan products in order to reconcile the requirements of bank and state bank of Pakistan. Auto Loan Home Loan ( SUHANA GHAR)

REQUIREMENTS FOR CAR FINANCE

1. Offering

All BOK conventional branches offering car finance.

2. Eligibility Criteria
The eligibility criteria contain a) Nationality All Pakistani residents holding valid computerized National Identity Card b) Age of applicant 21 to 55 years for salaried person and 21 to 60 years for businessman / self employed persons. c) Period of Employment/ Engagement in business or profession Salaried persons having an employment history of at least 2 years or more. Self employed and business persons engaged in profession or business for at least 3 years. d) Income i) Salaried Persons Monthly take home salary should be 2/3rd times of the amount of monthly installment. ii) Self Employed/Business Persons Average monthly verifiable income should be 3 times of monthly installment. Individuals who earn less than Rs. 15,000/- per month or Rs. 180,000/- per annum shall not be eligible for financing.

3. Maximum Limit
Rs.1.20 Million

4. Down Payment
Minimum Down Payment for the facility will be 20%.

5. Pricing Criteria (markup)

Risk Rating Based For Example: Six Months KIBOR + 500 BPS with a floor rate of 18%. The mark up will be revised on 1st January and 1st July each year according to the KIBOR rate at that day.

8. Title Of The Vehicle

Title of the vehicle shall be joint i.e. The Bank of Khyber and the Client.

9. Schedule Of Charges
Processing charges Rs. 2,500/ Early termination / settlement charges to be calculated on daily product basis Re-possession charges as Actual.

10. Required Documents

Clients request Borrower Basic Fact Sheet e-CIB Account statement for the past 6 months Application of finance on prescribed format Proof of income i-e salary slips, income tax return or affidavit, whichever is applicable Attested photocopy of valid CNIC 1 passport size color photograph Copy of Valid Driving License Quotation from authorized dealer Copy of valid CNIC & income proof of guarantor

11. Repayment Frequency

Monthly installments through post dated cheques Time Period 01 05 years

12. PENALTIES Etc

A penalty of 2% over and above the levied mark up will be charged on each delayed installment.

13. How To Apply

Through BOK Conventional Branches where application form is available in all branches.

REQUIREMENTS FOR SUHANA GHAR

1. Offering
All BOK Conventional Branches Offering Housing Finance.

2. Banks Policy On Mortgage Financing

The house financed by the Banks shall be mortgage in Banks favor by way of equitable and/or Registered Mortgage.

3. Eligibility Criteria
e) Nationality All Pakistani residents holding a valid computerized National Identity Card f) Age of applicant Between 22 and 55 years g) Period of Employment/ Engagement in business or profession Salaried person having an employment history of at least 5 years or more with a continuous employment of 2 years with the same employer. Self employed and business persons engaged in a profession or business for at least 5 years. h) Income i) Salaried Persons Monthly take home salary should be 2/3rd of the amount of monthly installment. ii) Self Employed/Business Persons Average monthly verifiable income should be 3 times of monthly installment. Individuals who earn less than Rs. 15,000/- per month or Rs. 180,000/- per annum shall not be eligible for financing. (i) Title of the Property Title of the property should be clear and marketable. The property shall be free from all encumbrances and charges. Permission to mortgage from the lessor or lessee (in case of sublease) shall invariably be required if term of lease/sub-lease provides for such permission before mortgage of the property. (j) Purpose Financing shall be allowed for House Purchase, Construction and Renovation.

4. Maximum Limit
Rs.10.00 Million

5. Pricing Criteria

Risk Rating Based For Example: Six Months KIBOR + 500 BPS with a floor rate of 18%. The mark up will be revised on 1st January and 1st July each year according to the KIBOR rate at that day.

6. Schedule Of Charges

Processing charges 0.1% of the facility amount Early termination / settlement charges to be calculated on daily product basis Partial payment charges 5% of the amount to be adjusted

7. Required Documents
Clients request Borrower Basic Fact Sheet e-CIB Account statement for the past 6 months Application of finance on prescribed Performa Proof of income i-e salary slips, income tax return or affidavit, whichever is applicable Attested photocopy of valid CNIC 01 passport size color photograph Property Documents NOC from the concerned Authority to mortgage where applicable Property valuation certificate from bank approved evaluator Copy of valid CNIC & income proof of guarantor

8. Repayment Frequency
Monthly installments through post dated cheques Time Period 1 15 years

9. Rates And Charges Of Agencies Other Than BOK

Evaluator Fee as Actual Lawyer Fee as Actual

10. Penalties Etc.

A penalty of 2% over and above the levied mark up will be charged on each delayed installment.

11. How To Apply

Through BOK Conventional Branches where application form is available at all Branches.

BANK CHARGES
Part H
1 (1.1)

CONSUMER FINANCE

AUTO FINANCE
Application Processing Fee (Inclusive of documentation charges Minimum Rs.5,000/Yes non-refundable for individuals only. (change if any would be notified across the board on monthly basis) In the event of preYes mature liquidation, penalty shall be 2.5% of the outstanding liability. In the event of partial payments, the penalty shall be 2.5% of the partial Repayment amount. Yes

(1.2)

Early Settlement Charges

(1.3)

Late payment Charges on As per terms of sanction Yes overdue rental letter (1.4) Re-possession Charges Actual Yes (1.5) Dishonor of installment Rs.500/- (Flat) per Yes cheque. presentation Note: Auto Finance Charges may vary during business promotional scheme or launching new products. 2 (2.1)

HOUSING LOAN
Processing charges 0.10% of the facility amount, Minimum Rs.500/Actual Actual In the event of premature liquidation penalty shall be 2% of the outstanding liability In the event of partial payment, the penalty shall be 2% of the partial payment amount. As per terms of sanction letter. Rs.500/- Flat per presentation Actual Actual Actual Yes

(2.2) (2.3) (2.4)

Lawyer Fee Property Evaluation Charges Early Termination/settlement charges Partial Payment Charges

Yes Yes Yes

(2.5)

Yes

(2.6) (2.7) (2.8)

Late Payment Charge Dishonor of installment cheque Legal documentation charges Re-possession charges Legal vetting charges

Yes Yes Yes Yes Yes

SBP REGULATIONS FOR AUTO LOANS

REGULATION R-9 The vehicles to be utilized for commercial purposes shall not be covered under the Prudential Regulations for Consumer Financing. Any such financing shall ensure compliance with Prudential Regulations for Corporate/Commercial Banking or Prudential Regulations for SMEs Financing. These regulations shall only apply for financing vehicles for personal use including light commercial vehicles also used for personal purposes. REGULATION R-10 The maximum tenure of the auto loan finance shall not exceed seven years. REGULATION R-11 While allowing auto loans, the banks/DFIs shall ensure that the minimum down payment does not fall below 10% of the value of vehicle. Further, banks/DFIs shall extend auto loans only for the ex-factory tax paid price fixed by the car manufacturers. In other words, banks/DFIs cannot finance the premium charged by the dealers and/or investors over and above the ex-factory tax paid price of cars, fixed by the manufacturers. REGULATION R-12 In addition to any other security arrangement on the discretion of the banks/ DFIs, the vehicles financed by the banks/DFIs shall be properly secured by way of hypothecation. Payments against the sale orders issued by the manufacturers are allowed till the time of delivery of the vehicle subject to the condition that payment will directly be made to the manufacturer/authorized dealer by the bank/ DFI and upon delivery, the vehicle will immediately be hypothecated to the bank/ DFI. REGULATION R-13 The banks/DFIs shall ensure that the vehicle remains properly insured at all times during the tenure of the loan. However, where the bank/DFI holds 100% provision against such loan, bank/DFI, if deemed appropriate, may not obtain insurance cover for the vehicle for remaining tenure of the loan.1 REGULATION O-6 The clause of repossession in case of default should be clearly stated in the loan agreement mentioning specific default period after which the repossession can be initiated. The repossession expenses charged to the borrower shall not be more than actual incurred by the bank/DFI. However, the maximum amount of repossession charges shall be listed in the schedule of charges provided to customers. The banks/DFIs shall develop an appropriate procedure for repossession of the vehicles and shall ensure that the procedure is strictly in accordance with law. REGULATION O-7 A detailed repayment schedule should be provided to the borrower at the outset. Where alterations become imminent because of late payments or prepayments and the installment amount or period changes significantly, the revised schedule should be provided to the borrower at the earliest convenience of the bank/DFI but not later than 15 days of the change. Further, even in case of insignificant changes, upon the request of the customer, the bank/DFI shall provide him revised repayment schedule free of cost. REGULATION O-8 The banks/DFIs desirous of financing the purchase of used cars shall prepare uniform guidelines for determining the value of the used vehicles. However, in no case the bank/DFI shall finance the cars older than five years. REGULATION O-9 The banks/DFIs should ensure that a good number of authorized auto dealers are placed at their panel to eliminate the chances of collusion or other unethical practices.

CLASSIFICATION (1) 1. Substandard.

DETERMINANT (2) Where mark-up/ interest or principal is overdue by 90 days or more from the due date.

2. Doubtful.

3. Loss.

Where mark-up/ interest or principal is overdue by 180 days or more from the due date. Where mark-up/ interest or principal is overdue by one year or more from the due date

TREATMENT OF INCOME (3) Unrealized markup/ interest to be kept in Memorandum Account and not to be credited to Income Account except when realized in cash. Unrealized mark up/interest already taken to income account to be reversed and kept in Memorandum Account. As above.

PROVISIONS TO BE MADE* (4) Provision of 25% of the difference resulting from the outstanding balance of principal less the amount of liquid assets.

As above.

Provision of 50% of the difference resulting from the outstanding balance of principal less the amount of liquid assets. Provision of 100% of the difference resulting from the outstanding balance of principal less the amount of liquid assets.

SBP REGULATIONS FOR HOUSING FINANCE

REGULATION R-15 Banks / DFIs shall determine the housing finance limit, both in urban and rural areas, in accordance with their internal credit policy, credit worthiness and loan repayment capacity of the borrowers. At the same time, while determining the credit worthiness and repayment capacity of the prospective borrower, banks / DFIs shall ensure that the total monthly amortization payments of consumer loans, inclusive of housing loan, should not exceed 50% of the net disposable income of the prospective borrower. Banks / DFIs will not allow housing finance purely for the purchase of land / plots; rather, such financing would be extended for the purchase of land / plot and construction on it. Accordingly, the sanctioned loan limit, assessed on the basis of repayment capacity of the borrower, value of land / plot and cost of construction on it etc., should be disbursed in tranches, i.e. up to a maximum of 50% of the loan limit can be disbursed for the purchase of land/ plot, and the remaining amount be disbursed for construction there-upon. Further, the lending bank / DFI will take a realistic construction schedule from the borrower before allowing disbursement of the initial loan limit for the purchase of land / plot. Banks / DFIs may allow housing finance facility for construction of houses against the security of land / plot already owned by their customers. However, the lending bank / DFI will ensure that the loan amount is utilized strictly for the construction purpose and loan is disbursed in tranches as per construction schedule. Loans against the security of existing land / plot, or for the purchase of new piece of land / plot, for commercial and industrial purposes may be allowed. But such loans will be treated as Commercial Loans, which will be covered either under Prudential Regulations for Corporate / Commercial Banking or Prudential Regulations for SMEs Financing.

Banks / DFIs may allow Housing Loans in the rural areas provided all relevant guidelines/regulations on the subject are complied with by them. REGULATION R-16 The housing finance facility shall be provided at a maximum debt-equity ratio of 85:15. REGULATION R-17 Banks / DFIs are free to extend mortgage loans for housing, for a period not exceeding twenty years. Banks / DFIs should be mindful of adequate asset liability matching. REGULATION R-18 The house financed by the bank / DFI shall be mortgaged in banks / DFIs favour by way of equitable or registered mortgage. REGULATION R-19 Banks / DFIs shall either engage professional expertise or arrange sufficient training for their concerned officials to evaluate the property, assess the genuineness and integrity of the title documents, etc. It may, however, be noted that the requirement of full-scope and desk-top evaluation, as required under R-8 and R-11 of Prudential Regulations for Corporate / Commercial Banking and SMEs Financing respectively, will not be applicable on housing finance. REGULATION R-20 The banks / DFIs management should put in place a mechanism to monitor conditions in the real estate market (or other product market) at least on quarterly basis to ensure that its policies are aligned to current market conditions. REGULATION R-21 Banks / DFIs are encouraged to develop floating rate products for extending housing finance, thereby managing interest rate risk to avoid its adverse effects. Banks / DFIs are also encouraged to develop in-house system to stress test their housing portfolio against adverse movements in interest rates as also maturity mismatches. REGULATION R-22 The mortgage loans shall be classified and provided for in the following manner: CLASSIFICATION (1) 1. Substandard. DETERMINANT (2) Where markup/ interest or principal is overdue by 90 days or more from the due date. TREATMENT OF INCOME (3) Unrealized markup/ interest to be kept in Memorandum Account and not to be credited to Income Account except when realized in cash. Unrealized mark up/interest already taken to income account to be reversed and kept in Memorandum Account. As above. PROVISIONS TO BE MADE* (4) Provision of 25% of the difference resulting from the outstanding balance of principal less the amount of liquid assets realizable without recourse to a Court of Law and Forced Sale Value (FSV) of mortgaged properties to the extent of 50% of such FSV. Provision of 50% of the difference resulting from the outstanding balance of principal less the amount of liquid assets realizable without recourse to a Court of Law and Forced Sale Value (FSV) of mortgaged properties to the extent of 50% of such FSV.

2. Doubtful.

Where markup/ interest or principal is overdue by 180 days or more from the due date.

RECONCILE b/w BANK CREDIT POLICY & SBP REQUIRMENTS Auto Loan
The reconciliation between bank auto loan policy and SBP requirements based on SBP prudential regulations of consumer financing for Auto Loan. 1. REGULATION R-9 The vehicles to be utilized for personal use only. BOK offering auto loan for personal use only.
2. REGULATION R-10 The maximum tenure of the auto loan finance shall not exceed seven years. BOK offering auto loan period of maximum 5 years. 3. REGULATION R-11 The minimum down payment does not fall below 10% of the value of vehicle. BOK requires Minimum Down Payment for the facility will be 20%. 4. REGULATION R-12 Vehicles financed by the banks shall be properly secured by way of hypothecation. Vehicles are secured through hypothecation in which the BOK take the ownership of vehicle and the Title of the vehicle shall be joint i.e. The Bank of Khyber and the Client. 5. REGULATION R-13 Vehicle remains properly insured at all times during the tenure of the loan. The vehicles are fully secured with insurance in whole tenure of loan. Motor Vehicle will be insured by customer entirely at his/her cost from an Insurance Company of his choice, approved by BOK. 6. REGULATION O-6 The clause of repossession in case of default should be clearly stated in the loan agreement. There is clearly mention in term and condition that in case of default of loan and installments bank will take repossession and there are no charges for repossession other than actual expense. 7. REGULATION O-7 Detailed repayment schedule should be provided to the borrower at the outset. Detail about repayment schedule is mentioned in term and condition, which are equal monthly installments in the form of post dated cheques. 8. REGULATION O-8 In case of used cars the bank shall not finance the cars older than five years. Bank of Khyber offering the maximum limit of 1.2 million for both new and used car not more than 5 year old.

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HOUSE LOAN
The reconciliation between bank house loan policy and SBP requirements based on SBP prudential regulations of consumer financing for house Loan. 1. REGULATION R-15
Banks shall determine the housing finance limit, both in urban and rural areas, in accordance with their internal credit policy, credit worthiness and loan repayment capacity of the borrowers and the total monthly amortization payments of housing loan, should not exceed 50% of the net disposable income of the prospective borrower. Bank providing house loan in installments under demand loan. Bank secured itself by creating maximum ratio of issuance of loan amount that is ratio of 70:30.which mean 70% bank investment and 30% customer investment and bank ensure that the total installment of repayment is not more than 50% of customer net income. 2. REGULATION R-16 The housing finance facility shall be provided at a maximum debt-equity ratio of 85:15. Bank secured itself by creating maximum ratio of issuance of loan amount that is ratio of 70:30.which mean 70% bank investment and 30% customer investment. 3. REGULATION R-18 The house financed by the bank shall be mortgaged in banks favor by way of equitable or registered mortgage. Bank take the documents of tiltlement of house under its possession in case of house renovation loan and take the ownership of house in case of new house purchase or loan for built new house. 4. REGULATION R-19 Banks shall either engage professional expertise or arrange sufficient training for their Concerned officials to evaluate the property, assess the genuineness and integrity of the title documents, etc. Bank takes the services of valuation experts and lawyers for legal expertise and trained there staff members for early valuation of property. 5. REGULATION R-20 The banks / DFIs management should put in place a mechanism to monitor conditions in the real estate market (or other product market) at least on quarterly basis to ensure that its policies are aligned to current market conditions. Bank has a department where current and futures forecast of value of properties and keep in touch with real estate dealers and keep panel of dealers. 6. REGULATION R-21 Banks are encouraged to develop floating rate products for extending housing finance, thereby managing interest rate risk to avoid its adverse effects. Bank of Khyber offering house loan on floating rate, which is updated quarterly.

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