Q.1    Answer every question with a clear “Yes” or “No” and then give reasons for your answer. (20)
                                                                                                                                                 (Answer)

i	You have accounts of two Private Limited Companies, A and B, both of which have the same set of Directors. Facility has been granted by you to Company A against the property of Company A. the value of which is very high nearly ten times the amount of facility availed by it. They now wish to avail some facility in the account of Company B against the available cushion in the value of property of Company A. In the Memorandum of Association of Company A there is no clause authorizing Company A to give any security or guarantee for liabilities of a third party. Will you entertain the request?
ii	You are maintaining an account of a retail trader running his business in his own name. He wants you to provide him a Running Finance facility of Rs. One million against an immovable property which is held in the name of his minor son with himself as his guardian. Will you entertain his request?
iii	You are presented a cheque drawn by an account holder on his account maintained with you. The balance in the account is insufficient to pay the cheque. Your telephone the account holder to deposit the deficiency in his account to enable you to pay the cheque but he requests you to return the cheque but with the reason “signature differs” and not “insufficient balance in the account”. Will you entertain his request?
iv	Your bank has allowed a facility of Rs. ten million to a partnership firm with three partners against the security of their factory held in the name of the firm. The account is stuck up and the value of the factory property is not sufficient to fully repay the dues of the Bank. One of the partners is quite wealthy and owns a very large and expensive house in which he is living. Can the Bank attach the house to recover its dues against the firm.
v	You have received an order from a Court attaching an account maintained with you and directing you to deposit in court a sum of Rs. three million from that account.
	The account is running in debit with a facility of Rs. ten million out of which the Customer has drawn only Rs. two million and has the drawing power for the remaining eight million. Will you carry out the order of the Court by depositing in court Rs. Three million out of the available drawing power of the Customer?

 

Q.2	You have allowed facility to a sole proprietary concern owned by Mr. Abdul Aziz. He offers as mortgage a property belong to his wife Mrs. Nasreen Abdul Aziz who is illiterate can cannot even sign her name. Explain in detail what precautions you will take to ensure that the mortgage is perfect and cannot be challenged later by the wife. (10)
Q.3	You have provided facility to a partnership firm in which there are three partners (i) Mr. Rahim, (ii) Mrs. Khadija wife of Rahim and (iii) their minor son Uzair. The account is stuck up and you have to file a suit for recovery. The hypothecated stocks against which the facility was allowed are all gone. There are no other assets in the name of the firm or of the two major partners, Mr. Rahim and his wife Khadija. All the assets of the family are held in the name of the minor son Uzair. Explain in detail what rights, if any, you have against the minor partner Uzair and his properties for recovery of your dues. (10)
Q.4	Discuss the protections available to a collecting bank under the Negotiable Instruments Act for collection of a cheque deposited by an account holder in his account, particularly the precautions the collecting bank must take to avail those protections. (10)
Q.5	An account in which you have been allowing Running Facility since 1st July 2000 is now stuck up and there are no operations in the account. The last entry is a credit balance for a sum of Rs. 100,000/= deposited by the Customer on 15th May, 2005 in cash leaving a debit balance of Rs. 5,670,987/=. To-day is 30th September, 2006. Explain whether you can file a suit, or your claim is now time barred, giving full reasons for your answer. (10)
Q.6	State Bank of Pakistan issued Guidelines and criteria for setting up of a commercial bank quoted below is an extract from this document: (20) “FIT AND PROPER CRITERIA FOR SPONSOR DIRECTORS The sponsor directors of the proposed bank have to qualify the following “Fit & Proper Test”: i) The sponsor director(s) should not be a director in another commercial bank in Pakistan i.e. he/she is not on the board of directors of another commercial bank in Pakistan. ii) The sponsor director(s) has declared personal net worth which should not be less than the amount to be subscribed by him individually. iii) No sponsor director shall subscribe more than 5% of the total paid up capital of the bank. Special permission has to be obtained separately from SBP with proper justification for holding more than 5% of the total paid up capital. iv) No more than 25% of the sponsor directors shall be from the same family”. Required: In your opinion what is the objective of each condition (From i to iv above) and will each condition be useful in maintaining the health and stability of the bank.
Q.7	The Banking Laws Review Commission has released the draft Banking Act-2006. Given below is the quote from this draft. (20) Restriction on Investments by domestic banks in other enterprises “A domestic bank shall not acquire or hold shares of, or hold a participation in, whether by one acquisition or participation or a series of acquisition or participation and by whatever means, any enterprise to a value of five percent or more of the unimpaired capital funds of the domestic bank at the time of the acquisition or participation, as the case may be, unless the approval of the State Bank has been given to such proposed acquisition or participation”. Describe and comment upon the suggestion.