ROLE OF NIFT & SWIFT IN COMMERCIAL BANKS

NIFT’S INTRODUCTION

• It was inaugurated in 1995 as a joint venture between six Banks & entrepreneurs from the private sector.

• SBP has also strived to modernize the payment infrastructure in the country & in doing so, it facilitated the establishment of NIFT for clearing services.

• NIFT provides quality service and solutions to all its clients.• NIFT is a licensed clearing house of Pakistan• Banks operating in Pakistan are members of NIFT's clearing system and the

State Bank of Pakistan monitors the clearing house operations.

SHAREHOLDERS IN NIFT

Equity share-holders of NIFT are :

• Habib Bank Limited (HBL)• National Bank of Pakistan (NBP)• Muslim Commercial Bank (MCB)• Allied Bank Limited (ABL)• United Bank Limited (UBL) • First Women Bank Limited (FWBL)

SERVICES OFFERED BY NIFT

The services includes :

• Cheques clearing • Cheque Truncation• Utility payment processing• E services

E-SERVICES

Let’s discuss the E-services first :

• E-Tendering• Know Your Customer• Financial Market Data Aggregation• Public Key Infrastructure (PKI)

E-SERVICES

E-Tendering • NIFT offers a complete solution for the requirement• Transactions can be easily done with thisKnow Your Customer• NIFT offers a service through which customers, employees can easily interact

with business applications• It offers form filling

E-SERVICES

Financial Market Data Aggregation• NIFT is providing financial data aggregation services by publishing KIBOR

with the help of Financial Market Association of Pakistan • Karachi Inter Bank Offer Rate is a benchmark for banksPublic Key Infrastructure (PKI)• NIFT also provides a service for safe & secure online business• It ensures safety of authentication, privacy & confidentiality

CHEQUE CLEARING

Let’s come to the cheque clearing service:

Basically what cheque clearing is:

• Cheque clearing is the process of moving a cheque from the bank in which it was deposited to the bank on which it was drawn, and the movement of the money in the opposite direction. This process is called the clearing cycle and normally results in a credit to the account at the bank of deposit, and an equivalent debit to the account at the bank on which it was drawn.

CHEQUE TRUNCATION

• Conversion of Physical cheque into electronic form• Saves time & processing costs• Central banking was done before which was difficult as banks arrange to

meet each day• Banks & financial institutes use Cheque Truncation• This process goes through Inward & Outward Clearing

CLEARING

• Definition The transfer of funds from a branch of a bank to the other bank on which the instrument is drawn, without involving cash through “ State bank’s Clearing house.” • Types of Clearing Inward ClearingInward clearing means cheques received by the bank from other bank. Outward ClearingOutward clearing means cheques sent for collection.

INWARD CLEARING PROCESS

• It means cheques received by the banks from the other banks.• The inward clearing process decreases the deposits of the banks

• The main operational task done by the banks were :

o Validation of customer accountso Validation of the physical instrumentso Archival of all physical instruments

OUTWARD CLEARING PROCESS

• It means cheques sent for collection• Outward clearing process increases the deposits of the bank Example• When we received inward clearing we have to debit our customer account

and when we receive outward clearing we have to send it to relevant bank payment.

• Like a cheque drawn on HBL deposited on MCB bank is an outward cheque for MCB and is an inward for HBL.

PROCEDURE OF CLEARING

• At the front office cheques are received. The cheques are then stamped with the clearing stamps

• The amount of cheques is then posted in the system. i.e the amount is credit in customer’s account

• Next to clearing cheques and other instruments are endorsed by the banks through the signature of the authorized signatory.

• The cheques/other instruments and deposits slips are separated and the clearing instruments are prepared in bundles

• Each bundle of clearing instruments is add listed and then counted and send it to NIFT

CLEARING TYPES

• Overnight clearing Including Return Cheque Processing (24 hour Clearing Cycle)

• Same Day / High Value Clearing including return cheque Processing (3 hour Clearing Cycle)

• Inter City clearing including Return Cheque Processing (48 hour Clearing Cycle)• Countrywide Local US Dollar Clearing (5 day Clearing Cycle)• Inter-Bank clearing• Intra-Bank clearing• Normal day clearing

UTILITY PAYMENT PROCESSING

• In addition to NIFT’s services to Financial industry it also provides services to Utility companies

• It provides processing services to:• Sui Southern Gas Co. and Sui Northern Pipeline Ltd• Telecommunication company (PTCL) • Karachi Electric Supply Co• Karachi Water and Sewerage Board

SWIFT(SOCIETY FOR WORLDWIDE INTERBANK

FINANCIAL TELECOMMUNICATION)• SWIFT was introduced in 1997.• SWIFT offers a service of network to Banks & other Financial

Organizations worldwide.• To send & receive Financial Transactions in a secured & reliable

environment through Financial Messages.• The messaging service includes letters of credit, payments & securities

transactions• Before SWIFT there was TELEX system but it was too slow & was

insecure.

INTRODUCTION OF SWIFT

• SWIFT transports financial messages in a highly secure way but does not hold accounts for its members.

• SWIFT does not perform any form of clearing or settlement. • Any financial institution who holds a banking license can become a member

of SWIFT by paying a joining fee and service charge for each message sent.• As of September 2010, SWIFT is linked with more than 9,000 financial

institutions in 209 countries, who were exchanging an average of over 15 million messages per day.

BASIC OBJECTIVES OF SWIFT

• Provide low-cost, competitive financial processing • Provide communication services of the highest security and reliability• SWIFT is providing with transparency of arrangements and customer access

policies. • Contribute significantly to the commercial success of its member countries• An international open forum to address industry-level threats, issues and

opportunities.• Become a leading global organization respected for its professionalism,

effectiveness, vision and management.

SERVICES OF SWIFT

• Financial transaction services• Remittance• SWIFT-Ref• SWIFT-Net Mail

FINANCIAL TRANSACTION SERVICES

• It provides financial transaction services• Offer payments & cash management services• Connects to an ACH for clearing

REMITTANCE

• Remittance

• A remittance is a transfer of funds to an overseas account.• It is done through mail or online transaction.• These are done by authorized remittance agents.

SWIFT REF.

• Swift Ref sources data direct from data originators, including central banks, code issuers • Banks making it easy for issuers and originators to

maintain data regularly• SWIFT-Ref constantly validates and cross-checks data

across the different data sets

SWIFT-NET MAIL

• Went live on 16 May 2007• Secure email infrastructure to pass email messages• secure transfer of sensitive business documents, such as invoices,

contracts and signatories.• designed to replace existing telex and courier services, as well as

the transmission of security-sensitive data over the open Internet.

SWIFT CODE

• Swift Code is a standard format of Bank Identifier Codes (BIC) and it is unique identification code for a particular bank. These codes are used when transferring money between banks, particularly for international wire transfers. Banks also used the codes for exchanging other messages between them.• Registrations of Swift Codes are handled by Society for

Worldwide Interbank Financial Telecommunication

IOS (INTERNATIONAL ORGANIZATION OF

STANDARDIZATION)

• It was the authoritative body that approved the creation of SWIFT codes• Over 40,000 “live” Swift codes• 50,000 “additional” codes

STRUCTURE OF SWIFT CODE

• The Swift code consists of 8 or 11 characters. When 8-digits code is given, it refers to the primary office. The code formatted as below;

• AAAA BB CC DDD• First 4 characters - bank code (only letters)• Next 2 characters - country code (only letters)• Next 2 characters - location code (letters and digits) (passive participant will

have "1" in the second character)• Last 3 characters - branch code, optional ('XXX' for primary office) (letters

and digits)

ALLIED BANK

• Allied Bank is a commercial bank in Pakistan. With its registered Offices in Karachi and Lahore. The swift code is ABPA PK KA XXX for its primary office.

• ABPA identifies ALLIED BANK• PK is the country code for PAKISTAN• KA is the location code • XXX is for branch code like 237 is used for Sitara tower branch in

FAISALABAD, MUL is used for Multan city branch in MULTAN.

HABIB BANK LIMITED

• HABIB Bank is a commercial bank in Pakistan. The swift code is HABBPKKAXXX for its primary office.

• HABB identifies ALLIED BANK• PK is the country code for PAKISTAN• KA is the location code • XXX is for branch code like 122 is used for Badami Bagh Branch in Lahore

etc.

THANKYOU