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970410

STATE BANK CIRCULARS RELATING TO BANKING AND CREDIT

BPRD Circular No. 9
Dated the l0th April, 1997.

Prudential Regulation-XXII Reconciliation of Pak. Account/Inter-Branch Accounts and Settlement of Suspense Account Entries:

The non-reconciliation of Pak/Inter-Branch Accounts and non-settlement of Suspense Account entries for long periods have the potential of posing serious risks to banks. With a view to guard against these risks inherent in neglecting timely settlement of entries booked in the Inter-Branch Accounts (by whatever name called) and the Suspense Accounts, it is hereby directed as follows:--

(i) All the entries outstanding in the Inter-Branch Accounts and/or Suspense Account as on 31st March, 1997 shall be reconciled and cleared at the earliest but not later than 30th June, 1997.

(ii) Entries booked in the Pak/Inter-Branch Accounts and/or Suspense Account on or after 1st April, 1997 must be reconciled/cleared and taken to the proper head of account within a maximum period of 30 days from the date entry is made in the above-named accounts.

2. Entries made in Suspense Account on account of tax at source, advance tax paid, tax recoverable, advance expense on new branches, advance rent paid, legal expenses, mark-up/service charge recoverable, Qarze Hasna for marriage, and forward cover fee, may be classified as "Other Assets" and the above instructions shall not be applicable to the foregoing items.

3. Banks are further directed to institute an effective internal control system for the operations of Inter-Branch and Suspense Accounts, which ensures reconciliation/clearing of the entries in shortest possible time and also clearly fixes the responsibilities for the officials for neglecting the timely reconciliation and clearance.

4. Failure to comply with the above instructions shall render the officials responsible for reconciliation and clearance of outstanding entries liable to penaltics under the Banking Companies Ordinance, 1962. The State Bank will also direct the bank managements to identify the official responsible for failure to comply with the instructions and institute disciplinary action against them.

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