IBP JAIBP Stage II cheat sheet

Cash reserve and liquidity: branch cash holdings must reconcile daily against the vault register; any excess above the retention limit is surrendered to the currency chest or linked branch.

KYC/CDD rule: account opening requires identity verification, address proof, source-of-income declaration, and risk categorization (low/medium/high) before activation; high-risk accounts need enhanced due diligence and periodic review.

Four-eyes principle: maker-checker segregation applies to cash posting, account opening, cheque-book issuance, and limit changes; the same officer cannot both originate and authorize.

Clearing cycle: inward clearing returns must be processed within the SBP-prescribed cut-off; late returns expose the branch to liability under the negotiable instruments framework.

Branch profitability is assessed on net interest margin plus non-interest income minus operating cost; deposit mix (current vs. term) drives cost of funds.

Dormant account rule: an account with no customer-initiated debit for the prescribed period is frozen for debits until reactivation with fresh KYC; credits continue.

Locker operations require a dual-control register, customer signature verification, and documented access logs; loss of key follows a formal indemnity process.

Reconciliation control: suspense, inter-branch, and ATM switch accounts must be cleared within the defined ageing limit; unresolved entries are escalated monthly.

Credit appraisal core: assess willingness (credit history, CIB report) and ability (income, cash flow, debt-service coverage) separately; a clean CIB does not substitute for repayment capacity.

DSCR = net operating income ÷ total debt service; a ratio below 1.0 signals insufficient cash generation to service obligations from operations.

SME lending relies on cash-flow-based assessment and collateral substitutes (receivables, stock, personal guarantees) because audited financials are often unavailable.

Consumer finance affordability: Debt Burden Ratio = total monthly obligations ÷ net disposable income; regulators cap DBR for consumer lending, and the cap binds before collateral does.

Loan classification and provisioning: overdue buckets (e.g., substandard, doubtful, loss) drive specific and general provisions; provisioning cost directly reduces reported profit.

Limit discipline: sanctioned limit, drawing power, and outstanding are three distinct figures; excess drawings require documented approval and are reported as irregularities.

Security perfection: mortgage registration, hypothecation charge filing, and lien marking must be completed before disbursement; unperfected security weakens recovery.

Early warning signals: frequent limit excesses, delayed stock statements, cheque returns, and deteriorating account turnover precede default and trigger a review.

Accounting equation: Assets = Liabilities + Equity; every transaction preserves this identity through double entry.

Accrual vs. cash: interest income is recognized on accrual, but interest on non-performing loans is suspended and recorded as a contra (suspense) until recovered.

Key ratios: ROA = net profit ÷ average total assets; ROE = net profit ÷ average equity; cost-to-income = operating expenses ÷ operating income.

CAMEL framework: Capital adequacy, Asset quality, Management, Earnings, Liquidity - used to grade a borrower or a bank's financial soundness.

Current ratio = current assets ÷ current liabilities; quick ratio excludes inventory; both test short-term liquidity but ignore timing of cash flows.

Depreciation and amortization are non-cash charges: they reduce reported profit but are added back when deriving operating cash flow.

Loan loss provision is an expense in the income statement and a contra-asset (allowance) on the balance sheet; write-off removes the gross loan and the allowance together.

Window dressing check: compare revenue growth with receivables and inventory growth; receivables rising faster than sales suggests aggressive recognition or collection issues.

Segmentation variables: demographic, geographic, psychographic, and behavioral; in banking, behavioral (transaction pattern, product depth) predicts churn better than demographics.

Customer lifetime value ≈ average annual margin × retention years; acquisition cost must be recovered within the payback period for the segment to be viable.

Relationship depth is measured by products per customer and share of wallet; cross-sell raises switching cost and lowers attrition.

Service quality gaps: the gap between customer expectation and perceived delivery drives dissatisfaction more than absolute service speed.

Complaint handling: acknowledge, log, investigate within a stated turnaround, and close with root-cause action; unresolved complaints escalate to the banking Mohtasib.

Product pricing communication must disclose markup, fees, and total cost of credit; misleading or hidden charges are a conduct-risk and reputational issue.

Churn signals: falling balances, stopped salary credits, reduced transaction frequency, and closure of ancillary products precede full account attrition.

Communication model: sender, encoding, channel, noise, decoding, receiver, feedback; noise at any stage distorts the message regardless of channel richness.

Channel richness: face-to-face is highest (immediate feedback, multiple cues); written notices are lowest but create an auditable record - use written form for commitments and refusals.

Ethical decision test: is it legal, is it balanced among stakeholders, and would the decision survive public disclosure? A 'no' on any test signals conflict.

Conflict of interest: disclose and recuse; personal borrowing from or lending to a customer of the same branch is a prohibited related-party situation.

Confidentiality: customer data may be shared only under legal compulsion, regulatory requirement, or express customer consent; casual internal sharing outside need-to-know breaches duty.

Bad-news message structure: buffer or context, clear statement of the decision, reasons, then alternatives or next steps; avoid burying the refusal.

Minutes of meetings record decisions, owners, and deadlines, not verbatim discussion; they are the primary evidence in later disputes.

Core banking system (CBS) holds customer accounts centrally; branches become access points, so availability and disaster recovery targets are business-continuity obligations, not IT preferences.

Two-factor authentication combines something you know (PIN/password) with something you have (token/OTP) or are (biometric); single-factor access to payment channels is a control failure.

Encryption: data at rest and in transit must be protected; ATM/POS traffic runs over encrypted networks with key management under dual control.

Cyber risk controls: least privilege, segregation of duties in the application, patch management, log retention, and periodic penetration testing.

Business continuity: define RTO (time to restore) and RPO (acceptable data loss); backups must be tested by restoration, not merely scheduled.

Phishing and social engineering defeat technical controls by targeting the user; verification callbacks on payment-instruction changes are the standard defence.

Digital onboarding requires identity verification against a trusted database plus liveness check; the audit trail must be retained for regulatory inspection.

Monetary policy transmission: the policy rate set by the central bank influences interbank rates, deposit pricing, and lending markup; markup repricing lags policy moves on fixed-rate books.

Inflation erodes real returns: real interest rate ≈ nominal rate − inflation; a negative real rate discourages deposits and pushes savers toward alternatives.

Exchange rate movement affects importers (cost up on depreciation) and exporters (competitiveness up); banks carry open-position limits to cap currency risk.

Fiscal deficit is financed by borrowing; heavy government borrowing from the banking system crowds out private credit and raises yields.

Balance of payments: current account deficit must be financed by capital and financial inflows or reserves; reserve drawdown is not a sustainable financing source.

SBP regulatory tools include policy rate, cash reserve and liquidity ratios, and prudential exposure limits; these shape bank balance sheets directly.

GDP components: consumption, investment, government spending, net exports; credit growth typically tracks investment and working-capital demand.