The non-reconciliation of Pak/Inter-Branch Accounts and non-settlement of Suspense Account entries for long periods have the potential of posing serious risk to banks. With a view to guard against these risk 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, 1998;

(ii) Entries booked in the Pak/Inter-Branch Accounts/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/services 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. Besides, entries relating to frauds and foregeries, cash theft and looted, payments against equity, scrips/debt instruments and contributory payments of capital nature to be capitalized at a later stage shall also be excluded from the purview of the said regulation. the exclusion of entries relating to frauds and forgeries, cash theft and looted will, however, be subject to the condition that the same are cleared immediately on receipt of insurance claims.

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 penalties 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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