EVERYTHING WE DO IS FOR YOU 1 sACKNOWLEDGEMENTS I would like to express my gratitude to the Institute of Business Administration for giving me the opportunity and arranging such an extensive internship programme. I would also like to acknowledge my debts to those officers of Bank Alfalah who have been extremely helpful for me. First of all Mr. Gulistan Khan. He has been a permanent source of encouragement and guidance. His helpful nature did not restrict him to the premises to the branch but extended to any place and any matter I needed his support on. He gave me a comprehensive summarization of the documentary credits procedure. He made me perform all the functions of his desk at one time or another. I would also acknowledge my debt to Mr. Khurram Waheed, for the knowledge he provided in a very frank and casual manner. Due to his gift of wittiness, the time of my internship that was spent with him was the most interesting and memorable one for me. The young officers of the Credit department, Mr. Kashif and Mr. Shaheryar, were a source of inspiration as well as admiration as they were absolutely thorough gentlemen. Moreover, I would also acknowledge my debt to Mr. Ulfat, Mr. Anwaar, Mr. Jamsheed, Mr. Ahsan, Mr. Mughees, Mr. Shaukat and Miss Zeba for the helpful hand they extended towards me at one time or another. In short, I would always be thankful to all the managers and officers, for their courteous and compassionate treatment given to me. Thank you all
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EVERYTHING WE DO IS FOR YOU 1
sACKNOWLEDGEMENTS I would like to express my gratitude to the Institute of Business
Administration for giving me the opportunity and arranging such an extensive
internship programme.
I would also like to acknowledge my debts to those officers of Bank
Alfalah who have been extremely helpful for me.
First of all Mr. Gulistan Khan. He has been a permanent source of
encouragement and guidance. His helpful nature did not restrict him to the
premises to the branch but extended to any place and any matter I needed his
support on. He gave me a comprehensive summarization of the documentary
credits procedure. He made me perform all the functions of his desk at one
time or another.
I would also acknowledge my debt to Mr. Khurram Waheed, for the
knowledge he provided in a very frank and casual manner. Due to his gift of
wittiness, the time of my internship that was spent with him was the most
interesting and memorable one for me.
The young officers of the Credit department, Mr. Kashif and Mr.
Shaheryar, were a source of inspiration as well as admiration as they were
absolutely thorough gentlemen.
Moreover, I would also acknowledge my debt to Mr. Ulfat, Mr.
Anwaar, Mr. Jamsheed, Mr. Ahsan, Mr. Mughees, Mr. Shaukat and Miss Zeba
for the helpful hand they extended towards me at one time or another.
In short, I would always be thankful to all the managers and officers,
for their courteous and compassionate treatment given to me.
Thank you all
EVERYTHING WE DO IS FOR YOU 2
PREFACE The pre-requisite of internship program is to make the students of
M.B.A, aware of the practical expertise and to acquaint them with the real
management process.
With an intention of grooming the best executives of the future, the
Institute of Business Administration has organized a comprehensive
internship-training program. All of us were placed in leading organizations of
business arena to gain first hand knowledge and insight into their
management and working. So, when I was given the chance of selecting an
organization, I opted for Bank Alfalah.
Getting a chance of working in Bank Alfalah proved to be very
beneficial for me. I think that I gained comprehensive insight into the working
of a bank. But nothing could have been possible without the co-operation and
guidance of the officers of BAL.
After the completion of internship program, internship report has been
prepared just in accordance with the practical exposure. It has been my
endeavor to stipulate my experience in a way that the reader may clearly
understand the core concepts.
AHSAN BASHIR
EVERYTHING WE DO IS FOR YOU 3
TABLE OF CONTENTS
Chapter 1 Introduction
Introduction to Bank Alfalah 05
BAL, Circular Road Lahore 07
Financial Standing of Bank Alfalah 08
Chapter 2 Organizational Structure & Policies
Organizational Hierarchy 10
The Management 14
Mission Statement 15
Strategy Formulation & Implementation 15
Names & Designations of Employees 16
Job Satisfaction 18
Management Styles 18
Training of Employees 18
Growth Strategy at Bank Alfalah 19
Managerial Policies 20
Chapter 3 Marketing Mix of BAL
Products / Services 26
Price 34
Place 35
Promotion 37
EVERYTHING WE DO IS FOR YOU 4
Chapter 4 Internship Programme
Consumer Banking 42
o Remittances
o Clearing
Trade Finance 57
o Imports 58
o Exports 81
Credits 88
Chapter 5 Financial Analysis
Trend (Horizontal) Analysis 107
Vertical Analysis 114
Ratio Analysis 119
Chapter 5 SWOT Analysis
Strengths 139
Weaknesses 141
Opportunities 142
Threats 143
&
Recommendations 144
EVERYTHING WE DO IS FOR YOU 5
INTRODUCTION TO BANK ALFALAH
After the debacle of BCCI, the Ministry of Finance (Govt. of Pakistan)
acquired its three branches and Habib Credit & Exchange Bank was incorporated
on June 21, 1992 as a public limited company under the Companies Ordinance,
1984 and commenced banking operations from November 1, 1992. It engaged in
commercial banking and related services as defined in the baking Companies
Ordinance, 1962.
Following the privatization in July, 1997, Habib Credit & Exchange Bank
assumed the new identity of Bank Alfalah on February 25, 1998. And with this a
challenge was launched, the challenge to transform this bank into a highly
professional, most efficient & service oriented institution.
Charged with the strength of the Abu Dhabi based consortium, and under
the leadership of Highness Sheikh Nahayan Mabarak Al-Nahayan, Minister of
Education, Government of Abu Dhabi, and a prominent member of Royal Family –
the bank is energized with the vision, envisaging the development of consumer
sector in Pakistan.
Bank Alfalah has emerged as one of the leading commercial banks in the
financial sector of Pakistan. Bank has made significant contribution in building and
strengthening both the corporate and retail banking in Pakistan.
Prioritizing its product portfolio in line with consumer needs and wants, the
bank is committed to develop products that give more value to its customer – be it
a simple bank account or complex financing of a major project. Designing product
portfolio in response to customer‟s preferences, bank‟s products like Royal Profit,
Royal Patriot and Royal Custodial are prime examples of quality and innovation –
providing timely banking opportunities to its customers.
Assessment of the needs and wants of its customers is an on going process
at Bank Alfalah, which helps it to continually develop new products and services.
Some of our new products in the pipeline include Royal Forex, ATM Network and a
credit card.
EVERYTHING WE DO IS FOR YOU 6
To continuously offer courteous, professional and advanced banking
solutions, bank‟s team has recently been rejuvenated by going through training
programs with a focus on Information Technology. With a team of talented,
service-dedicated professional bankers, Bank Alfalah commits all its energies,
resources and time to cater to all banking and financial needs of customers.
To make banking solutions become accessible to more and more people,
BAL has embarked upon a rapid expansion program, aiming to provide a
networking that makes its services available to any of its customers in all the major
urban centers of Pakistan – with a view to go international by the coming
millennium.
With its key indicators of progress already soaring to new heights, the bank
is committed to put all its energies, resources and time to bring higher value and
satisfaction of its customers, employees and shareholders.
Technological developments are opening up new vistas of solutions for
distributing traditional financial products. Concurrently, rapid change in customer
preferences has resulted in a major shift from manual to automated services of the
bank. Information technology today, is the key to sustain and succeed in the
corporate world. Therefore, during the year 2000, Bank Alfalah made heavy
investments, towards enhancing its capabilities in the area of automation and
technology. BAL is well positioned to meet client needs, with improved competitive
advantage.
Bank Alfalah is on the way of expansion of its business and branch network.
Presently, there are 23 branches of BAL, spread all over the Pakistan covering
major business centers and principle cities.
EVERYTHING WE DO IS FOR YOU 7
BAL CIRCULAR ROAD LAHORE
Valid city markets have their unusual importance regarding import business.
They are known as business and commercial hub of Lahore. Major commodities
and Industrial raw materials are being imported in these markets. Major industrials
are routing prefer to route their business through the banks situated in these areas.
These markets are highly profitable and important for banking sector.
Bank Alfalah‟s major competitors, Union Bank and Askari Commercial Bank
earned huge profits in this area. Therefore, to capture this business and to target
this very important segment, Bank Alfalah launched its Circular Road Branch in
October 2000, with a bright and clear vision of customer service.
Now, BAL Circular Road branch has the importance of backbone for Bank
Alfalah. It has 2nd largest volume of foreign trade business and has led to huge
profits, just with in a short span of 10 months.
Bank Alfalah launched its own Rupee Travellers Cheques during the course
of my internship, and till the completion of my internship, BAL Circular Road had
the highest sales volume of these TC‟s.
So, I have been much lucky that I got an opportunity for working in
concerned branch, and confronted with enough exposure and opportunities to
learn.
EVERYTHING WE DO IS FOR YOU 8
FINANCIAL STANDING OF BANK ALFALAH
Confronted with a more open financial market but tougher competition, Bank
Alfalah, with its professional out look and commitment, maintained healthy growth
in resource mobilization and financing of foreign trade.
Bank‟s pretax profit for the year 1999 increased more than 5 times as
compared to the 98, and stood at 354 million. For the year 2000, it grew by 12.96
percent to Pak Rupee 400 million. Growth in profitability is evident from the graph:
During the year 2000,the deposit base increased from Pak Rupees 15.82
billion to Pak Rupees 20.48 billion, an increase of 29.5 percent, with a balance
sheet footing of Pak Rupee 27.57 billion compared t previous year‟s figure of Rs.
21.02 billion.
Since Bank Alfalah is focused on Trade Financing; it attaches great
significance to the development and maintenance of healthy correspondent
relationships with banks and financial institutions, globally. Towards this pursuit,
BAL has developed excellent business relations with renowned banks, like ABN
Amro and Standard Chartered Bank, whose support in terms of lines of credit
extended to BAL, has enabled to handle its ever-growing trade volumes.
During the year 2000, BAL handled foreign trade business in excess of Pak
Rupees 30.6 billion, representing an increase of 92 percent over the previous year.
0
100000
200000
300000
400000
500000
FY98 FY99 FY2000
Profit (Rs. In 000)
EVERYTHING WE DO IS FOR YOU 9
It is also evident from the graph:
Whist, BAL peruses a stringent liquidity policy, the bank actively participated
in the interbank money market and Forex markets. Bank has put in place an
Assets- Liability Committee (ALCO) that not only sets the parameters of liquidity
and profitability but also reviews frequently the associated risks of interest rate
profile, exchange risk and targets for credit allocation to various sectors of the
economy.
0
5,000
10,000
15,000
20,000
25,000
Deposits Advances Imports Exports
Consolidated Figures (Rs. in 000)
FY 99
FY 00
EVERYTHING WE DO IS FOR YOU 10
COMPARISON
Bank Alfalah is a newly emerged bank and going on the way of progress.
Even it is at the initial stages of development, but it is facing developed strong
competition with Union Bank Limited and Askari Commercial Bank which are
leading commercial banks in the local private sector in Pakistan.
For the purpose of comparison, I have taken some important figures
regarding these banks.
Account Title Union Bank Askari
Comm.
Bank
Alfalah
PLS SAVING ACCOUNT:
NOTICE DEPOSIT:
7-29 days
30 days and over
TERM DEPOSIT:
1 Month
2 Months
3 Months
6 Months
1 Year
2 Years
3 Years
5 Years
5%
4%
5%
6%
-
7.5%
8%
8.5%
9%
9.5%
10.5%
8.5%
7%
8%
9.50%
9.75%
10.0%
10.5%
11.0%
-
-
-
9%
6.1%
7.5%
8%
-
10%
10.5%
11.0%
-
12.0%
13.0%
It is evident from the above figures that how successfully Bank Alfalah is
carrying on its business. Bank Alfalah is providing highest rates of return against
different types of deposits to its customers.
Also, with these high rates of returns, there is consistent declining trend in
the cost of funds of Bank Alfalah.
EVERYTHING WE DO IS FOR YOU 11
Cost of Funds Bank Alfalah Askari Comm. Bank
1998
1999
2000
13.20
9.26
8.48
13.02
10.04
9.00
Here is another table that signifies the growth rate in deposits and
advances, which constitute the basis of banking business.
Growth rate in Deposits 97-98 98-99 99-2000
Union Bank
Bank Alfalah
(8%)
32%
(9%)
33%
75%
30%
Growth rate in Advances 97-98 98-99 99-2000
Union Bank
Bank Alfalah
(12%)
60%
(6%)
33%
77%
5%
Above figures shows the consistency in growth rates that signifies the
management’s efficiency.
As a whole, I can say that Bank Alfalah is organizing and expanding its
business operations very successfully and competing for becoming top leading
commercial bank in Pakistan.
EVERYTHING WE DO IS FOR YOU 12
ORGANIZATIONAL HIERARCHY
CHAIRMAN / DIRECTOR
BOARD OF DIRECTORS
CHIEF EXECUTIVE OFFICER
EXECUTIVE INCHARGES
AREA MANAGER AREA MANAGER
NORTH SOUTH
EVERYTHING WE DO IS FOR YOU 13
CHAIRMAN
H.H Sheikh Nahayan Mabarak Al-Nahayan.
Chairman & Director
H.H Sheikh Nahayan Mabarak Al-Nahayan is an important and prominent
member of the ruling family of Abu Dhabi. After the culmination of his studies at
Oxford he returned shoulder important responsibilities in the state administration.
In 1988 he was appointed the President of the higher colleges of Technology
comprising of eight colleges throughout the UAE – a responsibility he fulfilled with
distinction. In 1990 he was appointed Minister of Higher Education and Scientific
Research. Presently he also holds the presidency of the Society of the Natural
History and National Heritage. In 1992 he became the Chairman of the Union
National Bank and has since remained involved in strategic management of the
institution.
EVERYTHING WE DO IS FOR YOU 14
During the first five Trying years, he effectively managed the bank in the
absence of a Board of Directors and steered it to success as one of the leading
Bank of UAE.
BOARD OF DIRECTORS
Mr. Omar Z. Al-Askari, Director
Mr. Abdulla Khalil Al-Mutawa, Director
Mr. Abdulla Nasser Hawaileel Al-Mansoori, Director
Mr. Mohammad Saleem Akhtar, CEO &Director
Mr. Ikramul Majeed Sehgal, Director
Mr. Nadeem Iqbal Sheikh, Director
EVERYTHING WE DO IS FOR YOU 15
THE CORE GROUP
Board Advisory Committee
Mr. Omar Z. Al-Askari
Mr. Abdulla K. Al-Mutawa
Mr. Ganpat Singhvi
Mr. Bashir A. Tahir
Executive Committee
Mr. Mohammad Saleem Akhtar
Mr. Ikram Ul-Majeed Sehgal
Mr. Parvez A. Shahid
Mr. M. Waqas Mohsin
Mr. Tanweer A. Khan
Mr. Mohammad Yousaf
EVERYTHING WE DO IS FOR YOU 16
THE MANAGEMENT
Management refers to the universal process of effectively and efficiently
getting activities completed with and through other people. It is a process by which
certain basic functions, which are planning, organizing, leading and controlling are
performed to achieve the desired objectives of the organization. These functions
are being performed at three levels in Bank Alfalah.
BOARD OF DIRECTORS
At the top of the human resource hierarchy sits the Board of Directors and
Executive Committee. The most important task of this level of management is
strategic planning, determining the goals and objectives and to formulate the
policies.
TOP MANAGEMENT
Top management mostly involves strategy formulation, technical planning,
determining how to best get the job done and control. Chief Managers and Branch
Managers are included in this level. They define and interpret the objectives and
vision and then formulate policies for their completion.
MIDDLE MANAGEMENT, SUPERVISORS AND EMPLOYEES
Departmental heads constitute this level of management at Bank Alfalah.
They are directly responsible for planning and controlling the activities of officers.
Finally, the employees whose activities are monitored and controlled according to
the desired objectives.
EVERYTHING WE DO IS FOR YOU 17
MISSION STATEMENT
Bank Alfalah is going on the road of progress very successfully.
Assessment of the needs and wants of consumers is an on going process at Bank
Alfalah, which helps it to continually develop new products and services. At BAL,
the philosophy is that the bank should go to all possible limits to satisfy the
customer needs. The bank is continuously formulating new products and services
for the growing and diversified needs of its ever-expanding client base. The bank‟s
commitment to its customers is evident from its mission statement:
“To provide innovative and high quality products to its customers at the
lowest possible rates. To achieve all set goals regarding service, performance and
goodwill.”
STRATEGY FORMULATION AND IMPLEMENTATION
In the considerations of set goals and objectives, policies are formulated at
higher level of management. To achieve the desired objectives, powers are
delegated at different levels of management. Each branch manager formulates
strategies in accordance with its branch structure and macro environment.
For the implementation of these strategies, meetings are conducted with
departmental heads. During my stay at Bank Alfalah Circular Road Br., I observed
that almost at every Saturday, there used to be a combined meeting, where the
business turnover throughout the week was observed, so that any deviation might
be identified and proper measure could be taken for controlling.
Along with these weekly meetings, whenever there was a special matter or
issue that was needed to be addressed. Special attention was paid to that and
views & ideas of different participant of management were always welcomed.
EVERYTHING WE DO IS FOR YOU 18
NAMES AND DESIGNATIONS OF OFFICERS
BANK ALFALAH Circular Road, LAHORE BRANCH
NAME DESIGNATION
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Mr. Malik Riaz-ul-Haq
Mr. Sardar Ahmed
Mr. Tariq Munir
Mr. Anwar Masood
Mr. Jamshed Yousaf
Mr. Ulfat Hussain
Mr. Malik Mughees Anwar
Mr. Kashif Hanif
Mr. Shaheryar Aziz Malik
Miss Zeba Maqsood
Mrs. Zeenat Rabia
Mr. Gulistan Khan
Mrs. Fareeda Naheed
Mr. Khurram Waheed
Mr. Salman Ahmed
Mr. Naveed Hussain
Mr. Azam Qaiser
Mr. Ahmed Mumtaz
Mr. Ahsan Butt
Mr. Waseem Asif Mirza
Mr. Saqib Mohsin Sheikh
Mr. Shaukat Hussain
Mr. Jul Habib-ur-Rehman
Branch Manager
Mgr. Corporate Banking
Manager Operations
Incharge Credits
Incharge Trade Finance
Incharge Cash Department
Officer Credits
Officer Credits
Officer Credits
Officer Trade Finance
Officer Trade Finance
Officer Trade Finance
Officer
Officer Remittance
Officer Remittance
Officer Cash Department
Officer Cash Department
Officer Cash Department
Incharge Car Financing
Officer Car Financing
Officer IT & Accounts
Officer Accounts
Officer IT
EVERYTHING WE DO IS FOR YOU 19
24
25
26
Mrs. Nudrat Adeeb
Mr. Khawaja Ahmed Farooq
Mr. Shoaib-ur-Rehman
Telephone Operator
Officer
Officer
EVERYTHING WE DO IS FOR YOU 20
JOB SATISFACTION
During my internship programme, I worked with different employees in
different departments. I observed their working and also their level of satisfaction
regarding their jobs and reward system.
In Cash and Trade Finance department, almost all the employees were
satisfied with their jobs, as far as the quality of work and rewards were concerned.
All the employees in these two departments were highly motivated and sincere
with their jobs.
However, their common complaint was the quantity of work. They were
overloaded with the huge work. Personnel in Trade Finance department, even, had
to work till 9 or 10 PM at night.
Employees in Credit department were almost young and there were not too
satisfied with the location of branch. They were, perhaps, the victims of complex.
MANAGEMENT STYLES
Management must have to adopt some administrative style to get all the
activities to be done effectively and efficiently. As far as the management styles at
BAL Circular Road Br., are concerned, there is some centralization and
decentralization to some extent.
Administrative style of Branch Manager Mr. Riaz-ul-Haq is authoritative.
His authoritative style was the requirement of administration. For the
implementation of strategies and getting all the activities to be done properly with
an organized environment, unity of command was the requirement of the time. In
the month of August, he remained on leave for one week. During his absence, I
observed the environment of uncertainty and deregulation in the bank.
But the scenario was different in case of departmental heads. In Cash and
Credit department, powers were delegated at low levels. Employees were allowed
to organized and take necessary actions to accomplish their work properly.
Whereas, situation was different in Trade Finance department. The incharge Trade
EVERYTHING WE DO IS FOR YOU 21
Finance, Mr. Jamshed was strict and martinet. There used to be a proper
monitoring of work of each employee.
TRAINING OF EMPLOYEES
Human resource constitutes the most valuable asset of Bank Alfalah. To
improve the staff‟s professional quality and proficiency, bank conducts on-job
training programs and in-house seminars/ courses, at its training center. Bank
Alfalah‟s training academy is equipped with the latest audio-visual training aids,
which facilitate in the dissemination of knowledge and skills.
Bank Alfalah has started a six-months extensive training program for
management trainees. The bank intends to continue, on need basis, such
programs each year.
GROWTH STRATEGY AT BANK ALFALAH Business network of Bank Alfalah is continuously growing and expanding.
For the growth of its business operations, Bank is emphasizing on Internal
Growth Strategy.
Bank Alfalah objective has been to expand its own branch network to meet
client‟s needs so that it may better preserve its organizational culture, efficiency,
quality and image. Bank is well positioned and geographically poised, to cater for
increasing business demands, from its existing and potential clientele. During the
year 2000, bank opened 8 new branches and presently there are 23 branches
spread all over Pakistan covering major business centers and principle cities. BAL
plans to add more branches to its growing network in the ensuing years.
EVERYTHING WE DO IS FOR YOU 22
MANAGERIAL POLICIES
Bank Alfalah is successfully going on the way of progress with its highly
qualified and professional management. Policies are formulated at top-level
management in accordance with its defined goals and objectives. Due to the
dynamic external environment, these policies keep on changing. So, here are
some major managerial policies that I observed during my course of internship at
Bank Alfalah.
RECRUITMENT POLICES:
Human resource is supposed to be the most valuable asset at Bank Alfalah.
With its expanding branch network, the requirement of new employees keeps on
arising. With an intention to recruit highly qualified employees, management has
formulated a comprehensive recruitment policy.
1) To provide an opportunity to new university graduates, so that they
may come up with fresh and innovative ideas, BAL has started an extensive
recruitment programme.
To locate brilliant business graduates, intimations are sent to universities
(including PU) and different business institutes. These MBA‟s must possess
a minimum of 3.2 GPA.
Written test is conducted for these graduates and the successful candidates
are selected for interviews. Such interviews are conducted at Area Offices
and Head Office, Karachi, respectively.
Finally, the graduates so selected, are imparted an extensive 6 months
training at Head Office, Karachi. After the completion of training programme,
they are appointed at different branches of Bank Alfalah throughout the
country.
During my course of internship, first batch of this training programme
completed their training, where one of my senior student, Mr. Gohar Irfan
stood first.
EVERYTHING WE DO IS FOR YOU 23
2) With the passage of time, whenever there are some vacant seats
available at any branch of Bank Alfalah, new applicants are invited. After
passing through the written test, successful candidates are called for
interviews at respective branches and also at Area Office. So, after having a
comprehensive interview, new candidates are selected for jobs.
ACCOUNTING POLICIES:
Bank Alfalah has adopted almost the same accounting procedures that
other financial institutions are adopting at this time. These accounting procedures
or Accounting policies are made according to GAAP.
1) ACCOUNTING COVENTION
All the accounts have been prepared under the historical cost convention,
except that certain investments and fixed assets have been included at revalued
amounts.
2) ADVANCES
These are stated net of provision for bad and doubtful debts. The provision
for bad and doubtful balances is made in accordance with the prudential
regulations of the State Bank of Pakistan.
3) INVESTMENT
In 2000, the bank decided to value treasury bills, term finance certificates
and shares companies at market value. Any surplus/(deficit) on revaluation is
shown under equality. Previously all investments were stated at cost and carrying
amounts were reduced for each investment individually where the decline in value
was other than temporary. The policy has been changed to comply with the
requirements of State Bank of Pakistan BSD circular No 20 of august 4, 2001. Had
the policy remained unchanged there would have been no deficit on revaluation of
investment.
All other investments are stated as follows:
EVERYTHING WE DO IS FOR YOU 24
Short-term investments are stated at lower of cost and market value
determined on an aggregate portfolio basis.
Long-term investments are stated at cost. Carrying amount is reduced
for each investment individually whenever decline in the value is other
than temporary.
Gains or losses on disposals during the year are taken to profit and loss
account. Premium/discount on purchase of investments are amortized over
the term of such investments.
4) FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated into Pak rupees
at the rate of exchange approximating those prevailing at the balance
sheet data.
Outstanding forward exchange contracts are translated at the contracted
rates.
Exchange gains or losses are included in profit and loss account.
5) OPERATING FIXED ASSETS AND DEPRECIATION
Office premises are shown at revalued amount less accumulated
depreciation. All assets are stated at cost less accumulated depreciation.
Depreciation is charged to income applying the straight-line method.
Maintenance and normal repairs are changed to income as when
incurred. Major renewals and improvements are capitalized. Gains or
losses on disposal of fixed assets are taken to profit and loss account.
6) TAXATION
Taxation charge in the accounts is based on the taxable income at the
current rates of taxation. The bank accounts for deferred taxation on timing
differences using the liability method.
EVERYTHING WE DO IS FOR YOU 25
7) STAFF RETIREMENT BENEFITS
The bank operates an unapproved unfunded gratuity scheme for its clerical
staff who have completed the qualifying period of service under the scheme.
The bank also operates an approved funded gratuity scheme for officers
and executive. Contributions are made on the basis of actuarial valuation. The
actuarial valuation of the scheme was carried out as January 1, 1991 in
accordance with IAS-1 (revised) using the projected unit credit method, which
disclosed the fair values of fund‟s assets and liabilities of RS. 15.00 million and RS.
28.88 million respectively.
The transitional obligation of RS. 13.88 million is being recognized by the
bank over a period of five years beginning from 1999 on a straight-line basis. The
following significant assumption were used for valuation of the scheme:
Expected rate of increase in salary level –10 percent per annum
compounded annually.
Expected rate of interest on investment –12 percent per annum.
8) DEFERRED COSTS
These are amortized over a maximum period of five years commencing
from the year in which are incurred.
9) REVENUE RECOGNITION
Mark-up/return on advances and investments are recognized on accrual
basis. Fee, commission and brokerage except income from guarantees accounted
for on receipt basis.
EVERYTHING WE DO IS FOR YOU 26
MARKETING MIX
Marketing Mix is defined as:
“The set of marketing tools that the firm uses to pursue its marketing
objectives in the target market”.
Two basic pillars of this basic concept are:
TARGET MARKET
Bank Alfalah‟s target market consists of individual clients as well as a
number of business organizations. Due to different market segments, BAL‟s
different branches have their target markets.
To capture the import business in Lahore, the targeted segments is valid
city markets known as business & commercial hub of Lahore and this has been
done via its Circular Road branch. Due to specialized services provided by BAL,
and its highly competitive foreign exchange rates, most of the major importers in
this area deal with BAL. Examples include; Mughal Steel and International, New
Shalimar Steel, Vellcone International, Rana Brothers etc.
As far as the individual clients are concerned, the targeted segment is posh
areas like DHA.
CONSUMER NEEDS
Assessment of the needs and wants of consumers is an on going process at
Bank Alfalah, which helps it to continually develop new products and services. At
BAL, the philosophy is that the bank should go to all possible limits to satisfy the
customer needs. The officers of the Import department, for example, try to get the
minimum possible exchange rates for their clients. Those in cash department do
not look at the clock while honouring the cheques. The bank is continuously
formulating new products and services for the growing and diversified needs of its
EVERYTHING WE DO IS FOR YOU 27
ever-expanding client base. The bank‟s commitment to its customers is evident
from its mission statement:
“To provide innovative and high quality products to its customers at the
lowest possible rates. To achieve all set goals regarding service, performance and
goodwill.”
FOUR P‟s OF MARKETING MIX
Marketing Mix is a Combination of Four P’s. Product, price, promotion
and place.
1) Product Service Provided by Bank
2) Price Commission and Bank Charges Received
3) Promotion Promotion of Services
4) Place Placement of Services i.e. Network of its
Branches
EVERYTHING WE DO IS FOR YOU 28
PRODUCTS / SERVICES
Due to trend setting and innovative banking, Bank Alfalah presents a range
of quality products with revolutionary perks and convenience. BAL provides a wide
range of products/ services to its customers, which can be compared with any
foreign, or national bank in terms of quality and reliability.
Here is an overview of different products and services formulated by Bank
Alfalah.
ACCOUNTS OFFERED BY BAL
One of the basic function of a commercial bank is to receive deposits and to
honour cheques. Accounts offered by the banks for the deposits of customers
constitute the basis of their operations and develops the basic relationship
between a banker and customer.
Bank Alfalah has formulated a number of accounts for the deposits of
customers, with unique features, to facilitate them. These are:
ROYAL PROFIT:
“More the Saving, Higher the Profit Rate”
Royal Profit is a profit bearing current account. In Royal Profit account, a
customer enjoys a higher rate of return that increases with savings. Account holder
has the comfort of unlimited transactions and there is no restriction regarding the
withdrawals that means all time accessibility to the account. Profit is calculated on
daily basis with attractive rates as:
ROYAL PROFIT
From 50,000 to 999,999 9.00%
From 1,000,000 to 9,999,999 9.50%
From 10,000,000 & above 10.50%
EVERYTHING WE DO IS FOR YOU 29
Minimum balance required is as low as just Rs.50,000/- which entitles the
customer to all the benefits.
ROYAL PATRIOT:
“Good for you, Good for the Nation”
Royal Patriot is a special term deposit account offering attracting profit rates
that improve with tenure and amount. Customer has a choice to deposit his
amount for terms of 1, 3, 6, 9, 12 & 24 months with a minimum balance of Rs.
25,000 only. There is no penalty in case of premature encashment (Profit will be
calculated according to the last tenure completed), & moreover, no prior notice is
required before withdrawals. Profit rates for different tenure and amount are as
follows:
ROYAL PATRIOT
1
Month
3
Months
6
Months
12
Months
2
Years
From 25,000 to 999,999 8.00% 10.00% 10.50% 11.00% 11.00%
From 1,000,000 to 4,999,999 8.10% 10.10% 10.60% 11.10% 11.25%
From 5,000,000 & above 8.20% 10.25% 10.70% 11.20% 11.50%
ROYAL GROUP:
“Pull in More Profits Together”
Royal Group is a joint investment account that provides a way to the
customers to have their joint accounts directing them towards more benefit.
Minimum number of people required to form a group is just 2. So, in this way, two
or more people get their joint account in the bank and can earn higher rates of
return. Profit is calculated on daily basis and disbursed monthly. It also provides an
EVERYTHING WE DO IS FOR YOU 30
opportunity to employees to get their salary disbursed through this account as it
provides better arrangements for secured collection of cash/ cheques. The rate of
return increases with the deposited amount as:
ROYAL GROUP
From 100,000 to 999,999 9.50%
From 1,000,000 to 9,999,999 9.70%
From 10,000,000 & above 10.00%
CLASSIC PLS DEPOSITS
Along with the above stated special Royal accounts, the bank also have
formulized the Classic PLS Deposits:
SAVING ACCOUNT:
Saving account is the most common account for individuals. Profit is
calculated on half yearly basis with the rate of 9.00%.
NOTICE DEPOSITS:
These are the short-term deposits of customers where the notice is to be
given to the bank prior to the withdrawal. Profit rates for these deposits are:
07 - 29 days 6.10%
30 days & above 7.50%
EVERYTHING WE DO IS FOR YOU 31
TERM DEPOSITS:
Term deposit is a fixed PLS account where the profit rates increase with the
amount as:
1 Month 8.00%
3 Months 10.00%
6 Months 10.50%
1 Year 11.00%
3 Years 12.00%
5 Years 13.00%
FOREIGN CURRENCY ACCOUNTS:
Due to the increasing globalized business, all leading commercial banks
have been offering foreign currency accounts to their customers. Same has been
done by Bank Alfalah by facilitating its customers to have their foreign currency
accounts in the bank.
At present, BAL offers US Dollar & UK Pound accounts and profit is being
paid on half yearly basis at the rate of 3.00% and 2.50% respectively.
ON-LINE SERVICE:
Bank Alfalah provides on-line services to its customers. At present, this
service facilitates the customers to deposit and transfer their amounts from one
branch to another of BAL. It is being planned to launch a universal account to
update this facility and make it more extensive.
OTHER CONSUMER PRODUCTS
Apart from the accounts offered for deposits of customers, BAL also
provides a lot of other consumer products like:
EVERYTHING WE DO IS FOR YOU 32
ALFALAH CAR:
Alfalah Car is a consumer-financing scheme that enables a customer to own
his desired car at easily affordable and flexible installation with minimum down
payment and insurance. All businessmen, Corporate Employees, Salaried and
self-employed professionals having net take home income in excess of three times
the monthly installment are eligible to take the advantage of this scheme.
Salient Features:
Lowest Financing cost available in the market
Tenure of 1 to 5 years as per requirement of customer
Quickest processing
Minimum documentation required
Down payment requirement of 20%
Repayment through monthly installments
Lowest insurance rates available from bank‟s approved insurance
companies
Documents Required:
National I.D card copy
Registered utility bill copy (Electricity/Phone/Gas)
Last six months Bank Statement (Duly Signed & Stamped by Bank)
Signature Verification by Banker
Salary Certificate
Sole-Proprietary Letter from the Bank
Sole-Proprietary Declaration on Business Letter Head or on Stamp Paper of
Rs.20/-
NTN Certificate
Partnership Deed copy (if necessary)
NOC from other partners
Recent Tax return of Firm
EVERYTHING WE DO IS FOR YOU 33
Form 29 of Limited Company
Form A of Limited Company
Salary Certificate of Director
Tax Return of Director
Basic Fact Sheet of Individuals
CIB Report
BAL RUPEE TRAVELLERS CHEQUES:
Bank Alfalah issued its own rupee travellers cheques with highest
denominations, during the course of my internship with the bank. BAL TCs have
been presented with ultimate combination of features, which allows the customers
the best way to make and accept payments (as it is called safe cash), or to save in
a rewarding way. Differentiating features of BAL TCs are as follows:
The highest denominations available as only BAL offers Rs.5 Lac and Rs.2
Lac traveller cheques
Widest range of travellers cheques as Rs. 1,000, Rs.5,000, Rs.20,000,
Rs.50,000, Rs.100,000, Rs.200,000 and Rs.500,000.
After 3 days of holding the TCs, customer may earn daily points and can
exchange these points for great gifts.
Another unmatched benefit of Bank Alfalah TCs is the commission on
encashment. Customer may receive a commission of 0.15% in case of
encashment after 7 days.
Special invisible UV printing, high definition micro-lines, anti-scanner effect,
mould based paper, Alfalah watermark and printing in the UK, are just some
of the security features of TCs which prevent counterfeiting.
BAL TCs are fully refundable. Customer can refund the TCs without any
penalty or loss.
A customer can transfer or endorse its TCs over to anyone.
Customer doesn‟t need to be an account holder to get BAL TCs benefits.
EVERYTHING WE DO IS FOR YOU 34
ALFALAH LOCKERS:
The client can also avail the facility of rent-free safe deposit lockers for their
valuables. The distinguishing features of these lockers are:
Highly effective security system
Fully refundable security deposit
Convenient locations
Flexible operating hours
BAL HOME LOANS: (For Overseas Pakistanis in UAE)
Alfalah Home Loan is specially designed for those NRP‟s in UAE whose
families live in Pakistan. BAL provides following types of Home Loans:
To purchase a new house
To renovate the existing house
To construct a house
Requirements:
A person can get a Home Loan from BAL if he fulfills the following
conditions:
Non Resident Pakistani of UAE, holding a valid Pakistani passport
Valid UAE Visa
Pakistani National Identity Card
EVERYTHING WE DO IS FOR YOU 35
Must be 21 years of age or over
Salaried, Businessman or Self Employed person
Similar to Home Loans scheme, Bank Alfalah has also offered Alfalah Car
for Overseas Pakistanis in UAE.
LENDING PRODUCTS
Bank Alfalah offers many lending products to its customer. They can get
running finance for their working capital requirements as well as trade finance for
importing their merchandise. Some of the major lending products of BAL are:
Overdraft
Cash Finance
FATR
FIM
Export Bills Discounting (Not in Circular Road Branch)
Letter of Credit etc.
EVERYTHING WE DO IS FOR YOU 36
PRICE
“The amount of money the customers pay for the product of a company”.
BAL provides different products and services to its customers, that have
been discussed in previous section. Pricing of products means the commission to
be paid by the customer in return of services provided by the bank. The
commission paid for the services mainly includes:
Mark up/ interest
Bank charges
Fees and bank commission etc.
These charges and commissions are prescribed on Schedule of Bank
Charges (SOC) that keeps on changing time-to-time, and issued by the bank
periodically (generally after six months).
There has been a lot of controversy regarding the price of banking
companies. Some scholars argue that the mark up received by the bank is rent for
capital that is used by others. On the contrary, some call it purely Riba. This
however is a very controversial and sensitive issue and I would like not to give any
comment on it.
EVERYTHING WE DO IS FOR YOU 37
PROMOTION
“All activities that a company undertakes to communicate and promote its
products”.
This is an age of competition. Numerous organizations are providing
financial services to the customer. These days every one is facing pressure of
competitors. In this world of growing competition, the only way to survive and grow,
for an organization, in the market place is the proper marketing and promotion of
its products. Same is the case with banking companies. There is large number of
foreign and local banks working in the country and it has been noticed that they are
emphasizing much on their marketing strategies. In this scenario, the key for a
bank to succeed and attract its customers is adequate promotion of its products
&services. The bank can attract and retain its customers through:
Sales Promotion
Advertisement
Direct Marketing
Public Relations
The most prominent and important way to attract a large number of
customers is the advertisement of bank and its products/services. Bank Alfalah has
adopted different approaches for the accomplishment of this purpose. For
example, formation of Alfalah Mini Golf near Gulberg is a major step taken by BAL.
It not only provides a source of recreation to the people but it serves as a major
source of marketing for the bank. Due to Bank Alfalah‟s assistance for the
construction of fountain in Liberty Market Square, it is named as Bank Alfalah
Square. BAL Square, for being situated in such a business and commercial area
has its unusual importance and has resulted into bank‟s promotion.
Construction of Shaahdin Manzil as main branch Lahore is going to be the
revolutionary step for BAL. It would not serve just as a main branch only, but it
would also be a great source of ever growing marking and promotion of bank.
BAL issued its own rupee travellers cheques with highest denomination
during the course of my internship. I have seen some coloured advertisements of
EVERYTHING WE DO IS FOR YOU 38
RTCs in some well-known magazines like Herald. Also, some fascinating
advertisements have been printed on Daewoo City Busses, which serves as a
dynamic source of marketing.
However, one drawback or shortcoming is that, BAL has formulized a lot of
products and services for its customers, even more than other commercial banks,
but any advertisement on electronic media has not been seen. Since, BAL‟s major
competitor Union Bank Limited has started large media campaign, so keeping in
view these threats, Bank Alfalah should emphasize more on its advertisement.
Along with the advertisement, the bank is providing personal services to its
clients with maximum security as other banks provide. Bank also encourages the
public relation policy of marketing.
Some brochures and promotional material has been printed but it is
distributed mainly through the clients who visit the branch for their day-to-day
business or through the customers who come to get information about new
schemes launched by the bank.
PLACE
EVERYTHING WE DO IS FOR YOU 39
“The activities a bank undertakes to make products and services easily
available or accessible to the customers”.
Bank Alfalah‟s objective has been to expand its branch network to meet
clients‟ needs. Bank is well positioned and geographically poised, to cater for
increased business demands, from its existing potential clientele. During last year
under review, BAL opened 8 new branches and presently it has 23 branches,
spread all over Pakistan covering major business centers and principle cities. Bank
plans to add more branches to his growing network in the ensuing years.
At present, BAL has opened all its branches at commercial and business
areas or near to commercial areas so that the customers or clients face no
problem in reaching the bank.
Head Office of BAL is situated in Karachi. The detail description of its
branches is as follows:
KARACHI
Main Branch
B.A. Building,
Chundrigar Road.
Cloth Market Branch
Laxmidas Street,
EVERYTHING WE DO IS FOR YOU 40
Cloth Market
Clifton Branch
FL-10, Block-5,
KDA Scheme #5,
Khayaban-e-Roomi
Sharee Faisal Branch
45-A, Fortune Towers,
PECHS, Block-6, Main Sharee Faisal
Jodia Bazar Branch
Gulzar Manzil,
NP/12/49-50,
Muhammad Shah Street,
Jodia Bazar
Korangi Industrial Area Branch
Plot No. ST 4/2, Sector 23,
Aiwan-e-Sanat,
Korangi Industrial Area
M.A. Jinnah Road Branch
Plot No. 23/1,
Corner M.A. Jinnah Road /
Abdullah Haroon Road
S.I.T.E. Branch
D-38 S.I.T.E.,
EVERYTHING WE DO IS FOR YOU 41
Near Siemens Chowrangi, S.I.T.E.
North Karachi Branch
Plot No. SA-1, Sector 12-B,
Opp Police Station (Gabol Town),
North Karachi Industrial Area
LAHORE
LDA Plaza Branch
Kashmir Road, Lahore.
(Proposed Main Branch, Lahore)
Gulberg Branch
125-E/I, Main Boulevard
Gulberg III
Defence Branch
G-9, Commercial Zone,
Phase-1, Main Boulevard, DHA
Lahore Cantt
EVERYTHING WE DO IS FOR YOU 42
Circular Road Branch
43-A, Opp. Mazar Hazrat Shah
Muhammad Ghaus
Township Branch
Akbar Chowk, Township
ISLAMABAD
1-B, Awan Arcade,
Nazimuddin Road, Blue Area
RAWALPINDI
Mall Road Branch
B.A. Building, 8-The Mall
HYDERABAD
Hyderabad Branch
Plot No. 476/1-2,
Adjacent to Hotel Faran,
Saddar Cantonment Area
PESHAWAR
6-38/L, Islamia Road,
Peshawar Cantt
FAISALABAD
Bazar Court,
Faisalabad Serena Hotel, Club Road
MULTAN
EVERYTHING WE DO IS FOR YOU 43
62-A, Abdali Road,
Multan
RAHIM YAR KHAN
City Centre, Shahi Road
Rahim Yar Khan
SIALKOT
40-A, Paris Road,
Sialkot
GUJRANWALA
G.T. Road,
Gujranwala
As per instructions of our internship incharge, Mrs. Sajida Nisar, I reported
at Bank Alfalah Limited (LDA Plaza, Lahore), accompanying my friends who had
also been assigned the same organization, on July 3, 2001. We were welcomed by
Mr. Amjad Imam, who is Senior Manager Operations and the internship training
EVERYTHING WE DO IS FOR YOU 44
incharge at BAL (LDA Plaza). He introduced us about the internship program at
Bank alfalah (BAL).
We were directed to intimate in our assigned branches. I, with a friend of
mine, reported at BAL Circular Road Branch, on the same day. Mr. Malik Riaz-ul-
Haq, Branch Manager, welcomed us and inquired us about our educational status.
He directed us to see Mr. Tariq Munir, Manager Operations. Mr. Tariq Munir
guided us about the banking operations and asked us about our intentions for the
internship program. Later he directed my friend to foreign trade department
whereas I was instructed to start my internship from Remittances, so that I might
understand the basic banking operations. Mr. Khurram Waheed, officer
remittances, was assigned the task of guiding me about working of department.
In this report, my endeavor has been to stipulate my experiences and
observations, during my internship in Bank Alfalah Circular Road, which would
always be memorable for me.
INTER-BRANCH ACCOUNTS
Like other successful commercial banks, Bank Alfalah Ltd. (BAL) has a
network of branches all over the country. These branches in different cities are
interlinked with each other through their correspondent accounts in other
branches.
EVERYTHING WE DO IS FOR YOU 45
In case, there are more than one braches of a bank in a city (as BAL has 9
branches in Karachi and 5 in Lahore), the main branch deals with other city
branches through their correspondent accounts. Similarly, in one city , all branches
of a bank have their corresponding accounts with each other.
So, all payments from one branch to another branch (in the same city or
another) are made by debiting and crediting these inter-branch accounts.
INTER-BANK ACCOUNTS
Like inter-branch accounts of a bank, different banks have correspondent
accounts with each other. Main branches of banks in a city maintain these inter-
bank accounts. So, money is transferred from one branch of a bank to another
bank‟s branch through these inter-bank and inter-branch accounts.
CLEARING
INCHARGE: Mr. Khurram
As we know that, one of the basic economic function of commercial banks is
to receive deposits and to honour cheques drawn upon them. So, cheque is a most
EVERYTHING WE DO IS FOR YOU 46
commonly used instrument for making payments by account holders. Along with
the cheques, there are some other negotiable instruments like PO, DD,TC, PS,
CDR etc. (discussed in the next part), that are used for making payments and are
drawn upon a bank.
The question arises that how these cheques & other negotiable instruments
drawn on one bank are deposited in other banks and money is transferred from
one bank to another.
Clearing House has provided this facility. Clearing house facilitates different
banks, in one city, to get their cheques drawn upon other banks to be cleared.
Cheques lodged in clearing constitute two types of clearing:
Outward Clearing
Inward Clearing
LODGEMENT OF CHEQUES IN OUTWARD
CLEARING
When cheques, TC‟s and other negotiable instruments drawn upon other
banks like MCB, ABN-AMRO of the same city(as Lahore) are presented in Bank
EVERYTHING WE DO IS FOR YOU 47
Alfalah Ltd. to deposit them in the respective payee‟s accounts, these instruments
are lodged in outward clearing(o/w clg) of Bank Alfalah.
STAMPS PUT ON THE CHEQUES:
When the cheques are presented in BAL to be deposited in their respective
payee‟s accounts, different stamps are put on cheques before their lodgment in
outward clearing.
i) CROSSING THE CHEQUES:
Crossing means two parallel transverse lines, drawn across the face of the
cheques with or without words written in between them.
Crossing may be general or special. In clearing cheques are crossed specially.
Cheques are stamped with bank‟s name between two transverse parallel lines to
constitute special crossing.
After the cheques have been crossed specially, the holder cannot receive
payment except through the banker named on the cheque. Basic advantage of
crossing is to save the instrument to go it from illegal hands. If, a crossed cheque
is lost or stolen, there is no risk of wrong payment. So it is an effective means of
minimizing the risk of loss or forgery.
ii) CLEARING STAMP:
After the cheques have been crossed specially, clearing stamp is put on the
cheques and other instruments, with the following day‟s date, as these cheques
would have to be presented in their concerned drawee banks on the subsequent
day.
iii) ENDORSEMENT STAMP:
The word endorsement is derived from Latin word „indorsum‟ which means
„on the back‟. Ordinarily, it means anything written or printed upon the back of an
instrument.
EVERYTHING WE DO IS FOR YOU 48
So, at the end, the cheques are endorsed in full (endorsed specially) by
putting the stamp with words describing “ Payee‟s account Credited in BAL Circular
road, Lahore”.
After putting these three stamps on cheques & other negotiable instruments,
they are sent to NIFT (National Institutional Facilitation Authority) with Add List.
NIFT after segregating the cheques of different banks delivers them to their
concerned banks, which constitute the inward clearing for those (drawee) banks.
ACCOUNTING PROCEDURE:
After lodgment of all cheques in outward clearing, Payee‟s accounts are
credited by the amount of their vouchers. Drawee banks will debit the drawer‟s
accounts in their inward clearing (discussed later).
As main branch Lhr. of BAL deals with other banks through inter-bank
accounts and we deal with our main branch. So, we (BAL Circular road) debit our
main br. account, maintained with us, by the total amount of outward clearing and
an IBDA (inter branch debit advise) with a debit voucher is sent to main branch
Lhr.
Account Titles Debit Credit
Local Clearing Main branch
Payee‟s Accounts
RETURN IN OUTWARD CLEARING:
Some of the cheques lodged in o/w clearing are dishonoured by the
concerned branches due to some deficiencies and returned back through NIFT.
This process is carried out under main branch‟s governance.
Either, these cheques are again lodged in outward clearing or returned to
customers by canceling bank‟s all stamps, based on the reasons.
Now, the accounting entries opposite to first are passed i.e. Payee‟s
accounts are debited & main branch‟s account is credited.
EVERYTHING WE DO IS FOR YOU 49
INWARD CLEARING
Cheques and other negotiable instruments (PO, DD, PS, CDR etc.) drawn
on Bank Alfalah Circular Road, sent by other banks, constitute the inward clearing
of BAL.
After having all the stamps and dates of cheques confirmed, the concerned
drawer‟s accounts are debited (in BAL Circular Road) and main branch‟s account
is credited by the total amount.
Account Titles Debit Credit
Drawer‟s Accounts
Local Clearing Main branch
RETURN IN INWARD CLEARING:
In case of cheques dishonoured (returned) due to some deficiencies, the
main branch‟s account is debited by the amount of cheques returned. As,
Account Titles Debit Credit
Drawer‟s Accounts
Local Clearing Main branch
Local Clearing Main branch
COLLECTION
INCHARGE: Mr. Shaukat
EVERYTHING WE DO IS FOR YOU 50
When cheques, TC‟s and other negotiable instruments drawn upon other
banks outside the city (Lhr.) are presented in BAL (Circular Road) to deposit in
payee‟s accounts, then instead of clearing, these instruments are lodged in
collection and constitute OBC‟s (outward bills for collection).
Cheques of cities, where BAL‟s branch exists (e.g. Faisalabad), are sent to
that branch where these cheques are lodged in outward clearing. Otherwise, they
are directly sent to the drawee bank. Postage & other charges are deducted on
account of payee according to SOC (Schedule of Charges).
ACCOUNTING PROCEDURE:
i) When a Cheque is lodged in OBC:
Account Titles Debit Credit
Customer‟s Liability on OBC
Banker‟s Liability on OBC
ii) On Realization of OBC:
when this cheque is got cleared (through outward clearing) in the concerned
BAL branch (e.g. Faisalabad Br.), then IBCA is sent to our branch and thus an
outstation cheque is deposited in payee‟s account. So,
Account Titles Debit Credit
Banker‟s Liability on OBC
Customer‟s Liability on OBC
&
Account Titles Debit Credit
Concerned BAL br.‟s Account
EVERYTHING WE DO IS FOR YOU 51
Payee‟s Account
LOCAL REMITTANCES
(Negotiable Instruments)
EVERYTHING WE DO IS FOR YOU 52
INCHARGE: Mr. Khurram
Besides cheques, banker‟s also handle Promissory Note, Bill of Exchange
(will be discussed in later part), Bank Drafts, Pay Orders, Traveler Cheques, Pay
Slips, Call Deposit Receipts; as negotiable instruments. Here, I have tried to
describe PO, DD, PS & CDR and their processing in accordance with my
observation, during first two weeks.
1) PAY ORDER (PO):
“Pay Order is a negotiable instrument made by the bank, on account of a
customer, to pay on order the specified amount to the directed person (payee)”.
Pay Orders are used to make payment or to transfer money, with in the
same city. Pay Order is always drawn on the bank that has issued it.
MAKING OFA PO:
When a person requires a Pay Order (made by BAL Circular Road, Lhr.), he
is asked to complete the prescribed application form in which the amount of pay
order is to be stated. Certain amount of commission and advance tax is charged
on issuance of pay order (according to SOC).
After having the total amount deposited in the bank (in cash or through
cheque, in case of account holder), pay order is issued in the favour of payee.
Like cheques, when pay orders issued by BAL Circular Road, are presented
in other banks to get them deposited in the payee‟s accounts, they constitute the
outward clearing for those banks and inward clearing for BAL Circular Road.
ACCOUNTING PROCEDURE:
i) When a Pay Order is issued, cash department debits cash account & Pay Order
issued account is credited as:
Account Titles Debit Credit
Cash Deposits
PO Issued
EVERYTHING WE DO IS FOR YOU 53
Commission on Remittances
Tax on PO & DD
ii) When Pay Order is received in inward clearing:
Account Titles Debit Credit
PO Issued
Cash Deposits
2) DEMAND DRAFT (DD):
“A Demand Draft is a negotiable instrument issued by the bank, on account of a
person, and drawn on its own branch in a specific city or on the branch of another
bank in that city (in case bank doesn‟t have any branch there), requesting it to pay
the specified amount to the person named on it”.
Demand Drafts are used to make outstation payments or to transfer money,
out of the city. Therefore, a DD is always made for a particular city.
MAKING OFA DD:
When a customer requests his banker to provide him a DD made on his
account for a particular city like Faisalabad. Then, after having the total amount
(including commission and advance tax) to be deposited with application form,
demand draft is issued in favour of the specified person in Faisalabad (supposed)
and is drawn on BAL Faisalabad Branch.
So, when this demand draft is presented by payee in any bank, it constitute
the inward clearing of BAL Fsd. Branch.
ACCOUNTING PROCEDURE:
EVERYTHING WE DO IS FOR YOU 54
i) When BAL Cir. Road issues a Demand Draft drawn on BAL Faisalabad
Br. Then, an IBCA with DD advice is sent to Faisalabad Br. (letter is also sent for
DD‟s amounting more than Rs.100,000.)
ii) Upon receipt of advice in Faisalabad Br. they will credit DD Payable a/c.
iii) DD Payable Account is debited (in Faisalabad Br.) when DD is presented
in inward clearing.
In case, advice is not received by BAL Faisalabad Br. and DD is presented
first, then instead of DD Payable, Suspense account is debited to make payment.
Similar is the process for demand drafts drawn on BAL Circular Road Branch.
3) CALL DEPOSIT RECEIPT (CDR):
BAL also issues Call Deposit Receipts (CDR). “It is an instrument like cheque
issued by the bank on account of a customer & in favour of a person, to pay the
specified amount”.
CDR‟s are issued to make payments, especially when a company goes for
some tenders or for purchase of government securities. The bank enjoys the
benefit of keeping funds deposited until the payment is not made. During this time,
the bank uses the deposit and earns income on that.
4) PAY SLIP (PS):
“It is a negotiable instrument like cheque issued by the bank on its own account to
pay a specified amount to the directed person”.
Pay Slips are used to make payment by the bank itself against certain
expenses incurred; like furniture purchased by bank, charges of Mucaddams etc.
For Example: If bank has purchased furniture (fixed asset) costing Rs.40,000 from
a company. Then a pay slip in the name of that company is made and,
Account Titles Debit Credit
EVERYTHING WE DO IS FOR YOU 55
Furniture
PS Issued
Instead of writing the issuing date on pay slip, date of encashment
(realization) is written when it is presented in bank.
CANCELLATION OF PO, DD & CDR
After issuance of Pay Order, Demand Draft or Call Deposit Receipt by BAL
Circular Road, when any one of these has to be cancelled by the customer and it is
returned in the bank. Then, after deducting the cancellation charges Rs.100, the
remaining (net) amount is paid to the customer through Cash Payment Voucher.
Suppose a demand draft amounting Rs.5,000 has to be cancelled, then
Account Titles Debit Credit
DD Issued 5,000
Cash
Misc. Earning
4,900
100
ADVANCE TAX AGAINST REMITTANCES
Advance Tax is deducted on issuance of PO & DD ( when customers don‟t
have tax exemption form) and credited in Tax on PO & DD account (discussed
earlier).
Tax deducted has to be paid to State Bank of Pakistan (SBP) with in one
week of issuance of these instruments. So to pay this tax, Pay Order in favour or
SBP Lahore is made, with a challan form. And,
Account Titles Debit Credit
EVERYTHING WE DO IS FOR YOU 56
Tax on PO & DD
PO Issued
ACCOUNT OPENING
During first two weeks of my internship program, I could not work properly in
account opening, but for being the basic operation of bank; I wanted to get some
information regarding it. Mr. Ulfat Hussain helped me a lot and guided me about
procedure & precautions in account opening. Here, I have described the procedure
of account opening in its simple form.
PROCEDURE OF ACCOUNT OPENING
Step 1-The Account Opening Form:
When a client comes to the bank, and makes a request for opening of an
A/C. The officer says that first fill up a prescribed application form. If he/she wants
to open a PLS A/C, then he/she has to fill a form according to the account.
Step II-Completion of The Form:
The name, occupation, and complete address of the person opening the
account are written in the columns are provided in the form. One signature of the
person is taken on the face of the form and one is taken on the backside. These
signatures should be usual signatures and he would operate the account with them
future.
Step III-Introduction:
The introduction of a current account holder is accepted for the opening of
either a current account or a solving account. The introduction of saving bank
account is accepted only for saving bank accounts. The signature of the account-
EVERYTHING WE DO IS FOR YOU 57
holder introducing the account is obtained at the place provided for in the account
opening form.
Step IV: Specimen Signature Card:
The signatures of the client are obtained on a specimen Signature card.
These cards are obtained in duplicate with two signatures on each card from the
customer. Every time a cheque is received for a payment from the client, the
signature on the cheque are verified by comparing them with the S.S. Card.
Step V-Account Number:
When all the formalities are completed then the final approval of account
has to be taken from the Branch Manager. After obtaining approval of the branch
manager an account number is allotted to the customer all the information is
entered into the computer. Then that account number is printed on the
chequebook, S. S. cards and account opening form.
Step VI- Issuance Of A Chequebook:
After opening an A/C with the bank, the A/C holder once again makes a
request in the name of bank for the issuance of a chequebook. the A/C holder
mentions title of A/C, A/C number, sign it properly and mentions the no of leaves
he requires. Normally BAL issues a chequebook having at least 25 leaves. Every
chequebook also contains one leaf that is used for another issue of a chequebook.
Step-VII Entry Of A chequebook:
Before issuance of a chequebook, the employee performs certain functions.
They include:
Stamping every leaf with specific A/C number.
Enters it in the chequebook issue register.
Check whether or not the signatures are verified by a senior officer, if no
then first he gets them verified.
EVERYTHING WE DO IS FOR YOU 58
After entry in the manual register, the employee issues the chequebook to
the A/C holder after his/her signature on the register.
Step-VIII Filling Of Account Opening Forms:
For current and saving account, separate files are maintained in which the
forms are pasted or punched in numerical order and kept under lock and key in
fireproof steel or safe. This is because these forms are the basic documents of the
contract with the customer.
Step-IX Maintaining the Computer Record:
After opening of account, every information regarding the account is entered
into the computer. Currently, a program named „Bankexcel‟ is being used for this
purpose. Record of all the transactions regarding the account of a customer is kept
updated in the computer.
EVERYTHING WE DO IS FOR YOU 59
TRADE FINANCE
After working in Remittances department for two weeks, I was advised by
Mr. Tariq Munir, Manager Operations, that I should move on to Trade Finance
department. I was much pleased to hear this as I had a great desire to work and