Internship Report Corporate Banking Group Islamabad. Amber Latif June 16 th , 2008 Internship Duration: 8 Weeks
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Internship Report
Corporate Banking Group Islamabad.
Amber Latif
June 16th, 2008
Internship Duration: 8 Weeks
United Bank Limited, Jinnah Avenue Branch Islamabad.
Table of Contents
Introduction.......................................................................................................3Corporate Banking Group..........................................................................................4
Department Structure.......................................................................................5Products of Corporate Banking Group...........................................................1
(a) Short Term Credit Facility....................................................................................1Non Interest Cash Finance (NCIF).........................................................................1Export Finance (FAPE I, II, G / LAPC).................................................................1Foreign Bills Purchased – on Account (FBP – A).................................................2Foreign Bills purchased – against L/C (FBP)........................................................2Payments against Documents – under sight L/C (PADs)......................................3Inward Foreign Documentary Bills for Collection under LC (IFDBCs)...............3Finance / Loan against Trust Receipt (FTR / LTR)...............................................3Finance / Loan against Imported Merchandise (FIM / LIM).................................4FE – 25 Financing..................................................................................................4Money Market Line (MML)..................................................................................5
(b) Term Credit Financing (Long term Financing)....................................................5Commercial and Industrial Loans..........................................................................6
Financing Agreement.................................................................................................7(c) Syndication...........................................................................................................8(d) Project / Limit Resource Financing......................................................................9
Risk factor..............................................................................................................9Procedure for Approval and Implementation.......................................................10
Guarantees (Bonds).........................................................................................11Letter of Credit................................................................................................12
Definition.................................................................................................................12Types........................................................................................................................12
Documentary Revocable Letter of Credit............................................................12Documentary Irrevocable Letter of Credit...........................................................12Standby Letter of Credit.......................................................................................13Special Letters of Credit.......................................................................................13Back-to-Back Letter of Credit..............................................................................13Deferred Payment (Usance) Letter of Credit.......................................................13
Common Problems with Letters of Credit...............................................................14Standard Forms of Documentation......................................................................16Commercial Invoice.............................................................................................16Bill of Lading.......................................................................................................16Warranty of Title..................................................................................................17Letter of Indemnity..............................................................................................17
Process flow of CBG........................................................................................18Different Tasks Performed during the Internship.......................................19
Introduction
United Bank Limited (UBL) is the third largest commercial bank in the domestic
market in terms of deposit size that indicates its strong market outreach and franchise.
The majority shareholders of the bank comprise H.H Shaikh Nahayan Mabarak Al
Nahayan with other members of Abu Dhabi Group (UAE) and Bestway Group (UK),
each holding 25.5% of the bank’s shares as at December 2005. The bank was listed in
2005, following which the Government of Pakistan (GOP) has divested
approximately 4.2% to the public and retains 44.8% of the bank’s shares. This level of
government shareholding is quite substantial and has positive implications for the
bank’s credit worthiness.
UBL operates with a network of 1,058 branches (including 15 overseas branches) and
employed 9,354 staff members as of December 31, 2005. Apart from its overseas
branches, the bank has presence in Switzerland and UK through its Subsidiaries
United Bank AG Zurich and United National Bank Limited, and in Oman through an
associate - Oman United Exchange Company in which UBL has 25% shareholding,
with management control.
Deposits of the bank increased by 25.37% during the 15 months ending March 31,
2006 and amounted to Rs. 288.7b (FY04: Rs. 230.3b). Non-remunerative deposits
constitute about 27% of the deposit base, allowing the bank to maintain a low cost
deposit mix. The deposit base is well diversified with top 20 and top 100 depositors
constituting 5.48% and 12.8% respectively of the total deposits as at December 2005.
Correspondingly rapid increase in advances portfolio, led to a rise in loans-to-deposit
ratio (LDR) to 70.8% (FY04: 62.6%) by the year end and further to 72.2% by the end
of 1QFY06. However liquidity position of UBL continues to be sufficient with liquid
assets as a percentage of deposits & borrowings averaging 38% during the last year,
and given the diversification of deposit base.
New funds generated through deposits were primarily directed towards financing.
Total performing advances of the bank increased to Rs. 202.3b, up from Rs. 139.9b
last year. The increased financing is reflected in both the corporate and consumer
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portfolios which increased by approximately Rs. 23b and Rs. 22b respectively. The
consumer portfolio of UBL in particular has shown remarkable growth. This portfolio
amounted to Rs. 33.3b (FY04: Rs. 6.5b) by the end of 1QFY06 with the target of
increasing the portfolio size to Rs. 47b by the end of FY06, which is likely to be
achieved given the portfolio’s current growth rate. The quality of consumer loans
portfolio has been sound with a gross infection of 0.23% as at December ’05.
Corporate Banking Group
For corporate customers, UBL has established CBG department (Corporate Banking
Group) that defines the corporate banking in Pakistan. CBG provides innovative
services and solutions to its valued customers. The corporate banking group focuses
on attracting and serving the companies and large businesses. UBL has the
relationship management team that consists of highly qualified individuals who help
in expanding the customer base and continues to enhance the relations with clients.
The mission statement of CBG is, “To serve all the corporate needs and ensure full
satisfaction through product innovation, personalized banking, and top notch service.”
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Corporate Banking GroupDepartment Structure
Regional Corporate Head(2) Support Officers Manager Admin.
Corp. Unit Head Corp. Unit Head IT Coordinator
Corp. Service officer Relationship Mgr Relationship Mgr Relationship Mgr Relationship Mgr Corp. Service officer
Relationship Associate Relationship Associate Relationship Associate Relationship Associate
Cash Mgmt Unit Head Country Head Cash Mgmt. Ops.
Relationship Mgr Relationship Mgr Operations Supervisor
Cash Mgmt Officer Cash Mgmt Officer Reconciliation Officer
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Products of Corporate Banking Group
Development of products at UBL is need-based and is market dependent. Innovative
Products will continue to be formulated as and when required. At present the CBG is
offering the following major products:
Short Term Credit Facility.
Term Credit Facility.
(a) Short Term Credit Facility
Short term credit facilities will be used to meet the identified short term needs of
clients having satisfactory relationship and will be defined as those credit facilities
with a tenor or validity of one year or less. Following are the lines of credit with a
view that liquidity is likely to take place within one year.
Non Interest Cash Finance (NCIF)
International Division is known as Clean/Secured Overdraft (COD/SOD).
Characteristics:
Tangible Security is provided to the bank by the customer.
Borrower is allowed to withdraw in the current account to the extent of the
limit sanctioned.
Advances adjusted by the customer periodically or within specific period.
Export Finance (FAPE I, II, G / LAPC)
Under this line of credit, Bank provides financing facility to the exporters against pre-
shipment exports at agreed rate of return. According to the rules set by State Bank of
Pakistan this facility is provided at subsidized rates, which are usually less then the
normal market rate.
Foreign Bills Purchased – on Account (FBP – A)
It is a post shipment facility for exporters, also known as Finance against foreign bills
(FAFB), against their export bills drawn against clean export documents (under L/C
or Export Sales Contract). The bank provides loan to the exporters for the exported
goods and realize the amount later from the importer after the goods have been
delivered.
Characteristics
Customer issues letter of indemnity, so the risk is beard by the customer till
realization of proceeds of that particular Bill of Exchange.
Bank requires a collateral security from the customer.
Certain percentage of cushion is maintained by the bank to allow exchange
cover, interest and other incidental expenses.
The method being adopted in this case is “Bill Discounting”, in which the
customer pays the mark-up in the beginning of the agreement with the bank.
Foreign Bills purchased – against L/C (FBP)
It is also a post shipment facility for exporters, against their export bills drawn against
clean export documents (under L/C or Export Sales Contract). The bank provides loan
to the exporters for the exported goods and realize the amount along with mark-up
and other expenses later from the importer after the goods have been delivered. In this
service the customer pays the mark-up at the end of the agreement period.
Characteristics
The export documents should be drawn strictly drawn under the terms of the
L/C.
All direct bank expenses, like foreign correspondence charges claimed by the
opening bank, shall be recoverable from the exporter unless it is expressed in
the L/C that the charges are on openers account.
Reimbursement instructions in the L/Cs shall be carefully studied before
discounting of documents.
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If the bill of exchange is accepted by the bank, the associated risk for
discounting will be considered Bank’s Risk.
Payments against Documents – under sight L/C (PADs)
This financing facility is provided to Importers. Import documents received under
sight L/Cs are lodged in PAD which are released on payment from the party.
Characteristics
There should be no discrepancy in the import documents in terms of LC.
The amount of bills and charges claimed by negotiating bank will be
converted into Pak Rupees at the exchange rate prevailing on the date of
lodgement or at the booked rate where exchange was booked at the time of
opening of LC as advised by treasury Division from time to time.
In this service the import LC can be issued by any bank.
Inward Foreign Documentary Bills for Collection under LC (IFDBCs)
In this service the Import LC is issued by UBL. Import documents received under DA
LCs are lodged in IFDBC and released against:
Acceptance of Bill of Exchange & execution of Trust receipt.
Pledge of imported goods.
In case goods are pledged with the bank, goods will be cleared through the
bank’s appointed clearing and forwarding agent and delivery orders issued
against cash receipts.
Collateral security is required. For relaxation in obtaining collateral security,
approval of credit committee will be required.
Finance / Loan against Trust Receipt (FTR / LTR)
In this case bank issues loan against trust Receipt Form / related security documents,
signed by the customer, covering hypothecation of goods.
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Finance / Loan against Imported Merchandise (FIM / LIM)
Bank may finance the client for imported goods against Import letter of credit
established through UBL. Mark-up will be decided but the loan period is for
maximum of 90 days. The financing may be in parts or lump sum.
Booking – FIM Liability
Conditions
FIM will be booked provided:
Goods are delivered to Muccaddam and placed under pledge.
The LCs parked under PAD will continue to show outstanding till the
time the goods are physically delivered to Muccaddam by clearing
agent.
There is no change in the risk.
Muccaddam will submit a stock report in order to calculate the drawing power
limit and then FIM power limit will be input into the system by Regional
Credit Administration Dept. (RCAD) to enable operations to transfer the
outstanding from PAD to FIM. It should be noted that the customer will
provider an undertaking cum authority to the clearing agent that any customs
or other charges will be paid by the customer’s account and by the bank.
FE – 25 Financing
FE 25 financing uses the bank’s foreign currency deposits held under the FE 25
Account Scheme.
Characteristics
It is a working capital facility provided to Importers and Exporters.
The tenor is 180 days from the date of shipment.
The USD amount is converted into PKR at the rate prevailing that day and is
lent. The borrower has to return the amount in USD or equivalent PKR.
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This financing is in accordance to the SBP circular on FE 25 and is subject to
change as per SBP guidelines.
Money Market Line (MML)
MML is a type of short term financing and has the following characteristics:
The mark-up is fixed for the tenor of transactions.
It is used by the corporations with back to back lines booked by the treasury,
i.e. bank borrows the amount at a fixed rate for a period and lends it at a fixed
rate which is higher then the amount at which it has borrowed. This way the
difference in mark-up provides income to the bank.
Bank usually borrows at KIBOR rate and lends it higher then KIBOR.
(Basic Points) BPS is the difference between bank’s lending rate and
KIBOR.
Besides the above mentioned products, UBL CBG is proving various other products
to its clients like Overdrafts, loans against salary, LMM etc. All of these are govern
under the rules and regulations prescribed by The State Bank of Pakistan.
(b) Term Credit Financing (Long term Financing)
Credit facilities approved for periods over one year with a fixed repayment schedule
are defined as Term Credit Facilities. This includes Non Interest Demand Finance
(NDIF).
Main Characteristics
Term credit facilities carry greater degree of risk than short term facilities.
Accordingly they need to be analysed in depth and with future outlook of five
to seven years.
Proposals for term credit facilities will be accompanied by future projections
up to the tenor of the loan.
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Commercial and Industrial Loans
Tenor
Tenor must not exceed 7 years including grace period, from the date of disbursement
to the date of final maturity.
Amortization
Grace period of two years may be allowed before beginning repayment. Principal
amount must be amortized through regularly instalments, preferably quarterly but not
less frequently then semi-annually starting from the date of final takedown.
Mark-up Frequency
Mark-up should preferably paid monthly but not less frequently then half yearly,
starting from the date of initial take down.
Final Payment
Balloon payment must not exceed 25% of the original amount of the loan. Bullet
payment will not be considered unless supported by strong business and credit ground
except for term loans which are fully cash collateralized or bank guaranteed which are
not subject to this rule.
Financial Forecast
All proposals for loans or financial guarantees must be accompanied by forecasts of
annual balance sheets, P & L Account and Cash operations statements covering the
tenor of the loan.
The projections are not required for loans with tenor of 4 years. However, if tenor
exceeds 4 years, the projections as stated above must be provided by the client.
The condition of projections may be waived in specific cases by GER&CP. Reasons
for waiver must be mentioned in the SCA.
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Financing Agreement
The loan agreement is a detailed document and covers all the aspects of financing
conditions and liabilities of both the parties involved. Following are the main features
of loan agreement:
Default Clause
The loan agreement contains a default clause in addition to general default clause(s)
and default of any of these clause(s) would prompt remedial action or recall of loan.
Standard Convent
All funded term credit facilities must be documented in appropriate loan agreement to
be drawn up and reviewed by the bank’s approved legal council.
Documentation Review
Documents required under the provision of term loan agreement, such as board
resolutions, power of attorney, MOA and AOA etc must be reviewed by legal council
who is engaged for the preparation of term loan agreement with a view to determine
their validity and protective value. All these details should be properly documented
and mentioned in the loan agreement.
General Conditions
The commitment must contain a specific maximum monetary liability for the bank, a
specific legally defensible expiry date and other rules governing Term Extensions of
Credit rate that any material change in the terms, conditions or covenants of a term
credit as originally approved etc.
* Details are available in UBL’s Credit Policy Manual.
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(c) Syndication
Syndications are normally handled by IBG jointly with CGB. In this case, CBG
participates and IBG arrange the remaining amount of syndicate through adding other
financial institutions. UBL might be major or minor participant in the syndicate.
Engagement Committee Approval (ECA) is required for a syndicate. After the
approval of ECA, a complete Standard Credit Application (SCA) is required to be
prepared and submitted for approval covering term loan requirements are mentioned
in the loan agreement. SCA will be prepared by CBG and when UBL is syndicate
leader / arranger approval from IBG Business Group Head is required.
Negotiation Responsibility
CBG is responsible for negotiations with the customer while IBG will negotiate with
the participating banks.
Issuance Risk
In case UBL is acting as a Lead Bank, Issuance risks will be clearly counter
guaranteed by other syndicate members. Issuance Risk is normally associated with
bonds and letters of guarantees but it may also exist in case of LCs and progress
payment financing facilities. Both Client Risk and issuance Risk must be clearly
mentioned in the SCA. Bank should seek several issuance of bonds and financing
obligations by the syndicate members and prior approval of an allocation from the
respective bank’s guarantor line must be obtained from FIRMU.
Maintenance Responsibility
IBG will monitor all syndicate credits where the bank is an agent and prepare the term
loan check off list for all syndicated credits.
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CBG will be responsible for all credit matters, maintenance of customer relationship,
completion of term loan summary and periodic, covenant check off which will be kept
in customer’s file.
Documentation Lodgement
Once at hand, a signed copy of the syndication agreement plus the documents
required will be forwarded to the Regional Credit Administration Department
(RCAD) for lodgement, together with a memorandum from the lawyer and IBG
confirming that al the documentation requirements and conditions have been met.
(d) Project / Limit Resource Financing
Project Limit Resource Financing shall be studied and analysed by IBG, whether it is
being lead by UBL or UBL is a participant in the transaction. The Bank may consider
project financing to viable business groups supported by:
Adequate financial strength.
Credit worthy sponsors.
Familiarity of sponsors with manufacturing process or product and
arrangement proposed to be made for hiring key personnel.
Previous experience of sponsors.
Risk factor
Following fundamental risk factors shall be considered for project financing:
Infrastructure.
Technical and Technological
Legal
Economic
Financial
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Further there are certain characteristics which should be there in the project financing
proposal. Detail of these characteristics has been discussed in Credit Policy Manual.
Procedure for Approval and Implementation
Procedure for documentation and credit proposal for term loans shall be followed in
Project Financing proposal as well. For monitoring following will be ensured:
Disbursements must co-relate with phase work flow. This will be monitored
by IBG with the help of technical consultant of bank.
Disbursements will be allowed against documented evidence of usage of
funds.
For financing to import machinery, LC will be opened through the bank pre-
shipment inspections from approved surveyors shall be required if necessary.
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Guarantees (Bonds)
UBL has to issue guarantees on behalf of its customers in favour of both govt. entities
and private beneficiaries. The guarantee issued in favour of govt. beneficiary is
considered low risk as compared to guarantees issued in favour of private
beneficiaries. SBP guidelines are strictly followed while issuing guarantees. Bank will
ensure that the following features are included in the text of the guarantee:
The guarantee must be issued as per approved text and formats by in house
legal counsel or vetted by council nominated by legal division.
The guarantee must be for a clear, well defined purpose and for a specific
amount and period.
In accordance with SBP directives open ended guarantees may be issued for
the following purposes against fully realizable value of securities acceptable to
the bank:
o Advance payment/bid guarantees
o Guarantees requested by public utility companies such as gas,
electricity etc in respect of their customers to cover the utility supplied
during the period of guarantee.
o Court Guarantees.
o Customs/Shipping Guarantees.
o Revenue related Govt. Dept. guarantees.
The text of the guarantee will have a reference to the underlying contract
agreement stipulating the Bid or Performance Bond or ADVANCE Payment
Guarantee etc as the rationale for issuing the guarantee.
Payment under the guarantee will be upon beneficiary’s request or upon
presentation of an agreement document or set of documents.
The guarantee shall state the maximum amount of Bank’s commitment in
clear terms both in figures and in words.
Guarantee shall not be of revolving nature or shall not contain automatic
revolving/renewal clause.
The guarantee issued by UBL must have a specific expiry date and all claims
must be lodged within the expiry date.
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Letter of Credit
TPC department is responsible for opening and closing of LCs. CBG arranges the
facility for the customer and provides customer support while LC is opened by the
TPC Department lead by Mr. Saeed Anwar.
Here is some brief overview of the Letter of Credits:
Definition
Letters of credit are commonly used to reduce credit risk to sellers in both domestic
and international sales arrangements. By having a bank issue a letter of credit, in
essence, one is substituting the bank's credit worthiness for that of the customer.
Types
There are two basic forms of letters of credit: Standby and Documentary.
Documentary letters of credit can be either Revocable or Irrevocable, although the
first is extremely rare. Irrevocable letters of credit can be Confirmed or Not
Confirmed. Each type of credit has advantages and disadvantages for the buyer and
for the seller, which this information will review below. Charges for each type will
also vary. However, the more the banks assume risk by guaranteeing payment, the
more they will charge for providing the service.
Documentary Revocable Letter of Credit
Revocable credits may be modified or even canceled by the buyer without notice to
the seller. Therefore, they are generally unacceptable to the seller.
Documentary Irrevocable Letter of Credit
This is the most common form of credit used in international trade. Irrevocable credits
may not be modified or canceled by the buyer. The buyer's issuing bank must follow
through with payment to the seller so long as the seller complies with the conditions
listed in the letter of credit. Changes in the credit must be approved by both the buyer
and the seller. If the documentary letter of credit does not mention whether it is
revocable or irrevocable, it automatically defaults to irrevocable. See Credit
Administration, Sample Procedure for Administration of a Documentary Irrevocable
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Letters of Credit for a systematic procedure for establishing an irrevocable letter of
credit.
Standby Letter of Credit
This credit is a payment or performance guarantee used primarily in the United States.
They are often called non-performing letters of credit because they are only used as a
backup should the buyer fail to pay as agreed. Thus, a stand-by letter of credit allows
the customer to establish a rapport with the seller by showing that it can fulfill its
payment commitments. Standby letters of credit are used, for example, to guarantee
repayment of loans, to ensure fulfillment of a contract, and to secure payment for
goods delivered by third parties. The beneficiary to a standby letter of credit can cash
it on demand. Stand-by letters of credit are generally less complicated and involve far
less documentation requirements than irrevocable letters of credit. See Credit
Administration, Sample Procedure for Administration of a Standby Letter of Credit
for a systematic procedure for establishing a standby letter of credit.
Special Letters of Credit
The following is a brief description of some special letters of credit.
Back-to-Back Letter of Credit
This is a new letter of credit opened based on an already existing, nontransferable
credit used as collateral. Traders often use back-to-back arrangements to pay the
ultimate supplier. A trader receives a letter of credit from the buyer and then opens
another letter of credit in favor of the supplier. The first letter of credit serves as
collateral for the second credit.
Deferred Payment (Usance) Letter of Credit
In Deferred Payment Letters of Credit, the buyer accepts the documents related to the
letter of credit and agrees to pay the issuing bank after a fixed period. This credit
gives the buyer a grace period for payment.
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Common Problems with Letters of Credit
Most problems result from the seller's inability to fulfill obligations stated in the letter
of credit. The seller may find these terms difficult or impossible to fulfill and, either
tries to fulfill them and fails, or asks the buyer to amend to the letter of credit. As
most letters of credit are irrevocable, amendments may at times be difficult since both
the buyer and the seller must agree.
Sellers may have one or more of the following problems:
The shipment schedule cannot be met;
The stipulations concerning freight costs are unacceptable;
The price becomes too low due to exchange rates fluctuations;
The quantity of product ordered is not the expected amount;
The description of product is either insufficient or too detailed; and,
The stipulated documents are difficult or impossible to obtain.
Even when sellers accept the terms of a letter of credit, problems often arise late in the
process. When this occurs, the buyer's and seller's banks will try to negotiate any
differences. In some cases, the seller can correct the documents and present them
within the time specified in the letter of credit. If the documents cannot be corrected,
the advising bank will ask the issuing bank to accept the documents despite the
discrepancies found. It is important to note that, if the documents are not in accord
with the specifications of the letter of credit, the buyer's issuing bank is no longer
obligated to pay.
Basic Procedures for Establishing a Letter of Credit
The letter of credit process has been standardized by a set of rules published by the
International Chamber of Commerce (ICC). These rules are called the Uniform
Customs and Practice for Documentary Credits (UCP) and are contained in ICC
Publication No. 500. The following is the basic set of steps used in a letter of credit
transaction. Specific letter of credit transactions follow somewhat different
procedures.
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1. After the buyer and seller agree on the terms of a sale, the buyer arranges for his
bank to open a letter of credit in favor of the seller. Note: The buyer will need to have
a line of credit established at the bank or provide cash collateral for the amount of the
letter of credit.
2. The buyer's issuing bank prepares the letter of credit, including all of the buyer's
instructions to the seller concerning shipment and required documentation.
3. The buyer's bank sends the letter of credit to the seller's advising bank.
4. The seller's advising bank forwards the letter of credit to the seller.
5. The seller carefully reviews all conditions stipulated in the letter of credit. If the
seller cannot comply with any of the provisions, it will ask the buyer to amend the
letter of credit.
6. After final terms are agreed upon, the seller ships the goods to the appropriate port
or location.
7. After shipping the goods, the seller obtains the required documents. Please note that
the seller may have to obtain some documents prior to shipment.
8. The seller presents the documents to its advising bank along with a draft for
payment.
9. The seller's advising bank reviews the documents. If they are in order, it will
forward them to the buyer's issuing bank. If a confirmed letter of credit, the advising
bank will pay the seller (cash or a bankers' acceptance).
10. Once the buyer's issuing bank receives and reviews the documents, it either (1)
pays if there are no discrepancies; or (2) forwards the documents to the buyer if there
are discrepancies for its review and approval.
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Documents
In specifying required documents, it is very important to include those required for
customs and those reflecting the agreement reached between the buyer and the seller.
Required documents usually include the bill of lading, a commercial and/or consular
invoice, the bill of exchange, the certificate of origin, and the insurance document.
Other documents required may be an inspection certificate, copies of a cable sent to
the buyer with shipping information, a confirmation from the shipping company of
the state of its ship, and a confirmation from the forwarder that the goods are
accompanied by a certificate of origin. Prices should be stated in the currency of the
letter of credit and documents should in the same language as the letter of credit.
Standard Forms of Documentation
When making payment for product on behalf of its customer, the issuing bank must
verify that all documents and drafts conform precisely to the terms and conditions of
the letter of credit. Although the credit can require an array of documents, the most
common documents that must accompany the draft include:
Commercial Invoice
The billing for the goods and services. It includes a description of merchandise, price,
FOB origin, and name and address of buyer and seller. The buyer and seller
information must correspond exactly to the description in the letter of credit. Unless
the letter of credit specifically states otherwise, a generic description of the
merchandise is usually acceptable in the other accompanying documents.
Bill of Lading
A document evidencing the receipt of goods for shipment and issued by a freight
carrier engaged in the business of forwarding or transporting goods. The documents
evidence control of goods. They also serve as a receipt for the merchandise shipped
and as evidence of the carrier's obligation to transport the goods to their proper
destination.
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Warranty of Title
A warranty given by a seller to a buyer of goods that states that the title being
conveyed is good and that the transfer is rightful. This is a method of certifying clear
title to product transfer. It is generally issued to the purchaser and issuing bank
expressing an agreement to indemnify and hold both parties harmless.
Letter of Indemnity
Specifically indemnifies the purchaser against a certain stated circumstance.
Indemnification is generally used to guaranty that shipping documents will be
provided in good order when available.
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Process flow of CBG
Its 70% focus is on the direct marketing or extracted through different sources.
The client is visited and the financing needs of the client, the strength of their business
which includes there financials, management, operational activities etc, current loan
structure and its utilization with various banks and security/collateral in offering.
Once the client is assessed and considered to fall under the corporate banking group,
basic documents like memorandum and article of association, certificate of
incorporation, form 29/A issued by SECP, audited financials and borrower basic fact
sheet of the client are acquired.
Comprehensive credit proposal is prepared and then sent to corporate head for the
initial review and approval. Once from the corporate head the approval is sought the
proposal is then routed to credit risk management department (CRM) where the risk
aspects of particular proposal are critically reviewed. All the observations and
compliances are marked and then send to the Credit Administration Department
(CAD) of the respective region.
A documentation check-off list is issued by CAD to CBG team which include the
provision of the relevant documents that has to be executed by the client and the
documents that has to be arranged by the CBG team itself like bank checking, search
report, market checking, CIB report and property evaluation report by independent
evaluator.
If all the CAD requirements and CRM observations are fulfilled, the Disbursement
Authorization Certificate (DAC) is issued by CAD, loan account is opened and
documents are kept in safe custody.
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Different Tasks Performed during the Internship
Following are the main issues which I learned during the Internship period:
Products of Corporate Banking Group, UBL.
Letter of Credit.
Guarantees.
Study of Standard Credit Approval Plan of Adjutant General Branch, W&R
Directorate, GHQ on behalf of DHI.
Financial Analysis of Dewan Salman Fibre Ltd.
Worked on SCA and Basic Information Report for Ferozsons Labs. Ltd. BIR
includes detailed information about the company, its history, credit ratings,
risk analysis etc.
Developed softcopy and hardcopy record of Corporate Customers SCAs for
the year 2006, of Sir Ali Zaidi’s Unit on the instruction of Mr. Yasir Farhan.
This activity helped me to understand the following integral parts of SCA:
Executive Summary, Facility Appendix, and Security Appendix. Further more
I also learned the purpose of Extension Memos and Ticklers.
Spread calculation of M/s Ferozsons Laboratories Ltd which includes financial
statement analysis of the company.
These and other small tasks which are included in the day to day routine of the CBG
helped me apply the theoretical knowledge which I leaned during the course of my
studies. Furthermore, I also learned many new things. Overall, I enjoyed my work at
UBL, all the people working here are very cooperative and helpful and almost all of
them helped me in learning different new things which came across during my
internship period.
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