Bank Alfalah Project

BANK ALFALAH LIMITED
AHMAD BHATTI- ------------------------------------------------8259
SUPERIOR UNIVERSITY LAHORE

PREFACE
Hailey College of Commerce, University of The Punjab, Lahore is making valuable

contribution in generating such business executives who are serving in various fields in
Pakistan as well as in abroad. To familiarize the students with practical difficulties and to
apply their knowledge in practical field, it had been made compulsory to have exposure
through internship programs in different organizations. These internship programs enable
students to equip themselves with management tolls and technique. Keeping all that in
mind and being a specialized student of banking me also preferred to join banking
industry. Banking sector owes a pivotal importance in the economy of any country
through its vibrant function. Moreover the practice and familiarity learned during this
tenure would also attest very help full
ACKNOWLEDGEMENT
IF YE GIVE THANKS, I WILL GIVE YOU MORE
(AL-QURAN)
We bow, beg and pray to Almighty Allah, Rehman-o-Rahim, in the name of our beloved
Prophet Muhammad (peace be upon him) for continued showering of His blessing,
guidance, strength, health, and prosperity to us.
During the period of my internship I found the Bank alfalah’s staff very kind and cooperative.
They provide with us their whole attention and share their practical experience with me. Further
they gave me precious time and provided useful information regarding the management of the
report. I would like to thank following staff members:
Name Department
Muhammad Authar Branch manager
Najeeb-ur-rehman Operation manager
Imran ali zaide Deputy operation manager
Fawad Ali Operation officer
Junaeed ali Operation officer
Muzaffar ali Operation officer
Zikrea sahab Operation officer
Miss fakhra General Banking
Muhammad ali General Banking
Sohail ali General Banking
Muhammad zubair Foreign Exchange
Muhammad mohsin Foreign Exchange
Ali hussain Foreign Exchange
Ammar hussain Foreign Exchange
Miss saima Foreign Exchange
Aun sahab Foreign Exchange
Amir mehmood Foreign Exchange
Shahzad barkat Foreign Exchange
Akram bhatti Accounts
Kamran ali Accounts
Zahid ali IT officer
Abid ali operation manager
Asif ali ansari Foreign trade
Rehman ali Foreign trade
Imran ali Foreign trade
Shahzad durani Foreign trade
Haroon sahib Foreign trade
Khalik sahab credit officer
Muhammad aziz credit officer
Miss sadia farooq officer
EXECUTIVE SUMMARY
The aim of an internship was to have the practical knowledge about the organizational
working. The organization assigned to me for an internship was Bank alfalah township
Branch, Lahore. , the Head office of BAL is located in karachi.. Departments working
in this bank are General Banking, Accounts department, Credit & Administration
department. I accepted this task as a challenge and tried my best to explore & cover each
and every aspect of BAL with in my 6 weeks internship.
This internship report covers many important aspects which are basically related with the
operations and financial aspects of the bank.
This is the final report of the internship program. The report is on the Internship program
in Bank Alfalah.
First of all, in the report, the introduction of Bank Alfalah is given. For this purpose a
brief history of the bank is given in the start. Then its business vision and mission
statement are discussed
After introduction comes management system of Bank Alfalah in which its

Organizational Chart is drawn, corporate profile and managerial policies are included.
Financial analysis of the Bank is done in detail and also compared with one of its direct
competitors; NATIONAL BANK OF PAKISTAN. And it is also explained graphically.
After the financial analysis, a brief industry analysis is done. Particularly it is not
analyzed with the bank but generally with the financial industry. SWOT of the Bank is
also done.
Then the whole internship program is discussed in detail. In this section all the
departments in which I have worked during my internship are explained in detail. The
working of the departments is mentioned and also at the end, my analysis of the
environment in that department is also mentioned.
In the end my findings and analysis of the Bank and its environment are given and then
recommendations are given.
HISTORICAL BACKGROUND
BANK OF CREDIT AND COMMERCIAL INTERNATIONAL
(BCCI) 1972
Bank Alfalah’s history is about 23 years old when it was incorporated as Bank of
Credit and Commercial International (BCCI) on 21 September 1972. It was
incorporated in Luxembourg with a paid-up capital of $2.50 million. BCCI operated
successfully in about 69 countries of the world. Due to an international conspiracy BCCI
had to stop its operations. Here ended the first phase of history of Bank Alfalah.
HABIB CREDIT AND EXCHANGE BANK—1992

On June 21, 1992 the Ministry of Finance (Govt. of Pakistan) acquired its three
branches and Habib Credit & Exchange Bank came into existence 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.
BANK ALFALAH—1997
After privatization of H.C.E.B. in 1997 bank alfalah came into existence on 21st
June 1997. The chairman of bank at that time was Highness Sheikh Nahayan Mabarak
Al-Nahayan, Minister of Education, Government of Abu Dhabi, and a prominent
member of Royal Family. HCEB was sold for Rs.1.70 billion. Its management was taken
over by Dubai based consortium. With this started the success story of Bank Alfalah once
again.
PRESENT STATUS
Bank Alfalah Limited was incorporated on June 21, 1997 as a Public Limited
Company under the Companies Ordinance 1984. Its banking operations
commenced from November 1, 1997. The bank is engaged in commercial banking
and related services as defined in the Banking Companies’ Ordinance, 1962.
For the last 8 years it has been successful in providing commercial banking
facilities to its customers and has developed a good reputation among Pakistan banks.
Quality services are provided as its backed by an Abu Dhabi based Group and driven by the strategic goals set out by its board
of management, the Bank has invested in innovative technology to keep pace with growing market and needs of
customers.
Currently Bank Alfalah Limited has 121 branches covering 47 cities spread all over
Pakistan, out of which 106 are conventional branches and 15 are Islamic Banking
branches. One overseas branch is located in Dhaka, Bangladesh. In the coming
years, the bank plans to open a number of new branches to ensure that its customers
get the benefit in the form of extended branch network and comprehensive products
and services.
Strategies and goals of Bank Alfalah Limited have enabled it to continue its upward climb in pursuit of excellence. Strengthened
by the backing of the Abu Dhabi Group and driven by strategic goals set out by its Board and management, Bank Alfalah
Limited increasingly inspires trust and confidence of all its clients and number of clients is increasingly significantly.
The bank aims to further enhance performance standards through implementation

of innovations in both products as well as customer care, by discovering newer avenues
of client benefit. These achievements have been preceded by concerted efforts to provide
highest levels of service and value to its customers. This customer-focused strategy has
enabled Bank Alfalah Limited to evolve as a single source financial service provider of
corporate and retail banking services and regarded highly by its customers.
Over the years, the management has succeeded in establishing an ideological base
for the employees to build the bank upon customer loyalty, service with dedication and
development of a wide range of products for the customers to choose from.
Philosophies followed at the bank are:

High Quality Services
Innovative Products And Services
Better Performance
Foreign Trade is another success of bank and has developed excellent business
and correspondent relations with well renowned banks of the world whose support in
terms of lines of credit has enabled it to handle ever-growing trade volumes and
diversified needs of customers.
Technology has opened new horizons in every field of life. At the same time,
rapid change in customer preferences has resulted in a major shift from manual to
automated services. Information technology today, is all pervading in the corporate
world. Information technology department of bank has successfully developed an
advanced computer program named BANK SMART. Bank Alfalah made heavy
investments towards enhancing its capabilities in the area of automation and information
technology.
Bank has made remarkable achievements within a short period of time despite
being in the nascent stage. The bank is committed to put all its energies, resources and
time to bring higher value and satisfaction of its customer, employees and shareholders
successfully since 1997.
INTRODUCTION OF BRANCH
The Township Branch is strategically located at the AKBAR CHUNK. It is
located adjacent to Township bazar, which forms the junction of Township colony. It has
ample of parking space and due to the attention and interest of the branch manager, Mr.
Athar ali, the exterior of the branch has been delightfully decorated.
At the time of my internship, the branch has a total of 54 employees, ranging

from the Bank Manager to the Tellers. Other than these officers, there were about eight
workers ranging from the Security Guard to the Cleaning Boys to the Incharge of the
kitchen etc.
The main reason of the bank’s existence is the acceptance of people’s money to
keep safe until they need it back and extending money on interest to those who need it for
investment purposes. The growing needs of people near the branch are the major reason
for its increasing profits.
The branch is going well for credits , operations and foreign trade load is much las
compared to other branches because it’s a new branch and foreign trade business is more
risky and people prefer experienced branches for this.
OBJECTIVES
Bank Alfalah believes in the phrase “customer comes first”. BAL’s objective is to
please their customers by fulfilling the financial needs as best as possible. They
believe in placing the client at the center of business and all of the products and
services.
Service excellence is one of the objectives of Bank Alfalah.
Alfalah strives continually on the development of new areas of activities to

distinguish itself in the market place along with traditional banking activities of
resource mobilization and credit disbursement.
Bank focus is on Foreign Trade as primary niche of business.
Alfalah’s objective is the complete automation and computerization of all of its

banking activities.
Alfalah Training and Development program of its employees is aimed at

developing skills of its employees. It makes positive contribution to the service
culture of the banking system as a whole.
They are committed to put all their energies, resources and time to bring higher
value
and satisfaction to their customers, employees and shareholders.
The introduction and development of innovative financial instrument will be

another
major objective of Bank Alfalah Limited.
THE VISION
The Mission
MANAGEMENT STRUCTURE
Bank Alfalah is proud of its Human Resource, as almost all the employees have
been hand picked by the management. However, in this section, I would discuss those
people who are responsible for hiring such a bright staff and establishing such a
magnificent bank. They are the higher management of Bank Alfalah Limited.
THE CHAIRMAN (OUTGOING)
H. H. Sheikh Nahayan Mabarak Al-Nahayan
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 to 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.
THE CHAIRMAN (NEW)
H. E. Sheikh Hamdan Bin Mabarak Al-Nahayan
BOARD OF DIRECTORS
H.E. Shikh Hamdan Bin Mubarak AlNahayan Chairman
Mr. Abdulla Naseer Hawalileel Al Mansoori Director
Mr. Abdulla Khalil Al Mutawa Director
Mr.Ikram-ul-Majeed Sehgal Director
Mr.Khalid Mana Saeed Al Otaiba Director
Mr. Nadeem Iqbal Sheikh Director
Mr. Sirajuddin Aziz Chief Executive officer
BOARD ADVISORY COMMITTREE

Mr. Abdulla KhalilAl Mutawa Director
Mr. Khalid Mana Saeed Al Otaiba Director
Mr. Bashir A. Tahir Member
Mr. Ganpat Singhvi Member
Mr. M. Iftikhar Shabbir Secretary
BOARD AUDIT COMMITTEE

Mr. M. Iqbal Safi Secretary
BOARD CREDIT AND FINANCE COMMITTEE

Mr. M. Iftikhar Shabbir Secretary
BOARD RISK AND MANAGEMENT COMMITTEE

Mr. Haroon a tahir Secretary
CENTRAL MANAGEMENT COMMITTEE

MR.Sirajuddin Aziz Chairman
Mr.Parvez A.Shahid Co.Chairman
Mr. Mohammad Yousaf Member
Mr.shakil sadiq Member
Mr. Shahid M. murtaza Member
Mr.Nadeemul Haq Member
Mr. Bakthaar khawaja Member
Mr. adil Rshid Member
Mr. Ijaz Farooq Member
Mr. Ashfaq A.Qureshi Secretary
COMPANY SECRETARY
Mr. Hamid Ashraf
CHIEF FINANCIAL OFFICER
Mr.zahid ali H.Jaml
AUDITOR
A.F.Ferguson & Co.

Chartered Accountants
REGISTERED/HEAD OFFICE
B.A Building
I.I Chundigar road
Karachi.
WEBSITE
WWW.bankalfalah.com
TOP MANAGEMENT HIERARCHY
Chairman
Chairman
Board
Boardofof
Directors
Directors
Chief
ChiefExecutive
Executive
Officer
Officer
Executive
Executive
Committee
Committee
Executive
Executive
Incharges
Incharges
Area
AreaManager Area
Manager AreaManager
Manager
North South
North South
HEIRARCHY OF BRANCH
CHIEF MANAGER /
BRANCH MANAGER
Manger Manager International Manger

Operations Banking Credits
Accounts
Department Imports Leasing
Department Department
Cash
Department
Home finance
Exports
Department
Department
Account opening
Department
Car finance
Foreign Exchange Department
Department
Remittances
Department
Credit card
Department
Clearing Internal Audit Marketing

Department Department Department
Field of Activities of BAL

This section is based on my observation and experiences and rotation during my
internship at the Township Branch of Bank Alfalah Limited, Lahore. My internship
duration was for six Weeks. I was rotated in Operations, Credits and Foreign exchange
departments for different periods of time.
My first rotation was in Account Opening Department where I was under
administration of Mr. Ammar Hussainand Ms.Aun
I spent second week in clearing Department. There I worked with Miss.Fakhra
After learning in clearing Department I was sent in Remittances Department.

There I worked with Ms. Muzaffar Qureshi. Here I got chance to learn about different
modes of transfer of funds.
Then I worked in Home finance Department under supervision of Mr. ALI and
Mr. Sohail
My fifth rotation was to Credits, where I learned that how loan is advanced to the
clients and different types of facilities the bank is providing to its customers. I went to car
finance foreign trade deparment.
OPERATIONS DEPARTMENT
In operations department my experiences of different departments are as under.
Manager operations Mr. Najeeb-ur -rehman was supervising this department.
ACCOUNT OPENING DEPARTMENT

I worked in account opening department for one week with Mr. Ammar Hussain
and Ms.Aunr. In account opening department I learned about
• Account Opening Procedure

• The persons who are eligible to open an account
• Kinds of Accounts offered by Bank Alfalah Limited
• Information about Royal Profit Account
• Documents required by different categories of persons
• Issuance of Cheque Book
• Preparation of Debit and Credit Vouchers
• Procedure of closing an account
• Information about Zakat Exemption
An account opening is an initial step of building contractual relationship with

customer. Customers wish to open their accounts with their different requirements. Some
people want an account in foreign currency. Some customers want Pak rupees account
but with different type of account.
Bank Al-Falah offers following types of Currency Accounts:
• Rupees
• US$
• P.Stg.
• DM
• J.Yen
Customers can avail following types of Accounts:
PLS/Saving
In this deposit, profit (interest) is paid semi-annually in accordance with the
remaining balances. The minimum account limit is Rs. 50000 and customer is required to
maintain this much amount in his account.
Current
Current account can be opened in any currency. Initial deposit requirement is Rs.
25000 and customer is required to maintain his account with this amount. Deposits and
with drawls can be at any time.
Royal Profit
Initial deposit for this account should be more than Rs.50, 000. Profit will be paid
as per marker rate on monthly basis in accordance with the remaining balance. Deposit
and withdraw of cash can be made anytime.
Term Deposits:
This term deposit varies with duration of times. On this fixed deposits profit will
be paid as per time period and money ranges.
Durations
• 7 days
• 30 days
• 3 months
• 6 months
• 1 year
• 2 year
• 3 year
• 4 year
Call Deposit:
This account has been particularly designed for Tenders. To avoid the cheque
bounce, receipts are issued in which specific amounts are invested and withdrawn.
Sundry Deposits:
This account has been designed for lenders, in which they maintain a specific
amount. The major purpose of this account is to discourage the defaulters.
Bank Al-Falah welcomes the following types of Organizations:
• Limited Co.
• Public
• Private
• Partnership
• Club/Association/Society
• Sole Proprietorship
• Others
Documents Required for Limited Co.

Copy of Certificate of Incorporation
This document is issued by SECP (Securities Exchange Commission of Pakistan)
on the inception of company. This document shows that Co. is registered by Govt. of
Pakistan under Co’s Ordinance, 1884.
Memorandum and articles of Association

These contain on following attributes
• Nature of business
• Capital
• Shares transfer & transmission
• General meetings
• Borrowing power
• Accounts etc
List of directors:
List of directors is required on company’s letterhead page.
Copy of Board Resolution:

In this certificate, an acceptance letter is issued by co’s directors in which they
declare that they are authorized or give sovereignty to some one to operate the account
with desired title, honor the cheque, bills of exchange, promissory notes drawn, signed,
accepted or more on behalf of the Co. by any one of the director.
Certificate of Commencement of Business

Once the Co. registered by SECP, it allows the Co. to generate specific funds to
start the business. When Co. achieves the target, SECP issue a Co. Certificate of
Commencement of Business.
Copies of NIC of directors:

Photo Copies of NIC of all directors are essential to open an account for Limited
Co.
Form-29
This certificate is issued by SECP to the Registered Co. in which essential details
of Directors and officers (CEO, Managing Agents, Secretary, Chief Accountant,
Auditors, Legal Advisors etc) are documented.
Documents Required for Partnership.

Partnership Deed, Certified Copy
This document contains the name, location, type of business, commencement date
of business, share of capital investment, declaration of authorities, limitations and net
profit and loss of the firm etc.
NIC photocopies of all partners:

NIC Copies of all partners are required.
Partners mandate for operation of Account

In this document, partners of the Co. agree to operate an account together or
authorize any one partner to operate an account. This document with the proclamation is
required to be signed by all partners.
Documents Required for Club/ Society/ Association

• Copy of Rules/By Laws
• Copy of registration
• List of executive member Management Committee/ Management/ Board etc.
• Certified Copy of resolution
• NIC of all members of Management body
Documents Required for Sole Proprietorship/ Individual

NIC/ Passport photocopy:
To open a sole proprietor ship or individual account, photocopy of NIC or
passport is required.
Letter from the Proprietor

Letter from the proprietor is required for the purpose of confirming Sole
Proprietorship.
Procedure of Account Opening

Once customers submit the forms to officers, all the provided information’s are
verified. After confirmation, account no is assigned to account holder. After this all
information’s are saved in system.
• This account is further approved by Manager operations

• After approval, S.S Card (attached with form) is received by Head of Cash Dept.
for the purpose of scan the signature of account holder.
• Once the new account is opened and all information is saved in system, then
Letter of thanks is sent to customer.
• One photocopy of gratitude letter is dispatch with form and pasted in File with
complete documents.
Procedure of Account Closing:

When a customer wishes to close the account, the instructions are followed:
• An account holder has to fill up the account closing form.

• After verification of Account holder’s signature, cheque book is collected from
the customer.
• Account balance should be zero.
Approval of account closing is taken from Branch Manager.
At the end, S.S Card is received from Cash Dept; it is attached with the form and
pasted in Account Closing File.
CLEARING DEPARTMENT
In clearing department I worked for 7 days with Miss.Fakhra and learned about
inward and outward clearing and I also learnt about:
• Procedure of clearing a cheque

• Checking of cheques
• Inward and outward clearing
• Within bank transfer
• Different reason of returning a cheque
• Types of clearing stamps
The basic function of the clearing department is to facilitate the customer; it provides
them the services in collection of their cheque in other banks. Clearing actually means
the transfer of funds from one branch of bank to the other branch of the same bank or the
other bank on which the instrument is drawn, without involving cash through State banks
clearing house.
NIFT:
NIFT stands for National Institutional facilitation Technologies. Clearing
House of SBP has shifted a tiresome part of its work to a private institution named NIFT.
NIFT collects cheques, demand drafts, Pat orders, Travelers Cheques, etc. from all the
branches of different banks within city through its carriers and send them to the branches
on which these are drawn for clearing. After the branches approve the instruments drawn
on them, NIFT prepares a sheet for each branch showing the number for instruments and
amount in its favor and drawn on it and sends it to each branch. A similar sheet for each
bank is also sent to clearing house of SBP where accounts of banks are settled in the
same manner.
The instruments are collected from the client. Following things are checked.
• Cheque date (a cheque is valid for six months, for example a cheque is dated
01.01.08 it will be valid till 30.06.08 and it should not be post dated).
• Title
• Amount in figures and words should be same
• There should be no cutting and overwriting on the cheque.
• Deposit should also match with the cheque.
Stamping Procedure:
In stamping procedure, the pay-in-slip counter foil the following three stamps are
used:
• If the cheques is for the same bank, and drawer and the payee both have the
account in the same bank, the simple bank stamp is used, and this stamp indicates
the transfer of cheques from one account to another account. This cheque is
directly moves towards posting in computer terminal where the computer operator
debit one account and credit the account of another party. This stamp is known as
the Transfer stamp.
• If the cheque is received from other bank and drawer’s account is not in the bank
then cheques received stamp is used. This cheque is represented in the
clearinghouse; date is also mentioned on the stamp.
• If the cheques is from out of the city then it is send for the collection.
Stamping On Cheques:
After receiving the cheques and issuance of the counter foil to the client, stamping
process starts on the cheques, the following stamps can be used.
The name and branch name of the bank stamp is used on the front side of the
cheques. This stamp is used on all types of cheques. This stamp is known as crossing
stamp.
The second stamp used is the clearing stamp on the front side of the cheques. It
also indicates the presenting date of the cheques. If the cheques is dishonored and
deposited again for clearing, the clearing stamp is used again with new date of presenting.
So the clearing stamp is necessary wherever the cheques are presented for clearing.
The third necessary stamp that is the endorsement indicates the paying bank to
“payees account credited”. It is the confirmation of outward clearing.
The whole clearing process requires about 2 days, after 2 days the customers’
account is credited and the customer can make the transactions.
REMITTANCES DEPARTMENT
In remittances department I remained for 7days and worked with Mr.Muzaffar
Qureeshi.In remittances I have learned about transfer of money through:
• Demand draft (D.D)

• Pay order (P.O)
• Pay slip (P.S)
• Telegraphic transfer (T.T)
• Mail transfer (M.T)
• Local remittances and outgoing remittances
• Schedule of bank charges for remittances
• Calculation of taxes on remittances
• Calculation of taxes on remittances
• How to prepare pay order, demand draft
Remittance is transfer of funds from one city to another city or within the city. For
this purpose, most commonly used instruments are
• Demand Draft
• Pay Order
• Telegraphic Transfer
• Online Transaction
DEMAND DRAFT:
Demand draft is made to transfer the funds from one station to other station. This
is not made for the same city and payment duration is 3 to 4 days. Demand draft is made
on the request of purchaser on drawee’s name or he may any bank account holder.
Demand draft is issued by three ways:
• Through cheque
• Through cash
• Through transfer
To settle this transaction, Sundry demand draft issued account is credited and Head
Office account debited on the time of DD issuance and on the time of payment Sundry
demand draft issued account is debited and Head office account is credited.
When demand draft is drawn on Bank Alfalah Sundry demand draft issued account is
debited and Head office account is credited.
Irregular Case:
If demand draft advice reaches to drawee bank late and beneficiary (purchaser
bank) wants to get Demand Draft cashed, in this scenario drawee bank would make the
confirmation with issuing bank and find out all the detail information since bank cannot
refuse to accept the original demand draft if it reaches earlier. Drawee bank will debit
“DD paid without advice account” and “Head office Account” will be credited. If
demand draft with more than 100,000 rupees drawn on any bank, issuing bank will send
“Tested Telex Message” to drawn bank for “ Double Caution” purpose.
Demand Draft Misplacement:

In misplacement scenario, payee would contact to purchaser who further asks to
issue bank. It would further contact to drawee’s bank to know whether issued Demand
Draft still outstand or not. If it does outstand, drawn bank would make this DD as stop
payment in Demand Draft payable Register. If misplace DD has been paid then duplicate
DD can’t be issued.
Agency Arrangement:
Those cities where Bank Alfalah has no branch, Bank has an agreement with
particular banks where Bank Alfalah will draw demand drafts and telegraphic transfers.
These banks will liable to perform operation on behalf of bank alfalah and will receive
40% commission against this transaction.
Cancellation of DD:
In case, client wants to cancel the draft he has to make an application with his
signature. Banker checks the signature. Amount of draft is returned to client after
deducting cancellation charges. The cancellation charges are Rs 100.
PAY ORDER
Pay Order is also known as Banker’s Cheque. This is the safest way to transfer
funds within a city. A pay order is an instrument in writing issued by bank for a certain
sum of money payable on demand to the order of the payee mention within the city,
where as pay slip is used for bank’s internal use. Pay order can be made for outstation but
it will take more time for example; if pay order is sent from Lahore to Karachi, this will
be sent back to Lahore for collection purpose then it will be lodged in clearing afterwards
this will be sent back to Karachi at required place.
Total time duration of pay order is not more than 2days.when pay orders are
made, control number is assigned to determine how many pay orders are issued to a
particular city in one year.
Pay orders are prepared by two ways:
• Cash
• Cheque
The client makes a request to the banker for issuance of a pay order. The banker
gives him an application form to fill and ask him to deposit the amount for which he
requires the pay order. The client deposits the amount in cash with bank. If he is account
holder of the same bank, he can give cheque upon which amount is transferred from his
account. After the fulfillment of all these requirements banker issue the pay order to the
customer. Bank takes charges for issuance of pay order, which varies from bank to bank.
Bank Alfalah takes 10 rupees irrespective of any location in city.
After issuing Pay order, banker gives credit Sundry creditors account. Posting is
made in the computer terminal. When Pay order is presented on cash counter bank makes
payment against it after checking N.I.C of payee and Sundry creditors account is debited.
If it is crossed, the amount is transferred into the payees account.
Cancellation of Pay Order:

If purchaser is willing to cancel the pay order bank will not entertain such
customer. If purchaser gets the cancellation of pay order from beneficiary, bank will
make the pay order canceled.
Incase of Misplacement:
If beneficiary misplaces his pay order, he will inform to purchaser. Purchaser will
have to submit indemnity bond where he will fill up all the particulars and oblige to give
back pay order to issuing bank when he will find pay order back. Then issuing bank will
issue the purchaser duplicate pay order.
TELEGRAPHIC TRANSFER:
TT is the quickest way to transfer funds from one station to another. This process
takes not more than one or two hours. TT is made on purchaser’s request who in turn gets
“Cost-Memo” in form of receipt in which TT number, charges that bank has deducted,
drawee bank name, issuing bank name, purchaser’s account number and other particulars
are included.
Telegraphic Transfer is bank-to-bank, and branch-to-branch. The bank has
settlement with other banks according to which the banks can make the payments to the
customer’s account mentioned by the other bank in the TELEX. In this case proper
authentication is must for this purpose.
Beneficiary acts in two ways:
• In First case, he may be account holder of Bank Alfalah but does not want to add
this amount in his account then message would be “Advice & Pay”.
• In Second case, beneficiary is account holder and wants to add TT amount in his
account then message would be “Advice & Credit”.
Customer obtains a requisition slip and fills it properly. After filling the application
from the concerning officer fills the TT form. This Telegram is send to he required bank.
After receiving the telegram bank immediately makes the payment to the customer and
the vouchers sent to the issuing bank by ordinary mail.
Bank debits the account of the customer or receives cash including charges of the
bank.
TT is made through codes. Bank sent telegrams with codes and in banking language
using the words test.
ONLINE TRANSACTION
For branch-to-branch transfer of funds on the same day, previously TT was used.
But now banks have adopted a new system known as Online Transfer.
In online transactions cheques of different branches can be paid. For instance if a
client has taken Online Transaction facility and presents Multan’s cheque to Bank
Alfalah Lahore, he/she can have payment from Lahore. If the cheque has been cleared
from Multan Bank Alfalah, a copy of cheque is made and is faxed to appropriate branch;
the branch then checks the client’s balance, date of cheque and signature of client. If the
cheque is given clearance from the respective branch then payment is made to client, the
branch is then debited and the branch that has made payment is credited
ACCOUNTS DEPARTMENT
I worked for 1 week in accounts department with Mr. Salman Rauf and Mr.
Luqman Hanif and found that in Banks, the accounts department plays a vital role. In
Bank Alfalah the burden of accounts department is largely reduced because of MIS. The
use of IT increases the efficiency and pace of bank’s work.
Following activities are carried out in Accounts Department.
• Budgets
• Income & expenditures
• Reports
• Budget review form
• Reconciliation
• Foreign Exchange; Forward Contracts
• Activity checking
• Funds management
• Depreciation & Maintenance of fixed assets provision
• Minutes of the branch review committee
• Test Keys
BUDGETS:
Annual budgets are prepared three months earlier before the start of New Year.
One-year budget are further splits in semi-annually, and monthly basis. During three
months, budgets are reviewed by head office (Karachi branch).At times changes are
asked to make in accordance with changing rates, excess funds and due to other reasons.
Budgets are revised after amendments.
Major heads include in budgets are:

• Deposits
• Advances
• Car finance
• Exports
• Imports
• Guarantees
• Sales of rupee travelers cheque
• Income/ expenditure
The revenue target is fixed keeping in view the past performance. The cost of
generating these revenues is also estimated. Then budget of each branch is submitted to
head office for modifications and for approval. After the modification and approval the
budget for a specific branch is being set by the head office. Monthly budget meeting is
held to analyze the monthly performance by all the branch managers with head office.
The actual performance is compared with the estimated and variance is calculated.
Variance can be negative as well as positive. If there is a negative variance, this shows
management’s inefficiency in controlling its expenses or incompetence in achieving the
desired revenue target. Proper Adjustments are made in the next month’s target according
to the previous month’s performance because sometimes the goals that are set by the head
office are unrealistic and unachievable.
Income & expenditures of bank:

Income
• Mark up on advances
• Mark up on h/o balances/ demand a/c
• Mark up on placements
• Mark up on investments
Expenditures:
• Total interest expenditures
• Total administrative expenditures
• Personal cost
• Training & subscription
• Rent, taxes, instrument
Reports:
In Allama Iqbal Town branch, each and every activity with their particular are
reported daily by MIS. Besides daily reports, these are weekly, monthly, semiannual, and
annual reports. These are generated from the main frame and are used or proper analysis.
MIS compiles every activity of each department. Account and Audit departments further
authenticate these activities on daily basis.
Statement of Affairs
It includes information about assets, liabilities and their balance. Daily position of
deposit and advances are also calculated in this report.
Subsidiary Statement:
This is a detailed report that includes all the information regarding the statement
of affairs.
Income & Expenditure Report:

It includes all the details regarding to both the heads of income and expenditure in
detail.
Royal Profit Report:

It includes the details of the deposit of royal profit account.
Currency Wise Report

It provides the details of all the deposits currency wise.
New FCY Report:

This report includes the information regarding only the new foreign currency
accounts. The old foreign currency accounts are those that were at the time of nuclear
explosion in Pakistan and were being freezed by Nawaz Sharif Government.
Sub 66 Report:
It contains income, expenditure, general ledger accounts and their balances.
Daily Position of Advances & Deposits:

This report is being sent to the Head Office daily in which the detail is given
regarding the new accounts of deposits and advances.
RECONCILIATION
Bank Alfalah prepares its reconciliation statements with
• Head Office
• State Bank of Pakistan
Head Office Reconciliation:

All the debit and credit entries of the main office account are recorded in the
statement. Then it is checked with physical vouchers and if there is any problem, they
reconcile it. Head Office check the outstanding entries, if there is any entry posted by
branch but not by head office they will send their query to the branch and then branch
will respond to that query by sending the required document. Head office reconciliation is
carried out in the head office; accounts department handles inquiries.
State Bank of Pakistan Reconciliation:

State Bank of Pakistan maintains the account of every scheduled bank including
Bank Alfalah. The statement of account reconciliation shows the entries that are passed
during the month in both banks. Bank Alfalah compares the statement with the ledger
card of State Bank of Pakistan in which all entries are recorded done with SBP. If any
amount debited by SBP and Bank Alfalah doesn’t credit that amount, it is added in the
balance of the reconcile statement provided by the State Bank of Pakistan to Bank
Alfalah.
FOREIGN EXCHANGE FORWARD CONTRACT

Since Pakistan is a foreign exchange control country, all the foreign exchange had
to be submitted to the SBP. The new Fcy accounts are treated differently. There is an
arrangement with the head office treasury. Revaluation of assets and liabilities takes care
of balances. Previously all the banks kept their foreign exchange with SBPon an
agreement that SBP will purchase the foreign exchange on book rate and SBP charged a
fee for risk coverage. The whole transaction is known as Foreign Exchange Transaction.
Now this facility is not available to banks on new accounts but they can avail this facility
on old accounts by renewing the limit on old accounts with SBP. Banks do all these
transactions through treasury.
For old FCY counts, whenever the foreign exchange is deposited to the accounts,
the $ amount is debited to the SBP and equivalent Pak Rupees are credited to the bank’s
account. This is done to take care of the exchange risk and to minimize it. This is a sort of
forward contract with SBP in which the Forex is sold to SBP on a particular date at the
particular rate of conversion. The difference between the purchase and sold amount of
Pak Rupees is then credited to the exchange difference account and SBP’s account will
be debited. The contract may be rolled over i.e. the Forex may be rebooked or resold to
the SBP for another three months or one year.
BUDGET REVIEW FORMS

These forms are designed to review the actual budgets and performances with
expected performances at the end of every month.
ACTIVITY CHECKING
Activity checking is the process of the entire banking, which is taken place on
daily basis. The report specifies every vouchering, which has taken place. Sorting is made
according to the mainframe-generated report. All the Vouchers are checked that whether
they are properly posted or is there any transaction is left to be posted. This checking
makes the working of the bank more efficient and avoids any loopholes.
FUNDS MANAGEMENT
Every commercial bank is oblige to open an account in SBP and maintain the
amount almost 5% of its total liabilities (deposits) in it.
Bank Al Falah Head office Karachi branch helps Allama Iqbal Town branch to maintain
its funds in SBP.Whenever its funds short fall, it informs head office branch to transfer
the funds to SBP.
Besides all liabilities, bank invests its excess funds in its head office branch that
pays interest on it. Head office branch manages to cover its Allama Iqbal Town branch’s
gap in SBP from its funds invested in it.
If SBP gets excess funds in clearing process, these funds are transferred to
Karachi head office branch.
DEPRECIATION OF FIXED ASSET’S PROVISION

Statements of fixed assets provision for depreciation are prepared on monthly basis
with the heads:
• Provisional Depreciation
• Debt and Credit
• Balances
• And accumulated Depreciation with determined rates.
• Depreciation is charged at the following rates:
MINUTES OF THE BRANCH REVIEW COMMITTEE

The role of review committee is to compare the projected budgeted figures with
the concrete results and suggest appropriate actions to count over the variances. This
review committee also articulates the remarks on performances.
TEST KEYS
Test is a coding system used to authenticate money transactions between banks.
Whenever money is transferred through TT, the concerned officer requests the
accounting department to apply test to the message. The test is applied to the message;
three copies of this message are prepared. One goes to the test key dept. one to the Telex/
Fax operator and the third one goes to the dept. record. When the TT is received at the
other end, this test is verifies. The transaction will be carried out if and only if the test
matches with their own test.
Banks have arrangement with their banks with which they have quite a large
volume of business and it is beneficial to have a direct arrangement with these banks.
This test arrangement can be with banks within country and outside country. For example
Bank Alfalah has test arrangements with ABN Amro N.Y, American Express N.Y, Citi
Bank N.Y etc. When this arrangement is carried out a test key is provided to the
concerned bank, which contains codes. This test key is different for every bank. This test
key is also different for inward and outward TT.
In local transfer double coding is used and in foreign transfer single coding is
used. Test key tables are to arrive at the code. Separate key table are used for different
banks. Twelve branches of Bank Alfalah have arrangement for local transfer and three
branches are authorized for foreign transfer. Four things should be carefully checked
because code is based on four things:
• Branch Name
• Currency
• Date
• Amount
Test can be applied on nil amounts. The purpose is to just secure the transaction.
Another important significance of test is agency arrangement, which bank built with
other banks. The bank also solves inquiries originated by any bank regarding the delay of
any message. They will check the message and will respond to the query.
CASH DEPARTMENT
I did not worked in cash department but the staff their guided us about the
working their and I understood that the department is responsible for the handling of cash
deposits and encashment of cheques issued by the depositors.
Receipt of Cash:
In receipt section deposits are received in form of cash. The depositor use pay-in-
slip for depositing the amount. There are two different types of slips for both saving and
current account.
The client gives all the detail regarding date, account number, title of account,
amounts in words and figure. The pay-in-slip is stamped, cash is received and counter foil
is given to the depositor. The adjacent credit voucher is used for recording and posting
purposes.
In case the client is depositing money in his/her account through a cheque of
another bank, and then the cheque is lodged in clearing.
Cheque Encashment Section:

The process of cheque encashment is done with the help of the following
procedure.
• Receiving Cheques
• Verification of signatures
• Computer terminal process
• Payment of cash
1.Receiving of Cheques:
The cash is paid against the cheque of the client. The following things have to be
checked by the cashier before the encashment of the cheque.
• The cheque that is presented should be drawn on Bank Alfalah Limited.

• Cheque is not post dated or the date should exist, for example it can’t be of 30 th
February etc.
• It should be a bearer cheque
• Amount in words and figures should be same.
• Alterations in date / figures / words require drawers’ full signature
• The receiver of cash should make one signature on the back of cheque.
2.Verification of Signatures:
After receiving the cheque, the officer verifies signatures of the account holder
and the signature on the cheque. The signatures are feeded in the computer so they are
checked from the computer. The CD personnel scan the Signature Specimen Card and
add the mentioned account number with the SS Card. It is then load in the main Server.
In this way the officers can use the SS Card for the verification of the signatures. If
signature is not same than it is returned back, otherwise forwarded to the computer
terminal.
3.Computer Terminal Process:

The cheque is received in computer terminal, where the computer operator checks
the balance of the account holder that whether there is enough balance in the account or
not. After considering these points the computer operator posts the cheque in account
holder ledger and after cancellation of the cheque returned it back to the cashier.
4.Payment of Cash:
After the cancellation of the cheque the cashier enters the cheque in the “Cash
Paid Register” and pay against the second signature of the receiver on the back of the
cheque.
CREDITS DEPARTMENT
In credits department my experiences of different departments are as under.
Manager credits Mr.Khalik was supervising this department.
In this department I learnt about:
• Credit facilities for customers

• Long term & short term loans
• Employees loan
• Securities for credit
• How to give credit to customers
• Five C’s of credit
• How to prepare credit line proposal
• Parts of credit file
• Facilities for borrowers
• Study the prudential register
• How to recover the loan
• Funded facilities
• Non funded facilities
• Letter of guarantee and its types
The basic function of a bank is to receive deposits (at low rate of return) and to
lend money (at a high rate of return). So, the lending operations of a bank constitute a
vital part of its business. This department is the source of income and earnings for the
bank.
Bank’s funds comprises mainly of money borrowed from numerous customers on
various accounts such as saving accounts, current accounts, fixed deposits etc. Whereas
the major part of total income of a bank is generated through the utilization of these
funds.
The credit department is further divided into two departments that are as follows:
• Credit Marketing
• Credit Administration
Credit facilities in Bank Alfalah

Bank provides two types of credit facilities to its customers. Following are those credit
facilities:
• Funded
• Non-Funded
Funded:
Funded facility is that facility in which the bank funds are physically involved. It
is further divided into following types:
• Current Finance (OD)

• Cash Finance (Pledge)
• Term Finance
• FAPC I
• FAPC II
• FAFB
• LBP
• FIM
• FATR
Current Finance (OD):

This is the most common form of bank lending. In over draft facility, a customer
is allowed to withdraw on his account in excess of the balance that the borrowing
customer has in credit. So when a customer withdraws in excess of his balance, an
overdraft occurs (balance becomes debit). This facility can be availed for a certain limit
called OD limit and is used to meet the seasonal requirements of cash. In current finance
the interest is only charged on the amount that has been over draft.
Cash Finance (pledge):

This is also a very common form of borrowing by commercial and industrial
concerns, and is made available either against pledge or hypothecation of goods. This is
also known as running finance. It is utilized for the creation of current assets and to meet
the permanent working capital requirements. In this facility, the borrower is allowed to
borrow money from the bank up to a certain limit, either at once or as required. The
borrower prefers this form of lending due to the facility of paying mark-up charges only
on the amount he actually utilizes not the whole limit amount.
Term Finance:
Term finance is for a fixed period of time, all the amount is transferred to the
borrowers account right in the beginning and interest is charged. The mark-up is received
in the end on semi annually basis. Term finance has to be paid within a limit and once it
is paid the client cannot take it back.
FAPC I (Finance against packing credit):

Bank provides this facility against LC or sale contract (in favor of exporter). Bank
takes 100% security against this type of financing. This facility is also called Pre
shipment finance. Afterwards bank receives the payment of exports and adjusts the
exporters account.
This loan is disbursed by the bank for the preparation of goods once the L/C is received.
FAPC II (Finance against Packing credit):

This loan is also known as performance-based financing. This type of financing is
against last performance of the exporter. According to SBP exporter can have finance up
to the half of amount of previous year export but then the exporter should ensure that the
exports he makes are equal to double amount of the loan for one year. The mark-up is
charged for the period the exporter has used the facility and not for the whole limit.
FAFB (Finance against foreign bills):

This facility is also known as post shipment finance. This facility is availed by the
exporter after he has shipped the goods and sent his documents for collection. The bank
purchases the documents from the exporter and gives him this facility. He will take loan
against these documents and pays fixed mark-up rate on this facility.
LBP (Local bills purchase):

Local bill purchase documentary is used for inland import export transaction.
Other wise it is same as finance against foreign bill purchased. This is also availed by the
exporter after the shipment of goods and the bank purchases the documents.
FIM (Finance against imported merchandise):

Finance against Imported Merchandise (FIM) is a credit facility provided to the
customer, in L/C transaction. In FIM, bank itself makes the payment to the exporter and
the goods are kept in the possession of bank. Delivery order (DO) is issued by the bank
for every time, when the importer makes the payment, goods are transferred in the
possession of importer.
FATR (Finance against Trust Receipt):

The bank also offers credit facility FATR, against sight L/C’s, like FIM. Contrary
to FIM, goods are given in the possession of importer. This facility is provided to the
customer having a credit rating A+.
Non-Funded:
Non-funded facility is that facility in which the bank’s funds are not physically
involved. A non-funded facility can any time become a funded one. It can further divided
into the following:
• L/C
• LG
L/C (Letter of Credit):

Letter of Credit, whether sight or usance is a non-fund based facility provided to
the customer. L/C can further divided into sight L/C and Usance L/C.
Sight L/C:
If the beneficiary of a credit is to obtain payment immediately on presentation of
stipulated documents, it is a Sight L/C.
Usance L/C:
When a credit stipulates payment to the beneficiary upon the maturity of a bill of
exchange drawn under the terms of the credit, it is an ‘acceptance credit’, ‘term credit’ or
‘usance credit’.
In this form of credit the beneficiary draws a draft for a particular usance (e.g.30,
60, or 90 days etc) payable upon either the correspondent bank or the issuing bank.
L/G (Letter of guarantee):

Letter of Guarantee is also a non-fund based facility. Letter of guarantee involves
three parties namely buyer, the seller and the guarantor. The letter of guarantee is
basically bank’s guarantee that the respective person will perform his/her duties/services
within the appropriate time other wise the bank will pay the loan amount. When the bank
takes the guarantee of the client, a commission is charged from the customer.
Types of L/G:
• Bid Bond
• Performance Bond
• Security Deposit
• Repayment Guarantee
• Mobilization Advance
• Back to Back Guarantee
Securities for Advances
The advancing of credit involves a great risk for the bank. Therefore, to cover
risk, the bank keeps different tangible and non-tangible securities, before sanctioning the
credit facility to a customer. The bankers prefer those securities that carry less risk of
depreciation due to market fluctuations and are easily saleable, even under changing
market conditions.
The securities used in advances are as follows:
• Pledge
• Mortgage
• Hypothecation
• Charge
• Lien on Documents
• Guarantees
Pledge:
Pledge is the actual delivery of the movable and tangible property to the lender, as
a security for a credit. In pledge, the possession of movable assets is with bank but the
ownership remains with the client. Pledge is considered to be the best security for the
bank. The commodities which are being pledged are normally raw material, consumables,
finished goods and in certain cases work in process (WIP).
Margin:
For every credit, the bank needs security with margin or cushion. The margin
requirements are different for every case. IF, there is 25% margin requirement then to
obtain loan of Rs 1 million, the security that is to be pledged should be have worth of Rs.
1.25 million.
The possession of the goods is with the bank, so bank keeps these goods in
godowns under the custody of Mucaddams.
People who look after the pledged goods are called Mucaddams. If rice is to be
pledged with the bank, it doesn’t mean that this cotton will be kept n bank, such type of
goods is kept in the godowns of the company. So to make these goods secure bank
appoints its own men called Mucaddams to take care of the stock and also bank has a
board of its own name on the godown.
Precautions:
Nature of Commodity:
The banker must be aware of the nature of the property i.e. whether the
commodity is a perishable item. Also the commodity being pledged should be easily
saleable, so that in case of default of client, bank can easily sell it in the market.
Client:
In case of pledge, godowns are in the premises of the clients under the custody of
Mucaddams, whose honesty can be brought at any time. Therefore greater risk is imposed
by the client. So the bank must be satisfied with the honesty and credibility of the client.
Market Awareness:
A banker must have market awareness e.g. fluctuation in prices. Such
commodities should not be pledged that might have low demand in market and have
many risks attached to it.
Suitability of Godown:
Suitability of godown depends upon the nature of the commodity. Banker must be
fully satisfied with the appropriation of the Godown.
Proper Valuation:
Whenever goods are pledged, the banker should be aware of the true cost of the
product as the client always overvalues his product. Sales taxes, excise duties are also
paid on the finished goods.
Insurance:
The goods offered for security must be properly insured. Banker must analyze all the
associated risks of the goods. So, to cover these risks banker should decide about the
insurance of the commodity.
Mortgage:
In mortgage, immovable assets are offered as security. Mortgage means, to
surrender the proprietary rights of the property. The transferor of property is called a
mortgagor and the transferee (bank) is called a mortgagee.
Usually two types of Mortgages are being created in the bank for the purpose of
collateral.
• Equitable Mortgage
• Registered Mortgage
Equitable Mortgage (E/M):

When a mortgage deed is attached with the title documents only and is deposited
in the bank, it is known as “Equitable Mortgage” or “Mortgage by deposit of title deed”.
It is the most common form of the mortgage created in bank.
1-Registered Mortgage (R/M):

When the mortgage deed is between the bank and the client is registered, it
becomes a registered mortgage. Mortgage deed is registered with the Registrar of the
Companies. It is an expensive mortgage and is created when the title documents are weak
or the client is not much trustworthy.
Precautions:
1-Nature and value of the property:
The banker satisfy themselves that whether the property is suitable for security purposes
and in case of sale the bank will not suffer any loss. For this purpose, the bankers inspect
the property and properly visit report is prepared. Also the bankers hire the services of
different valuators to assess the right value of the property.
2-Investigation of Title:
The banker must be satisfied that his borrower has a good title to the property.
The bankers, therefore, conduct a proper investigation into the borrower’s title to the
property, through their own legal advisors.
3- Search for Prior Charges:

A search is made (with registrar of companies), to ensure that there exists no prior
charge on the property. If the title deeds of the property are in the name of more than one
person, search should be directed against the name of each person through whom the title
is made. For this purpose, the bank also gets fresh NEC i.e. Non-Encumbrance
Certificate, issued by the registrar indicating that no lien or charge has been created on
property being mortgaged, upto a specific date.
After a banker is satisfied with the property offered for security, mortgage against
his property is created through “Mortgage Deed”. For this purpose, the original title
documents are deposited in the bank with the mortgage deed. Along with the title
documents of property, the bank requires:
• Memorandum of Deposit of the Title Deed

• Agreement to create Mortgage
• General Power of Attorney (Registered)
Hypothecation:
When an immovable property is offered for security against credit but both the
ownership and possession is left with the borrower, the goods are said to be
“Hypothecated”. Securities like machinery, stock etc. are offered for hypothecation.
Lending against hypothecation of goods is very risky. The control of bank is weak so
greater risk is involved in hypothecation.
In case of hypothecation the banker reserves the right to inspect the goods
hypothecated to him and can ask for periodic stock reports, where necessary.
The banker, for his protection, may ask the borrower to insure. The banker may
himself do so and recover the expenses from the borrower.
The banker may ask the borrower to maintain a balance of goods sufficient to fulfill the
margin requirements.
For the creation of hypothecation, the bank gets the letter of hypothecation signed
by the client. This deed is got registered in case of both public and private limited
companies, with the Registrar of Companies (SECP).
1-Charge:
Charge means the legal right on the assets of the person (company). In case of
limited companies, banks generally create their charge on the assets of the company, as
security. The charge is registered with the Registrar of the companies (SECP).
Charge is of many types:
• First Charge
• Second Charge
• Pari Passu Charge
a) First Charge:
The bank that has the first charge means that it has the first right on the assets of
the company in case of liquidation. If other banks also have charge against that asset then
they have second charge after the first one.
b) Second Charge:
Second charge means that the bank has the second right on the assets of the
company, and then afterwards third charge, fourth charge and so on have the right.
c) Pari Passu Charge

Pari Passu charge means that all the banks who have involved in the Pari Passu
charge have the equal rights. Pari Passu charge can be created for the first charge, or for
the second or so.
2-Lien on Documents:
Like charge, bank creates its lien on the documents in its possession, as security.
For example, in case of import transaction under L/C, bank creates lien on import
documents.
3-Guarantees:
Along with other securities, bank may rely on other guarantees like other bank
guarantees, to protect himself against the advances.
Processing of Loan
The banker must be very careful and ensure that his depositor’s money is
advanced to safe hands where risk of loss does not exist. When a customer requests his
banker to facilitate him with different credit facilities, the banker first assesses the
credibility of customer and the market conditions.
The elements of credibility, integrity, repayment, and market conditions help a
banker in arriving at a conclusion regarding the safety of advances.
Credibility:
It is the most important factor in determining the safety of advances, for there is
no substitute for integrity, honesty and trustworthiness. A borrower’s character can
indicate his intention to repay the advance, since his honesty and integrity is of primary
importance. If the past record of the borrower shows that his integrity has been
questionable then the banker usually tries to avoid such a customer.
Repayment:
This is the management ability factor, which tells how successful a business has
been in the past, and what are the future possibilities are. Before advancing loan a banker
must be satisfied with the sources of the repayment of the funds.
Capital:
The bankers also check the capital of the borrower. This can be kept as a security
of a loan. In other words, if the businessman financial Position is sound, only then he can
be lended.
CIB Report:
Bank cannot sanction any loan to a customer, until and unless it gets credit report
form CIB (Credit Information Bureau, SBP). Before making any decision about the
client, bank needs a CIB report. Therefore, first of all the bankers requests CIB to provide
the credit report of the client. This report indicates all the credit facilities outstanding
(availed) by the client.
Credit Line Proposal (CLP):

After being satisfied with the credibility and integrity of the applicant, the
processing of loan application starts with the preparation of Credit Line Proposal (CLP).
It has the vital and most important task assigned to the credit officers in BAL.
In a CLP, every information regarding the client and his business is stipulated as
follows:
• Total existing facilities (limit), their outstanding value and the securities that were
provided against these facilities.
• Total proposed limit of credit and the securities provided against it. The credit
officer does the analysis and verification of these securities
.
Business on OTT basis:
Client may conduct a business with bank on OTT (One Time Transaction) basis.
When a client wants his banker to facilitate him with a certain credit only for a single
transaction, then he would ask for OTT limit of credit facility. For example, in case of
OTT limit for SLC, credit facility expires with the completion of L/C cycle.
Regular Credit Limit:

But if the client wants to route a regular business with the bank, then he requests
for regular credit limit of credit facilities for a specific period. Following things should be
undertaken while preparing a CLP and also being mentioned in the CLP.
• Customer’s background, his relationship with the bank (if he is an existing

customer), his relationships with other banks.
• Purpose of facility and terms and conditions regarding the client.
• Nature of his business and what are the market conditions and opportunities fro
the business.
• Reciprocal business is also stipulated on the proposal, which means expected
business that would be routed through the bank for these facilities. Bank
calculates his profitability on the basis of this business.
Financial Analysis:
Financial Analysis of the business of the customer constitutes the most important
part of a proposal. Banker makes an analysis on liquidity, leverage and profitability of his
business.
Finally along with other information banker must himself gives his comments and
recommendations for the proposal.
HOME FINANCE
In home finance department I worked with Mr.Ali and learnt that:
• Home finance is term loan facility repayable in monthly installments and secured
by equitable or registered mortgage over real estate property
• Purpose of facility is to finance purchase, construction, improvements, extension
and restoration of private residential or commercial real estate property
• It shall be extended for all types of real estate properties i.e. houses, apartments,
bunglows, town houses, office premises etc
• Target customs are individuals (self employees, businessmen, salaried) including
permanent staff of BAL
TYPES OF HOME FINANCE
• Alfalah home buyer (3-20 years)

• Alfalah home construct (3-20 years)
• Alfalah home improvement (3-10 years)
• Alfalah home start (3-10 years)
• Alfalah balance transfer facility (3-20 years)
CAR FINANCE DEPARTMENT

Car finance department is responsible for providing cars to both individuals and
corporates and hence there are two types of products in this department
• Car Finance
• Auto Lease
•
The procedure for loan disbursement for leasing, home finance and car finance is
same as discussed above.
FOREIGN TRADE DEPARTMENT

In this department I worked with Mr. Zahid Rasool and learnt that trade deals
with the entry/departure of goods into/from one country to another country. International
Trade is basically a consequence of an agreement between a buyer and seller separated by
geographical boundaries.
To ensure secure transfer of goods to the right buyer and payment to the right
seller, the services of financial institutions are very important, which have contracts and
roots in both countries become indispensable.
The banks act as Authorized Dealer of the Government of Pakistan, serve four
purposes in trade. These are:
They use their reputation to give credibility to their customer, who may be
unknown in another country.
They check the validity of the trade agreement al along spotting and then
informing their customers of any deviation and discrepancy as regards the requirements
of the agreement.
They act as post offices, so as to lend validity to correspondence between the
importer and exporter.
They serve as moneychangers by dealing in the relevant currencies in the relevant
countries, allowing exporters to receive payment in their own currency and importers to
pay in their own.
Just as trading customers are interested in goods and not the documents, banks are
interested in documents and not goods. Banks see goods in their documents, not in the
shipyard. If the documents say the goods are fine, the bank accepts them as so, even
though the goods may, in reality be damaged or totally non-existent. Therefore,
preparation, transfer and perusal of documents command the greatest importance for
banks.
EXPORT DEPARTMENT
Here I learnt about:
• Procedure of registration as an exporter

• Documents needed for export
• Form “E”
• Checking of documents
• Exchange control regulation
• How to make foreign documents bills for collection
• How to make export payment realization certificate
• How to fill covering letter
• Mode of payment
This dept provides two types of services. One is that it according to SBP, registers
contracts between Pakistani Exporter and foreign importer. Foreign bank issues LC
(Letter of Credit) in the name of importer to the bank of advising bank on the basis of
Performa invoice or quotation submitted by importer. This Department scrutinizes and
advises the LC to its client, “the Exporter”. Exporter files an application for export
purpose, bank issues an E-FORM to exporter in which complete detail of goods
description, quantity, terms of sale, and destination name and address of both parties are
documented. This LC obliges the advising bank to send the documents as per
requirements. LC is basically the undertaking of the bank on behalf of exporter to
reimburse the draft to the beneficiary. In this case, banks liability gets high. Advising
bank send documents to the importers bank which in turn are given to importers bank
who can receive their shipment on getting documents from the bank after paying at sight.
When importer pays to bank, it withholds service charges and then transfer funds through
Reimbursement banks i.e. ABN Amro, Citi Bank to advising bank who further pays to
exporter after charging their service dues.
Letter of credit requires the following documents:
Bill of Lading:
This is issued by shipping lines, demonstrates the evidence of promised goods
have been shipped with stated number of quantity. Importer is obliged to receive his
shipment on the presentation of this bill of lading to their home shipping lines.
Bill of Exchange:
This bill is passed on the agreement between both parties on due payment dates,
shipment dates or any negotiation case (if any).
Packing List:
In packing list, exporter enlists the product description, total no of carton and total
gross Weight etc.
Commercial Invoice:
This invoice is issued by the co. in which it notifies the applicant of importer
about the rate per unit and total cost of goods exported.
Covering Schedule:
This covering schedule is dispatch on the above of all documents to be sent to
foreign bank. This contains all the accumulated information, negotiated against the letter
of credit.
Insurance certificate:
Importers prefer insurance certificate of commodities to avoid any sort of risk. In
the export of food commodities, the following documents are required:
• Certificate of Origin
• Fumigation certificate
• Philtosanitory/ health certificate.
Status for Exporters:

The exporter has to fulfill the following conditions:
• The person must be an account holder of BAL.

• No one can export any commodity until and unless he is a Pakistani National and
also has a valid registration with Export Promotion Bureau (EPB).
• The person must possess a valid membership certificate of Trade organization,
licensed and recognized by Federal Government like Chamber of Commerce (e.g.
Lahore Chamber of Commerce)
• The person must possess a valid NTN (National Tax Number) certificate.
• A person cannot export any good unless he files an E form (E stands for Exports)
with his application to the bank. All specifications stipulated on the form must be
met.
• The person must have the Sales Tax Registration Certificate.
E-Form:
E stands for exports. E-Form is a basic requirement to be fulfilled by an exporter.
E-Form is a very sensitive document. Bank does not give this form to any person before
filling of basic from which contains the information about his business, nature of
business, his name address, and some documents have to be attached with the form to get
E-form. These documents include:
• Certified copy of letter of authority, if E-form is signed by other than

proprietor/directors/partners on behalf of the company.
• Copy of ID cards of the proprietor/directors/partners and authorized persons
• Export registration certificate
• Lahore Chamber of Commerce Certificate
• National Tax number
E form contains the following details:
• Goods (with full details and quantity as identifiable with report)

• Quantity (bales, bundles, pieces)
• Invoice value of Goods (state currency and terms CIF, C&F, FOB)
• Terms of sales
• Port /Station country of departure
• Name and address of the Importer
• Name of carrying steamer/air co./truck co./railways
• Value declared in document
• Port of shipment
After filling the complete information about the goods to be exported, the exporter
brings E-Form to the bank for verification. The bank verifies the contents in accordance
with the documents and not by physical checking.
After getting the E-form verified from bank, the exporter starts preparing for the
shipment. As the bank only deals in documents, so in order to receive the payment for his
goods to be exported, the exporter has to send certain documents to the L/C issuing bank
via negotiating bank.
A very important step is to scrutinize the documents, before sending them to the
issuing bank. It requires utmost care of the bank officer. When the documents are
presented in the bank, they are always scrutinized and they must be in accordance with
the requirements stipulated on the L/C. Any deviation could result in rejecting the
documents by the importer, hence causing loss to the exporter or even to the bank if the
documents are to be negotiated.
IMPORT DEPARTMENT
In import department I learnt about:
• Issuance of import registration certificate

• Parties of L/C
• Letter of credit opening procedure
• Types of L/c
• Import license (registration of import in EPB)
• Import bill
• Checking an scrutinizing of documents
• Mode of payment
The Second section of trade finance department is Import. This department is

responsible to assist the importers in foreign trade by providing finances and guarantees.
This import department registers the contract between Pakistani importer and foreign
exporter under law of State Bank of Pakistan circular 56. An importer submits the
proforma invoices with contract. Besides contract the most widely provided service is
issuing letter of credit. Letter of credit is responsibility of the bank on behalf of the
importer to secure all trade process in against the exporter.
Once the importer files an application for trade purpose, the security evaluation of his
application is done by the credit department to analyze whether the shipment worth the
advances or not. On the approval, Importer is assigned a LC code and a PAD number.
The bank sends the approval of an LC in the name of importer to the Advising Bank
(Exporters bank). Exporters bank sends all the documents negotiated in LC to importers
bank. Once the shipment arrives in importing country, documents are kept with the bank
until the importer makes full payment to bank.
Letter of Credit
The letter of credit is today the foremost way of financing international trade. In
simple words, a letter of Credit (L/C) can be defined as:
“A bank’s written undertaking given to the exporter for payment of a certain sum of
money on behalf of the importer provided the exporter tenders to the bank or its
overseas agents, the specified documents within a specified period in accordance with
the terms of the undertaking”.
Advantages of L/C:
Following are some of the main advantages of a letter of credit:
• Since a letter of credit is opened only fro the importers with established credit
standing, the exporter is sure of receiving the price of his commodity.
• An exporter may obtain necessary finance immediately on shipment under a letter
of credit (through negotiation or OD buying).
• A letter of credit may help the importer to meet its financial difficulties. He may
obtain some finances against the L/C (Like FIM, FATR etc).
• Similarly, an L/C enables the exporter to obtain finances from his bank, for the
operations of production even before shipment (Pre-Shipment finance).
Following Banks are involved in letter of credit:

• Issuing Bank (Opening Bank)

• Reimbursing Bank
• Advising Bank
• Negotiating Bank
• Intermediary Bank
Issuing Bank (Opening Bank):

Issuing bank is the bank, which opens the L/C on behalf of the importer. This
bank’s undertaking under an irrevocable L/C is absolute. Therefore, once the L/C has
been communicated to the beneficiary through the bank, it has no option, but to pay,
provided the other terms and conditions have been fulfilled.
Reimbursing Bank:
Monetary transactions between both parties are taken place by reimbursement
bank. These banks are Citi Bank and ABN AMRO. Foreign bank transfers advising
bank’s funds through these banks. Three types of accounts are utilized in these
transactions:
• NASTRO: our account with others

• VASTRO: others account with ours
• LORO: others account with them
Advising Bank:
The bank that advises the L/C means who physically delivers the L/C to the
exporter on behalf of the issuing bank. It is a correspondent bank of the issuing bank
situated in the beneficiary’s country or it can also be a branch of issuing bank.
Negotiating Bank:
Negotiation is actually an exchange of value of draft. In this case, exporter
negotiates with bank to extend the due date because of unavailability of funds when
importer is obliged to pay the exporter. Bank pays to advising bank on behalf of importer
and agrees to charge the markup on funds when importer will pay. Bank pledge some
property worth of advances.
Intermediary Bank:
Intermediary bank is that where the negotiating bank has its Nostro Account and
who obtains reimbursement against L/C from reimbursing bank and gives credit to the
negotiating bank. For dollar payments, intermediary bank would have to be situated in
USA. Similarly, for transactions in GBP, both the Reimbursement and Intermediary
banks would be in UK.
Terms for an Importer to get an L/C:

A letter of Credit cannot be opened on behalf of the importer unless he fulfills the
following requirements:
• The person must be an account holder of BAL.

• No person can be an importer without first being registered with EPB. So the
person must have valid import registration with Export Promotion Bureau (EPB)
of Pakistan. This registration is not necessary fro those who have been exempted
from it.
• The person must process a valid membership certificate of Trade Organization,
licensed and recognized by Federal Government like a Chamber of Commerce
(e.g. Lahore Chamber of Commerce)
• The person must possess a valid NTN (National Tax No) certificate.
• The person must have the Sales Tax Registration Certificate.
L/C Application Form:

After having an approved L/C limit, the process of L/C opening starts with L/C
Application form. The bank has prescribed a standard application form that contains the
required guidelines, instructions and other relevant terms and conditions under which the
L/C is to be opened and claims from the beneficiary are to be settled.
The application form contains the following:
• Description of the goods, detail of quantity, unit price, total price and currency of
detail.
• Instructions about the advice of credit, whether it should be sent by airmail, by
courier or telecommunicated.
• Form of credit: Whether revocable or irrevocable, confirmed or unconfirmed. Due
to permission of irrevocable credit only, it is prescribed on from.
• The name and address of the beneficiary.
• Type of Credit: Whether sight, usance etc.
• Validity period of credit and last dates for shipment and negotiation.
• Port of shipment and port of destination and whether trans-shipment and/or part-
shipment are allowed.
• Types and number of sets of documents required to be submitted by the exporter.
• The application form is a formal contract between the issuing bank and the
applicant; therefore, it is signed by the customer, who by doing so undertakes to
abide by the terms and conditions of L/C, mentioned in the application form.
Documents Required for Import:

Performa Invoice:
The Performa invoice is the quotation of goods to be imported. It contains the
description of goods and their price.
Insurance Certificate:
A certificate of insurance of the goods to be imported is also required by the bank
in order to minimize the risk that it undertakes.
I” Form:
The “I” form is an important document containing the information about the
importer, exporter, the goods to be imported, the mode of shipment and etc. Its copies are
sent to the State Bank of Pakistan so that a record can be kept.
Bill of Lading:
This is issued by exporter’s shipping lines, demonstrates the evidence of promised
goods have been shipped with stated number of quantity. Importer is obliged to receive
his shipment on the presentation of this bill of lading to their home shipping lines.
Bill of Exchange:
This bill is passed on the agreement between both parties on due payment dates,
shipment dates or any negotiation case (if any).
Packing List:
In packing list, exporter enlists the product description, total no of carton and total
gross Weight etc.
Commercial Invoice:
This invoice is issued by the co. in which it notifies the applicant of importer
about the rate per unit and total cost of goods exported.
Covering Schedule:
Along with the above stated documents, the negotiating bank sends it’s covering
Schedule on which the instructions regarding the whole transaction are prescribed. It also
mentions the number of each document sent by the exporter. The number of each
document depends upon the instructions of importer mentioned on L/C.
This covering schedule is dispatch on the above of all documents to be sent to foreign
bank. This contains all the accumulated information, negotiated against the letter of
credit.
Indent:
When the importer and exporter don’t have direct relations and are connected to
each other through an intermediary, called Indenter, then he issues an indent form
containing all terms and conditions.
Mode of Payment
1. Sight L/C:
If the beneficiary of a credit is to obtain payment immediately on presentation of
stipulated documents, it is a Sight L/C.
Example: An L/C opened by BAL for I (importer) in favor of E (exporter),
requires I to pay for the goods, as soon as he sight the title documents or takes possession
of them. That is when the exporter’s documents reach BAL’s desk, BAL after checking
for discrepancies presents the documents to I. After satisfactory perusal from I’s part,
BAL gets I to sign the bill of Exchange, I is then asked to make payments for the goods
than BAL lets him to take possession of the documents.
2. Usance L/C:
When a credit stipulates payment to the beneficiary upon the maturity of a bill of
exchange drawn under the terms of the credit, it is an ‘acceptance credit’, ‘term credit’ or
‘usance credit’.
In this form of credit the beneficiary draws a draft for a particular usance (e.g.30,
60, or 90 days etc,), payable upon either the correspondent bank or the issuing bank.
Example: If L/C says “payment to be made 90 days from bill of lading date” or
any similar statement, this implies a usance period. After 90 days from bill of lading date,
Citi Bank NY (exporter’s bank) will debit BAL Nostro account and remit payment to E.
Meanwhile, in Lahore on arrival of documents, BAL will get I to sign the bill of
exchange, drawn on BAL, calling for payment on the due date.
Documents are then released to I so he can get the possession of goods. After 90
days, if I refuse to pay, BAL is responsible for it.
Lodgment of Documents in PAD (For sight L/C’s only):

After all the documents are scrutinized carefully, documents are lodged in PAD
(payment Against Documents). For this purpose, the documents are stamped with PAD
for a specific PAD number and entered into the register by the total amount. Exchange
rate (selling) approved by the BAL treasury (fro that day) is charged.
When the documents are lodged in PAD, L/C becomes a fund-based facility. Until
the party does not make the payment, PAD remains outstanding and the bank keeps the
documents in its safe custody. Record of every information regarding PAD is mentioned
in the PAD register.
A PAD register contains:
• Date of Lodgment of PAD

• PAD number
• Importer’s name
• Invoice price in Foreign Currency
• Invoice price in Foreign Currency
• L/C margin (if any)
• PAD amount
• Name of vessel
• Date of Retirement of Documents
Retirement of Documents:
The whole transaction of foreign trade in which an L/C is involved, completes
with the retirement of documents.
The documents that are first lodged in PAD are retired when the importer pays the
total amount (payable). This amount includes the PAD plus the mark-up charged on PAD
and other charges (mentioned on cost memo). Upon receipt of payment, when the
documents are retired, they are given to the importer and he gets the consignment cleared
from custom authorities (by submitting the Bill of Entry).
Shipping Guarantee
Sometime, it so happens that the consignment reaches the port in the importer’s
country but the bank has not received the documents.
Since, the importer needs original bill of lading and commercial invoice to get his
consignment cleared, through the bill of entry. Whereas these documents has not reached
the bank and without these, the importer cannot claim possession of the consignment. So
the bank, in such case, issues a shipping guarantee. Bank does so against a certain
margin, which should be 110%.
Short Term Financing Facilities

Finance Against Imported Merchandise (FIM):
Finance against Imported Merchandise (FIM) is a credit facility provided to the
customer, in L/C transaction. In FIM, bank itself makes the payment to the exporter and
the goods are kept in the possession of bank. Delivery order (DO) is issued by the bank
for every time, when the importer makes the payment, goods are transferred in the
possession of importer.
Finance Against Trust Receipt:

The bank also offers credit facility FATR, against sight L/C’s, like FIM. Contrary
to FIM, goods are given in the possession of importer. This facility is provided to the
customer having a credit rating A+.
FINANCIAL STATEMENT
ANALYSIS
 Financial Statements
 Trend/horizontal analysis
 Vertical analysis
 Financial Ratio analysis
Bank Alfalah Limited

Balance Sheet
2004-2003
Particulars 2004 2003

Assets
Cash and balances with treasury banks 19,708,518 8,423,399

Balances with other banks 3,183,957 626,917
Lending to financial institutions – 7,437,733
Investments 35,503,196 28,903,596
Advances - net of provision 88,931,400 49,216,120
Operating Fixed Assets 4,280,504 2,791,626
Other Assets 3,226,959 1,553,108
154,834,53
4 98,952,499
Liabilities
129,714,89
Deposits and other accounts 1 76,698,322
Borrowing from other banks, agents etc. 12,723,830 13,127,754
Bills Payable 2,233,671 1,208,671
Other Liabilities 2,725,344 2,186,754
Deferred Liability - Staff retirement gratuity 275,834 323,010
Subordinate Loans 1,899,480 649,740
149,573,05
0 94,194,251
Net Assets 5,261,484 4,758,248
Represented By
Share Capital 2,500,000 2,000,000
Reserve funds and other reserves 1,008,772 790,374
Unappropriated profit 860,300 963,042
4,369,072 3,753,416
Surplus on revaluation of fixed assets 892,412 1,004,832
5,261,484 4,758,248

Income Statement
2004-2003

Mark-up / return / interest earned 5,620,203 4,033,380
Mark-up / return / interest expensed 2,434,459 2,028,577
Net mark-up / interest income 3,185,744 2,004,803
Provision against non-performing loans and
advances - net (370,208) (87,091)
Provision for diminution in the value of
investments (2,165) –
Bad debts written off directly (351) (418)
(372,724) (87,509)
Net mark-up / interest income after provisions 2,813,020 1,917,294
NON MARK-UP/INTEREST INCOME
Fee, commission and brokerage income 675,868 399,383

Dividend income 52,539 112,017
Income from dealing in foreign currencies 218,820 106,848
Other income 572,822 2,773,503
Total non-mark up / interest income 1,520,049 3,391,751
4,333,069 5,309,045
NON MARK-UP/INTEREST EXPENSES

Administrative expenses 2,677,635 1,799,490
Provision against non-performing advances – 2,000
Other charges 1,700 1,875
Total non-mark up / interest expenses 2,679,335 2,679,335
PROFIT BEFORE TAXATION 1,653,734 3,505,680
Taxation-Current 586,159 1,364,723

-Prior (30,000) 22,887
-Deferred 9,249 8,507
561,745 1,382,446
PROFIT AFTER TAXATION 1,091,989 2,123,234

Balance Sheet
2005-2004

Assets
Cash and balances with treasury banks 24,788,625 19,708,518

Balances with other banks 9,713,369 3,183,957
Lending to financial institutions 27,050,493 -
Investments 57,425,700 35,503,196
118,864,01
Advances - net of provision 0 88,931,400
Operating Fixed Assets 6,620,067 4,280,504
Other Assets 3,851,529 3,226,959
248,313,79
3 154,834,534
Liabilities
222,345,06
Deposits and other accounts 7 129,714,891
Borrowing from other banks, agents etc. 5,844,389 12,723,830
Bills Payable 3,733,124 2,233,671
Subordinate Loans 1,899,480 649,740
240,849,66
7 149,573,050
Net Assets 7,464,126 5,261,484
Represented By
Share Capital 3,000,000 2,500,000
Reserve funds and other reserves 2,351,218 1,008,772
Unappropriated profit 1,386,845 860,300
6,738,063 4,369,072
Surplus on revaluation of fixed assets 726,063 892,412
7,464,126 5,261,484

Income Statement
2005-2004

Mark-up / return / interest earned 12,246,811 5,620,203
Mark-up / return / interest expensed 7,204,992 2,434,459
Net mark-up / interest income 5,041,819 3,185,744
advances - net (402,298) (370,208)
Provision for diminution in the value of investments 23,163 (2,165)
Bad debts written off directly (512) (351)
(379,647) (372,724)
Net mark-up / interest income after provisions 4,662,172 2,813,020
Fee, commission and brokerage income 1,158,747 675,868

Dividend income 52,014 52,539
Income from dealing in foreign currencies 290,091 218,820
Other income 744,518 572,822
Total non-mark up / interest income 2,245,370 1,520,049
6,907,542 4,333,069

Administrative expenses 4,313,023 2,677,635
Provision against non-performing advances 10,125 -
Other charges 21,104 1,700
Total non-mark up / interest expenses 4,344,252 2,679,335
PROFIT BEFORE TAXATION 2,563,290 1,653,734
Taxation-Current 592,635 586,159

-Prior 267,524 (3,663)
-Deferred (7,000) (30,000)
861,196 561,745
PROFIT AFTER TAXATION 1,702,094 1,091,989
Trend/Horizontal Analysis
Trend Analysis
Balance Sheet
2005-2004
% Change
Assets
Cash 21.19 133.92

Balances with other banks 54.82 200.73
Money at call and short notice 790.00 -59.68
Investments -0.51 46.573
Advances - net of provision 47.59 33.123
operating Fixed Assets 6.72 337.37
Other Assets -12.12 3.8581
31.20 46.774
Liabilities
Deposits and other accounts 29.46 33.189

borrowing from other banks, agents etc. 56.08 120.44
Bills Payable -12.01 133.62
other Liabilities 67.71 111.09
Deferred Liability - Staff retirement gratuity -2.87 -6.865
34.03 43.314
Net Assets -0.47 101.01
Represented By
Share Capital 0.00 0
Reserve funds and other reserves 4.56 12.272
Unappropriated profit -86.44 140.6
Shareholder's Equity 0.60 4.2529
Surplus/(deficit) on revaluation of investments - -
-0.91 4.2529
Surplus on revaluation of fixed assets 0.00 -
-0.47 101.01
Comments:
The trend analysis is also called the horizontal analysis. The trend analysis of an
organization gives a picture of all the financial strengths and weaknesses of the business.
Assets:
The level of cash with the bank rose sharply in the year 2004also increases in the year
2005.In 2004the level of cash in hand in local currency increased and took he level of
cash up with them.
The balances with other banks also rose tremendously in the year 2004. Mainly there was
a major increase in the deposit accounts outside Pakistan which rose the percentage.
Call money is a highly volatile account and its increase or decrease does not signify
much. According to the Balance sheet, in the year 2004it fell by 59% but then in 2005 it
rises by 790%.
The bank’s investment does not show any significant change in the year 2005 but in 2004
it rises by 47%, which was mainly because of the investment in FIB, T-Bills and prize
bonds.
The Advances of the bank increases consistently. This is a very good sign for the bank
and it also shows that the business of the bank is growing. The increase in the level of
advances has also led to an increase in the mark up income received.
Operating fixed assets of the bank rises immensely in the year 2004, which shows that the
bank is in its growing stages. It also shows a meager increase in the year 2005.
The total assets of the bank increased by 46% in 2004 and 31% in the year 2005
signifying an increase in the business of the bank.
Liabilities:
The deposits of the bank are increasing steadily and consistently in the previous years.
Increasing trend in the deposits is a very encouraging trend for the bank.
Borrowings from other banks have been on the rise too. There was 120% increase in
2004 . This shows that the bank is a regular borrower from the inter bank money market.
Rather than going for deposits, it finds it easier to borrow from the money market. This is
having an adverse effect on the bank’s cost of capital.
The total liabilities of the bank rise in the recent years but the increase matches the
increase in the assets so it is not alarming for the bank.
Equity:
The total equity includes the reserves, as well as the assigned capital and the unremitted
profit. The total amount is increasing through 2003. But the difference is not much.

Trend Analysis
Income Statement
2003-2005
% Change
Mark up/interest & discount/return earned 18.51 17.26
less: Cost/return on deposits, borrowings 16.94 12.24
23.88 38.38
Fees, commissions and brokerage 78.90 47.18
Profit from investment securities 42.23 312.32
Dividend Income - -
Other Operating Profit 21.63 -6.16
45.83 13.10
30.49 29.65
Operating Expenses
Administrative expenses 25.01 19.30
-
Provision against non-performing advances -23.61 243.61
Bad debts written off directly - -
Provision for other Losses - -
52.60 -38.30
13.69 695.28
Other Income -59.69 -85.08

Profit before taxation 12.96 423.23
Taxation-Current -22.73 -45.70

198.3
-Prior 1 -
419.7 -
-Deferred 8 107.57
-
-6.51 354.92
Profit after Taxation 37.58 7.68
Comments:
Increase in Total revenue:
Year Total Revenue Change % Change

2003 1789889 - -
2004 2091893 302004 16.87
2005 2529896 438003 20.94
The figure of Total Revenue includes the markup earned, the fees, commissions and
brokerage earned, profit from investment securities, Dividend income, and other
operating income. The other operating income has been include in total revenue as it also
includes the income of the bank from dealing in foreign currencies and some of the
charges the bank receives.
The total revenue has been increasing. This is a positive sign for the bank which shows
that the bank is growing every year and also enjoying high profit every year.
Cost / Markup Paid:

The movement in the cost and markup paid is along with the movement in the total
revenue. The increase in revenue has been in a higher percentage as compared to the
increase in the cost. This is a very encouraging feature for the bank.
Administrative Expenses:
The administrative expenses have been on the rise consistently. This is not a bad sign and
shows the expansion of the bank’s business but only if the deposits have also been
increasing along with the expenses.
The total deposits increased in the year 2004 and 2005 followed by the increase in the
Administrative expenses and there is no significant change in both of them.
Vertical Analysis
Balance Sheet
Vertical Analysis
2005-2004
% change
Assets
Cash and balances with treasury banks 99.8 12.72

Balances with other banks 3.9 2.05
Lending to financial institutions 10.8 -
Investments 23.12 22.93
Advances - net of provision 47.86 57.4
Operating Fixed Assets 1.55 2.08
Other Assets 2.6 2.76
100 100
Liabilities
Deposits and other accounts 89.54 83.77

Borrowing from other banks, agents etc. 2.35 8.2
Bills Payable 1.50 1.44
Subordinate Loans 1.29 1.22
97 96.6
Net Assets 3 33.98
Represented By
Share Capital 1.2 1.6
Reserve funds and other reserves 0.94 0.65
Unappropriated profit 0.55 0.55
2.71 2.82
Surplus on revaluation of fixed assets 0.29 0.57
3 33.98
Comments:
The vertical analysis is calculated by dividing each item with the total assets of the
particular year
Assets:
The level of cash with the bank rose sharply in the year 2004also increases in the year
2005.In 2004the level of cash in hand in local currency increased and took he level of
cash up with them.
The balances with other banks also rose tremendously in the year 2004.
The bank’s investment does not show any significant change in the year 2005 but in 2004
it rises by 23% which was mainly because of the investment in FIB, T-Bills and prize
bonds.
The Advances of the bank decreases

This is not a very good sign as it shows that the business of the bank is going downwards.
The decrease in the level of advances has also led to a decrease in the mark up income
received.
Operating fixed assets of the bank rises immensely in the year 2004, which shows that the
bank is in its growing stages. But It shows a meager decrease in 2005
Liabilities:
The deposits of the bank are increasing steadily and consistently in the previous years.
Increasing trend in the deposits is a very encouraging trend for the bank.
Borrowings from other banks have been on the decrease which is good sign that bank is
able to fund its activities itself and doesn’t need any financial need from other banks or
institutions.
The total liabilities of the bank rise in the recent years but the increase matches the
increase in the assets so it is not alarming for the bank.
Equity:
The total equity includes the reserves, as well as the assigned capital and the unremitted
profit. The total amount is increasing through 2003. But the difference is not much.

Income Statement
Vertical Analysis
2005-2004
% change
Mark-up / return / interest earned 242.9 176.4
Mark-up / return / interest expensed 142.9 75.4
Net mark-up / interest income 100 100
advances - net (7.9) (11.6)
Provision for diminution in the value of investments (0.45) (10.067)
Bad debts written off directly (0.01) (0.01)
(5.22) (6.72)
Net mark-up / interest income after provisions (7.52) (11.6)
Fee, commission and brokerage income 22.98 21.2

Dividend income 1.03 1.64
Income from dealing in foreign currencies 5.75 6.86
Other income 14.76 17.98
Total non-mark up / interest income 44.53 47.71
137 136

Administrative expenses 85.54 94
Provision against non-performing advances 0.2 -
Other charges 0.4 0.05
Total non-mark up / interest expenses 86.16 84.10
PROFIT BEFORE TAXATION 50.84 51.9
Taxation-Current 11.75 19.39

-Prior 5.80 (0.11)
-Deferred (0.138) (0.84)
17.08 17.63
PROFIT AFTER TAXATION 33.75 34.27
Comments:
The figure of Total Revenue includes the markup earned, the fees, commissions and
brokerage earned, profit from investment securities, Dividend income, and other
operating income. The other operating income has been include in total revenue as it also
includes the income of the bank from dealing in foreign currencies and some of the
charges the bank receives.
The total revenue has been increasing. This is a positive sign for the bank which shows
that the bank is growing every year and also enjoying high profit every year.
Cost / Markup Paid:

The movement in the cost and markup paid is along with the movement in the total
revenue. The increase in revenue has been in a higher percentage as compared to the
increase in the cost. This is a very encouraging feature for the bank.
Administrative Expenses:
The administrative expenses have been on the rise consistently. This is not a bad sign and
shows the expansion of the bank’s business but only if the deposits have also been
increasing along with the expenses.
The total deposits increased in the year 2004 and 2005 followed by the increase in the
Administrative expenses and there is no significant change in both of them.
Financial Ratio Analysis

NET PROFIT MARGIN
= Profit after Taxation * 100

Total Revenue
2005= 215,350 * 100
2529896
= 8.51 %
2004= 156524 * 100

2091893
= 7.48 %
2003= 145365 * 100

1789889
= 8.12 %
The net profit margin is a profitability ratio which shows the combined effects of
liquidity, asset management, and debt on operating results. For the year 2005, the net
profit margin of the bank shows an increasing effect which is encouraging for the bank
Net Profit Margin

9 2005
2003
8 2004
%7
6
Years
2004
2005 2003
RETURN ON EQUITY
= Net Profit (Profit After taxation) * 100

Paid Up Capital + Reserves
2005 = 215,350 * 100

899469
= 24 %
2004 = 156524 * 100

886399
= 17.66 %
2003= 145365 * 100

855094
= 17 %
The return on equity shows the return the owners of the business enjoy after paying all
the financial expenses and other liabilities of the business. The return on equity keeps on
increasing for the past three consecutive years which is a very healthy trend for the bank.
Return on Equity
30
2005
20 2004 2003
%
10
Years
2005 2004 2003
RETURN ON INVESTMENT
= Net Profit + Cost / Return on Deposits * 100

Share Holder’s Equity + Total Liabilities
2005 = 1939391 * 100

26759737
= 7.25 %
2004 = 1630867 * 100

20188658
= 8.08 %
2003 = 1458929 * 100

14321107
= 10.19 %
The return on investment shows the average return earned by all the investors and
stakeholders of the business. The net profit is available to the share holders whereas
markup is paid to the creditors. The bank has been giving quite steady ROI since 2003
and it has remained between 10.19% to 7.25%. The decrease in the cost/return paid on
deposits or increase in total liabilities result in decrease in ROI.
Return on Investment
15
2003
2004
% 10 2005
5
0
Years
2005 2004 2003
ADMINISTRATIVE EXPENSES TO DEPOSITS

= Administrative Expenses * 100
Deposits
2005 = 503256 * 100

20481568
= 2.46 %
2004 = 402559 * 100

15820473
= 2.54 %
2003 = 337447 * 100

11878221
= 2.84 %
This ratio is very helpful in determining the relationship between the deposits and the
cost associated with maintaining them. The benchmark figure is 2%-3%. This ratio shows
the shrewdness of the management of Bank Alfalah. It is below 3% and also showing
decreasing trend in the past years.
Admn. Expense to deposit ratio
2.9 2003
2.8
2.7
% 2.6 2004
2005
2.5
2.4
2.3
2.2
Years
2005 2004 2003
COST OF FUNDS RATIO

= Cost/Return on Deposits + Admn. Expenses * 100
Total Deposits + Borrowings
2005 = 2227297 * 100

25120698
= 8.87 %
2004 = 1876902 * 100

18792713
= 10 %
2003 = 1651011 * 100

13226534
= 12.48 %
This ratio shows the cost that the bank has had to incur on the financing it has received
from various sources. These sources can be the money deposited by the depositors or the
funds that the bank borrows from other banks and agents etc. The bank pays markup to
these banks and agents and bears admn. Expenses to maintain deposits. Ideally, the cost
of funds should be less than the ROI but in this case ROI is lower than costs of funds.
Cost of Fun
14
12
Debt to Equity Ratio
10 2005
= Total deposit
Equity
2005 = 20481568
899469
= 22.8 times
2004 = 15820473
886399
= 17.85 times
2003 = 11878221
855094
= 13.9 times
This is also a very critical ratio and shows the long-term solvency position of an
organization. The bench marked level is 10 times. The bank should increase its equity
level i.e. reserves plus assigned capital. Bank Alfalah has a very high debt equity ratio
which shows that outsider’s money is being used to run the business. And the D.E ratio of
Bank Alfalah is kept on increasing
Debt Equity Ratio
25 2005
20 2004
2003
% 15
10
5
0
Years
2005 2004 2003
SEGMENT ANALYSIS
SECTOR DEPOSITS ADVANCES

Rupees Percentage Rupees Percentage
In 000's % In 000's %
PUBLIC 3021384 14.75 841748 5.52
PRIVATE 17460184 85.25 14400569 94.48
TOTAL 20481568 100 15242317 100
The segment analysis shows the breakup of advances and deposits according to the sector
of the economy. The sectors have been divided into two broad categories, i.e. public
sector and private sector.
It is evident from the table that most of the bank’s dealings are with the private sector.
94.48% of advances are towards this sector. The public sector has only 5.52% of the total
advances. Similarly, 85.25% of the deposits are by the private sector and the public sector
is only a minor depositor with nearly 15%.
ADVANCES
6%
94%
PUBLIC PRIVATE
• SWOT Analysis
 Strengths
 Weakness
 Opportunity
 Threat
SWOT
Strengths:
 Bank is in its growing stages so there is good financial position.
 Professional and Committed workforce
 Low cost than other major banks
 Wide National Branch Network
Weaknesses:
 Less Advertisement
 Slow in introducing new products
Opportunities:
 Bank Alfalah can fully avail the facilities of E-banking.
 Extension of International network of the branches
 Introduction of innovative products
 Growing market
 Credit Card Facility
Threats:
 Uncertain economic conditions
 Action taken by competitors
 Political instability
PEST
Political Environment:
 Government encourage a sound financial industry
 Inconsistent Government Policies because of instability in the country
Economic Environment:
As far as the economic conditions goes than we all know that the economic conditions
look like that they are getting favorable in Pakistan.
 Pakistan is the country that is benefiting best from the Afghanistan Crisis, as it is
having Aids that is favorable for the economic conditions as well as the industries.
 As far as the rate of profit is concerned it is declining than it was in the past so
people are reluctant to deposit their money in banks.
Social Environment:
 The social environment in this regard is always favorable because the businesses
in which the banks are involved do not have any side effects on the society.
 Majority of the people in Pakistan have faith in the banks and feel that there
money is safe in the banks.
Technological Environment:
The overall technological environment for this industry is favorable.
 Technological advancements constantly bring new machines, which have the
ability to produce more. It makes the process of the faster than before.
 The technological change in the computer industry is favorable for us. The reason
for that is that because of rapid growth in the computer industry which will
encourage online banking.
Competitors
Despite notable economic uncertainties, the financial strength of Bank Alfalah Limited
has greatly enhanced during the previous years. The successful expansion program
proved their capability and commitment in comparison with the competition in the
financial sector. The Banking structure in Pakistan comprises of:
 Central Bank
 Commercial Banks
 Investment Banks
 Development finance Institutions (DFIs)
 Specialized Banks
 Foreign Banks
Bank Alfalah is a private commercial bank so the major competitors of Bank Alfalah are
the following:
 Askari Commercial Bank Ltd
 Union Bank Ltd
 Soneri Bank Ltd
 Prime Commercial bank
 The bank of Punjab
 Bolan Bank Ltd
 Bank Al-Habib Ltd
 ABL
 Faysal Bank Ltd
 Platinum Bank Ltd
Suggestions & Recommendations
Based on the SWOT analysis of the National Bank of Pakistan, it is observed that the
Bank like the other public sector Industries has not been showing up to mark
performance. There is a long list of weaknesses that is given on the previous page. Most
of them are going along since long time and that all efforts made to remove them have
not succeeded. On the basis of SWOT analysis of the Bank the following suggestions and
recommendations are given.
 NBP should be in pace with on going changing in banking industry, like other
bank. Now this bank combining all it power and trying to approach other banks.
 Latest reorganizing efforts are necessary to make it cost effective also making its
facility accordingly to modern banking. These must continue.
 Bank management has to put its all effort to change the prevailing culture of the
bank and to put the foundation stone of business oriented culture. In which
employees give important to the bank and its customer.
 Bank should try to get rid of the political influence to be able to compete in the
industry with prudent and strong policies.
 The undue reliance on the public sector be minimized and ventures of private
sectors should be taken as well
 Redefining of rules, regulations and policies should be made implemented at all
cost.
 Efforts of great importance to be made for the over the counter services of general
banking making it more simple and faster to get a better response of the
customers. The behavior of the employees, especially on the counter has to be
strictly monitored and checked.
 The still existed bureaucratic approval system has to be demolished.
 All advances should be made by getting the maximum security and should focus
on productive work.
 Better and comprehensive long-term and short-term planning should be made to
forecast the future needs.
 There is a possibility of establishing a task force to ascertain the effectiveness of
the policies being implemented.
 The Bank should develop a comprehensive recruitment policy to make only the
competent ones to be on the job.
 There is a still a vast pool of incompetent employees that has to right sized.
 There is lack of promotional element in the planning and budgetary decisions of
the Bank that has to think seriously.
 All branches of the Bank should be computerized for increasing the effectiveness
and efficiency of its employees.
 Efforts should be continued to keep the powers of employees union to the
minimum, like the current situation.
 Promotions must not be delayed and should be made on time to further increase
the commitment and efficiency of the employees.
These and many others can make a good set of recommendations, which have to be made
possible to escape from the threats and weaknesses and the risks in environment that
surrounds the Bank. The management do considers the policy matter that are not helping
the Bank, but are still in practice due the absence of prudentially regulated system to
protect them and the Bank, Efforts have been made with serious concern to give NBP a
status that It has to maintain by having practices of:
 Right sizing of the employees.

 By closing unprofitable branches.
 By introducing a merit based selection criteria.
 Promotions made conditional with qualifications.
REFERENCES
I have concerned the following resources for the making of my internship report. These
resources include the different employees of NBP, different relevant internet websites
and the annual report of NBP.
WEB REFERENCES:
1. www.Nbp.com.pk
2. www.bankshistory.com
3. www.google.com
4. www.yahoosearch.com
5. www.hotmailsearch.com
6. www.gmailsearch.com
7. www.ask.com
8. www.allrefers.com
9. www.reports.com
Recommendations
After doing internship of six weeks in Bank Alfalah Limited, I have analyzed some
problem in the Bank. Following are my recommendations:
 Web Site:
Bank Alfalah limited has the web site, which has not been updated. The web site is very
less informative and it won’t leave a good impression on the visitor. So I suggest that it
should be updated to meet the requirements of the visitors.
 Marketing:
Bank Alfalah is not very prompt in its marketing like its competitors. Most of the people
in Pakistan know nothing about the bank or its products so the bank should spend and
concentrate more on its marketing through various communication channels.
 Misdistribution of work:
In Bank Alfalah, there is misdistribution of work; some people are over burdened with
the work. So I suggest that there should be fair distribution of work in all the
departments.
 Participative management:
Participative management concept should be adopted, where ideas from the employees
should also be taken, not only for developing products but also on service, efficiency,
employee morale etc. in order to improve them.
 Split Units:
Bank Alfalah is a very well established bank, but the number of air conditioners they
have in the whole bank is very less. Bank should increase the number of its Split units,
because summer stays longer in Lahore.
 Fax Machines and Photocopying Machine:

The number of Fax machines and photocopying machine in the bank are also less than
they are needed. For photocopying one has to go downstairs. So there should be more
machines and also their placement should be at the right place.
 Appropriate Dinning Hall:

The major problem which I have faced in the bank is of the lunch. In the surroundings of
the bank, it didn’t have restaurants so the bank has its own dining hall. But there was no
arrangement for the lunch in that dining hall so I think that there should be an appropriate
dining hall.
Conclusion
The conclusion of Bank Alfalah Limited is as follows:
 Good Image:
Bank Alfalah has the benefit of having better reputation and image because of having
the strength of Abu Dhabi consortium and under the leadership of His Highness
Sheikh Nayan Mabarak Al-Nahayan. People feel lesser risk for investing their money
with the bank.
 World Class Services:

The bank is providing its customers world class and excellent services. This is the
main reason for the growth of the bank.
 Coordination:
Meetings are held very frequently which keeps the head-office well informed about
the performance of its branches and also provides officials with the opportunity to
communicate, discuss and deals with different situations as they arise.
 Employee Behavior:
The employees of Bank Alfalah Limited are very committed to their work. They are
very hard working and punctual but some of them have problems with he
environment of the bank and they feel that the branch environment is not very
encouraging.
LIST OF ANNEXURE
Annexure A: Deposit Slip

Annexure B: credit card payment slip
Annexure C: FC account slip (dollars)
Annexure D: FC account slip (pounds)
Annexure E: Credit slip
ANNEXURE A

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BANK ALFALAH LIMITED

AHMAD BHATTI- ------------------------------------------------8259

SUPERIOR UNIVERSITY LAHORE

Hailey College of Commerce, University of The Punjab, Lahore is making valuable

After introduction comes management system of Bank Alfalah in which its

HABIB CREDIT AND EXCHANGE BANK—1992

Al-Nahayan, Minister of Education, Government of Abu Dhabi, and a prominent

branches. One overseas branch is located in Dhaka, Bangladesh. In the coming

The bank aims to further enhance performance standards through implementation

Philosophies followed at the bank are:

At the time of my internship, the branch has a total of 54 employees, ranging

Service excellence is one of the objectives of Bank Alfalah.

Alfalah strives continually on the development of new areas of activities to

Bank focus is on Foreign Trade as primary niche of business.

Alfalah’s objective is the complete automation and computerization of all of its

Alfalah Training and Development program of its employees is aimed at

The introduction and development of innovative financial instrument will be

THE CHAIRMAN (OUTGOING)

H. H. Sheikh Nahayan Mabarak Al-Nahayan

H. H. Sheikh Nahayan Mabarak Al-Nahayan is an important and prominent

THE CHAIRMAN (NEW)

H. E. Sheikh Hamdan Bin Mabarak Al-Nahayan

BOARD ADVISORY COMMITTREE

BOARD AUDIT COMMITTEE

BOARD CREDIT AND FINANCE COMMITTEE

BOARD RISK AND MANAGEMENT COMMITTEE

CENTRAL MANAGEMENT COMMITTEE

Mr. Hamid Ashraf

CHIEF FINANCIAL OFFICER

Mr.zahid ali H.Jaml

A.F.Ferguson & Co.

TOP MANAGEMENT HIERARCHY

Manger Manager International Manger

Clearing Internal Audit Marketing

Field of Activities of BAL

After learning in clearing Department I was sent in Remittances Department.

ACCOUNT OPENING DEPARTMENT

• Account Opening Procedure

An account opening is an initial step of building contractual relationship with

Bank Al-Falah offers following types of Currency Accounts:

Customers can avail following types of Accounts:

Documents Required for Limited Co.

Memorandum and articles of Association

Copy of Board Resolution:

Certificate of Commencement of Business

Copies of NIC of directors:

Documents Required for Partnership.

NIC photocopies of all partners:

Partners mandate for operation of Account

Documents Required for Club/ Society/ Association

Documents Required for Sole Proprietorship/ Individual

Letter from the Proprietor

Procedure of Account Opening

• This account is further approved by Manager operations

Procedure of Account Closing:

• An account holder has to fill up the account closing form.

• Procedure of clearing a cheque

• Demand draft (D.D)

Demand Draft Misplacement:

Cancellation of Pay Order:

Beneficiary acts in two ways:

Major heads include in budgets are:

Income & expenditures of bank: