INTERNSHIP REPORT ON

BANK ALFALAH LIMITED

BRANCH HARIPUR

BY

M. JUNAID KHAN

Roll No: 13160

BBA HONS (FINANCE)

SESSION 2007-2011

DEPARTMENT OF MANAGEMENT SCIENCES

HAZARA UNIVERSITY HAVELIAN CAMPUS

INTERNSHIP REPORT ON

BANK ALFALAH LIMITED

BRANCH HARIPUR

Internship Report submitted to the Department of Management Sciences

In partial Fulfillment of the Requirements for the Degree of

Bachelor of Business Administration

DEPARTMENT OF MANAGEMENT SCIENCES

HAZARA UNIVERSITY HAVELIAN CAMPUS

APPROVAL SHEET

It is certified that Mr. M.Junaid Khan Student of BBA HONS (Finance) has submitted

report to department of Management Sciences, Hazara University Havelian campus as

required by the university.

Internal Supervisor:

Signature: ___________________________

Name: ___________________________

Designation: ___________________________

Organization: ___________________________

External Examiner:

Signature: ___________________________

Name: ___________________________

Designation: ___________________________

Organization: ___________________________

ACKNOWLEDGEMENT

First of all I would like to thank Almighty Allah who made me able to complete this

internship report by utilizing my skills and knowledge. I am also thankful for giving me

spirit of patience, consistency and courage during my internship.

I acknowledge my thanks to my report supervisor Ms. Tahira Qureshi Department of

Management Sciences. As a supervisor his constructive and critical guidance, enable me

to complete my report. I am also grateful to the faculty of Management Department,

especially my respected teachers for their assistance, cooperation and guidance to furnish

my academic career and also for giving me chance to show the best of my abilities during

the period of my internship.

At Bank Alfalah, I would like to thank Sir.Anees Ur rehman (Manager operation) who

provided me full opportunity to start internship and accumulate first hand comprehensive

information’ during my internship. I offer my heartiest thanks to my respected parents

who encouraged and supported me to achieve this target. Whose valuable guidance and

persistence help remains with me in every field of life.

Last but not the least, I express our deepest gratitude to all those who contributed directly

or indirectly to bring this report to this original format, because I would never have been

able to achieve this by my self.

M.Junaid Khan

CHAPTER: 1

INTRODUCTION TO STUDY

1.1 Background of the Study

Banks play a vital role in strengthening economy of any country. They help in mobilizing

savings and provide capital for trade, commerce and industry. In Pakistan banking sector

has always shown remarkable results in the past and is carrying on with it. BAL is one of

the leading banks in Pakistan, and had played a key role in the development of the

country.

The opportunity has been provided to understand the bank operations during six weeks

internship in Haripur Branch as the requirement for fulfillment of MBA degree. In this

report different aspect of the banking sector in general and BAL in particular with

especial emphasis on account opening, clearing and remittances have been covered.

1.2 Purpose of the Study:

The purpose of the study is to give a comprehensive review of the BAL and to analyze its

financial aspects. Besides that, the purpose of the study is:

1) To compare the theoretical knowledge with the actual practical work.

2) To study operations of the banks, and to analyze the strength and weaknesses of

the organization.

3) To analyze its financial performance.

4) To recommend the measures to improve overall performance.

1.3 Methodology of Study:

For writing this report the information has been collected by following ways. There are

two types of data used for report writing.

1.3.1 Primary Data:

The data, which is collected for the first time and exist in raw form, is called

primary data. It includes:

i. Personal observation

ii. Discussion with staff

iii. Informal interviews with branch manager

1.3.2 Secondary Data:The data gathered from existing sources are called secondary data. They are in

processed form.

The main sources of secondary data of BAL are: -

i. Annual reports of BAL

ii. BAL’s website/ internet

iii. Manuals

iv. Brochures

v. Relevant books

vi. Circulars

1.4 Limitations of the Study:

1.4.1 Lack of Time:

A time period of 3 weeks is not enough to study the operations of such a large

organization like bal. so the study had to be restricted to certain specific areas

only. Hence, we can term the time factor a big limitation of the study.

1.4.2 Lack of Information:

The lack of information was another limitation of the study. The only source of

information about the financial performance of the overall organization was its

annual reports, which was also not available at the branch. Also annual reports of

other banks were not available for the same year, so cross sectional analysis was

not possible.

1.4.3 Burden on Employees:

Due to large volume of work handled by due to, the workload on the employees

was too much due to which they could not properly share their views about the

organization.

1.5 Scheme of the Report:The report has been divided into four sections, each section having sub-sections in it. The

scheme of the report is as follows.

1.5.1 Section One:

This section includes the introduction of the report, the background of study,

purpose of study, scope of work, methodology of research and tells about the

scheme of the entire report.

1.5.2 Section Two:

This section presents a comprehensive review of the bank. It includes history of

BAL, its organizational structure, departmentation, human resource policies and

advances.

1.5.3 Section Three:

This section contains critical analysis, SWOT analysis and financial analysis of

BAL.

1.5.4 Section Four:

It summarizes the findings and recommendations based on the analysis in section

3.

CHAPTER 2:

OVERVIEW OF BANK ALFALAH IN PAKISTAN

2.1 Introduction to bank Alfalah

Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited company,

under the Companies Ordinance 1984. Its banking operations commenced from

November 1st, 1997. The bank is engaged in Islamic banking, commercial banking and

related services as defined in the Banking Companies Ordinance, 1962. The Bank is

currently operating through 200 branches in 90 cities, with the registered office at

B.A.Building, I.I.Chundrigar, Karachi.

Management of Bank Alfalah accepted the challenge to transform this bank into a highly

professional, most efficient & service oriented institution. The management has been

successful in fulfilling the undertaken challenge. It has been successful in making a

significant contribution to both corporate and retail banking in Pakistan.

Over the years, its emphasis on growth has resulted in a strong entity capable of offering

high quality services to a wide spectrum of clients, in a highly challenging business

environment. Its strategy is to maximize the synergies of branch network through an

optimal allocation of financial resources in the face of dynamic challenges of present

financial environment.

Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals

set out by its board of management, the Bank has invested in revolutionary

technology to have an extensive range of products and services. This facilitates their

commitment to a culture of innovation and seeks out synergies with clients and service

providers to ensure uninterrupted services to its customers.  The bank perceives the

requirements of its customers and matches them with quality products and service

solutions. During the past ten years, we have emerged as one of the foremost financial

institution in the region endeavoring to meet the needs of tomorrow today. Bank Alfalah

Limited has continued 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. Within a short span of time the bank has carved a significant niche for itself in the

banking industry.

2.2 History and Present Status of bank Alfalah

Bank of Credit & Commerce International (BCCI) was a Pakistan based bank,

established by Mr. Agha Hassan Abdi from UBL, in association with U.A.E and Europe.

BCCI has its branches in 74 different countries of the world. It had its 3 branches in

Pakistan. In 1991, the BCCI was banned, when was accused by European countries that

the bank was involved in some illegal operations with Gulf countries. The major reason

behind European accusation was that BCCI was of Islamic mode. Therefore, the bank

was closed due to international pressure. Then, its 3 Pakistani branches were taken over

by the Government of Pakistan, which were named as Habib Credit and Exchange Bank

(HCEB) and these were working as subsidiary of Habib Bank Limited.

Following the privatization in July 1997, Habib credit and Exchange Bank assumed the

new identity of Bank Alfalah on February 25, 1998. It is now Abu Dhabi based bank as

the family of H. E. Sheikh Hamdan Bin Mubarak Al-Nahayan purchased 70% of its

shares and 30% shares remained with Habib Bank on behalf of Government of Pakistan.

Since its inception, as the new identity of H.C.E.B after the privatization in 1997, the

management of the bank has implemented strategies and policies to carve a distinct

position for the bank in the market place.

2.3 The Mission

To develop & deliver the most innovative products, manage customer experience, deliver

quality services that contributes to brand strength, establishes a competitive advantage

and enhances profitability, thus providing value to the stakeholders of the bank“

2.4 The vision

“To be the premier organizations operating locally and internationally that provides the

complete range of financial Services to all segments under one roof.”

2.5 Objectives of bank Alfalah

The objectives of Bank Alfalah are as follows:

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. For this the management has adopted the strategy of

“Caring for you… Our Customers”

To get maximum share of the market

To price the products optimally

To expand more the network of branches in several other cities of Pakistan as well as in the other countries of the world.

To reinforce a corporate culture that fosters learning, creativity and flexibility.

To invest further in banking innovations which include Islamic banking, SME, Home Loans and other areas of product development to provide higher levels of services and value to the clients.

2.6 Company Management System

Management means the administration and the governing body that is concerning the

whole organization. All the decision and strategies are been proposed and evaluated the

management of the organization. At Bank Alfalah, the management is pretty strong and

there is lot centralization in the whole network of the bank. The management at Bank

Alfalah has been divided into 3 major parts. i-e, Board of Directors, the Top

management, and the group of middle managers, supervisors and the employees.

2.6.1 The Board of Directors:

The upper most part of the management is the Board of Directors or the

Executives. The Board of Directors are responsible for the first phase of the

management process, i-e, planning. So, all the decisions and the strategies are

being proposed and implemented under the instructions and the supervision of the

board of directors or the executives. Also the policies and the overall objectives of

the Bank are being proposed at this level of the organization.

2.6.2 The Top Management:

The top management involves the branch managers and the chief managers of the

bank including the operations managers as well. The major responsibilities

include the strategy formulating for the bank and supervising the whole staff at

the branch. They define and interpret the objectives and vision and then formulate

policies for their completion.

2.6.3 The Middle Management, Supervisors and the Employees:

Departmental heads constitute this level of management at Bank Alfalah. They

are directly responsible for planning and controlling the activities of officers.

Finally, the employees whose activities are monitored and controlled according to

the desired objectives.

2.6.4 The Overall Management

2.6.4.1 Board of Directors

H. E. Sheikh Hamdan Bin Mubarak Al-Nahayan - Chairman

Mr. Mohammad Saleem Akhtar - CEO

Mr. Abdullah Khalil Al-Mutawa - Director

Mr. Omar Z. Al-Askari - Director

Mr. Abdullah Naseer Hawaileel Al-Mansoor - Director

Mr. Nadeem Iqbal Sheik - Director

Mr. Ikram Ul-Majeed Sehgal - Director

2.6.4.2 The Core Group

Board Advisory Committee

Mr. Abdullah Khalil Al Mutawa

Mr. Khalid Mana Saeed Al Otaiba

Mr. Ganpat Singhvi

Mr. Bashir A. Tahir

Central Management Committee

Mr. Mohammad Saleem Akhtar - (Chairman)

Mr. Pervaiz A. Shahid

Mr. Sirrajuddin Aziz

Mr. Mohammad Yousaf

Mr. Ijaz Farooq

Mr. Bakhtiar Khawaja

Mr. Arfa Waheed Malik

Mr. Adil Rasheed

Mr. Shakeel Sadiq

Mr. Adnan Anwar Khan

Mr. Shahid M. Murtaza

Mr. Nadeem ul Haq

2.6.4.3 Corporate Information

Mr. Hamid Ashraf - Company Secretary

Mr. Zahid Ali H. Jamal -CFO

Taseer Hadi Khalid & Co. (Chartered Accountants) - Auditors

B A Building, - Head Office

I. I. Chundrigar Road,

P. O. Box 6773, Karachi.

2.7 Organizational charts

The source of these organizational charts is the official website of BAL.

www.bankalfalah.com.

Chart No 2.1 organizational Charts 1

Chart No.2.2 Organizational Chart 2

2.7 Organogram

The source of this chart is Mr.Shoib Khan Credit/SME officer. This is organizational

chart of all employees with their designation, working in BAL Haripur Branch

2.8 Fields and Activities

A support functions Group, mainly responsible for development of systems and

procedures, process-re-engineering, automaton and credit management. The Group is

BRANCH MANAGERImdad Khan

Jadoon

Accounts OfficerUmair Ud Din

Farooqui

Credit/SME Officer

Shoaib Khan

Credit/SME Officer

Sajid Iqbal

CD InchargeRazaib Khan

Manager Operations

Anees Ur Rehman

DMSDaniyal Akhtar

OutsourcedM Kamran

M Ahsan KhanKhurram Rafique

M Khalid

Operations OfficerKazi Hammad

Masood

CROSadia Khyber

Branch Sales Supervisor

Muhammad Nadeem

IT OfficerShoaib Khan

CashierMuhammad

Zubair

CashierMuhammad

Ashfaq

Outsourced Khurram ShehzadM Irfan (sweeper)

M Zahid(Cash sorter)

organized in three divisions i.e. Systems and Operations Division, Human Resource

Division and the Credit Division.

2.8.1 Credit Division

Providing extensive support to branches for credit administration, control and

monitoring, the Division has played a pivotal role in helping the Bank achieve a

remarkable loan growth of with well-diversified risk exposure. Most of the loans

are for short-term trade financing on a secure and self-liquidating basis. The

Division has a special Assets Management team, which is responsible for

ensuring low ratio of bad debts, effective monitoring of delinquent advances and

close follow-up for recoveries. Bank’s Head Office Credit Committee (H.O.C.C)

reviews the credit quality and pricing on regular basis not only to ensure healthy

credit growth but also the management of Bank’s risk assets in a most prudent and

profitable manner.

2.8.2 Systems and operations division

This Division has been instrumental in developments of procedures and manuals

for various operating requirements of the Bank. After careful mapping of existing

process flow, the Division recommends automation and re-engineering

requirements to improve transaction efficiencies. The Division is active in

providing equipment procurement support and development of new branches.

This Division, as a direct function also manages the protection of fixed assets of

Bank.

2.8.3 Technological innovation:

“Modern science is not an option, it is an obligation”

Technology is rapidly changing the way we think, act and do business. Is has

played pivotal role in enhancing customer expectation, particularly with respect to

speed and quality of service.

Alfalah bank enjoys a strategic competitive advantage overall domestic players by

virtue of its leadership in technological innovation. Phone banking service and

Internet banking facility allows customer to enjoy routine banking services from

anywhere in the world. 365 days a year, 24 hours a day.

2.8.4 Credit Card Division

The Bank’s product portfolio is designed to remain flexible and adapt itself to

changing customer needs. Bank endeavor in this regard is to actively explore

newer avenues of offering higher values to our clients, whom bank feel, deserve

nothing less. Bank Alfalah has launched various unique credit card schemes to

cater to numerous segments.

2.8.5 Human Resource Division

Strategically, perhaps the most important Division at the Head Office is

responsible for human resource management, including recruitment, staff training

and evaluation. This division is also handles matters relating top administration.

This Division operates on a future oriented strategy focusing on employee’s

personal and professional growth. Staff development activities are reared to

enhance their capabilities for applying the knowledge and fats towards

development of practical solutions. Under our Human Resource management

policy, Alfalah develops and grooms the management personnel for position of

greater responsibility analytical, interpersonal, and conceptual and specialization

skills to enable them to understand the cause-and-effect relationships and to think

logically.

2.8.6 Dedicated professionals:

“Unusual efforts on the part of the employees who are apparently ordinary

workers is one of the key indicates of the superior enterprise”

Staff is the most valuable asset of any organization. The human resource

philosophy at Alfalah bank focus on multi-talent hiring, professional grooming,

requisite training and meritocracy based reward system. Staff welfare has been a

priority.

Employee productivity enhancement is organized through in-house and external

training programs. Bank continues to offer opportunity for people to develop their

knowledge, skills and personalities, thus ensuring greater self-fulfillment and

progression in the organization.

In short bank Alfalah team comprise of dedicated professionals equipped with a

diverse array of skills and vast experience. The management concentrates its

energies on making informed economic decisions, translating it into greater

returns for our investors and customer. The prudent attitude has created a

synergistic organizational structure leading to improvements in profitability and a

sustainable competitive advantage for the bank.

2.8.7 Training & development:

Bank Alfalah is committed to the personal welfare and professional development

of all our team members. Proper training of human resource is essential, not only

for the more productive and satisfied work force but for also homogenous

corporate culture.

The bank continuous to follow its strategy of hiring batches of young and

energetic Management Trainees who are sent to our Training and Development

Center for training in all areas of banking. Our Training and Development

Center is a state of the art facility with an impressive faculty.

2.8.8 Ethical values:

“Professionalism without integrity is like a book without pages”

Because the right may not always be obvious, we must be guided in our every

action by set of well-defined values, governing our decision. Alfalah bank

understands that its commitment to satisfy customer needs must be fulfilled

within in a professional and ethical framework.

2.8.9 Finance divisionFinance Division is responsible for bookkeeping and accounts. This Division is

the head office and manages all financial returns and the MIS through its

Management Reporting Wing. The Division is actively involved in preparing

market comparative analysis, consolidation of Bank’s budgets, monitoring and

constant review of various financial indicators.

Financial Division works as the backbone for Bank’s operations. The Division,

which reports directly to the President And Chief Executive of the Bank’s, has

been instrumental in preparation of Bank’s business plans and future stratigies.the

budgetary performances are constantly reviewed and trough a sophisticated

“Monthly Performance Report” (MPR) which is a computer based program, the

Division provides feedback to the senior management on strategic issues like

reasons for budgetary variances and methods to arrest negative performance

factors.

Preparing the Bank’s Annual Accounts and coordinating external audits is a direct

function of the Finance Division. Through the dedicated efforts of staff at this

division, the Bank has been winning various awards for the Best Presentation of

its Annual Accounts and also the management has been able to monitor and

review the Bank’s performance in procreative manner.

2.8.10 Audit division

The Audit Division reports directly to the Board through the Executive

Committee-which are also the Audit Committee.

The Audit Division acts completely independent of the management and is

responsible for checking and reporting on the Management’s compliance with the

Board’s policies and directives, as also the Prudential Regulations and other

directives of the SBP. However, their role is not intended to be just that of fault-

finding; but also guiding and assisting branches in improving their operations.

2.9 Policy formulation and process meeting

At Bank Alfalah, policies as mentioned earlier, are been formulated at the Executive

level of the organization. Policies for any organization constitute a major part in the

overall long term functioning of the bank. In short we can say that policies and the

objectives are the lifeblood of the organization in long run. Though policy formulation is

in the prescribed hands yet the policies formulated by the top level have been very

successful as indicated by the success pattern of the bank so far.

Then these policies are transformed into the hands of the top-level management. The top

management is been suggested to make the policies implemented keeping in view the

long-term objectives of the organization. Also the views from the middle managers and

employees are encouraged as well for the purpose of removing flaws form the system.

For these very purpose meetings arte held almost weekly at the branches level and also in

case of any contingent dispute resolving the meeting scan be called at any time during the

branch timings.

2.9.1 Lending Policy

Bank Alfalah pursues a conservative yet dynamic credit policy. This strategy has

enabled the bank to have a high quality risk portfolio. Bank prefers to finance

exporters because of less risk involved. Bank Alfalah manages the credit risk,

liquidity risk, market risk and other operational risks very efficiently. For this

very purpose Bank Alfalah has got an effective credit line proposals system to be

sanctioned to the clients on demand.

2.9.2 Selection of Clients

Management is very selective of clients. All of the references are carefully

checked to learn about a potential client before establishing a relationship.

References are excellent sources of new accounts as they give an opportunity to

learn about a potential client before establishing a relationship. This policy helps

in protecting the integrity of the bank. It ensures good relationship with the clients

2.9.3 Services and Product Polices Bank Alfalah provides a vast variety of services to its clients. Some of those

policies are discussed below:

Credit Facility

In this service the loans are provided to the customers by the bank to

meet revenue shortfalls.

Stop Payment Instructions

It is one of the most important services provided by the bank to its

clients. In case the account holder has lost his/her cheque he can issue

the stop payment instructions to the bank. The bank till further

instructions will not honor the cheque.

Deposits

The bank offers different types of Deposits to its account holders.

Alfalah Musharakah Saving Account

Current Account

Musharakah Time Deposits On PLS Basis

Drafts, Telephonic Transfers, Pay Orders

These are the facilities that the bank offers its customers and, at times, to

the people who do not maintain an account with the bank, that is, ordinary

people. For offering these services the bank charges commission besides

the government taxes and duties.

2.9.4 Trade Department Policy

Bank Alfalah’s focus is on “Foreign Trade” as its primary market of business. It

maintains high emphasis on enlarging its Correspondent Banking network besides

aiming to enhance the scope and level of cooperation with existing

correspondents. The Trade finance department has efficiently done management

of the changing trade policies by the central bank over there.

2.9.5 Marketing Policy

Bank Alfalah inverts heavily for the marketing policies and orientation, for the

publicity of its new products/services. It uses television advertisements,

newspaper as well as various promotional schemes to attract customers. The Bank

sponsors a number of sporting and community development initiatives to play its

part as a responsible corporate citizen.

2.9.6 Promotion and Incentive

Bank hires officers in range 1. Then depending upon their job performance they

are promoted to next range. More facilities and increments are given along with

promotion. The bank gives a car facility to the officers of range 5. Bank’s policy

is to give cash rewards and salary increments for increasing the employees’

satisfaction. Also with the expansion of the branch network growth in the current

era, more and more opportunities have been provoked not only for the young

generation but also for the employees of the bank.

2.9.7 Accounting Policies

Bank Alfalah has adopted almost the same accounting procedures that other

financial institutions are adopting at this time. These accounting procedures or

Accounting policies are made according to Generally Accepted Accounting

Principles, the GAAP. The process flow and the usage of the policies in the day

wise routine are mandatory for all the employees working in the specified

departments at the branch.

2.9.8 Recruitment Policy

Hiring is mainly of two types i.e. direct hiring and promotion from lower levels.

Bank’s policy is to hire suitable candidates. By suitable candidates bank refers to

candidates having proper educational qualification, experience and background. It

is the policy of the bank that “President” of the bank will be the representative of

major stakeholders/owners. Board of Directors is representative of sponsors. Bank

is reluctant in making direct appointment of senior executives. EVPs are

promoted from lower levels. Every year Bank Alfalah opens its doors for about 30

fresh post-graduates to join the prestigious ranks of Management Trainee officers

with the Bank. The MTO scheme is a highly competitive and sought after

induction scheme, in which short-listed applicants appear in a written test

followed by a panel interview. Successful candidates then receive comprehensive

training in essential areas of branch banking at the Bank’s state-of-the-art training

facility at Lahore and Karachi, prior to their posting at various branch locations.

Preferred educational background for entry into the MTO scheme includes an

MBA degree, MA Economics or M.Com from reputable Pakistani or foreign

institutions with GPA of 3 plus, or equivalent. Strong personal character, as well

as communication and interpersonal skills are essential pre-requisites to succeed

as an MTO.

2.9.9 Training and Development Policy

Bank Alfalah’s policy is to take special interest in recruitment and training. This

training is been given in two instances, i-e, the Off-job training and the On-job

Training. To impart technical skills to its staff “Training and Development

Center” offers programs in several skill areas. Its employees attend seminars and

courses offered by “Institute of Bankers”. Alfalah also offers various computer-

training courses to its employees. It is obligatory for each staff member of the

bank to attend a minimum number of training courses during the course of a year.

Wherever the Training Department is unable to provide focused training for

certain groups of staff, reputable external training providers are invited to fill the

gap.

2.9.10 Quality assurance services

Service excellence is one of the priorities of Bank Alfalah. A separate quality

assurance department is to be established as well very soon for the removal of

little flaws that are still prevailing at some of the branches regarding facilities for

the consumers. The focus of the bank is to develop new areas of activities along

with traditional banking activities of resource mobilization and credit

disbursement.

2.9.11Growth Policy

Bank Alfalah emphasizes on growth along with providing best quality customer

service. Bank’s policy is to maximize the synergies of branch network through

optimal allocation of financial, human and other resources to compete in the

marketplace.

2.9.12 Liquidity Policy

Bank Alfalah maintains positive and healthy liquidity. Bank’s policy is to keep

surplus liquidity in fixed income securities issued by the Federal Government of

Pakistan. If necessary it can be easily converted into cash.

2.9.13 Investments Policies

Bank Alfalah investment policies are based on federal and provincial securities,

debentures, and participation term certificates treasury bills and blue chip share of

joint stock companies.

CHAPTER: 3

DEPATRMENTATION

3.1 The Account Opening Department:

Borrowing funds from different sources has become an essential feature of today’s

business enterprises. But in the case of bank borrowing funds from outside parties is

more vital because the borrowed capital of a bank is much greater their own capital.

Banks borrowing is mostly in the form of deposits. These deposits are lent out to different

parties such deposit creation is done through open an account in the bank.

The department that is responsible for opening and closing an account assumes immense

significance and holds a central place in the basic banking operations. The Account

opening department was the very first experience of my practical life being working with

a bank, during my internship with Bank Alfalah Ltd.

This department is the best way to start with the banking career or training. This is

because the ways you deal with the customers give a lot exposure to you for the coming

days in banking because the bankers are always in contact with customers as customers

are the biggest source of assets for the bank.

Types of Account

Current Account.

Saving Account.

Term Deposit.

3.1.1 Current Account

The current account is the most common account and the most preferred amongst

business concerns. The theoretical explanation for this would be that they can

function more efficiently but since in reality there are no restrictions on any

withdrawal. The only reason we can think of is that current account facilitates

online banking which saves time to a considerable extent. No interest is being

credited to the customer’s accounts that are maintaining the current accounts with

the bank. Current account enables the client to do cash transactions in a more

efficient manner.

There is no interest on these accounts. It is only for transaction purposes. They

paid on demand. Where a banker accepts, paying all checks drawn against him to

extend of the balance in the accounts. As there is no profit paid on this account, it

is also called checking account because cheque can be drawn on it. Current

account is mostly opened for business. The minimum balance requirement for

opening the current account is Rs. 10,000.

Basic banking account:

Initial deposit for account opening is Rs. 1,000 with no minimum balance

requirement.

Non interest bearing checking account.

Maximum 2 deposits & 2 withdrawals through cheque are allowed.

Free debit card can be used to withdraw cash and make purchases at

thousands of outlets across Pakistan which provides access to funds 24 hours a

day.

No restriction on ATM withdrawal.

3.1.2 The PLS Savings Account:

The purpose of this account is to introduce the habit of saving individuals in the

neighborhood. The profit on saving accounts is paid on the basis of profit and loss

sharing at 2 % per month. The minimum balance requirement for opening the

account is Rs.5000.

The PLS savings Account is meant for those people who have got an aptitude

towards earning some profit on their amount deposited for sometime with the

bank. Individuals who wish to earn profit/interest on their investment normally

maintain the profit and loss sharing account but in order to earn interest the client

is required to keep his/her deposits with the bank for some time. For this purpose,

there are some restrictions on withdrawal of money from a Profit and Loss

sharing account but in general banking practice there is no restriction on any with

drawl from a Profit and Loss sharing account. The interest/profit is paid half

yearly.

3.1.3 Term DepositA term deposit is a deposit that is made of a certain period of time. At the end of

specific period the customer is allowed to with draw the principal amount. The

rate of return of this account varies from 3.25 % to 6.50 %. The term deposit

account varies from one month to 3 years and the minimum balance requirement

is Rs. 50,000.

Particulars at the Account Opening Form:

In the account opening form the client is required to provide the following

information. The first part establishes the currency in which the account is to be

maintained / operated. The currencies include

Pakistani rupee.

U.S. dollar

Pound sterling

Euro

The second part then establishes the preference regarding the type of account to

be maintained. The various choices offered are

Savings account

Current account.

Royal profit

For the chequing account, there are different types of account holders are required

for all these types of account holders. The operation/procedure requirement that is

needed for “Individual Account” differs greatly from the “Joint Accounts”

proprietorship A/C, Partnership A/C, Private Limited Company A/C and Public

Limited Company A/C.

Now, during my internship at the Account Opening department at Bank Alfalah

Ltd. Garden Town Branch, I found out the following documentation and writings

are required in order to open an account with us:

The first thing mentioned at the account opening form is the Title of the

account. Title of the account is to be written in block letters. By title of an

account we mean the name (either of the individual or of the business

concern) with which the account is to be opened and operated.

The client is supposed to provide the information whether the account would

be maintained singly (only one person operates the account) or jointly (two or

more than two persons maintain the account).

The name of the person who intends to operate the account.

Provision of either Father’s or the Husband’s name is also a pre-requisite.

Occupation of the prospective account holder.

The name and complete address of the employer.

Nationality of the Account opener

Country of residence is to be specified.

Contact numbers both the cellular and the landline numbers are to be provided

in addition to the segregation of the residential and the office phone as well.

The national identity card, of course is an integral part of the account opening

application.

Passport number, if the prospective client has got one.

Another requirement is the date and place of issue of the national identity

card.

The prospective client also has to provide the name, address and relationship

of any one of his/her close relatives in order to facilitate the communication

problem. The clients often have a misconception that there next of kin might,

if some peculiar circumstances arise, get the profit out of his account but this

is not the case. The name and address of a close relative is only recorded in

order to undertake necessary communication when needed.

In case of a business concern there are two more things that are to be provided

by the business.

Type of organization

The various types of organization which are present in Pakistan at present are:

Public Limited Company

Private Limited Company

Partnership

Association/Club/Society

Sole-Proprietorship

Some special documentation is also required like the certifications regarding

the incorporation and commencement of business and the Form 29. The

business concerns also have to give their full name, brief description of the

business, date of incorporation, and place of incorporation, national tax

number, telephone number and fax number.

The choice of either the deduction or non-deduction of Zakat also needs to be

highlighted. Zakat is deducted out of a Musharakah savings account and not in

the case f the current accounts...

Details of other accounts maintained with other branches of Bank Alfalah Ltd.

or other banks are also to be given.

The name, signatures, and account number of the introducer is a very essential

prerequisite in order to facilitate the opening of an account. The introducer is a

person who already has an account in the same branch. It can also be a person

from the staff of the branch as well. This introduction is the mandatory

requirement in order to open an account in order to trace out the defaulter in

case of defaults.

Then the client also has to put forth the instructions regarding as to whether

the account would be maintained on the basis of ‘either or survivor’,

‘jointly’ or ‘any one of us’.

After this three signatures of the client are needed and if it is an account of a

business concern then the rubber stamp of the company/organization is also

needed below the three signatures.

In case of a joint account all the persons unanimously might give the right to

operate the account to one person. This right is also termed as mandate for

joint account. If the mandate is given to a person all join account holders

must sign as an evidence of their approval. The names of persons are written

on the title of A/C and on S.S. card.

3.2 Individual account

Any individual or proprietor of business can open an individual account at BAL.

PLS (profit and loss sharing) saving accounts can be opened with the minimum balance

Rs. 5000/- with expected profit rate is 2% on Rs. 25,000 or above. Following

requirements has to be fulfilled for this account.

Signature of customer on back of AOF.

Mention next of kin (nominee)

Name and A/C # of introducer.

Verified sign of introducer.

Customer signature admitted by officer.

N.I.C photocopy attached.

Letter of thanks.

3.3 Joint account

When different people want to or need to share a single account it is called joint account.

The names of persons are written on the title of A/C and on S.S. card.

Joint A/C cannot be opened by single person. Both persons have to sign on cheque. When

two or more person neither partner nor trustee open account in their name is joint

account.

Requirements

Sign of both customers on back of AOF

Sign on joint A/C # mandate

Name and A/C # of introducer

NIC copies of both members.

Mode of operation.

In case of account opened by a business concern there are some documents that are

needed to be attached with the account opening form. The details of these documents are

given below.

3.4 Limited Company:

Copy of certificate of incorporation

Memorandum and Articles of Association

List of Director’s

Copy of the board resolution

Certificate of Commencement of Business

Copies of CNICs of Director’s

Latest copy of Form-29

3.5 Partnership:

Partnership deed certified copy

NIC photocopies of all partners.

Partnership mandate for account signed by all the partners

A letter duly signed by all the partners containing the operating instructions of

the account also has to be taken.

3.6 Sole proprietorship / Individual:

NIC/ Passport photocopy

Letter from Proprietor confirming “sole proprietorship”

3.7 Term and conditions governing the account

3.7.1 Account

Each Account will be allotted a distinctive number, which should be

quoted in all correspondence with the bank relating to the account.

The account should be subject to the applicable laws of Pakistan and

prevailing rules, regulations and directives of the State Bank of Pakistan.

3.7.2 Minimum Balance

Subject to the regulations of State Bank of Pakistan, the customer should

maintain a minimum credit balance in the account as may be prescribed by

Bank from time to time. The bank reserves the right to close the account

after giving 14 days notice if the customer fails to maintain the required

minimum balance in the account.

3.7.3 Deposits

All deposits in the account should be accompanied by pay in slip showing

the correct title & account number to be credited.

If the amount indicated on the deposit slip differs from that “later cash

account” the banks count shall be final and conclusive.

Proceeds of a cheque deposited in the account for collection will be value

dated after receipt of the proceeds thereof.

In receiving cheque/instruments the bank acts only a collective agent of

the customer & assumes no responsibility for the realization of such

cheques/instruments.

The bank may refuse to accept such cheques/instruments drawn in favor of

third party. The customer shall not draw against unclear cheques/

instruments though credited.

The bank shall recover return cheque charges at the rate fixed by the bank

by dividing the account on every cheque deposited for collection and

return unpaid.

The bank is realizes the services of other bank, customer do so for account

and the sole risk of the customer. The bank assumes no liability should the

instruction is transmits is not carried by such banks.

The bank shall not be responsible for the delay or loss in transit of any

cheque not for any act, omission, neglect, default, and failure of any

correspondent bank, agent or sub agent or for any reason beyond the

control of the bank.

3.7.4 Withdrawals

Withdrawals from the account shall only be made by using cheque books

supplied by the bank at the request of the customer. The bank reserves the

right to withdraw cheque book facility without notice if in the opinion of

the bank the account is not being maintained or operated in accordance

with these terms and conditions or for any other reason.

The customer shall exercise care when drawing cheques and agree that

cheques will not be drawn in a manner which may enable a cheque to be

altered in a manner which is not readily detectable.

The customer shall ensure safe keeping of the cheque book and shall not

allow access to the cheque book to any unauthorized person. In case of

loss or theft of the chequebook or any cheque leaf, the customer will

inform the bank, if he will not then he will be himself responsible for any

loss.

3.8 Minor’s Account

In respect of an account opened in the name of a minor, the bank shall be entitled to act

on the instructions received from the guardian name on the account opening form,

irrespective of whether the minor account holder continues to be a minor or not unless the

bank receives written instructions from the guardian or a notice to the contrary from an

appropriate authority.

3.9 Statement of Account

The bank shall quarterly or at such other interval as it may deem fit send to the customer

statement of account and the customer shall check the entries made therein. In case of any

discrepancy or error in the statement of account, the customer will notify the bank within

14 days of receipt of the statement.

3.9.1 Hold Mail Facility

Upon written request of the customer, the bank may in its sole discretion provide

a hold mail facility. The customer hereby waives his right to question any detail

appearing in the hold mail communication or statement of account irrespective of

their actual receipt. The customer accepts all risks and responsibilities in this

regard.

3.9.2 Stop Payment Instructions

The bank may, in its absolute discretion, accept stop payment instructions from

customer if a cheque is reported lost or stolen, provided the necessary details of

the lost/stolen cheque given by the customer.

3.9.3 Death of a customer

In case of death of individual customer, the bank will permit no withdrawal from

that account after receiving notice of customer’s death, except on production of a

succession certificate or other court order from a court of competent jurisdiction.

Now, there are some documents that are always there with the account opening

forms. These things need to be filled in by the customers efficiently and carefully.

These are:

Signature Specimen Card.

Cheque Book Requisition.

The Signature specimen card basically contains information that is basically a

repertoire of information given in the account opening form, but in this card the

client vividly puts his signatures as a specimen, which are scanned and stored in

an intelligent terminal for future use and reference.

The Cheque Book requisition basically serves as an application to issue a

Chequebook. The client also fills it up and submits it along with the account

opening form as a result of which he is issued a Chequebook once his account is

approved. As regards the Chequebook one of the most important entries in a

Chequebook requisition is the series number of Cheques that correspond with the

numbers of the cheques contained in the Chequebook issued to the client.

3.9.4 Procedure of Opening an Account

The Account Opening Form:

When a client comes to the bank, and makes a request for opening of an A/C.

The officer says that first fill up a prescribed application form. If he/she wants to

open a PLS A/C, then he/she has to fill a form according to the account.

Completion of the Form:

The name, occupation, and complete address of the person opening the account

are written in the columns are provided in the form. One signature of the person is

taken on the face of the form and one is taken on the backside. These signatures

should be usual signatures and he would operate the account with them future.

Introduction:

The introduction of a current account holder is accepted for the opening of either

a current account or a solving account. The introduction of saving bank account is

accepted only for saving bank accounts. The signature of the account-holder

introducing the account is obtained at the place provided for in the account

opening form.

Specimen Signature Card (S. S. Card)

It is card on which specimen of applicant’s signature are taken for future

reference. Every time a cheque is presented for payment, the signature on the

cheque is verified by comparing it with S.S Card. In case of joint account two

applicants can sign on one SS card. In case of more than two joint account holders

more than one SS card are required.

Account Number:

As now a day’s Bank Alfalah has acquired centralized banking system where all

the branches are directly connected to Head office. When customers give all the

information about him, this information is entered into centralized data base.

When this procedure is completed, the system automatically generated the

account number of that customer. Due to this system the process of account

opening becomes fast and also there is no chance of any mistake.

The account numbers of various accounts start with the following series

Table no.3.1 Account Number Series

Account Title Account Number

Current account 01

Saving account 02

Royal profit account 029

Term deposit account 03

Car finance account 0191

Issuance of Cheque Book:

After opening an A/C with the bank, the A/C holder once again makes a request

in the name of bank for the issuance of a chequebook. The A/C holder mentions

title of A/C, A/C number, sign it properly and mentions the no of leaves he

requires. Normally BAL issues a chequebook having at least 25 leaves. Every

chequebook also contains one leaf that is used for another issue of a Chequebook

Bank Alfalah issues the following cheque Books

Saving account - 25 leaves

Current account - 50 leaves

Current account - 25 leaves

Loose cheques are also issued in some cases.

Entry of cheque book:

Before issuance of a chequebook, the employee performs certain functions.

They include:

Stamping every leaf with specific A/C number.

Enters it in the chequebook issue register.

Check whether or not a senior officer has verified the signatures, if no

then first he gets them verified.

If the check book is of photo account then be sure that each and every

leaf of cheque book should carry photo account stamp

Filling of Account Opening Forms:

For current and saving account, separate files are maintained in which the

forms are pasted or punched in numerical order and kept under lock and key

in fireproof steel or safe. This is because these forms are the basic documents

of the contract with the customer.

Maintaining the computer record:

After opening of account, all information regarding the account is entered into

the computer. Currently, a program named Bank Smart is being used for this

purpose. Record of all the transactions regarding the account of a customer is

kept updated in the computer.

3.9.5 Procedure followed in order to close an Account:Now, coming towards the procedure for the closing of an account at Bank Alfalah, the

following steps will be followed.

The client who wishes to close an account first has to give an application, duly

signed on the pre-printed application of the bank. The client has to attach this

application with the liability form (explained below). The client can also give

an application on a plain paper, but correct signatures are very necessary.

Then it has to be made sure that if the account to be closed is a saving or

Royal Profit then the account balance before closing should be zero. In case of

these two types of accounts the bank does not take any closing charges. If a

client wishes to close a current account then the bank charges Rs.150, so at the

time of closing the balance should be Rs.150.

Along with the application to close the account client’s Chequebook is also

received from him and then it is destroyed in order to prevent any misuse in

the future.

A liability form is filled and sent to the Credit Department in order to Cheque

that the customer does not owe the bank a single penny in any regard. A debit

voucher and a credit voucher are also attached to the liability form.

When the Credit department approves that the customer does not owe any

money to the bank and the form is returned to the account opening department

then the original account opening form pasted in the ledger when the account

was opened is marked ‘account closed’ along with the date on which it is so

marked.

After approval of the liability form, it is sent to the Cash Department so that

the officer who scanned it in the first place could return the specimen

signature card to the account-opening department.

Once the S. S. Card is received back from the concerned official then the

liability form, the client’s application along with the specimen signature card

is pasted in the ledger right along side the original account opening form. The

form has to be pasted with the original account opening form even if the

account was opened a decade ago. In the computer as well all the entries and

records related to that particular account is permanently deleted by using the

‘close account’ option.

3.9.6 Important documents used in the Account Opening Department

Liability form

This particular form is used when an account is to be closed. The staff of account

opening department, after filling in the name and account number of the client

forwards this form to the credit department and the trade finance department who

upon receipt of such liability form make required scrutiny so as to check whether

or not the customer owes some money to the bank or not.

Account statement request form

This small form is used to request for the account statement for the desired period.

The client gets this Performa from the account-opening department and then, after

filling it up, gives it to the computer section that gives the statement to the client

in printed form.

Vernacular Form

This form basically functions as a thank you letter (and also as a request) on

behalf of the customer if he wants to operate his account by doing signatures in a

language other than that of English.

Issuance Requisition

This requisition is used by the staff to order for any thing (e.g. stationary) they

need. They write the type and quantity of the stationary they need, get it signed by

the Manager Operations, give it to the person in-charge of issuance of stationary

who on receipt of this requisition (duly signed) issues the stationary.

Debit And Credit Vouchers

These two vouchers are basically used when an account has to be closed. The

debit voucher shows as to how much amount has to be taken from the client’s

account and the credit voucher shows as to how much amount has to be credited

as Bank’s income, in order to facilitate the account closing process.

Application To Close The Account

This is a pre printed application of the bank in which the client fills in the account

number, the title of the account and the type of account and requests the branch

manager to close his account with the Bank.

Application To Change The Address

This is again a pre printed request form in which the client fills in his name,

account number, telephone number/s and the new address so that he could

communicate with the bank and receives all the notices, statements and other

necessary document which the bank might send through mail depending upon the

circumstances.

Discrepancies:

If there is fond any discrepancy in any of the following particulars then the form will not

be entertained:

Table no.3.2 Discrepancies that should avoided

1. Date of account opening 13. Hold Mail

2. Account opening Approval 14.Either or Survivor Instructions

3. Customer Name 15. Next of Kin Information

4. Joint Name (in case of joint account)16. Proof of Guardianship in case of

Minor’s Account

5. Mailing Address 17. Thirty Party Mandate

6. Alternate Mailing Address 18. Specimen Signature Card

7. Telephone Number 19. Check Book Ordered

8. Nationality20. Introducer’s Name and Account

number

9. NIC / Passport 21. Introducer’s Signature Verification

10. Currency of Account 22. Segment Code mentioned

11. Related Account Information23. Signature on Bank’s Terms and

Conditions

12.Zakat Deduction Authorization 24.Account Type

3.10 Remittances

“Remittance is transfer of funds from one place to another or from one person to

another.”

A Remittance is an important service provided by banks to customers as well as non-

customers. Since it is not a free service it is a source of income for the bank.

Parties involve in remittances. Four parties involved in remittance:-

Remitter

Remittee

Issuing Bank

Paying Bank

Remitter

One who initiates, or requests for a remittance. The remitter comes to the issuing or

originating branch, asks for a remittance to be made, and deposits the money to be

remitted. The bank charges him a commission for this service. He may or may not be

the branch’s customer.

Remittee

A Remittee is also called the beneficiary, or the payee. The person in whose name the

remittance is made. A remittee is also the one who receive the payment.

Issuing Bank

The bank that sends or affects the remittance, through demand drafts, telegraphic

transfers, or Mail Transfers.

Paying Bank

Paying Bank also knows as the drawee branch. The branch on which the instrument is

drawn. It has to make the payment (usually located in a different city country).

Kind of remittances

Transfer within the branch

Transfer from one branch to another

Transfer from one bank to another bank in the same city

Transfers from one bank to another bank in two cities

Principal duties

The principal duties this department is performing are as follows

1. Pay Slips

2. Pay orders

3. Demand Drafts (DD)

4. Rupee Travelers Cheque (RTC)

5. Money Gram

3.10.1 Demand drafts

Demand Drafts (DD) are a bill of exchange. It is an instrument in writing signed by

the banker containing an unconditional order to pay certain amount to or to the order

of certain person for payment on demand or otherwise as future determinant time. It

consists of four copies.

1) Original copy which is given to account holder.

2) DD advice is sent to the central branch.

3) Third copy is for reconciliation.

4) Last copy is sent to head office for reconciliation.

Purpose

As the name subjects DD is made on the request of the customer (which may or

may not be the accountholder of the Bank) in favor of another customer or party

in some other city. Thus it is a mode of payment used by one customer to pay

another who must be residing in some other city.

Payment

Payment of DD can be made through all modes i.e. transfer, cash, cheque

collection (all branches in Pakistan) etc.

Record

No manual record of the demand draft is kept; only the record is saved in the

computer at the time of making the demand draft.

Computer Entry

In the system enter into the ‘DD’ section then enter the

Name of the person who is being favored

Branch code at which draft will be drawn

Bank code of that branch

Name of the person to whom the draft is being issued

The account no of the issues (if he/she has an account with our branch)

The total amount of the demand draft is entered

The commission charged is entered (computer usually perform this job

automatically)

The DD number appears at the end which is entered on the ‘demand draft

application form for record purpose.

Now press yes for the print of DD, which is in two, parts both are given to the

customer. When the computer record has been saved now the advices are made in

the favor of the bank on which DD will be drawn. The advices for BAL branches

are sent directly to that branch through mail.

3.10.2 Pay order

Pay order is also a bank instrument a bill of exchange. The pay orders are usually

used for the payment within the city. The pay orders issued from one branch of

bank can only be drawn at the same branch, that’s why it is generally referred to

as Banker’s cheque.

There is a separate slip for the pay order application. All the procedures for the

pay orders are similar to the demand drafts except the charges and the record

keeping which are given below

Record keeping:

The record of the pay orders is kept in both the computers and manually in

registers. The computer record keeping system is similar to that of the demand

drafts. Where as in register you enter the

Date on which the pay order is issued.

Pay order number.

Payee, to whom the pay order is being issued.

Amount of pay order is entered then the officer signs it.

Date of the payment and the remarks are taken.

3.10.3 Pay slips

The bank for the settlement of its own payment uses this instrument. There are no

charges for the pay slips. They are used to meet the miscellaneous expenses of the

bank. The pay slips can only be drawn on the same branch of the bank. No

manual or computer record of the pay slips is kept. Only the record of the counter

file of the slip is maintained as a record at the bank of which two signatures of the

beneficiary are taken.

On the pay slip

Enter the name of the party as ‘Messrs. The reasons of payment i.e. repair,

releases of security etc are written as ‘on account of’. Signs and stamp of the

beneficiary are taken.

The payment of the pay slips can be made through any of clearing, transfer (same

city branches), cheque, and cash. Collection (all branches within Pakistan) the pay

slips can issue to both minors and majors. On the slip the signatures of two

authorized bank officials are must.

3.10.3.1 Rupee Traveler’s Cheques

These are the banks instruments issued to only major account holders of the bank.

TC’s are issued to the facilities the customers during the travel.

There are the three copies of the travels cheque application. The white copy,

which is also known as ‘agreement’, remains with the customer with the

agreement at the back of it. This copy is must to be shown lost for the

reimbursement. The yellow copy is for the record and the blue one is for the head

office.

According to the government policies only the RTC’s of rupees 10,000 & 5,000

are being offered to the customers .The amount in the RTC (the application for

rupee travelers cheque) is entered in multiples of 10000 as per request of the

customer but separate cheque are issued against it each of RS. 10,000 or in

multiples of 5,000 as per request of the customer but separate cheque are issued

against it each of RS. 5,000.

All the travelers’ cheque is credited by the head office ‘HO’ accounts. The

payment mode used for the traveler’s cheque can be cash. Transfer, authority

letters, collection (all branches in Pakistan), the president of the bank and it

already signs cheque is also signed by an authorized person at the bank.

Issuing branch

The branch that is issuing the TC will take the signs of the customer on upper part

of the cheque.The issuing bank send one copy of RTC application to head office

and keeps other with it after entering all the account opening conditions i.e.

NIC.no, NTC.no, address, phone no, name etc into the system.

Paying branch: -

On the next date when the cheque is presented in the paying branch (any BAL

branch in PK) same signatures on the lower part of the cheque are taken and the

bank officer cheque whether they match or not.

3.10.4 Money gram

Bank Alfalah Limited, in collaboration with money gram offer remittance services to

Pakistan.

“It’s basically a person to person money transfer service that allows consumer to receive

money in just a few minutes.”

3.10.4.1Procedure

Person must have reference no.

Person must tell reference no. and compute the simple form.

Person has to show NIC and tell compute introduction after that he can obtain

money.

3.11 Collection:

All the cheques under collection are called cheques under collection in Bank Alfalah

Limited. There are two types of bills for collection:

Outward bills for collection

Inward bills for collection

3.11.1.1 Outwards Bills for Collection (OBC):

All the cheques are received on one counter along with the paying slips duly filled

in properly containing particulars of cheques and account holder. Counter folio of

paying slip is handed over to the customer by putting stamp for “cheque received

for collection for bank Alfalah” on it duly signed by officer. These cheques are

scrutinized and cheques for local clearing are separated from OBCs. Cheques for

local clearing are entered in clearing register, whereas cheques for collection are

entered in OBC register and handed over to the bills department for collection.

OBC number is allotted to the cheque from OBC register. Special crossing and

bank endorsement stamps are affixed on the cheque.

OBC schedule is attached with the cheque and dispatched to the main branch of

that city for collection. If they do not have any branch in that city, then cheque

will be sent to the collecting agent of bank Alfalah for that city, and if they do not

have any collecting agent even, then cheque can be sent directly to the drawing

branch. Instructions are given on the OBC schedule for the payment of that

cheque. Contra-liability vouchers are also posted in the system. When OBC is

realized, collection bank pays the amount through IBCA if it is the same bank or

through DD if it is another bank. If DD is received against OBC, it is presented in

the clearing for collection. If IBCA is received from the branch for the payment

of OBC, certain vouchers are posted in the system.

3.11.1.2 Inward Bills for Collection (IBC):

If any other bank sends a cheque of bank Alfalah limited, it is inward bill for

collection. Bank Alfalah remits money after checking the Balance of the customer

account.

The process of collection starts when the cheques of Bank Alfalah Ltd. are

received from other banks. Then these cheques are sent to the head office

Karachi, which sends the cheques to sbp for clearing and get the confirmation of

cheque and credit advice. Main activity of clearing is performed by head office,

which contacts other banks through SBP.

CHAPTER: 4

FINANCIAL ANALYSIS

Purpose:

Financial analysis of the organization involves the evaluation of the financial

performance as depicted in the financial statements of the organization. To improve the

quality of decision making, proper analysis of these statements helps a lot. Financial

statement analysis helps in determining the financial conditions at any particular point in

time and effectiveness of operations of a firm during a specific period.

The BAL provides this information in the shape of its annual report for every financial

year containing financial as well as non-financial information.

The financial data of BAL is analyzed in the following two ways

The given below types of analyses are used to measure firm’s performance over time. In

the common size analysis we use the balance sheet and income statement and measure

their performance as compared to other years and in the same year, by generating a

percentage increase or decline. The following types are as follows:

Common size analysis

Financial ratio analysis

4.1 Common size analysis

Common size analysis expresses comparison in percentage. For example, if cash is Rs

30,000 and the total asset is Rs 1, 00,000 then cash represents 30% of total assets. The

use of common size analysis makes comparisons of firms for different sizes mush more

meaningful. A small change in amount can results in a very substantial percentage

change. This is the analysis where total assets are divided by all balance sheet items, and

all income statement items are divided by net sales or revenue is called common size

analysis. Common size analysis can give analyst valuable approaching into changes that

have occurred in a firm’s financial condition and performance. As common size analysis

gives us relative percentage of an item with respect to total, so the growth or decline in

various items of balance sheet and income statement cannot be detected from common

size percentages. It has the following types:

Horizontal analysis

Vertical analysis

4.1.1 Horizontal analysis

Horizontal analysis compares each amount for a selected base year or we take each item

of base year as 100% and compare with other items.

4.1.1.1 Horizontal analysis of balance sheet

Table no.4.1. Horizontal analysis of balance sheet

2008 2009 2010 2009 2010Assets % changeCash and balance with treasury bank

100% 111.04% 119.09% 11.04% 19.09%

Balance with other banks 100% 117.41% 123.62% 17.41% 23.62%

Lending to Financial Inst 100% 96.04% 433% -3.96% 333%Investments 100% 85.85% 112.05% -14.15% 12.05%Advances 100% 112.54% 109.83% 12.54% 9.83%Operating fixed assets 100% 115.52% 121.55% 15.52% 21.55%Deferred tax assets 100% ---- ---- ---- ----Other assets 100% 149.49% 243.62% 49.49% 143.62%Total Assets 100% 106.11% 118.29% 6.11% 18.29%LabilitiesBills payable 100% 83.41% 91% -16.59% -9%Borrowings 100% 64.48% 97.28% -35.52% -2.72%Deposits and other accounts 100% 110.08% 118.88% 10.08% 18.88%

Deferred tax lease 100% 15.10% 13.03% -84.9% -86.97%Other liabilities 100% 118.45% 104.98% 18.45% 4.98%Total liabilities 100% 106.16% 117.35% 6.16% 17.35%Net Assets 100% 105.08% 136.45% 5.08% 36.45%Shareholders equity

Share capital 100% 123% 207.56% 23% 107.56%Reserves 100% 131.10% 148.58% 31.10% 48.58%Unappropriated profit 100% 71.05% 55.45% 28.95% -44.55%Total equity 100% 106.11% 143.60% 6.11% 43.60%Total liabilities and Total equity

100% 106.16% 118.46% 6.16% 18.46%

Surplus 100% 105.08% 136.45% 5.08% 36.45%

Since we are measuring the change between 2008, 2009 and 2010, the rupee amounts for

2008 become the base figure for expressing these changes in percentage form. For

example, Cash and balance with treasury bank increased by figures Rs. 3,250,957

between 2008 and 2009. This increase expressed in percentage form is computed as

follows

Other percentage figures are computed by the same formula.

Conclusion:

Total assets of BAL are increased 10.04% in 2009 and 19.09% in 2010 from 2008(base

year). This increase is due to the major increase in Operating fixed assets.

Cash and balance with treasury bank. Total assets increases more in 2010 as compared to

2009 from the base year. Lending to Financial Inst decreased by 3.96% in 2009 and

increased by 333% in 2010.

Total liabilities and Total equity increased by 6.16% in 2009 and 18.46% in 2010, and

share capital of BAL increase to 23% in 2009 and 107.56% in 2010. Share capital

increases more in 2010 as compared to 2009.

4.1.1.2 Horizontal analysis of income statement

Table no.4.2 Horizontal analysis of income statement

  2008 2009 2010 2009 2010

% change

Markup Revenue 100% 120.41% 137.92% 20.41% 37.92%

Markup Expense 100% 122.32% 148.33% 22.32% 48.33%

Gross Profit Margin 100% 116.94% 119.03% 16.94% 19.03%

Provision for Advances 100% 85.87% 155.83% -14.13% 55.83%

Bad debts written off directly 100% 484.22% ---- 384.22% ----

 Total Provision 100% 149.08% 171.30% 49.08% 71.30%

Net Markup after provision 100% 105.68% 100.72% 5.68% 0.72%

Non-Markup/ Interest Income

Fee and Commission 100% 100.40% 78.73% 0.04% -21.27%

Dividend Income 100% 464.9% 283.51% 364.9% 183.51%

Exchange income 100% 192.79% 214.90% 92.79% 114.90%

Gain on sale 100% 20.59% 33.44% -79.41% 66.56%

Other Income 100% 120.97% 126.96% 20.97% 26.96%

 Total non mark-up income  100% 96.82% 93.70% 21.19% 40.46%

Total non-markup expense 100% 128.15% 132.72% 28.15% 32.72%

Profit Before Tax 100% 39.57% 22.40% -60.43% -77.6%

Taxation 100% 35.11% 8.48% -64.89% -91.52%

Profit After Tax 100% 41.57% 28.65% -58.43% -71.35%

Conclusion:

The Trend analysis that we conclude from the above table gives us a clear view of the

bank’s income statement. Here we find an absolute increase in the gross profit. Gross

profit increases by 16.94% in 2009 and 19.03%% in 2010. There is more increase in

2010. This is mainly due to the fact that BAL has a good control over its markup

expenses, in relation to its total markup revenue. As we can see that markup expenses are

gradually being increased, that ultimately gives boost to the gross profit of the bank from

the base year. The markup expense stands as the cost of sales. The increase in the gross

profit shows that the management has been able to gain control over the markup expenses

then previous year this shows that the bank is moving in a trend where it would lead into

the achievement of the goals it has set.

The total income of the bank has increased from the base year mainly due to the fee and

commission reduction, as they kept on an increase from the past few years. The bank

tackled the situation, by reducing the markup expense, that balanced the effect and

ultimately the profit after tax has increased. The ultimate increase in the profit after tax

also comes due to the fact that BAL has relieved itself from the provisions against the

balance sheet liabilities, which have reduced the expenditure

4.1.2 Vertical analysis

Vertical analysis compares each amount with a base amount selected from the same year.

Simply, we compare the items of balance sheet or income statement vertically by taking

one item as 100%.

4.1.2.1 Vertical analysis of balance sheet

2008 2009 2010Assets

Cash and balance with treasury bank

8.95% 9.37% 9.01%

Balance with other banks 5.85% 6.18% 5.84%

Lending to Financial Inst 1.05% 0.95% 3.84%Investments 26.90% 21.77% 25.49%Advances 52.05% 55.21% 48.33%Operating fixed assets 3.62% 3.94% 3.72%Deferred tax assets ---- ---- ----Other assets 1.83% 2.57% 3.77%Total Assets 100% 100% 100%LiabilitiesBills payable 1.26% 1.00% 0.97%Borrowings 6.45% 3.92% 5.30%Deposits and other accounts 83.05% 86.17% 83.47%

Subordinate loans 0.98% 0.74% 1.95%Deferred tax liabilities 0.42% 0.06% 0.05%Other liabilities 2.90% 3.23% 2.57%Total liabilities 95.06% 95.12% 94.31%Shareholders equity

Share capital 1.97% 2.29% 3.47%Reserves 0.73% 0.91% 0.92%Unappropriated profit 1.47% 0.98% 0.69%Total equity 4.18% 4.18% 5.81%surplus 0.74% 0.70% 0.60%Total liabilities and Total equity 100% 100% 100%

Table no.4.3 Vertical analysis of balance sheet

Each asset in balance sheet is expressed in terms of total assets, and each liability and

equity account is expressed in terms of Total liabilities and Total equity.

For example, the percentage figure above for Cash and balance with treasury bank in

2009 is computed as follows: 

Other percentage figures are computed by the same formula.

Conclusion:

Vertical analysis shows the proportionate percentage of different items of the balance

sheet with respect to Total Assets. The vertical analysis of BAL shows that there are

different assets and liabilities over the time period. This is due to many reasons. First of

all the assets have changed and increased over the time period. The change in assets

affects the overall vertical analysis as the change is analyzed with respect to assets. The

major components in the balance sheet of banks are deposits, advances and investments,

as the major expense and income occurred due to these respectively.

So looking closely to these items investment increased from 2009 to 2010. On other hand

the advances decreases in 2010. This is due to high interest rates in 2009 and lower

interest rates in 2010. Investments, as being a non-interest source of income are more

promising than advances that are becoming more profitable due to inclining interest rates.

Bankers prefer to give advances when the interest rate was high but then prefer to invest

in no interest income in 2010 when the income from investment was higher than the

interest rate.

The deposits are approximately same in both years. Only slightly increase in 2010. The

cash in hand is decreasing from 2009 to 2010. Thus showing that now the bank is more

liquid, and liquidity is inversely proportion to profit. The cash in hand should be invested

in short term investments, so that the organization can earn profit on idle money. Now

coming to the share holder’s equity, the equity has been increased from 4.18% to 5.81%

in 2010 of total asset over the time period. This shows that more people are interested to

invest in the BAL in 2010. In BAL share holder equity the major cause of increase is the

revaluation of assets and increase in inappropriate profits. Reserves have decreased over

the time period and share holder equity increased a little with respect to assets.

4.1.2.2 Vertical analysis of income statement

Table no.4.4 Vertical analysis of income statement

2008 2009 2010

Markup Revenue 100% 100% 100%

Markup Expense 64.46% 66.18% 69.33%

Gross Profit 35.54% 33.82% 30.67%

Provision for Advances 9.15% 6.51% 10.38%

Provision for Investments ---- 4.78% 0.9%

Bad debts written off 0.02% 0.10% 0.7%

Net Markup Income 26.31% 22.37% 19.22%

Non-Markup Income

Fee and Commission 9.42% 6.83% 5.38%

Dividend income 0.25% 0.97% 0.70%

Exchange income 1.84% 2.95% 2.87%

Gain on sale 8.00% 1.37% 1.94%

Unrealized gain 0.08% 0.58% ----

Other Income 4.00% 4.03% 3.68%

Total non-markup income 23.42% 15.57% 14.57%

Total income 49.74% 37.95% 33.79%

Non-Markup Expenses

Admin Expenses 32.08% 31.66% 30.71%

Other provisions 0.02% 0.09% ----

Other charges 0.04% 0.40% 0.22%

Total non-markup expense 32.15% 32.15% 30.93%

Profit Before Tax 17.60% 5.79% 2.86%

Provision for Taxes 5.45% 1.59% 2.52%

Profit After Tax 12.14% 4.20% 9.69%

Conclusion:

The Vertical Analyses of Income Statement of BAL as given in the above table is

showing a percentage change with respect of the sales or markup income. There is a

consistent decreasing trend in 2010 in the banks gross profit. The main reason behind this

is that the bank has not controlled its markup expenses in relation to total markup

revenue. In simple words we can say that increase in the markup expenses resulting in the

decrease gross profit. This can be because of decreasing interest rate on advances or

decreasing interest rate on deposits to encourage savings. Markup expenses are actually

cost of sale in case of a bank. Furthermore this decreasing trend in gross profit shows the

bank’s management is not efficient in controlling markup expenses. So this decreasing

trend of gross profit is a negative sign and the bank’s management should consider it and

take some more actions to improve its position.

Now if we take a look at the figure of total income of the bank, there is consisting

decrease in it as well. As total income is the summation of both markup income and the

non markup income. This decrease in total income is due to the decrease in the markup

income. Many organizations total non markup income consists of fees and commissions,

dividend income, exchange income and other income. If the look at the figure of non

markup expense there is a decreasing trend and this increasing trend in these expense is

due to the decrease in administrative expenses.

Furthermore, the taxation percentage was high for 2009 but for 2010 the taxation

percentage decreases due to decrease in profit before tax. The combine effect of all of

these has resulted in lower percentage increase in the net profit as compare to decrease of

gross profit.

4.2 Financial ratio analysis

A financial ratio is an index that relates two accounting numbers and is obtain by

dividing one number by other. One may consider that why there is a need to mingle with

these ratios and not take the actual figures straightforwardly. Among various reasons one

strong reason can be put forward that ratios help in comparison. When analysis is two

compare the internal performance of the organization in relation to time, only ratios

analysis is the viable option for them. Along with it, comparison with the other

competitors in the same industry can only be carried out with the help of financial ratios.

The number of financial ratios might be created in virtually unlimited, but there are

certain basic ratios that are frequently used specially for measuring the banks

performance. There are some ratios that are used for the analysis of the banks these are:

1. Earning assets to total assets

2. Return on earning assets

3. Interest margin to average earning assets

4. Loan loss coverage ratio

5. Equity capital to total assets

6. Deposit times capital

7. Loan to deposits

4.2.1 Earning assets to total assets

Earning assets includes loans, leases, investment securities, and money market assets. It

excludes cash and non earning deposits plus fixed assets. This ratio shows how well bank

management puts banks assets to work. High performance banks have a high ratio.

Graph no.4.1

2008 = 263142615 = 0.80 = 80%

328895152

2009 = 271959907 = 0.78 = 78%

348990765

2010 = 302149830 = 0.77 =77%

389070055

This represents the earning assets to total assets ratio which decreases from 0.80 to 0.78

in 2010 and decreases to 0.77 in 2010, which is the slight decrease.

4.2.2 Return on earning assets

Return on earning assets, computed by dividing net income by average earning assets, is

a profitability measure to be viewed in union with return on assets and return on equity.

Graph no.4.2

2008 = 3130299 = 0.119 = 1.19%

263142615

2009 = 1301301 = 0.004 = 0.47%271959907

2010 = 897035 = 0.002 =0.29%302149830

This ratio is decreased moderately in 2009

and 2010.

4.2.3 Interest margin to average earning assets

This is the key determinant of bank profitability for it provides an indication of

management's ability to control the spread between interest income and interest expense.

Graph no.4.3

2008 = 9162908 = 0.034 = 3.48%

263142615

2009 = 10715389 = 0.04 = 4%

271959907

2010 = 10907132 = 0.036 =3.61%

302149830

This ratio shows the increase in profitability in 2009 and decline in 2010.

4.2.4 Loan loss coverage ratio

This ratio is computed by dividing pre-tax income plus provision for loan losses by net

charge offs, and helps determine the assets quality and the level of protection of loans.

Graph no.4.4

2008 = 453552+2370867 = 1182

5844

2009 = 1794720+2035997 = 135.4 28298

2010 = 1016316+3694546 = 78.75 59817

This Ratio decreases from 2008 to 2010.

4.2.5 Equity capital to total assets

This ratio, also called funds to total assets measures the extent of equity ownership in the

bank. This ownership provides the cushion against the risk of using debt and leverage.

Graph no.4.5

2008 = 13766673 = 0.041 = 4.18%

328895152

2009 = 14608523 = 0.041 = 4.18%

348990764

2010 = 19770260 = 0.05 = 5.08%

389070055

This ratio is same in 2008 and 2009, and increased in 2010.

4.2.6 Deposit times capital

This ratio concerns both the depositor and the stockholders. To some extent, it is a type of

debt, equity ratio, indicating a banks debt position. More capital implies a greater margin

of safety, while larger deposit base gives a prospect of higher return to stock holders

since more money available for investment purposes.

Graph no.4.6

2008 = 273173841 = 42.02

6500000

2009 = 300732858 = 37.61

7995000

2010 = 324759752 = 24.07

13491563

Deposit times capital in 2008 is 42.02 and in 2009 is 37.61. Which shows that ratio is

4.41 times smaller in 2009.

4.2.7 Loan to deposit

Average total loans to average deposits are a type of assets to liability ratio. Loans make

up a large proportion of the bank’s assets. And its principle obligations are the deposits

that can be withdrawn on request with in time limitations. This is the type of debt

coverage ratio and it measures the position of the bank with regard to taking risk.

Graph no.4.7

2008 = 3452059 = 0.012 = 1.26%

273173841

2009 = 3315500 = 0.011 = 1.10 %

3007332858

2010 = 14947435 = 0.046 = 4.60%

324759752

This ratio shows that loan to deposit decreased in 2009 and increased in 2010.

CHAPTER: 5

SWOT ANALYSIS

THE SWOT ANALYSIS OF BANK ALFALAH LTD

3.1 Strengths

The predominant strengths of Bank Alfalah Limited are

5.1.1 Humble Management

The senior management of Bank Alfalah Limited is considerably humble. Their humility

is an integral part of the organizational culture of the bank. The modern management

techniques have discarded the bureaucratic style of management in which employees

were treated as servants if not as slaves. In the contemporary business world employees

are said to be the biggest and the most crucial assets of a business concern, specifically if

we are talking about a service industry and this is precisely the management policy Bank

Alfalah Limited follows. The humility of the management serves as a big morale booster

and encouragement catalyst for all employees in general and new inductees in particular.

5.1.2 Strength And Commitment Of Sponsors

Bank Alfalah Limited is a project of Al-Nahayan family, which is a renowned Abu Dhabi

based investor family. The first project of this particular family was Bank of Credit and

Commerce International (which later on became on of the most renowned banks of the

Muslim world). BCCI was acquired by Habib Bank Limited (a nationalized bank) and as

a result BCCI became Habib Credit and Exchange Bank (H.C.E.B). The bank functioned

under this particular name for six years and then Al-Nahayan family bought 70% of its

shares from Habib Bank Limited and renamed the institute as Bank Alfalah Limited.

Thus in real terms the same family reinvested in their lost project and tried to rejuvenate

their brainchild. This reinvestment shows the investor’s trust, commitment, and

perseverance to transform Bank Alfalah Limited into one of the strongest financial

houses of Pakistan. The “Al-Nahayan” family is a royal family and this fact further adds

to the bank’s inherent strength.

5.1.3 ‘Kaizan’

Kaizan is a process of continuous improvement in production and every aspect of value

added (Japanese). In a very short time span the management of Bank Alfalah Limited has

been able to develop its image in a very effective and efficient manner. Through the

laborious efforts of the top management and the employees, the entire organization as a

whole has been able to continuously add its prestige as a reliable, service oriented, and

flourishing financial institution. When we compare the image of Habib Credit and

Exchange Bank with that of Bank Alfalah Limited we find a world of difference, and

when we compare the image of Bank Alfalah Limited at its inception with its present

image we find an even greater difference. This fact proves the thesis that there has been

continuous value addition. The number of individuals and corporate entities that feel

comfortable while dealing with Bank Alfalah Limited is increasing on a daily basis.

5.1.4 Phenomenal Growth in Profitability, Branch Network And Deposit Portfolio

In the very first year of its inception Bank Alfalah Limited closed its operations at a

deposit portfolio of Rs. 7 billion, at the end of the second year the deposit portfolio had

risen to Rs. 14 billion. Thus Bank Alfalah Limited is growing at a multiplier rate of 50%.

The profit before provisions and taxation of your bank for the year 2007 stood at Rs.

3.264 billion which was 10% higher than that of last year. The deposit grew by 7.7% and

stood at a figure of Rs. 239.509 billion while advance portfolio grew by 26% and showed

a figure of Rs. 149.999 billion. When Bank Alfalah Limited started its operations it only

had three branches and in a short time span the branch network has expanded to 195.

5.1.5 Vastly Experienced Management

The people who occupy the top positions in Bank Alfalah’s management hierarchy are

certainly no mugs at what they do. Rather they are as capable and as competent as they

come. Their superior management skills certainly do create a synergistic effect when

coupled with the enormous amount of trust sponsors have put in the management. One of

the most evident proofs of above average management expertise are the deposit portfolio

growth, profitability growth, and branch network growth figures shown under the

previous heading.

5.1.6 Highly Trained Human Resource Department; Transformation of Work

Force into Human Capital

One of the most significant catalysts, management of BAL had incorporated---and it still

is incorporating---in the organization, when H.C.E.B was transformed into Bank Alfalah

Limited, was induction of young and energetic business graduates. This was done in

order to achieve quite a few objectives; one was to raise the overall skill level of the work

force so that service provision could be improved and the second objective was to reduce

the average age of Bank Alfalah Limited’s employees so that an overall sense of change

is trickled down to the grass root level of the organization. Bank Alfalah Limited has an

excellent selection / recruitment and training program which are undertaken at its

Training and Development Center, Human Resource Division Karachi.

5.1.7 Superior Consumer Finance

In contemporary banking consumer finance has assumed immense significance, as it is

that department of a commercial bank whose personnel directly and extensively deal with

the client body. One of the most predominant sub departments of consumer finance is

Alfalah Car Finance. The customer interface is greater in the consumer finance

department, and the diligent staff of Bank Alfalah limited enriched with its superior

service and relationship skills attracts / persuades these clients to develop relationship

with Bank Alfalah Limited in the arena of corporate banking as well. Thus a strong

consumer finance department really helps the bank to expand its corporate banking

business.

5.1.8 Crucial Location Of Branches

All the forty five branches of Bank Alfalah Limited are located at extremely crucial and

vital locations, which is indeed a very significant factor towards earning more profit.

Moreover all of the branches are very well furnished which is an integral characteristic of

a good bank in this age of consumerism.

5.1.9 Image Building Activities

Activities such as building of Alfalah Square at Liberty Lahore, the China Khan at the

Alfalah Square, Alfalah Mini Golf Course, and Shahdin Manzil (proposed main branch,

Lahore at The Mall, under construction) have really contributed a lot towards the image

building process of Bank Alfalah Limited. Such activities also make people aware of the

rejuvenation process of Bank Alfalah Limited. Such activities are classified as strength

because they involve people in the change process that contributes a lot towards building

customer loyalty.

5.2 Weaknesses

The chief weaknesses are enlisted as under

5.2.1 Small Size

Bank Alfalah Limited is small in size; there is no doubt about this fact. Although, as I

mentioned in the strengths section, the branch network is expanding at a phenomenal rate

but still the size is not big enough as compared to some of the big banks present in the

market. Bank Alfalah limited has 189 branches in the whole of Pakistan. A huge branch

network is always an invaluable asset for any bank. Customers simply love it when they

could see another branch of their own bank at every turn they take. Extensive branch

network might reduce per branch profit but it is very likely to raise the overall profit

figure for the entire organization as a whole.

5.2.2 Lack of Research Cell

There should be a research cell in the bank, which should be engaged in gathering the

information about the present actions of its competitors

5.2.3 Uneven treatment with customers

Customers having accounts with small amounts are not given same services and dealing

given to those with high accounts.

5.24 Kill set of employees is not up to the mark as there is no job rotation.

The contemporary banking all over the world has taken a unique turn i.e. they have made

job rotation an integral part of their management philosophy. Job rotation adds value to

every single employee, as he is able to perform a variety of jobs related to banking

profession. Moreover job rotation increases the human capital pool of the organization as

every one is trained in more than one sphere of banking. Bank Alfalah Limited

completely lacks this.

5.2.4 Foreign banks still are a little more prestigious

Although Bank Alfalah Limited is continuously adding to its prestige, but still it can not

be rated as a bank with the same repute as International Banks functioning in Pakistan,

for instance ABN AMRO Bank, Citi Bank. Banks function as custodian of people’s

possessions, act as their agents, represent clients in trade dealings outside the country,

and give different types of guarantees and in all of these transactions repute plays a

central role. And when it comes to repute foreign banks have a little more of it as

compared to Bank Alfalah Limited.

5.2.5 Bank Alfalah Limited does not possess foreign network in Europe

countries

Foreign banks and some local banks having international network have this edge over

Bank Alfalah Limited. Banking transactions regarding trade finance constitute a very

important part of contemporary banking and moreover they are said to be the bread and

butter for the commercial bank. Bank Alfalah Limited, for such transactions has to rely

on its correspondents and agents in other countries, and naturally has to pay them some

remuneration --- an expense banks having foreign network do not have to incur.

5.2.7 No advertising in electronic media

Bank Alfalah does embark upon occasional sales promotion activities, it also gives

advertisements in the print media, but it has never flashed an advertisement on the

television screen, which is said to be the strongest of all Medias. Some other commercial

banks are really capitalizing on the power of this media; examples are Askari commercial

bank, Muslim commercial bank, Habib Bank Limited etc.

5.3 Opportunities

The opportunities on which bank Alfalah can capitalize upon are delineated as under.

5.3.1 Extension of local branch network

One of the biggest opportunities for bank Alfalah Limited is to extend its branch network

in Pakistan. The essential pre-requisites for a vast branch network are all there; sponsors

have the money, managerial expertise are available, and last but not the least any bank

with ‘Bank Alfalah Limited written in blue at its front is accepted in the market’.

5.3.2 Establishing foreign branch network

Going global could have been termed as a fad a few years ago, but now for those business

organizations that want to survive and thrive globalization has become the order of the

day. In order to increase the bottom line figure, it really is crucial. But the senior

management would start implementing this course of action once they feel that they have

got a strong hold in Pakistan.

5.3.2 Capitalizing on information technology

The information revolution has certainly made its inroads in almost all human functions.

If Bank Alfalah Limited’s senior management and the IT division make a concerted

effort to make best possible use of this miracle of human mind it would enable Bank

Alfalah Limited to harness unexplored benefits of immense magnitude.

5.3.4 Unexplored market of multinational corporations

Unfortunately in spite of unprecedented image building efforts, Bank Alfalah Limited

still is an unattractive bank for big multi nationals functioning in Pakistan. If the

management is able to develop a strong relationship with such MNC’s then it would open

doors of huge and unimaginable opportunities for Bank Alfalah Limited. If even a single

MNC becomes a corporate client of Bank Alfalah Limited i.e. it deposits its revenue with

Bank Alfalah Limited, pays its salaries through Bank Alfalah Limited, does trade

dealings through Bank Alfalah Limited, and avails credit facilities offered by Bank

Alfalah Limited, it would make a world of difference to Bank Alfalah Limited.

5.3.5 Customers are more willing

Muslims are more consciously differentiate the Islamic-base banking from interest-base

banking. That is why there is large caution of expansion.

5.4 Threats

The predominant threats Bank Alfalah is facing at the moment are discussed in the

following lines.

5.4.1 Private Sector Banks

Bank Alfalah Limited is at present facing really tough competition from not only the first

line international banks (ABN AMRO, Standard Chartered, Citi Bank) but is also having

a neck to neck race with other privatized banks such as Askari Commercial Bank

Limited, Union Bank, Prime Commercial Bank, Faysal Bank Limited, Bank Al-Habib

Ltd etc. All the new schemes launched by these banks and their plans to expand branch

networks are a real threat for Bank Alfalah Limited.

5.4.2 New Trade Polices

Introduction of new trade policies and laws are also been a source of threats to the

organization due to the imposition of new rules and terrifies, previous maintained

regulations have to be amended.

5.4.3 Network Expansion By Foreign Banks

Foreign banks have a lot of plus points as compared to Pakistani banks (state owned and

private); they have better products, better and personalized service, desirable interest

rates, foreign branch network, but they definitely lack in local branch network (in

Pakistan). Literary no foreign bank has been able to expand its network to far-fetched

places of Pakistan. Pakistani banks (private banks in general and state owned banks in

particular) are spread all over Pakistan. This is an intangible asset for Pakistani banks.

But if any of the foreign banks expands it network, backed by their traditional powerful

service, then it might prove to be the start of downfall for Bank Alfalah Limited, unless

and until Bank Alfalah Limited raises its level of service and product feasibility to the

international standards.

5.4.4 If Pakistani banks (specially State Owned Banks), backed by huge network

improve the service they give and their employee skill set

State owned banks like National Bank of Pakistan and Habib Bank Limited have huge

networks, they have the experience, but the only set back they have is below par service

and lack of motivation amongst the employees. If their corporate strategy is altered, and

the managerial policy is revitalized, enabling them to improve upon the service they give

and enabling them to convert their work force into human capital then such financial

institutions backed up by their huge networks pose a potential threat to Bank Alfalah

Limited. So, Bank Alfalah Limited should endeavor to expand their branch network as

efficiently as possible and as soon as possible.

5.4.5 Terrorist image of the country

After the 9 / 11 incident every kind of transaction that uses to take place with the outside

world has assumed a different mode. The trade finance transactions are the bread and

butter for the commercial bank, were also hampered by that terrorist attack on 11 th of

September i.e. the magnitude of orders the exporters were receiving decreased by a great

deal, but as far as our image in the international community is concerned there is still a

considerable room for improvement. If this situation further aggravates rather than

improving, the trade finance business would really be hampered, and one of the major

earning avenues for Bank Alfalah Limited will loose its footings. This fact poses a real

threat to the sanctity of Bank Alfalah Limited.

5.4.6 Inconsistency in government policies

This is a phenomenon that could hamper smooth functioning of any organization working

in a particular country. Although the sponsors of Bank Alfalah Limited --- Al-Nahayan

Family --- are really committed to invest more and more in the country but still any

drastic change in either the economic policies like increase in taxation rates, or any

change in the foreign policy, which could hurt Pakistan’s image could also shake the

investor confidence and also could lead to a decrease in the repute of the entire banking

sector of Pakistan.

Recommendations and conclusions

Recommendations

It was an interested experience to do internship in Bank Alfalah Limited. The staff was

highly cooperated and due to their help I learned big deal about modern banking.

I suggest that such an internship program highly integrative for the students of commerce

education so that the students should be enquired with the knowledge of practice world .I

do summarize that it would be a great help to me in selection of job or future field of

work.

Here I am putting some suggestions, which will enable the bank to compete with other

banks more effectively & efficiently.

It is observed that the employees were overburdened so they have to stay at

branch till late at night.

The employees should be signed jobs for specific period and than they should

shifted to other department so that they gain knowledge of other jobs.

Bank Alfalah Limited should properly advertise and Communicate to public about

the services provided by it, so that more customers will be attracted.

The bank’s management should give more incentives and pay scale of officers

should be revised & improved.

System and operations should be more defined and organized.

IT draw backs should be improved.

Administration drawbacks should be improved by the strict control of general

issues.

Audit should be held internally. Rather there should be an Audit Department in

the branch to make audit on daily basis.

Expenditures must be control, which are very high.

Conclusions

If I have to express my experience of internship in Bank Alfalah Limited GT road Branch

Haripur I would briefly say:

Bank Alfalah is a good Organization in the way that anybody can join it for his/ her long-

term career. Overall working environment is comfortable. Management of branch cares a

lot of its employees and considers them as the Asset of bank. Behavior of senior

executive of bank is very polite and they are caring about the individual’s career and their

growth. However management is very demanding about the targets but good reward at

the achievement of assigned targets is awarded.

Employees at Bank Alfalah are quite efficient. Employees have to bring their bank

among the list of good banks. Therefore, they work more than their working hours and it

is all according to their will. It also shows their loyalty, commitment to organization.

All the customers are entertained individually. Same kind of behavior and attention is

given to all the customers. Getting ideas for improvement from customer side is a new

idea and that is working very well in Bank Alfalah Ltd. All the customers are asked to fill

a suggestion form and the standards of the bank are improved through them.

Prioritizing its product portfolio in line with its corporate and consumer needs and wants

the bank is committed to develop products that give more value to its customers in both

the sectors.

In bank, all the work is done on computers. All the entries are made in computer. Balance

is fed into the computer. This increases efficiency of the bank.

I found my internship training at Bank Alfalah Limited Branch Haripur to be a very

rewarding experience. The training was beneficial because it helpful me to aware a real

life working environment.

So far my learning is concerned; all the employees at branch were quite cooperative.

They helped me to understand the activities of a bank to possible extent. Their good

attitude gave me more confidence to learn more and to ask if I have any query in my

mind. Besides their ever going activities they never get irritant by my questioning. I had

made an honest efferent to present the working & operation of Bank Alfalah Limited

Branch Haripur in simplest way.

I feel pleasure that I have really gained a lot during 6 weeks & enjoyed working with

experienced cooperative & intelligent staff.