Bank Alfalah Final Report 2008

Preface

The internship is an essential part of BBA degree program because

through this, training students come to know the real difference between

theory and practice and they introduced to the outside business world. I

have done my internship in Bank Alfalah Limited, Main Boulevard Gulberg

Branch. The internship provided me great opportunity to equip myself

with knowledge, techniques, application and tools used in an organization.

I have tried to choose suitable words to lighter the subject of this

report. Because words are, the symbols used to express ideas. There are

the tools of affective writing. There importance lies in the power, when

they have suitably chosen and arranged to convey and through to other in

language, that is the understandable clearly and understood readily.

I have tried my best to make the style of this report as good, as

possible, because style in writing as in other walks of life, is a quietly

peculiar to the individual, as not to people write alike. Background,

training, experience and the way a person thinks determine it. The source

of information for the preparation of report includes the written notes

extracts from banking literature and verbal discussion with bank officials.

I hope this report will help in understanding various aspects and

features of Bank Alfalah Ltd. and will be equally important for business

student.

Amjad Ali

BBA

(evening) 2005-30

INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR1

AcknowledgementAll praise and gratitude due to ALMIGHTY ALLAH who created man in His

own image and enjoyed upon him to travel on the earth and enter into a

profound and analytical study of Universe for spiritual appreciation of

ALLAH’S unity and His attribute as well as for harnessing the material

manifestation of the world to the mankind’s profitable utilization. In the

first place, therefore, we express our utmost thanks to ALLAH. At the next

stage I offer my gratitude to our Apostle and prospector Prophet

Muhammad (P.B.U.H) for his golden saying “Gain knowledge even if you

have to travel to China”.

Very special thanks to all staff members at Bank Alfalah Limited and

Agha Ali Akbar (Branch Manager), Mr.Subhan (Operational Manager),Ch

Irfan Aslam(relationship manager) who gave me enormous support during

my stay at the bank. They gave me their precious time and briefed me

personally during the entire period of stay.

I shall fail my duty if I did not say thanks to all the teachers of

Institute of Business Administration University of The Punjab who always

remained with us at every step and gave us a lot of moral strength. Lastly

I want to chronicle my thanks to Labiba Sheikh for being so cooperative,

accommodating and compassionate, who provided me with her kind

guidance whenever I felt difficulty and to Mian Farhan, who made me

capable of making financial analysis of financial statement of this

organization.

Amjad Ali

BBA (E) 2005-30


Dedication

This work out is dedicated to my loving

parents and strenuous teachers. Without their

knowledge, wisdom, and guidance, I would not

have the goals I have to strive and be the best to

reach my dreams!


Executive summary

The purpose of study was to gain practical knowledge and to aware with

organizational environment. In this report the Bank Alfalfa’s history,

mission, vision and services as well as management is mentioned. After

this the analysis of financial statements is conducted which shows where

the Banks is standing.

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

limited company under the companies’ ordinance 1984, charged with the

strength of the Abu Dhabi based group, under the leadership of highness

Sheikh Nahayan Mubarak Al-Nahayan, Minister of Education, Government

of Abu Dhabi and a prominent member of Royal family.

Working in bank was a great learning exposure for me. When I conduct

financial and trend analysis of Bank Alfalah I found that its financial

position is improving year by year. Comparative study with other banks

shows that it is somewhat better them other banks. I concluded that BAL

is performing very well.

In my report I have discusses the introduction, goals and objectives vision,

corporate profile branch network of the bank. The financial analysis is

showing favorable banking ratio evidencing a promising prospects for the

bank. SWOT Analysis and PEST analysis is also showing favorable

conditions for bank’s survival and growth. I also discuss the marketing

strategies, competitive advantages and business process analysis of Bank

Alfalah. The need is to realize the banks growth potential and drive it in

the right direction using the right strategy.

In the business process analysis detail procedurals has been discussed

regarding different departments and products. I have also mentioned my

duties, accomplishments and knowledge, which I have, gain during

internship. INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

4

Table of Contents

Introduction to Banking?.............................................................................8

Banking industry in Pakistan.....................................................................10

HISTORICAL OVERVIEW OF BANK ALFALAH...............................................14

Status and nature of business...................................................................17

Vision and Mission Statement...................................................................20

Vision.........................................................................................................20

Mission......................................................................................................20

CREDIT RATING.........................................................................................24

STRATEGIC FOCUS.....................................................................................25

MANAGEMENT SYSTEM..............................................................................26

Board Advisory committee........................................................................28

Branch Level Designation..........................................................................29

Managerial policies....................................................................................30

Management styles...................................................................................33

PRODUCTS & SERVICES.........................................................................35

Current account.........................................................................................35

Saving account..........................................................................................37

Alfalah Hilal Card.......................................................................................45

Money Gram..............................................................................................48

Alfalah Credit Card....................................................................................50

Home Finances..........................................................................................54

Alfalah Car Financing.................................................................................56

FINANCIAL SERVICES.................................................................................59

1. Trade finance...................................................................................59

2. Structured Finance..........................................................................61

Small and Medium enterprises..................................................................62

Schedule of Product and Financial services..............................................63

PROMOTION...............................................................................................71INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

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FINANCIAL ANALYSIS.................................................................................73

PROFITABILITY RATIOS..............................................................................77

PORTFOLIO MANAGEMENT RATIO..............................................................84

INTERNATIONAL TRADE 98

TRADE PROCEDURE AT BANK ALFALAH 102

FIM (FINANCE AGAINST IMPORTED MERCHANSE)...................................112

FTR (FINANCE AGAINST TRUST RECEIPT)................................................112

FIM/FTR....................................................................................................112

Documentation........................................................................................112

Approval..................................................................................................113

Duration..................................................................................................113

Amount to be financed............................................................................113

Caution!...................................................................................................113

Margin on L/C..........................................................................................114

Clearance of goods..................................................................................115

Storage & insurance................................................................................115

Recording................................................................................................115

Mark-up...................................................................................................116

SWOT Analysis.........................................................................................116

Account opening department..................................................................120

Types of Deposit Facility.........................................................................121

Procedure to Open An Account...............................................................121

Issuance of Chequebook.........................................................................128

How to close an account.........................................................................130

Clearing department...............................................................................131

MODES OF TRANSFERING FUNDS IN REMITTANCES................................132

CLEARING................................................................................................138

Credit department...................................................................................146

Letter of credit (L/C)..........................................................................149

Letter of guarantee (L/G)...................................................................149

Finance against imported merchandise (F I M)..................................149


Finance against trust receipt (F A T R)..............................................150

Accounts department..............................................................................151

Budgeting................................................................................................151

Reporting.................................................................................................152

CAR FINANCING.......................................................................................156

CONCLUSIONS & RECOMMENDATION ON ANALYSIS...............................162

Annexure.................................................................................................165

Employees in various sections................................................................165


Introduction to Banking?

A bank is an institution for the custody, loan or exchange of money for

sanctioning credit, for transferring funds by domestic foreign bills of

exchange. Currency moves into and out of circulation through a pipeline.

ACCORDING TO BANKING COMPANIES’ ORDINANCE 1962:

“Banking means the accepting, for the purpose of lending, or investment,

of deposits of money from the public, repayable on demand or otherwise,

and withdraw able by cheque, draft, order or otherwise.”


Banking Functions

PRIMARY FUNCTION:

o Accepting deposit

o Lending

SECONDARY FUNCTION:

o Agency function

o Conducting FE transactions

GENERAL FUNCTION:

o Letter of guarantees/letter of credit

o Travelers’ cheque

o Lockers

o Remittances

o Credit & debit card

o ATMs

o Utility bills

o Payment of salaries

o Advisor to customer

o Safe custody


Banking industry in Pakistan

Nationalization of banks in the seventies was a major upset to domestic

banking industry of the country, which changed the whole complexion of

the banking industry.

With irrational decision at the top all, the commercial banks were made

subservient to the political leadership and the bureaucracy. Specialized

banking institutions were already working in the public sector.

The new accountability paradigm changed the business ethics in the

banking industry, and with this change started the disaster.

Nationalization of banking industry was accompanied by violent changes

in the external value of rupee.

The commercial banks thus lost their assets management equilibrium,

initiative and growth momentum. They ceased to be a business concern

and became big bureaucracies.

This was accompanied by indiscreet loaning under political pressure.

They suffered from three terminal diseases: non-performing loans; higher

intermediation cost; and loss of initiative and entrepreneurship. The rise

to Labor Unions and Officers Associations made life tough and working

conditions ugly to honest, dedicated and industrious workers in the realms

of domestic banking industry.

The era of nineties was the climax of privatization, deregulation and

restructuring in the domestic banking industry and financial institutions.

The Muslim Commercial Bank was the first bank to privatize. Followed by


Allied Bank limited, United Bank Limited and now the Habib Bank Limited

has been privatized.

One thing good for that particular period was the recruitment of fresh

officers in the domestic banking industry through well-organized policies

of Banking Council. With the decay of Banking Council, there was flood of

insincere, nonprofessional, incompetent candidates directly appointed/

recruited in all the domestic banks of the country.

BANKS PUBLIC SECTOR COMMERCIAL

o National Bank of Pakistan ( NBP)

o First Women Bank Limited (FWB)

o The Bank of Khyber (KB)

o The Bank of Punjab (BOP)

The government of Pakistan permitted small private sector banks to

operate, which indulged in doubtful policies to promote business. The

public sector banking, which constituted the backbone, thus continued to

suffer because of their approach, size and carried over liabilities. Mehran

Bank is the prime example of that kind of lax banking in the country,

which ultimately merged into National bank of Pakistan i.e. last resort of

domestic banking industry.


LOCAL PRIVATE BANKS

o Askari Commercial Bank Limited

o Bank Al-Falah Limited

o Bank Al Habib Limited

o Bolan Bank Limited

o Faysal Bank Limited

o Metropolitan Bank Limited

o Platinum Commercial Bank Ltd

o Saudi Pak Commercial Bank Ltd

o NIB Bank

o Soneri Bank Limited

o Muslim Commercial Bank Limited

o Allied Bank of Pakistan

o Mashreq Bank

o Silk Bank

In the meanwhile, western banks started entering into the business. They,

with the support of ruling elite, concentrated on the big business, leaving

the routine business to the local banks. This reduced the profitability of

the local banks.


FOREIGN BANKS

o RBS

o Al Baraka Islamic Bank

o American Express

o The Bank of Tokyo Mitsubishi

o CITI Bank

o Credit Agricole Indo Suez

o Deutsche Bank

o Doha Bank

o Emirates Bank

o Habib Bank A. G. Zurich

o Hong Kong Shangai Banking Corporation

o Mashreq Bank PJSC

o Oman Bank

o Rupali Bank

o Standard Chartered Bank

o Barclay Bank

o JS Bank

SPECIALIZED BANKS

o Zari Tarqiati Bank Ltd.

o Industrial Development Bank of Pakistan

o Punjab Provincial Cooperative Bank Limited


HISTORICAL OVERVIEW OF BANK ALFALAH

Bank Alfalah Limited was being formed after going through different

changes. At first, the Bank Alfalah Limited was working with the name of

Bank of Credit and Commerce International (BCCI). BCCI was incorporated

in Luxembourg on September 21, 1972. At that time, its paid up capital

was US $ 2.50 million.

By early 1973, BCCI has established its first four branches in Luxembourg,

UAE and UK. With the passage of time the branch network of Bank Alfalah

Limited was expand rapidly in different region of the world i.e. Far East,

Middle East, Africa, Europe and Western and Latin America. Its founders

were an influential and professional team possessing an intimate

knowledge of East Asian and Middle Eastern countries, particularly those

with oil resources and expertise for sophisticated operation of three most

important elements in the early formation of organization, e.g.

Investors from the oil producing countries of Middle East. A business

connection in the expanded markets. A well developed and fully equipped

management structure.


MAJOR FUNCTIONS OF BCCI

BCCI performed the following international function along with the

domestic commercial banking and International banking services to meet

the needs of individual.

o An intermediary bank between importer and exporter.

o Advanced loans for the persons involved in foreign trade.

o Advanced computer system to facilitate the clients.

o Provisioning of effective services of foreign trade.

o Bills for collection, inward and outward both clean and

documentary are attached by BCCI, which provide fast and efficient

remittances operations from many third world countries to

multinational corporations.

BRANCHES OF BCCI IN PAKISTAN

There were three branches of BCCI in Pakistan. These were

o Karachi

o Lahore

o Rawalpindi

The Lahore branch was opened on 15 December 1978. This branch was

opened at that time when some other international banks like Citi Bank,

Bank of America, and American Express etc. were already working.

However, within a few years this branch crossed mostly all the other

banks in case of deposits, advances, imports and exports dealings,

guarantees, traveler’s cheque sales etc.


LIQIUDATION OF BCCI

BCCI was liquidated on July 5, 1991.At that time BCCI was opening in

almost 69 countries in the world. When financial authorities launched a

coordinated swoop in what was alleged to be the biggest international

fund in history.

INCORPORATION OF HABIB CREDIT AND EXCHANGE BANK (HCEB)

In July 1991, the branches of BCCI in Pakistan at that time took over by

ministry of finance and SBP. All three branches were emerged in HBL after

valuation of its assets for 15 million dollars. It worked with Habib Bank Ltd.

For around about 10 months from 14 March 1992 to 31 October 1992.

PRIVATIZATION OF HABIB CREDIT AND EXCHANGE BANK

HCEB was privatized on July 7, 1997. Management was taken over by Abu

Dubai based Alnahan consortium. This consortium consists of foreign

investors of UAE and highly professional Pakistani bankers. Mr. Sheikh

Pervaiz and Mr. Omer Khan represent this consortium in Pakistan. The

bank was sold for Rs.39 per share for buying 70% shares. The government

decides to sell 10% shares to employees and rest of the shares was

privatized by stock exchange.


EMERGANCE OF BANK ALFALAH LTD.

Following the privatization in July 7, 1997 Habib Credit and Exchange Bank

assumed a new identity of Bank Alfalah on February 25, 1998. Bank is

committed to develop products that give more value to its customers.

With its deposits already soaring by more than 40% after privatization,

Bank Alfalah has embarked upon expansion program to ensure physical

presence in all cities of Pakistan. With a team of talented, service

dedicated professional bankers, Bank Alfalah commits all its energies,

resources and time to cater to all banking and financial needs.

Status and nature of business

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

limited company under the Companies Ordinance 1984. Its banking

operations commenced from November 1, 1997. The bank is engaged in

commercial banking and related services as defined in the Banking

Company’s ordinance, 1962. The Bank is currently operating through 282

branches in 82 cities, with the registered office at B.A.Building,

I.I.Chundrigar, Karachi. 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. 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 our

commitment to a culture of innovation and seeks out synergies with

clients and service providers to ensure uninterrupted services to its

customers. They perceive the requirements of customers and match them

with quality products and service solutions. During the past five years,

they have emerged as one of the foremost financial institution in the

region endeavoring to meet the needs of tomorrow today


Since the inception of Bank Alfalah, by the grace of the Almighty, They

have moved rapidly in expanding their branch network and deposit base,

along with making profitable advances and increasing the range of

products and services. They have made a break-through in providing

premier services at an affordable cost to our customers. Keeping in view

valued clients and the need for constant and effective communication of

information, As They pursues the path of excellence, and customer

satisfaction remains their priority. It is only when we know our customers

better, can we deliver a higher quality of services, thereby adding synergy

to existing management expertise, financial strength and profitability.

This is yet another channel of communication for the delivery of quality

products and services that enhance value to bank are stakeholders.

MANAGEMENT SYSTEM

It is fortunate for Bank Alfalah Limited that the leaders e.g. the top

management is very much qualified and has the ability to lead in a good

and effective manner. In Bank Alfalah Limited, all kinds of policies and

strategies are formulated and worked out by the board of directors and

the executive committee. The leadership style at Bank Alfalah can rightly

be mentioned as the customer oriented. Some individual persons have

some leadership traits in their personality. The top management should

have a contact with such persons, as it will help them in achieving their

objectives.

Branch network of alfalah

The Bank is fully aware that the branch network has direct implications on

the services that it provides to its customers. They offer services through

a network of 282 branches and 320 state of the art ATM machines. INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

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Conventional Branches 226

Islamic Banking Branches 048

Overseas Branches 008

ATM Machines 320

Following are the cities in which Bank Alfalfa’s branches are located:

Ahmadpur

Arifwala

Bahawalpur

Burewala

Chakwal

Chichawatni

Chiniot

Daska

Dera Ghazi Khan

Faisalabad

Gujranwala

Gujarat

Hafiz Abad

Islamabad

Jhang

RahimYar Khan

Rawalpindi

Sadiqabad

Sargodha

Sheikhupura

Abbott Abad

Attock

Dera Ismail Khan

Hangu

Kohat

Mardan

Mingora

Peshawar

Gawadar

Quetta

Jhelum

Kasur

Kharian

Lahore

Lalamosa

Mandi Bahaudin

Mian Chunnu

Multan

Okara

Pakpattan

Toba Tek Singh

Wah Cantt

Daharki

Ghotki

Hyderabad

Karachi

Mirpurkhas

Nawabshah

Sialkot

Sukkur

Vision and Mission Statement

Vision


To be the premier organization operating locally &

internationality that provides the complete range of financial

services to all segments under one roof.

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.


The Abu Dhabi Group (ADG), comprising some of the prominent members

of UAE’s ruling family, leading executives of UAE and their associates,

owns the majority shareholding in BAL since its privatization in 1997. The

bank is listed on the Karachi and Lahore Stock Exchange. The bank has a

leading position in consumer, trade finance and working capital finance.

Seven members BoD comprise four members from ADG and three other

professionals including the CEO. The chairperson of the board, H.E. Sheikh

Hamdan Bin Mubarak Al Nahayan, is Federal Minister of Public Works,

United Arab Emirates. The current CEO, an MBA with above three decades

banking experience, joined BAL in 2001 and elevated to the current

position in mid 2007. BAL, with a domestic network of 223, has operations

in Bangladesh (five branches) and Afghanistan (two branches), and is on

the lookout for further regional expansion. The bank also entered into

communication sector and other dimensions of financial services –

brokerage, asset management, and insurance – through its subsidiaries

and associates, which are in their gestation phase and would require

sometime before emerging as material contributors to BAL’s revenue

stream.

From the very outset, Bank Alfalah Limited has concentrated on

excellence and precision in banking practice and has consequently been

redefining industry standards. The bank’s core strengths stem from its

corporate philosophy, which stresses the higher level of security,

reliability and value for its client’s money. The Pakistani banking industry

has undergone substantive reformation in the last decade. It is now

characterized by increased growth and greater efficiencies, a focus on

market consolidation and international integration arising from increased

foreign investment. Thus Bank Alfalah Limited operates as a progressive

and adaptive organization maintaining dynamism and flexibility in all

facets of its operations.


As its inception in 1997, Bank Alfalah Limited faced still competition from

established banking giants. However, through mature focus, hard work

and dedication Bank Alfalah has carved on enduring niche for itself and

serves as a benchmark for financial institutions. This is a momentous

achievement given the fact that Bank Alfalah Limited started out as a

fledgling with only three branch offices burdened with a host of problems.

Today it has a network of 282 branches across Pakistan, facilitating access

to high quality banking service for all.

Reinforced with invaluable practical experience often spanning many

nations, sound technical and professional skills, its human resource strives

for perfection in service to delight clients and surpass expectations. Bank

Alfalah realizes the potential that the synergy of the well-trained, satisfied

and secure workforce offers. Consequently, the institution has adopted a

holistic approach to nurture its human resource where from initial

recruitment to throughout their careers; employee interests are kept

paramount, focusing on congruency between organizational and personal

goals.

Bank Alfalah Limited is highly cognizant of its obligation to the society in

which it operates. Consequently as a caring corporate citizen the bank

remains at the forefront in the promotion of health, education and sports

through contributions, endorsements and sponsorships. Recently Bank

Alfalah Limited has renovated the Shaahdin Manzil in Pakistan’s cultural

capital of Lahore.

This building, which is capital of Pakistan’s culture and historical heritage,

has been restored to its original grandeur for prosperity. It now serves as

Bank Alfalah Limited’s financial centre in Lahore.


CREDIT RATING

PACRA, a premier rating agency of the country, has rated the bank ‘AA’

(double A), Entity Rating for long term and A1+ (A one plus) for the short

term. These ratings denote a very low expectation of credit risk, strong

capacity for timely payment of financial commitments in the long term

and by highest capacity for timely repayment in the short term,

respectively. The ratings of first, second, and third unsecured listed and

subordinated TFC issues of PKR 650 million, PKR 1,250 million and Rs.1,

325 million have been maintained at AA- (Double A minus).

STRATEGIC FOCUS

Bank Alfalah continually reviews its offshore banking operations with a

view to further mobilize its organizational strategy of enhancing

excellence in banking. Encouraged by the unprecedented success of Bank INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

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Alfalah Limited in Pakistan, the bank recently acquired operations of

Shamil Bank in Bangladesh. In addition, Alfalah have moved forward

applications for branch presence in neighboring SAARC countries.

Presently Alfalah has established its branch in Afganistan.The

telecommunication industry in Pakistan is developing at a fast pace. As a

versatile organization, Bank Alfalah too acquired a 26% stake in the Warid

Telecom. This state of the art telecommunications firm is expected to

emerge as one of the key players in the communication industry.

FUTURE OUTLOOK

The future augurs well for the local banking industry as key

macroeconomic fundamentals stabilize and improve further. The bank will

continue to invest further in bank innovations which includes Islamic

banking, leasing, SME, home loans and other areas of product

development to provide higher levels of service and value to our clients.

Amidst these encouraging developments, Bank Alfalah Limited will

continue to embark on its strategy of network enhancement and deposit

mobilization.

MANAGEMENT SYSTEM


Chairman’s review

Since the inception of Bank Alfalah, by the grace of the Almighty, we have

moved rapidly in expanding our branch network and deposit base, along

with making profitable advances and increasing the range of products and

services. We have made a break-through in providing premier services at

an affordable cost to our customers.

Keeping in view our valued clients and the need for constant and effective

communication of information, we have designed this website to be as

user-friendly as possible.

As we pursue the path of excellence, customer satisfaction remains our

priority. It is only when we know our customers better, can we deliver a

higher quality of services, thereby adding synergy to our existing

management expertise, financial strength and profitability.

This is yet another channel of communication for the delivery of quality

products and services that enhance value to our stakeholders.

Board of directors


HIS Excellence Sheikh Hamdan Bin Mubarak Al Nahayan Chairman

Board Advisory committee

Mr.KhalidMana Saeed Al Otaiba DIRECTOR

Mr.Abdullaha khalil Al Mutwa (Director)


Sirajuddin Aziz

Director & CEO

Ikram Ul Majeed

Sehgal DIRECTOR

Mr.Nadeem Iqbal Sheikh (Director)

(Director)

Mr.Abdullaha khalil Al Mutwa (Director)

Mr.KhalidMana Saeed

Al Otaiba DIRECTOR

Mr. Abdullah Nasser Hawalileel Al-Mansoori (Director)

Bashir A Tahir

Ganpat singhvi

Central Management Committee

Sirajuddin Aziz (Chairman)

Parvez a Shahid (co-chairman)

Shakil Sadiq

Bakhtiar Khawaja

Mohammad yousuf

Adil Rashid

Ijaz Farooq

Arfa Waheed Malik

Nadeem Ul haq

Branch Level Designation


BRANCH MANAGER

Managerial policies

Managerial policies include all those policies which are adopted by the

bank in performing all it internal activities as well as external operations.

Different policies are required in order to introduce innovation and ensure

maximum operational efficiency at minimum cost.

POLICY FORMULATION PROCESS

Any policy that is being suggested is to be approved by the beard of

directors. Before this, the management of the bank takes up the affairs

that are to be discussed in the board meeting and the agenda is prepared.

Circular is sent to the persons who have to attend the meeting. And the

policies and issues are discussed for possible approval or rejection in the


OPERATIONAL

MANAGER

IT CREDIT

MANAGER

A/O Officer

Clearing Officer

Remittances Officer

Accounts Officer

CD In-

Charge

Auto Finance Officer

Agri. Finance Officer

SME Officer

Cash Assistant

Cash Officer

meeting. BANK ALFALAH has its policy making function centralized to the

upper management. The upper management after making the policies

communicates them to the respective departments and branches. The

meetings for policy making are held as and when required. Lower

management loses not take part in policy formulation but can give

suggestions.

The policies of Bank Alfalah are as follows:

Financial policies

Procurement policies

Marketing policies

Promotional policies

lending policies

Personal policies

FINANCIAL POLICIES

The financial policies of any bank are the most important policies through

which the whole banking activity is conducted. These policies are

primarily conducted on:

o Source of funds

o Use of funds


PROCUREMENT POLICIES

Procurement policies are more concerned with manufacturing

organizations. In bank industry that is service industry procurement

means the procurement of funds from various sources such as deposits. It

involves attracting and holding the funds of the depositors.

MARKETING POLICIES

Marketing policies are also one of the most important policies because

they are related to the growth of the organization. Marketing for a bank

would mean:

1. Creation of new product and services.

2. The bank marketing must be consumer oriented.

PROMOTIONAL POLICIES

Public relation and advertising has assumed a great importance in the

modern banking business. As far as promotional activities are concerned,

the main objective of the bank is to inform the existing clients and other

people about its new products or change in the existing services. ACBL

establishes its purpose through:

Direct contact with customers.

Relation with business organizations.

Community relations.


LENDING POLICIES

Every bank has its own lending policies except for those, which are

common for all the banks, i.e. the policies, which are imposed on all the

commercial banks by the SBP, are known as prudential regulations. The

lending policies of Alfalah are as follows:

1. The bank only invests in those sound and viable projects, which

have good rate of return.

2. Bank prefers to advance loan to their account holders.

3. Loan is given to reliable person only.

4. No political loan is sanctioned by bank.

5. Any account holder can apply for running finance or demand

finance. The manger appraises the past record of account holder

and his credit worthiness. If he finds any thing wrong he can

refuse to sanction the amount.

6. The bank while taking security prefers govt. Securities to shares.

7. It also advances working capital loans.

PERSONAL POLICIES

Good personal policies motivate the employees towards hardworking.

Following are the main personal policies of Alfalah:

Selection of employees on merit

Selection of capable employees.

Attractive salary package for motivation of employees.


To train and develop the future management of the bank.

Every employee must have certain set of clearly defined duties

Effective communication at al levels of the organization.

Management styles

To avoid risks in a bank and for security measures banks adopt

Autocratic style. The leadership style in most of the departments of

bank is AUTOCRATIC.

The features are discussed as under:

The managers are very directive and allow no participation from

the lower side.

The managers tend to give individual attention when praising and

criticizing but try to be friendly or impersonal rather openly

hostile.

Managers try to be objective in giving praise or criticizing.

IMPACT ON MORALE OF EMPLOYEESAdministrative style has a strong impact on the moral of employees.

Most of the work in bank is monotonous and need special

attention. Specialized employees work in different departments.


Employees are rotated on different seats after one or two years. It

affects the employee’s performance. Sometimes they perform

better on another seat.

Very strict behavior is adopted by managers to control the work

and to run the working smoothly. It has strong impact on morale

of employees as they become reluctant to work.

Employees become fed up with the routine and find difficult to

face the burden.


PRODUCTS & SERVICES

Current account

Every bank maintains the current account with its customers;

“A current account is running account which is continuously

In operation by the customer on all working days of the bank”.

The customer withdraws money from current account without prior notice

to the bank. In short, in current account, the banker incurs an obligation

to honors all the cheques drawn by the customer so long as there is

enough money to credit of the client.

Interest on current account

The banks don’t usually pay any interest on current account in local as

well as foreign currency. The amount can be withdrawn at any time, so

the bank can’t comply these funds due to fear of withdrawal.

Who are interested in opening current account?

The current account is operated by traders, business companies,

institutions, public bodies, industrialists who

o Wish to have working capital in their custody

o Like to receive and make payments through cheques

o Are interested in keeping their money liquid and safe

o Utilize the agency services of the bank frequently INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

34

Advantages of having current account

The customer gets the following advantages on behalf of current account;

o The bank collects properly endorsed cheques on behalf of current

account holders

o The bank may allow the facility of overdraft on prior arrangements

to the trustworthy customers.

o Loans and advances may be sanctioned to the creditworthy clients

with ease.

o On line facility alternative of cash transaction is also provided to

customers having min. balance of Rs.500, 000/- in their current

account.

Initial deposit

The minimum initial deposit for current account in local currency in Rs.

1000/-. Where as for maintain current account min Rs. 10000 is must;

otherwise the bank will deduct Rs.50/month for not maintaining account

properly. Initial deposit in foreign currency current account is US$ or UK

pound 100.

Summing up, the current account doesn’t earn but serves the cause of

industry trade and commerce.


Saving account

Saving deposit account is an ideal account for those who have money to

save but cannot profitably invest it anywhere else, as amount is too small.

Saving deposit is an important source of fund for commercial banks. It is

opened to encourage thrift among the persons of small means. Saving

account is opened both in local and foreign currency.

The bank can safely invest the deposits of saving account, as it knows

that only the customer withdraws a small percentage of this account.

Interest on saving account

On Pak. Rs. Account the bank usually pays interest according to

prescribed rates by the central bank. This amount is credited to the

customer’s account after every 6 months. The rate doesn’t remain the

same but fluctuates due to many reasons e.g. conditions of the bank,

bank’s total deposit’s position, inflationary and deflationary powers in the

economy etc.

Some features of this account are as:

o Profit & Loss Sharing Saving Bank Account.

o Minimum account opening requirement of Rs. 5,000 only.

o No restriction on number of withdrawals and number of deposits.

o Profit on saving accounts is credited to the customer account on

half-yearly basis.

o 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.

ROYAL PROFIT:

o Minimum Deposit requirement of Rs. 5,000 only.INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

36

o Higher returns on higher balances.

o No restriction on number of withdrawals and on number of

deposits.

o Profit is credited to the customer account on monthly basis

BASIC BANKING ACCOUNT:

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

balance requirement.

o Non interest bearing checking account.

o Maximum 3 deposits & 3 withdrawals through cheques are

allowed.

o 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.

o No restriction on ATM withdrawal.


ALFALAH KIFAYAT:

Any Pakistani resident over the age of 18 can open this account. This

account is for individual/joint customers only. Other customers like

companies, corporate etc are not eligible for opening of this account.

o Minimum balance requirement for opening this account is Rs.

10,000/- with a maximum of Rs.1, 000,000/-

o Three debit transactions are allowed in a month either

through cheques or Debit Card/POS machine.

o There is no restriction on deposit transactions.

o The bank will issue the first cheques book of 25 leaves and a

Debit card free of cost.

o Profit will be calculated on monthly minimum balance basis

and will be credited in the account on quarterly basis. No

profit shall be payable for a particular month, if the minimum

balance for any particular day of said month falls below the

amount of Rs. 10,000/-.

o Online facility available for this account. (Subject to fulfillment

of all related requirements)

o All service charges are as per the prevailing ‘Schedule of

Charges’

o Only one account per customer will be allowed across all

branches of Bank Alfalah.


Alfalah Mahana Amdan:

Alfalah Mahana Amdan is a 3 year TDR with expected rate of profit of

10.5% p.a. This term deposit will provide an opportunity to individual/joint

customers to enjoy higher returns that will automatically be credited to

his/her current/PLS/RP/BBA account on 1st working day of each month.

This facility is not available for business and corporate customers.

Basic features are as

o Minimum placement limit is Rs. 50,000/- and maximum placement

limit is Rs.15,000,000/-

o Expected Rate of profit is 10.50% Per annum (as per PLS

governing rules)

o Profit will be automatically credited on the 1st working day of each

month into customers Current/PLS/RP/BBA account

o Free Personal Accident Insurance coverage up to the deposit

amount or Rs. 1,500,000/- whichever is lower.

o Customer can avail financing facility up to 90% of the deposit(as

per banks policy)

o Any Pakistani resident over the age of 18 can open this account

o Alfalah Mahana Amdan term deposit can be maintained only at

any one BAL branch with a maximum cap of Rs. 15 Million. An

undertaking shall be obtained from the customer certifying that

he/she is not availing Alfalah Mahana Amdan Term Deposit

Receipt facility from any other BAL branch.(included in AOF)

o Alfalah Mahana Amdan TDR will be issued for three years tenure

with auto renewal facility of principal amount i.e. the facility will

be renewed automatically on maturity (i.e. 3 years)

o Alfalah Mahana Amdan TDR will be subject to Zakat, Withholding

Tax as well as any other applicable taxes


Alfalah Education

Alfalah Education is a Term Deposit product with No Additional Cost (NAC)

education insurance cover for account holders with school going children.

Alfalah Education Account , beside offering competitive return on TERM

DEPOSIT , offers tuition fee reimbursement of children for 15 years of

schooling or up to their 20th birthday, in the unfortunate event of the

death (either through accident, illness or natural causes) of the main

breadwinner (account holder) parent.

Alfalah Education offers a competitive return on term deposit and

secondly, it creates a contingency provision for our school going youth’s

education in the hapless event of the death of any major breadwinner.

The product seems rewarding in the current scenario of increasing

number of children of school going age and the general public interest in

quality education of their off springs.

Featureso Deposits can be placed in multiple of 100,000 units with

maximum 3 units allowed per depositor, i.e. a maximum deposit

per customer of Rs. 300,000 across all BAL branches.

o All 3 units can be purchased for 1 child or each for up to 3

children.

o No evidence of insurability (medical examination/health

decoration) is required.

o Maximum entry point age is 55 years (renewable up to 64th

birthday)

o Benefit payment increases with age/class of the child.INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

40

o The product will be offered as a 1 year term deposit at up to 7 %

profit to be paid at maturity

o Premium cost for each deposit unit of Rs. 100,000 would be Rs.

85 per month and borne by the bank.

o Regular Zakat and WHT would apply on the deposit.

o Monthly payments set forth will be paid directly to the

mother/guardian, regardless of the actual school fee.

o In case of joint account holders, only main breadwinner account

holder would be covered under the policy.

o Premium will be paid to ALICO by BAL on monthly basis.

Benefit Schedule

Benefit Payable: for 15 years or up to the child age 20

Monthly Premium: Rs. 85

Deposit: Rs. 100,000

Child

Age*

Benefit

Payable

for no. of years

Monthly

Payment (Rs.)

5 15 2600

6 14 2800

7 13 3000

8 12 3200


Child

Age*

Benefit

Payable

for no. of years

Monthly

Payment (Rs.)

9 11 3300

10 10 3600

11 9 3900

12 8 4300

13 7 4800

14 6 5400

15 5 6300

16 4 7600

17 3 10000

18 2 14600

19 1 28300

* Child age at the time of Breadwinner’s death.

LOCKERS:Bank Alfalah provides safe deposit locker facility to its customers for safe

keeping of their valuables like documents, securities and jewellery etc.

Important features of lockers facility are as follows:

o Various sizes to choose from small, medium & large.

o Annual locker rent ranges from Rs.1,000/- to Rs.3,500/-

o Locker rent is waived for customers maintaining a minimum

deposit of Rs.2 million in current account or above US $25,000/- in

a current account or US $50,000/- in a savings account.


Locker Rates

The annual license fees of the following sizes of lockers will be as follows:

Key Deposit: Rs.1000/- (Refundable)

The license fees lockers will be payable in advance every year and no part

of the same shall be refundable in any circumstances.

Alfalah Hilal Card

It gives an unlimited access to current/savings account with a simple

swipe, at millions of retail shops and ATMs, worldwide. It is easy to

operate and it can be used where visa is accepted, locally and

internationally. No more hassle of remembering PIN and no need to go to

the ATM for cash withdrawal, one swipe and the transaction is complete.


Locker Size Charges

Small Rs.1000/-

Medium Rs.1500/-

Large Rs.3000/-

Special Rs.3500/-

Alfalah Hilal Card is a debit card that gives access to bank account of

customers. Alfalah Hilal Card allows customers to purchase goods at

merchant establishments across Pakistan & abroad and also give the

freedom to withdraw cash from any VISA/ Electron/PLUS ATMs in Pakistan

and abroad, from all Local Bank Alfalah and 1 Link ATMs. In our endeavor

to provide you versatile banking options to fulfill your financial needs,

Bank Alfalah Limited presents the Alfalah HilalCard, a Debit Card, which

gives you unlimited access to your current / savings account with a simple

swipe at millions of retail shops and ATMs worldwide. The Alfalah HilalCard

comes with a host of conveniences and benefits combined with the wide

reach of Visa Network, enabling it to be accepted at more than 1 million

ATMs and 13 million retail outlets around the world, making it the most

acceptable Debit Card available in Pakistan.

Feature of Alfalah Hilal card

The Alfalah HilalCard can be used electronically at any retail outlet or ATM

that accepts VISA cards and displays these logos:

Personal Identification Number (PIN):Debit cards that are currently available in Pakistan require the card

member to enter the PIN number in order to complete a transaction. The

Alfalah HilalCard is a "One-Swipe Card" and does not require you to

remember any PIN in order to execute retail transactions. The PIN which

will be delivered to you for Visa Electron will be required for ATM based

transactions only.

Special POS Machines:

In order to use other debit cards currently in the market you would need

to find outlets that carry special POS machines where these cards can be


used. Alfalah HilalCard is accepted at all outlets displaying the

VISA/Electron logo worldwide and having self-printing POS terminals.

To be used not to be used For Alfalah HilalCard for Alfalah HilalCard

Global Acceptability:The Alfalah HilalCard is globally accepted welcomed at all locations

displaying the VISA/ ELECTRON/PLUS logos with self-printing POS

terminals. Your card is accepted at nearly 13 million physical locations in

more than 130 countries round the globe with above 14,000 major

establishments in Pakistan.

With your Alfalah HilalCard, you can pay for shopping, meals, travel,

entertainment, holiday, petrol and much more. Also it gives you access to

ready cash through your PIN (Personal Identification Number) at more

than 1 million ATMs to withdraw any amount up to your available bank

account balance. This premier card service is a convenient point-of-sale

alternative for ATM cardholders who do not qualify for Visa credit

purchasing power. Through Alfalah HilalCard, you can access your Bank

Alfalfa’s account from anywhere in the world.

24-Hour Customer ServiceOur 24-Hours Customer Service is there to help you with your requests.

Our well-trained and qualified Customer Service team will assist you in:

o Answering your queries


o Registering and resolving your complaints

o Reporting a lost/ stolen card

o Activating your Card

No Minimum Income Requirement:

Unlike other Cards, the Alfalah HilalCard is easy to obtain. There is no

preset income requirement to enjoy the benefits of this fast, convenient

and safe. All you need to do is open and maintain an account with any of

the branches of Bank Alfalah Limited.

Simplicity:

Charge goods and services to your Alfalah HilalCard at all point-of-sale

terminals with self-printing ability displaying VISA / Electron sign in

Pakistan and abroad.

Promptness:

Using Alfalah HilalCard at ATMs and / or shops requires less time than

queuing in the Bank and writing out checks.

Immediate Payment:

With Alfalah HilalCard you pay your bills immediately unlike when you use

a Credit Card and get the bill later. The amount is directly debited from

your designated Current/Savings account.


Money Gram

Bank Alfalah limited, in collaboration with Money Gram, offers remittance

service to Pakistan. Money Gram is person to person money transfer

service that allows consumers to receive money in just a few minutes.

Secure and reliable:

An extensive network of quality agents, linked by computer, will transfer

your money safely and ensure that it is handled with care and without

delay. Thousands of people already use the MoneyGram service all over

the world. It is trusted for its reliability and security.

Convenient and fast:

MoneyGram is available in over 154 countries and in more than 40,000

locations worldwide. With MoneyGram your money is transferred

immediately and usually arrives at the receiving end within 10 minutes

while other services can take days or weeks. There are no complicated

procedures and you do not need a bank account or a credit card. What’s

more, the receiver is handed the cash immediately.


Free message service (for senders):

There is also an added personal touch-you can receive a 10 word message

from the sender with every transaction at no extra cost.

Alfalah Credit Card

Your Bank Alfalah Credit Card is your partner everywhere and is globally

accepted and welcomed at locations displaying the VISA logo. It is

accepted at nearly 27 million locations in more than 150 countries around

the globe and over 22,000 Bank Alfalfa’s establishments in Pakistan.

Alfalah VISA lets you pay for shopping, travel, entertainment, meals and

much more. Card members are facilitated through a number of

promotions from time to time. In addition, there are a number of strategic

business partnerships with leading local and international brands for

purchase of home appliances at exciting Step-BY-Step (SBS) monthly

installment plan with free home delivery at lowest interest rates. Salient

features are:

o No Joining / Annual / Renewal fee

o Electricity, Sui Gas, PTCL and Warid bills payment through 24 hour

Call Center and Auto Debit instructions

o SMS for card usage, mini statement, payment receipt

confirmation, etc.


o Cash withdrawal at all 1LINK ATMs

o Special offer on Warid post paid connections

Types of Cards

Classic Blue & Classic

It is the first card of its type in Pakistan for professionals who do not

qualify for other credit cards. With the minimum requirement of a

graduation degree customers have been provided a chance to have credit

cards at the start of their careers. Its range of credit is up to 25,000/- & in

simple classic it is 100,000/-.

Student cards

Bank Alfalah has recently launched its student credit cards to the

customers with 14 years of education and currently enrolled in a

professional college. For the first time in Pakistan, Bank Alfalah introduces

a credit card for Students.

This card is for customers if they are enrolled in a professional university

(as per Bank Alfalfa’s approved list) with 15 years of schooling experience.

Now people can pay your fee, buy books with Alfalah VISA. Not only this

but they will also earn reward points and can redeem them for a TV,

Mobile Phone, and CD player & DVDs etc.


Women Exclusive

This card has basically designed for household and workingwomen for

purchasing household goods for themselves or their family.

Now for the first time in Pakistan, Bank Alfalah has introduced a credit

card exclusively for women. This card has its unique features, which have

been tailor-made for the women in Pakistan. Its limit is up to 150,000/-.

Liability

The liability of this card depends on what basis this card has been applied

for:

If the female is applying on her own income basis, she herself will be liable

to pay for the amount spent through the card(s).

If the female is a house wife and does not have any direct income source,

she can apply for the card through the person responsible for the

household (i.e. husband, parent, bother or sister) who will sign an

undertaking to be responsible for the amount spent through all the card(s)

issued under this scheme.

Visa Mini Card


Easily attachable to customer’s key chain, mobile phone or any other

household device. Visa Mini is a practical and convenient part of everyday

life - whether they go for shopping, dine out, buy grocery, want to go for

holidays or feel like buying something of interest while we are out just for

a jog!

Customers can take it anywhere they like with no hassle as it has a

perforated hole in the bottom left corner making it attachable to key

chain, mobile phone or other day-to-day carry along device.

o 43% smaller than the regular sized credit card with the same

features and the benefits

o Accepted at over 13 million merchants worldwide and around

7000 establishments in Pakistan (used on electronic POS terminals

only).

o Has the same security feature as the regular sized Alfalah VISA

credit card.

Gold & Silver

A perfect card combination for all segments of

salaried & professional individuals. Its credit limit is up to 100,000/-.

Titanium

Titanium MasterCard is your partner everywhere and is

globally accepted and welcomed at locations displaying the MasterCard

logo. Its credit limit is up to 350,000/-.


Platinum card

It is accepted at nearly 27 million locations in more than

150 countries around the globe and at over 22,000

establishments in Pakistan. Its credit limit is up to one million.

Home Finances

BAL has priced Home Finance Plans with a

wide variety of rate options to suit pocket,

and budget. These rates will indicate just

how competitive they are! So whether

people are buying their first home, moving

to a new property, or looking to switch from

current lender, with Bank Alfalah it’s easy

to make mortgage arrangements that are

really right for people.

1) Buy home

2) Renovate home

3) Build home

4) Make an easy transfer

I. Buy home

BAL provides customers up to 70% of the purchase price of the property

(whichever is less), so that they can realize dream of people and enter the

reality of owning a home!


II. Renovate home

If people already own a home, but need extra space for a growing family.

They can simply apply for financing of up to Rs. 3.50 million or 40% of the

surveyed value of home and get the extra space!

III. Build home

People have a plot and need finance to construct a home, which excites

everyone in family! No problem. BAL will provide 70% of the estimated

value of constructed property to enable people to say good-bye to rent

forever! Even if they don't have a plot, BAL will provide them up to 60% of

the value of the plot that they have selected to purchase!

IV. Make an easy transfer

Does customer’s existing installment on a home finance leave them with

nothing to spend? They need not worry any more because BAL has

genuinely low rates and payment options that could leave more funds

with them each month. Transfer up to 100 % of the existing finance.

The Eligibility Criteria People may apply for Bank Alfalah Home Finance,

o If they are a Pakistani National.

o If they age is between 23 and 65 years.

o If they are in continuous employment in a permanent position for

the last 2 years or more.

OR


o If they have existing 3 years (or more) of business or professional

experience.

o If their gross annual income is Rs: 240,000/ — or more [their

spouse’s income (up-to 50%) can also be combined

o If they require a financing requirement starting from at least Rs:

500,000/

o If they have been a Bank Alfalah borrower for past one year with

clean payment record.

People may apply for Bank Alfalfa’s Home Finance for minimum period of

3 years and a maximum period of 20 years.

Alfalah Car Financing

o Quickest processing.

o No hidden charges.

o Minimum down payment.

o Complete repayment at any point of time.

o Balance transfer facility {BTF} for existing as well as new clients

from other Banks.INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

54

o Tenure period ranging from 1 to 5 years.

o Financing of all brand new locally assembled vehicles and used

cars.

o Financing limit ranging between Rs. 200,000/- to Rs. 2000, 000/-

for brand new cars.

Corporate & Individual Car Leasing

BAL’s recently introduced car leasing facility for individuals and corporate

sector has set new dimensions for the product. Now you are provided with

the option of either to get the vehicle leased or financed.

Insurance

Renowned and reliable Insurance companies are offering the competitive

rates of insurance. Pay year insurance premium in advance {at the time

of down payment} and the remaining in the subsequent equal monthly

installment.

How Much Extra Money Being Paid? {Mark-Up}

Financing Product 1Yr 2Yr 3Yr 4Yr 5Yr

Car Loan for Brand New Vehicles 17.00%. 17.50% 18.00% 18.50% 18.50%

Car Loan for Brand New 19.00% 19.00% 19.00% 19.00% 19.00%


Imported Vehicles

Car Loan for New Commercial

Vehicles20.00% 20.00% 20.00% 20.00% 20.00%

Car Loan for Used Vehicles

(Local Assembled Only)21.00% 21.00% 21.00% 21.00% 21.00%

Car Loan for Internal / External

BTF (Local Assembled)19.00% 19.00% 19.00% 19.00% 19.00%

Repayments

Easily affordable installments on monthly basis in the form of post-dated

cheques will set you free of depositing your rental cheques every month.

Security

Hypothecation of vehicle is in the name of Bank Alfalah Limited.

You Can Act As a Co-Borrower

Acting as a co-borrower will enable your family members {spouse,

children- 18 year and above} to avail the financing facility and get the car

registered in their names as well.


Yes you can get a car loan form Bank Alfalah to purchase a brand new car

if you are:

o Pakistani National Identity Card holder.

o Over 20 years of age (Maximum 60 years in case of salaried and

62 in case of a business person at the time of maturity of the

loan).

o Salaried, businessman or self employed.

FINANCIAL SERVICES

1. Trade finance

Inspired by a challenging spirit and an unyielding desire to create a sound

and reliable networking of correspondent relationships, the bank has

placed great emphasis towards it growth. Accomplishing something for

the first time requires a special focus. It demands foreseeing possibilities.

To do so, BAL successfully surmounted problems and difficulties arising

out of issues relating to weak economic conditions of the economy and a

continuous deteriorating status of country risk.

The incertitude and skepticism of the international banking community

towards financial institutions from emerging markets remained intact. BAL

persistence during the past four years allowed us to make significant

inroads into the arena of correspondent banking. Large international

banks, after critically evaluating us, agreed to enter into relationship.


During 2002 they added 81 banks to their network of correspondents,

bringing the total number over 170. Of these relationships, there are now

several banks that rank amongst, the top financial institutions in the

world. Geographical coverage of BAL now extends to over 100 countries,

which is adequately compatible with trade flows.

Bank’s correspondents, during the year extended unqualified support,

which enabled it to undertake a healthy quantum of foreign trade

business. There are many challenges ahead for the bank, in the coming

year, bank will not only continue to review its efforts on existing

correspondents to make the relationship more beneficial, but will also add

more correspondents to establish a comprehensive international

networking to facilitate its customer’s transaction as well as the Bank’s

proprietary needs.

They have provided against the list of correspondents their world and

country ranking. These ranking have been taken from The Bankers

Almanac – July 2001 issue.

BAL would like to emphasize that correspondent arrangements do not

necessarily imply the existence of account relationship. BAL is in the

process of rationalizing current nostro account relationships. They shall

continue to open new accounts in various currencies based on trade flows

and business requirements.


2. Structured Finance

Established in 1998 in order to provide innovative investment banking

services to valued clients.

A team of hand picked professionals, dedicated to syndicated loans and

structured products. The team’s expertise is well known in the

marketplace with its capability to assist public & private sector entities,

major financial institutions, multinational corporations, domestic &

international institutional investors in innovative financing including

underwriting & private placements.

The scope of SFU’s activities also encompasses advisory assignments,

such as privatization, Mergers & Acquisitions (M&as), domestic listings,

IPO’s and restructuring.

During the past few years, SFU has been successful in sourcing and

participating in a number of prestigious transactions involving large

amounts.

Some of the value added services offered by SFU include the

following:

Loan syndication

Public floatation of Term Finance Certificates (TFCs) and equity

Private placement of Term Finance Certificates (TFCs) and equity

underwriting

Guarantee syndications

Financial restructuring

Mergers & Acquisitions (M&As)

Fostering joint ventures

Privatization – Sale side and buyers side advisory

Structuring new financial instruments


In the future, SFU is envisaged to supplement the enhanced profile and

profitability of Bank Alfalah Limited through its value added services,

through both asset building and income generating aspects.

Small and Medium enterprises

Small and Medium Enterprise (SME) means an entity, ideally not a public

limited company, which does not employ more than 250 persons (if it is

manufacturing / service concern) and 50 persons (if it is trading concern)

and also fulfills the following criteria of either ‘a’ and ‘c’ or ‘b’ and ‘c’ as

relevant:

A trading / service concern with total assets at cost excluding land

and building up to Rs 50 million.

A manufacturing concern with total assets at cost excluding land

and building up to Rs 100 million.

Any concern (trading, service or manufacturing) with net sales not

exceeding Rs 300 million as per latest financial statements.

An Individual, if he or she meets the above criteria, can also be

categorized as an SME.

Realizing its corporate social responsibility and carrying forward the image

of "The Caring Bank", Bank Alfalah started a separate department at the

Head Office level in early 2004. The SME Department was established with

a mandate to foster SME finance at BAL, explore opportunities for

developing structured product programs for SMEs, introduce the concept


of Dedicated SME officers and finding market based solutions to fill the

financing gap to this important and under-served business segment.

Bank Alfalah believes in innovation, simplification of procedures, and

reduction in turnaround time and customer friendly service. To accomplish

this resolve, the SME Department is supported by 86 dedicated officers in

57 branches of the bank who are nurturing valuable relationships in the

SME sector.

ALFALAH KAROBAR FINANCE

Bank Alfalfa’s first SME product Alfalah Karobar Finance is a running

finance facility based on projected cash flows. Under AKF, we offer

working capital finance (Rs.0.5 million to Rs. 10 million) to SMEs at highly

competitive rates. We have a team of professional credit officers who

provide expert financial advice along with customized packages to a

diverse range of business clientele. The product is available to SMEs

through our 86 branches in 38 cities.

Schedule of Product and Financial services

Every bank charge some amount to its customers in exchange of services

and value that it offers to its customers. Bank Alfalfa’s charges are

nominal and are extremely competitive when compared to market

standards. Some of the charges are described below:

Issuance of new cheque book is for Rs. 5 per leaf.

Statement of accounts is provided to customer @ Rs. 50 per

statement.

If the balance of any account is below than the minimum balance

requirement then Rs. 50 per month will be deducted from the

account.


Cheque returned is charged for Rs.350 per cheque.

Stop payment of any cheque is for Rs. 200 per cheque.

Following are the other charges related to bank:

REMITTANCEPay order Against debit to account Rs. 50

Plus 16% excise charges

Issuance of Draft, TT’s Rs. 50-1500

SAFE DEPOSIT LOCKERSSmall Rs. 1000 Per annum

Medium Rs. 1500 Per annum

Large 1 Rs. 2500 Per annum

Large 2 Rs. 3000 Per annum

Extra Large Rs. 3500 Per annum

Online Facility Charges

If the average balance of account holder in the previous month is more

than one lack then online facility is totally free, otherwise the following

charges will be applicable:

For any transaction Rs.110 will be charged on current account,

And rupees 200 charges on saving account.


Consumer Financing Charges

Home Loan

Alfalah Home FinanceProcessing Fee

a) Up to Rs. 1.0 Million

b) More than 1.0 Million to Rs.

2.5 Million

c) More than 2.5 Million to Rs.

5.0 Million

d) More than 5.0 Million to Rs.

50.00 Million

e) More than 20 Million

Rs. 5000

Rs. 10000

Rs. 12500

Rs. 15000

Rs. 20000

ALFALAH CAR FINANCINGProcessing Fee Rs. 4000

Registration charges Rs. 2000

Cheque returned or rejected Rs. 500

Penalty for late premium Rs. 200

Financing Product 1Yr 2Yr 3Yr 4Yr 5Yr


Car Loan for Brand New Vehicles 17.00%. 17.50% 18.00% 18.50% 18.50%

Car Loan for Brand New

Imported Vehicles19.00% 19.00% 19.00% 19.00% 19.00%

Car Loan for New Commercial

Vehicles20.00% 20.00% 20.00% 20.00% 20.00%

Car Loan for Used Vehicles

(Local Assembled Only)21.00% 21.00% 21.00% 21.00% 21.00%

Car Loan for Internal / External

BTF (Local Assembled)19.00% 19.00% 19.00% 19.00% 19.00%


Credit Cards

The following Schedule of Charges is associated with Alfalah Credit Card.

Schedule of Charges

Service Fee 3.00% per month (APR 36%) on cash

advance.

3.00% per month (APR 36%) on retail

transactions.

1.75% per month (APR 21%) on SBS

transactions.

1.50% per month (APR 18%) on BTF

transactions.

Late Fee Rs. 600/- or 10% of minimum

amount, whichever is higher.

Cash Payment Processing fee Rs. 100/- per transaction.

Merchant Discount Charges

Up to 5% of transaction amount.

VISA Mini Card Supplementary Fee Rs. 500/-

Cash Advance Fee/Call & Pay Fee Rs. 500/- or 3% of cash advance


Acquiring Bank Charges 1% of cash advance amount.

Cheque / Cash Pickup Fee Rs. 200/- (available in cities having

Bank Alfalah branches).


Over Limit Fee Rs. 600/- or 2% of Over Limit


Voucher Retrieval Fee Local: Rs. 350/- and

International: Rs. 800/-

Card Replacement/Upgrade Fee Local: Rs. 500/-

Cheque Return Charges/ Rejected

Auto Pay Service Fee

Rs. 800/-

Duplicate Statement Charges Rs. 200/- (whenever 1 month old).

Step By Step Processing Charges 2% of transaction amount.

Step By Step Premature Settlement

Charges

5% on balance amount or Rs. 1,000/-,

whichever is higher

Credit Cover Premium 0.50% of outstanding amount.

Utility Bill Payment Charges Rs. 25/- per transaction.

VISA Platinum Priority – Annual Fee US $4.71 per annum

VISA Platinum Priority – Airport

Lounge Visit fee

Up to US $28.25 per visit.

SMS Alert Fee Rs. 25/- per month

Mobile Banking Fee Rs. 5/- per transaction

Merchant Cash Advance Incentive Rs. 25/- per transaction

ALFALAH KAROBAR FINANCEProcessing Fee Rs. 2000

Document charges Actual cost of revenue and special

adhesive stampsINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

66

Legal Charges Actual charges of the lawyers

Property valuation charges Actual charges of the valuators

Business and financial appraisal

charges

Rs. 4000

Place

The Bank is fully aware that the branch network has direct implications on

the services that it provides to its customers. They offer services through

a network of 282 branches and 320 state of the art ATM machines.


Conventional Branches 226

Islamic Banking Branches 048

Overseas Branches 008

ATM Machines 320

Following are the cities in which Bank Alfalfa’s branches are located:

Ahmadpur

Arifwala

Bahawalpur

Burewala

Chakwal

Chichawatni

Chiniot

Daska

Dera Ghazi Khan

Faisalabad

Gujranwala

Gujarat

Hafiz Abad

Islamabad

Jhang

RahimYar Khan

Rawalpindi

Sadiqabad

Sargodha

Sheikhupura

Abbott Abad

Attock

Dera Ismail Khan

Hangu

Kohat

Mardan

Mingora

Peshawar

Gawadar

Quetta

Jhelum

Kasur

Kharian

Lahore

Lalamosa

Mandi Bahaudin

Mian Chunnu

Multan

Okara

Pakpattan

Toba Tek Singh

Wah Cantt

Daharki

Ghotki

Hyderabad

Karachi

Mirpurkhas

Nawabshah

Sialkot

Sukkur

PROMOTION

One of the most important element of marketing mix of services is

promotion which is consist of personal selling, advertising, public

relations, and selling promotional tools.


PERSONAL SELLING

Due to the characteristics of banking services, personal selling is the way

that Bank Alfalah prefers in expanding selling and use of them.

Personal selling occurs in two ways.

First occurs in a way that customer and banker perform interaction face to

face at branch office. In this case, whole personnel, bank employees, chief

and office manager, takes part in selling.

Second occurs in a way that customer representatives go to customers’

place. Customer representatives are specialist in banks’ services to be

offered and they shape the relationship between bank and customer.

ADVERTISING

Bank Alfalah has too many goals which it wants to achieve. Those goals

are for accomplishing the objectives as follows in a way that Bank Alfalah

develops advertising campaigns and use media.

Conceive customers to examine all services that Bank offers

Increase use of services

Create well fit image about Bank Alfalah and services

Change customers’ attitudes

Introduce services of Bank Alfalah

Support personal selling

Emphasize well service

Advertising media and channels that Bank Alfalah prefers are newspaper,

magazine, radio, direct posting and outdoor ads and TV commercials. In


the selection of media, target market is determined and the media that

reach this target easily and cheaply must be preferred.

Newspaper

Bank Alfalah advertises its products also through newspapers, signboards

and banners. Also the customers are given brochures, which contain

detailed material about the products and services, offered by BAL. In fact,

the application forms of Retail Banking Products.

PUBLIC RELATIONS

Public relations in banking should provide;

1. Establishing most effective communication system

2. Creating sympathy about relationship between bank and customer

3. Giving broadest information about activities of bank.

CONTRIBUTION IN SOCIAL EVENTS

As a committed corporate citizen, Bank Alfalah contributes to different

areas of the social sector in various ways which help improve the quality

of life in our country.

FINANCIAL ANALYSIS

Particulars of Balance Sheet Actual Figures in ('000')

2007 2008

Cash and Balances with treasury banks 29,436,378 32,687,335

Balance with other banks 18,380,738 21,581,043INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

70

Landings to financial institution 3,452,059 3,315,500

Investments 88,491,564 75,973,238

Advances 171,198,992 192,671,169

Operating Fixed assets 11,922,324 13,773,293

Other assets 6,013,097 8,989,186

Total Assets 328,895,152 348,990,764

Liabilities

Bills payable 4,138,243 3,452,031

Borrowings 21,230,697 13,690,222

Deposits and other accounts 273,173,841 300,732,858

Sub-ordianted loans 3,220,858 2,571,169

Liabilities against assets subject to lease 0 0

Deferred tax liabilities 1,379,809 208,465

Other liabilities 9,531,860 11,291,280

Total liabilities 312,675,308 331,946,025

Net Assets 16,219,844 17,044,739

Represented by

Share capital 6,500,000 7,995,000

Reserves 2,414,833 3,166,056

unappropriated profits 4,851,840 3,447,467

13,766,673 14,608,523

Surplus on revaluation of assets 2,453,171 2,436,216

16,219,844 17,044,739

(Rs in ‘000’)

Income statement particulars 2007 2008

Markup/return/interest earned 25783871 31046583

Markup/return/interest expensed 16620963 20331194

Net markup interest income 9162908 10715389


Provision against non-performing loans 2370867 2035997

Provision for diminution in value of investment 0000000 1479062

Bad-debts written off directly 5844 28298

Net interest income after provisions 6786197 7172032

Non markup/ interest income

Fee, commission and brokerage income 2429599 2539321

Dividend income 64722 300943

Income from dealing in foreign currencies 474510 914845

Gain on sale of securities 2059793 424220

Unrealized loss on revaluation 21530 181571

Other income 1031372 1247669

Total Interest Income 6038466 5245427

12824663 12417459

Non Markup/ Interest Expense

Administrative expenses 8272587 10471339

Provisions against off-balance sheet obligation 6,959 28582

other charges 9565 122758

Total Non mark-up Expense 8289111 10622739

Profit before Tax 4535552 1794720

Profit after tax 3130229 1301301

Earning per share 3.92 1.63

Current Ratio (Rs in ‘000’)

Current Ratio ═Current Assets

Current Liabilities

Years Current

AssetsCurrent Liabilities Current Ratio


2008 326288285 317864111 1.026 time

2007 310959731 298542781 1.041592 Times

2006 259549500 250994656 1.034084 Times

Commentary

The current ratio is a measure

whether or not a firm has enough

resources to pay its debts over

the next 12 months. Acceptable

Current ratios vary from industry

to industry. For banks in Pakistan

2:1 is ideal one. Bank alfalah is

facing difficulty in maintaining its

ratio. In 2008 bank has to attract

more deposits, so current

liabilities increased much proportion to current assets. However bank has

enough strength to pay off its short run liabilities.

Advance to Deposits

Loan To Deposit (%) ═ Advance

Deposits

(Rs in ‘000’)

Years Loans DepositsLoans to deposits


Ratio

2008 192671169 300732858 64.06

2007 171198992 273173841 62.67035

2006 149999325 239509391 62.62774

Commentary

It is the most important ratio for a

bank as all the bank profits are

major based on loans and deposits.

Because on the deposits they have

to pay and on loans they earn and

the difference is the profit of the

bank. The higher the ratio, the

more is relying on borrowed which

are generally more costly than

most of deposits. As bank alfalah

has increasing trend in this ratio, it

shows a healthy sign. It means bank is trying more to generate advances

which ultimate result is increase in bank income.

PROFITABILITY RATIOS

Operating Expense Ratio (Rs in ‘000’)

Operating Expense Ratio

═ Non markup expense × 100

Gross Income

Years Non markup

expense

Gross

Income

Operating Expense

Ratio in %

2008 10622739 12417459 85.54


2007 8289111 12824663 64.63414

2006 5918051 8483996 69.75547

Commentary The

Operating Expense Ratio is

usually viewed as a

measurement of management

Efficiency. This is because

management usually has

greater control over operating

Expenses than they do over

revenues. As of 2008 Bank has

very high operating expense

ratio. This was not due to poor

management. This year bank has lower income due to provision for

diminution in value of investment and bad debts written of directly.

Previous year bank earned of Rs.2, 059 million as compared to this year of

only 424 million. Provisions against off balance sheet items also increased

the administrative expenses. So all these factors pull this ratio up.

Admin Expenses to Total Deposits

Admin expenses to total

deposits

═ Expense on deposits * %

Total deposits

(Rs in ‘000’)

Years Expense on

deposits

Total

deposits

Admin Expense to

Total Deposits


2008 10471399 300732858 3.48235

2007 8272587 273173841 3.028323

2006 5874745 239509391 2.452824

Commentary

For banks, this ratio must be less

than 3%. Alfalah has lowest

admin cost in 2006.but latter it is

showing

Increasing trend, which is not

good sign for bank. Depression in

financial system forced banking

system to attract more deposit at

higher costs. Bank has to increase Minimum wage rate to meet

government regulations, depreciation and amortization costs also

increased. So overall position lead the management to increase these

costs.

Return on Equity

Return On Equity ═ Net Profit × 100

Shareholder's Equity

(Rs in ‘000’)

Years Net Profit Shareholder's Equity

Return On Equity

in %

2008 1301301 17044739 7.6346

2007 3130229 16219844 19.2987


2006 1762691 12241945 14.3987

Commentary

Return on equity revels how

much profit a company earned

in comparison to the

shareholder equity found in

balance sheet. Return on equity

of Alfalah is showing a changing

situation on all given years. In

year 2006, the return on equity

of Alfalah is 14.39%, in year

2007 it is 19.298%. And in year 2008 it again goes to 7.6345% although

net profit increase but the shareholders equity is also increase so this

increase shows that bank is not utilizing its funds properly. This year bank

has to face additional costs as well as less income due to economic

slowdown. As compared to industry, this year ratio is also sufficient.

Non Interest Income to Total Assets

Non interest income to

total assets

═ Non interest income

Total Assets

(Rs in ‘000’)

YearsNon Interest

IncomeTotal Assets

Non interest income

to total assets in %


2008 5245427 348990764 1.503

2007 6038466 328895152 1.8360

2006 3224639 275685541 1.1697

Commentary

This ratio shows how much you

are earning on the total assets

through non-mark up income.

This ratio is increasing in the year

2006 and 2007 and showing a

vital change in the year 2008.

This ratio reveals that bank

assets has increased but

decrease in non interest income

due to Unrealized loss on

revaluation of investment classified as held for trading disturb for this

year over all non markup income is increasing for the Bank.

Risk Assets Turnover

Risk Asset Turnover ═ Net interest income 100

Risk Assets (Advances)

(Rs in ‘000’)

Years

Net mark-up /

interest income Advances

Risk Assets

Turnover in %

2008 10715389 192671169 5.5615


2007 9162908 171198992 5.3522

2006 5958584 149999325 3.9724

Commentary

This ratio is good when it is more. It

shows how much you are earning on

your risk assets. But this ratio for

Alfalah is showing an increasing trend

in current fiscal year. Advances to

agriculture sector and sme sectors

have increased. This causes to

increase higher interest income for

bank. Due to inflationary trend

interest income is also high. So this

ratio is in favor of bank.

CAPITAL ADEQUACY RATIOS

CAPITAL ADEQUACY RATIOS═ Capital

Risk weighted assets

Year 2006 2007 2008


CAR (%) 9.48 9.85 8.03

Commentary

Capital adequacy ratios are a

measure of the amount of a bank's

capital expressed as a percentage of

its risk weighted credit exposures.

Capital Adequacy ratio also

represents how much interest the

sponsors have in the affaires of the

company. In Pakistan, regulatory

requirement for CAR is not less than

8% of total risk weighted assets. As

the data represent there is a decrease in car for bank alfalah in

2008.Considering this the bank the bank has announced right issue of

399750,000 shares at par i.e. Rs.10/-per share to raise Rs 3,997.5 millions

of additional share capital and proceeds are expected to be received soon

thereby ensuring Compliance with the prescribed minimum CAR

requirement. In view of aforementioned, the state bank of Pakistan has

granted an extension to the group in meeting minimum capital

requirement up till March 31, 2009.

Debt Equity Ratio

Debt Equity Ratio ═ Total Debts

Shareholder's Equity

(Rs in ‘000’)

Years Total Debts Shareholder's Debt Equity RatioINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

80

Equity

2008 331,946,025 17044739 19.4749 times

2007 312675308 16219844 19.27733 Times

2006 263443596 12241945 21.51975 Times

Commentary

Debt equity ratio shows a relationship

of shareholder equity and total debts

of a company. It is a relationship of

internal and external equity of a

company. Debt equity ratio of Alfalah

is showing decreasing trend. It means

that Alfalah is trying to rely on its own

resources and increasing its Capital by

issuing shares.

PORTFOLIO MANAGEMENT RATIO

Advances to Total AssetsAdvances To Total

Assets

═ Advances

Total Assets

(Rs in ‘000’)

Years Advances

Total

Assets

Advances To Total

Assets

2008 192671169 348990764 .5520 timesINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

81

2007 171198992 328895152 0.520528 Times

2006 149999325 275685541 0.544096 Times

INTERPRETATION

This ratio shows percentage of

advances over total assets. This ratio

for bank is showing a decreasing trend

in 2006 but remains almost same in

next two years two years. It means in

1rupee assets about 52 paisa are

advances.

Break up Value

Break up Value ═ Net worth

Total number of share

(Rs in ‘000’)

Years Net worth

Total number

of shares

Break up Value

2008 17044739,000 799500000 21.32 Rs

2007 16219844,000 650000,000 24.95 Rs


Lending Rates

Lending Rates

═ Mark up/return/interest earned

Advances+ investment+ lending to financial

institutions

(Rs in ‘000’)

Years

Mark

up/return/interest

earned

Advances+ investment+

lending to financial

institutions

Lending Rates (%)

2007 25,783871000 263142615000 10%

2008 31046583,000 271959897 15%

Borrowing rates

Borrowing Rates ═ Mark up/return/interest expensed

Deposit + Borrowings

(Rs in ‘000’)

Years

Mark up/return/interest

expensed Deposit + Borrowing

Borrowing

rates (%)

2007 16620963000 294,403,538 5.645%

2008 20331194000 314428280 6.47%


Cost of funds Cost of funds (%) ═ Borrowing rates+ admin cost

(Rs in ‘000’)

Years Borrowing rates (%) Admin cost (%)Cost of funds (%)

2007 5.645 3.03 8.675%

2008 6.47 3.48 9.95%

Spread

Spread (%) ═ Lending rate - cost of funds

(Rs in ‘000’)

Years Lending rate (%) Cost of funds (%) Spread (%)

2007 10 8.675 1.325

2008 14.65 9.95 4.70


Infection ratio

Infection ratio ═ Non performing loan

Gross advances

(Rs in ‘000’)

Years

Non performing

loan Gross advancesInfection ratio

2007 4705085 175678810 2.68 %

2008 8934273 198811852 4.49 %

Provision to non performing loan

Provision to non performing loan

═ Non performing loan

Gross advances

(Rs in ‘000’)

Years provision

Non performing

loan ratio

2007 4479818 4705085 95.21 %

2008 6140683 8934273 68.73 %


Earning per share

Earning per share ═ Profit after taxation

Weighted average number of

share

(Rs in ‘000’)

Years

Profit after

taxation

Weighted average

number of share Earning per share

2007 3130229 799500 3.92 Rs

2008 1301301 799500 1.63 Rs

Actual Figures in ('000') in %

2007 2008 Increase/decrease 2008

Markup/return/interest earned 25783871 31046583 5262712 20

Markup/return/interest expensed 16620963 20331194 3710282 22

Net markup interest income 9162908 10715389 1552481 17

Provision against non-performing

loans 2370867 2035997 334870 14

Provision for diminution in value of

investment 0000000 1479062 1479062

*

Bad-debts written off directly 5844 28298 22454 384

Net interest income after

provisions 6786197 7172032 385835

5.69



Fee, commission and brokerage

income 2429599 2539321 109722

4.52

Dividend income 64722 300943 236221365

Income from dealing in foreign

currencies 474510 914845

93

Gain on sale of securities 2059793 424220 1635573 79

Unrealized loss on revaluation 21530 181571 160041 743

Other income 1031372 1247669 216297 20.97

Total Interest Income 6038466 5245427

12824663 12417459


Administrative expenses 8272587 10471339 2198812 26.58

Provisions against off-balance sheet

obligation 6,959 28582 21623

310

other charges 9565 122758 113193 1183

Total Non mark-up Expense 8289111 10622739 2333628 28

Profit before Tax 4535552 1794720 2740832 60

Profit after tax 3130229 1301301 1828928 58

Earning per share 3.92 1.63

Commentary

Markup/return/interest earned

This head is increased if the bank’s investments, lending to financial

institutions, and advances increased.

If lending rates are increased then this head is also increased.

If Mix of both i.e. portfolio as well as rate increase. Then this head is also

increased.

This year bank loans and advances to customer and financial institutions

have increased significantly. Also due to increase in lending rates that

increased up to 15% as compared to 10% in previsions year play great

role in increasing this head.


Markup/return/interest expensed

If deposits, borrowing from financial institutions, subordinated loans

increased, and rate of interest on deposits increased then this factor is

increased. Deposits are liability for banks and rate given to customer is

expense, now if expense is increased with the increase in deposit it is not

–ive sign because public has confidence on the bank.

If borrowings from other institutions decrease it is +ive, because your

deposit also fulfills banks requirement.

This year bank alfalah enjoyed 3 billion increases in deposits but 100%

increase in lending from other institutions shows that bank’s requirements

are not fulfilling through its deposit base. This year bank has to issue term

finance certificate of Rs. 9.1 millions. These factors show that

management should start deposit marketing next year.

Net markup interest income

This year net income is increased by 17% as compared to 22% increase in

expenses

But income base is higher than expense base. So it is positive sign for

bank.

Provision against non-performing loans

This year bank has decreased the provision by 14% .as the

loans/advances portfolio has increased so bank should have increased

provision but the bank did opposite.

Based on the SBP recent circular on FSV bank Alfalah has taken the

benefit of the same by decreasing the provision requirement of by

622.245M and resultant increase in the profit before provisions and

taxations. So decrease in provisions this year is not a –ive sign for bank.


Provision for dimidiation in value of investment

This year the bank has charged full impairment on equity securities of amounting to Rs.1439 M as per international accounting standards. It means the company has wrongly made investment in less profitable securities.

Bad-debts written off directly

In financial accounting and finance, bad debt is the portion of receivables

that can no longer be collected, typically from accounts receivable or

loans. Bad debt in accounting is considered an expense.

This year this head is increased by384%.it shows that management is not

receiving proper collateral against loans or recovery process or loan

monitoring system is very week, this situation is posing a negative sign for

bank performance.

Fee, commission and brokerage income

Bank receives fees when acts as principal agent relationship, or providing

any other facility such as locker facility, and receives commission, when

acting as guarantor for letter of credit or performance bond or bid bond

guarantee.

This year this head is increased by 4.52%.This is very good increment as

compared to industry. It means bank non fund based business volume is

increased .it is benefited for bank because there are no fund involvement

in this activity.

Dividend income


http://en.wikipedia.org/wiki/Loan

http://en.wikipedia.org/wiki/Accounts_receivable

http://en.wikipedia.org/wiki/Receivable

http://en.wikipedia.org/wiki/Finance

http://en.wikipedia.org/wiki/Accounting

If this head is increased, it means the bank has invested for the purpose

of Holding. If investment increased dividend income is also increased. Till

31 December 2009 bank enjoyed a huge increase of 365% in dividend

income. Instead of gross investments decreased by 14% but bank

investments in Associates and held to maturity securities are more than

previous. That is why bank enjoyed 236 million increases in this head.

Income from dealing in foreign currencies

93% increase in this head shows that bank has got more maturity in

dealing in foreign currency. It also shows that Treasury department of

bank is working well.

Gain on sale of securities

This year gain on sale of securities is decreased by 79%.As market was in

depression so gain was impossible this year. It also posing threat that

bank might replace its high price portfolio with low price portfolio.

Unrealized loss on revaluation classified as held for

trading

These are the investments, which are either acquired for generating a

profit from short term fluctuations in market prices, interest rate

movement, and dealer’s margin or are securities included in portfolio in

which a pattern of short term profit taking exist.


At the year ended 31 December 2009, bank bared a huge loss of 743%.

As our stock exchange crashed in 2008, so this loss was suffered by whole

industry.

Other income

Net profit on sale of equipment and property and income from postage

telex service charges has increased this year. So this year bank get 216

millions more under the head other income than year ended 2007.

Administrative Expense

This year administrative expenses of the bank has increased by 27%.But

this is not a negative sign because increase in expenses shows that

number of Branches has increased, salaries have also increased also bank

have to hire new staff to operate new branches. So increase in expenses

under this head means a growth for banking business.

Provisions against off balance sheet items

Obligations that are contingent liabilities of a bank, and thus do not

appear on its balance sheet. In general, off-balance sheet items include

the following: direct credit substitutes in which a bank substitutes its own

credit for a third party, including standby letters of credit; irrevocable

letters of credit that guarantee repayment of commercial paper or tax-

exempt securities; risk participations in bankers' acceptances; sale and

repurchase agreements; and asset sales with recourse against the seller;

interest rate swaps; interest rate options and currency options, and so on.

The risk weights for off-balance sheet items are as follows:

100% risk weight: standby letters of credit, risk participations, asset sales

with recourse, risk participations in bankers' acceptances.


50% risk weight: unused portions of loan or lease commitments with

original maturities of more than one year; Revolving Underwriting

Agreements, Note Issuance Facilities.

20% risk weight: short-term commercial letters of credit and documentary

letters of credit collateralized by the underlying shipments.

These provisions are increased by 310%.The rapid change in Dollar-rupee

exchange rates and increased in bank’s secondary business drag up this

head. However it is not bad for the bank.

Other charges

This head is increased by 1183%.during year ended bank alfalah have to

bear penalties from state bank of Pakistan amounting Rs.16137000 which

were only Rs.9565 during preceding year. The other reason for increment

in this head is starting a new fund for bank employee amounting Rs.106

million. But this is not a bad sign for the bank, because bank considers its

employee as an asset. The starting of worker welfare fund will result in

employee efficiency and effectiveness. Also the provision for worker

welfare fund has been made consequent to the amendment made in

finance act 2008.as a result of this amendment this levy has now become

applicable to the bank.

Profit before Taxation

This year the profit before taxation decreased by 60%.which is Rs.2.74

billion decrease .such huge difference is due to increase in non mark-up

interest expenses, which were 2.3 billions more this year. So profit before

taxation restricted up to 1.794 billion as compared to previous year profit

of rs.4.535 billion.


Profit after taxation

This year bank has deferred its major portion of taxes that is why bank

paid only 493 million this year as compared to 1.405 billion previous year.

So profit after taxation is not much affected. It showed 58% decrease in

profit. Common Size Analysis of Balance Sheet

Common Size Analysis of Balance Sheet


2007 2008 2007 2008

Cash and Balances with

treasury banks 29,436,378 32,687,335 8.95 9.37

Balance with other banks 18,380,738 21,581,043 5.59 6.18

Landings to financial institution 3,452,059 3,315,500 1.05 0.95

Investments 88,491,564 75,973,238 26.91 21.77

Advances 171,198,992 192,671,169 52.05 55.20

Operating Fixed assets 11,922,324 13,773,293 3.62 3.95

Other assets 6,013,097 8,989,186 1.83 2.58

Total Assets 328,895,152 348,990,764 100 100

Liabilities

Bills payable 4,138,243 3,452,031 1.25 0.99


Borrowings 21,230,697 13,690,222 6.46 3.92

Deposits and other accounts 273,173,841 300,732,858 83.06 86.17

Sub-ordianted loans 3,220,858 2,571,169 0.98 0.74

Deferred tax liabilities 1,379,809 208,465 0.42 .060

Other liabilities 9,531,860 11,291,280 2.90 3.24

Total liabilities 312,675,308 331,946,025 95.07 95.12

Net Assets 16,219,844 17,044,739 4.93 4.88

Represented by

Share capital 6,500,000 7,995,000 1.98 2.29

Reserves 2,414,833 3,166,056 0.73 0.91

unappropriated profits 4,851,840 3,447,467 1.48 0.99

13,766,673 14,608,523 4.19 4.18

Surplus on revaluation of

assets 2,453,171 2,436,216 0.75 0.70

16,219,844 17,044,739 4.93 4.88

Common Size Analysis of Income Statement


2007 2008 2007 2008

Markup/return/interest earned 25,783,871 31,046,583 100 100

Markup/return/interest expensed 16,620,963 20,331,194 64.46 65.49

Net markup interest income 9,162,908 10,715,389 35.54 34.51

Provision against non-performing

loans -2,370,867 -2,035,997 -9.20 -6.56

Provision for diminution in value of

investment * -1,479,062 ** ***

Bad-debts written off directly -5,844 -28,298 -0.023 -0.09

Net interest income after provisions 6,786,197 7,172,032 26.32 23.10


Fee, commission 2,429,599 2,539,321 9.42 8.18

Dividend income 64,722 300,943 0.25 0.97


Income from dealing in foreign

currency 474,510 914,845 1.84 2.95

Gain on sale of securities 2,053,192 424,220 7.96 1.37

Unrealized loss on revaluation -14,929 -181,571 -0.058 -0.58

Other income 1,031,372 1,247,669 4.0001 4.02

Total Interest Income 6,038,466 5,245,427 23.42 16.90

12,824,663 12,417,459 49.74 40


Administrative expenses 8,272,587 10,471,339 32.08 33.73

Provisions against off-balance sheet

obligation 6,959 28,582 0.027 0.092

other charges 9,565 122,758 0.037 0.40

Total Non mark-up Expense 8,289,111 10,622,739 32.15 34.21

Profit before Tax 4,535,552 1,794,720 17.59 5.78

Taxation 1,405,323 493,419 4.77 1.59

Profit after tax 3130229 1,301,301 12.14 4.19

International trade

International trade is exchange of capital, goods, and services across international borders or

territories.

Importance of Foreign Trade

No country can be self sufficiency

Demand of goods not produced in the country

Cost of production can vary from country to country

Capital Investment

Balance of trade

Balance of payments

Peace & prosperity


http://en.wikipedia.org/wiki/International_borders

http://en.wikipedia.org/wiki/Service_(economics)

http://en.wikipedia.org/wiki/Goods

http://en.wikipedia.org/wiki/Capital_(economics)

Difference between international and domestic trade.

Currencies More than two types of Currencies are involved in

international trade.

Geographical distance: international trade is across borders,

geographical Boundaries, where as domestic trade is within borders of

the country

Trade restrictions: Trade quotas, Tariff ,import export restrictions are

involved in international trade-in Domestic trade such restriction are not

applicable

Heavy documentation: international trade comprises of L/C, Insurance

documents, B/L, Airway bill and involve Different Banks along with

foreign exchange rates etc, Where as Domestic trade comprises of only

few receipts and one or two banks involvement.

Risk in transit; international trade is done over long distances through

Ships. Aeroplane etc, so goods may be lost, destroyed during the transit.

Custom formalities

Legal systems.

Advantages of Int’l Trade

International trade offers benefits for three parties:

The two trading countries

The exporter &

The importer

Advantages for trading countries

Resources of the world are better utilized.

Consumers have a vast range of goods available to them.


Countries can take benefit of specialization (Comparative

Advantage)

Advantages for exporters

Wider markets available

Economies of scale

Can get a better price

Advantages for importer

Wider choice of goods

Better quality of goods

Better margin on sale

International Trade Mechanism


International trade is a complex procedure of importing and exporting of

goods that involve several steps as explained below.

1. Information, advertisement

International trade starts when a seller of goods (exporter) send particular

of his goods to the importer.

2. Enquiry

If information, advertisement and description is sought to the importer he

may started an enquiry about exporter creditworthiness, order fulfillment

capacity etc.

3. Quotation, invoices


In the step a formal agreement is done between importer and exporter,

this agreement is evidenced by PROFORMA INVOICE. Performa invoice

contains the weight of goods or number of goods, per unit price,

description of goods, Total price, Performa invoice number, Exporter name

and signature along with date and currency. Following is a sample of pro

forma invoice


4. Contract, order

After receiving pro forma invoice agreement take the form of contract,

importer sends an order to the exporter for goods. In this contract, full

documentation for goods is agreed. L/C is opened by importer in favour of

exporter.

5. Shipment

After manufacturing the goods, exporter sends them to importer either

through ship or through aero plan or through Railway, truck etc.

6. Documents/Draft.

Exporter sends the documents (B/L, Airway bill, Mate receipt, Truck

Receipt etc) to importer or importer bank. A draft is drawn on importer.

Importer gives his acceptance to receive the documents.

7. Payment

Exporter receives the Payment after putting the draft to his bank.

Trade Procedure at bank Alfalah

Bank alfalah is growing its trade business through strong correspondence

banking services irrespective of weak economic condition. At alfalah, both


imports and export dealings are done by Experts. The methods and

techniques used by the bank for imports and exports are explained below.

Imports Procedure

When a customer approaches to the bank to imports its required goods

bank, open an L/C on behalf of the Client.

Introduction: What is a Letter of Credit?

A Letter of Credit is a written undertaking by the Importer’s bank,

known as the Issuing Bank, on behalf of its customer, the Importer

(Applicant), promising to effect payment in favour of the Exporter

(Beneficiary) up to a stated sum of money, within a prescribed

time limit and against stipulated documents.

A key principle underlying Letters of Credit is that banks deal only

in documents and not in goods. The decision to pay under a Letter

of Credit will be based entirely on whether the documents

presented to the bank appear on their face to be in accordance

with the terms and conditions of the Letter of Credit. It would be

prohibitive for the banks to physically check whether all

merchandise has been shipped exactly as per each letter of

Credit.

The International Chamber of Commerce (ICC) publishes

internationally agreed-upon rules, definitions and practices

governing Letters of Credit, called “Uniform Customs and Practice

for Documentary Credits” (UCP). The last revision of these rules

was effective Jan. 1, 1994 and is referred to as the UCP 600.

Types of Letter of Credit

Letters of Credit are either Revocable or Irrevocable:


o A Revocable Letter of Credit can be revoked without the

consent of the Exporter, meaning that it may be canceled or

changed up to the time the documents are presented.

Revocable Letters of Credit are very rarely used.

o An Irrevocable Letter of Credit cannot be canceled or

amended without the consent of all parties including the

Exporter. Unless otherwise stipulated, all Letters of Credit are

irrevocable.

Letters of Credit may be settled either by sight or by acceptance:

o If payment is to be made at the time that documents are

presented, this is referred to as a sight Letter of Credit.

o If payment is to be made at a future fixed time from the

presentation of documents, this is referred to as a term Letter

of Credit


4

Bank require following documents to open a L/C.

1. L/C credit Approval


Contract

Negotiations

Exporter/ Beneficiary

Advice /Confirmation of the Letter of Credit.

Advising/ Confirming Bank

Issuing Bank

Importer applies for letter of credit

Note: For the purpose of this session, the Advising Bank is

Also acting as the Confirming Bank. However, the roles of

Advising and confirming the Letter of Credit may be performed

Importer/Applicant

Request to advice & possibly confirm the Letter of Credit

1

2

3

Issuance of L/C

It is issued by Credit department of the bank after scrutinizing

the following information.

If the Client is has a registered Business.

Have NTN Number Issued by the tax department

Have valid imports license issued by Pakistan chamber of

Commerce.

Credit worthiness of the client

2. L/c opening Form

Client has to fulfill L/C opening request. By fulfilling this importer is

engaged in an agreement with the bank for import of goods.

3. Proforma invoice

It is an evidence of agreement between importer and exporter before

L/C opening request. Performa invoice contains the weight of goods or

number of goods, per unit price, description of goods, Total price,

Performa invoice number, Exporter name and signature along with

date and currency

4. Insurance Policy

What goods are to be imported, they must be insured by the importer

110% of the import Items.

5. Import form


Four copies are filled, one is retained by the bank itself, two copies are

sent to the state bank of Pakistan, and one is returned to the importer.

After these requirements are fulfilled Issuing bank open the L/C. This

L/C contains the following Information.

Fields of L/C.

Documentary credit number CSLC:7233/090028

Date of issue

Applicable Rules

Date and place of Expiry

Applicant

Applicant bank

Beneficiary name and address

Advising Bank

Currency code and amount

Maximum Credit amount

Partial shipment/Transshipment

Port of Loading

Port of Destination

Latest date of shipment

Description of goods and Services

Document Required

o Exchange Certificate


o B/L or air way Bill etc

o Shipment Advise

o Certificate of origin

o Packing list

o Commercial advice

o Shipping Company certificate regarding ISM code

o Vessel classification

o E-form

o Goods Declaration

o Harmony system code

Additional Conditions

o Certificate of Analysis

o Shelf life

Charges

Periods for presentation

Conformation

Classification of Imports.

Before establishing any letter of credit/registering contracts, Bank takes

all precautions to ensure that the goods to be imported under it are

clearly classifiable under the Import Trade Control Schedules.

Terms of Imports


Imports can be made on FOB (free on Board) basis, CFR (cost and Freight)

liner terms basis or CFR free out basis. However, prior permission of the

State Bank shall be obtained for import of sugar and food grains (cereals)

on CFR free out basis. Imports Can made on CPT Basis (when goods are

imported through air way).

Advising Bank

This bank is in Exporter Country, it is also called exporter’s bank. Issuing

Bank sent the L/C to advising Bank. Its obligation is to check the

Authenticity of L/C and then advise this to Exporter. Exporter must collect

the document within 15 days from advising bank.

As soon as exporter receives documentary credit, he manufactured the

goods according to specification of L/C. then exporter shipped the goods

at shipping date as per L/C and complete the following documents

Exchange Certificate B/L or air way Bill etc, Shipment Advise, Certificate of

origin, Packing list, Commercial advice, Shipping Company certificate

regarding ISM code, Vessel classification, E-form, Goods Declaration,

Harmony system code.


Importer/Applicant

Exporter/ BeneficiaryGOODS

Flow of Goods

2

4


Importer/Applicant

Documents

Do

CUm

e

NTS

3

1

GOODS

Nominating bank

Exporter sends back the documents to the issuing bank through this bank.

This may be the advising bank or any other bank in exporter country.

Scrutiny of documents

As soon as the documents are received by issuing bank, issuing bank

scrutinize them. If these documents are clean then issuing bank will make

the payment, if discrepancies are found then

1. Issuing bank will inform the importer and if importer accept such

documents, and then Issuing bank will Charge US $35 to exporter

and make the payment to exporter.

2. If importer does not accept such documents, with in 5 working

days Documents will be dispatched to the Nominating bank and

issuing bank will charge US $35 after discrepancies are removed and

Payment is made to the exporter.


Lodgment of Documents

After clearance of documents bank make the payment to nominating bank and if

importer not reaches the bank within 3 working days then issuing bank issue a

forced loan in favour of importer which is called PAD LODGMENT and bank will

charge 55 paisa per Rs.1000/=

If importer is not in position to make full payment, he can avail two types of

facilities for Retirement of Documents



Issuing Bank

2

4


Importer/Applicant

Documents

6

5

Docu

men

ts

Documents

3

7

Advising/ Confirming

Bank

1

GOODS

FIM (FINANCE AGAINST IMPORTED MERCHANSE)

Bank retains physical possession of goods

FTR (FINANCE AGAINST TRUST RECEIPT)

Bank does not retain physical possession of goods. Goods are released to

the customer on a trust receipt document prior to the payment of bill.

FIM/FTR

Documentation

Request letter duly signed by the customer

Demand promissory note

Letter of offer

Letter of pledge (in case of FIM)

Trust receipt (in case of FTR)

Mark-up agreement IB6A

Letter of arrangement

Letter of disbursement

Letter of installment

Letter of authority to debit mark-up

Documentation for any additional security


Approval

Can only be granted against approved facility

Under any specific approval of appropriate credit

authority

Allowed only against L/Cs established by the branch.

(Exceptions to be approved by the appropriate credit

authority)

Duration

Normally allowed for fixed periods of time

In local currency

Mark-up payable in arrears on due date

Amount to be financed

Partial amount of the bill

Exact amount of the bill

Exact amount required to retire the bill

Bill amount plus duties and sales tax (for exceptional

cases after approval)

Caution!


In case import duty, sales tax etc. are also to be

financed in addition to bill amount, separate Dr. entries

from the same FIM A/C should be passed for adjustment

of bill amount and import duty/sales tax

Mark-up on PAD should be adjusted from a separate FIM

A/C

Make sure that Mark-up on mark-up is not charged

Margin on L/C

Any margin held against L/C should be utilized in partial

repayment of the Finance

If the bill represents only a partial drawing of the credit

amount, the amount of margin to be applied must be in

direct proportion as the bill amount is to the credit

amount.


Clearance of goods

Dr. Customer A/C for all costs incurred in clearance &

storage

Clearance & storage through approved clearing agent &

Macadam

Storage & insurance

Goods to be insured & stored in bank’s name

Partial deliveries against partial repayment of finance

Deliveries against D/Os issued by the respective branch

Recording

A separate account # allocated to every FIM or FTR

sanctioned

FIM/FTR accounts are linked to customer’s current

account.

FIMs & FTRs granted will reflect in the GL accounts

FINANCE AGAINST IMPORTED MERCHANDISE &

FINANCEAGAINST TRUST RECIEPT

Details such as limit, expiry date, M-up rate & security

entered into the computer for calculation of M-up

Details entered into FIM/FTR register


Statement of O/S facility generated on monthly basis to

mark overdues

Fortnightly review of overdues by Manager Credits

Mark-up

At the end of each month, m-up accrued on the

outstanding finance will be calculated

Accounting entries

SWOT Analysis

Strengths

Bank Alfalah Limited is considered to be a very successful bank in the

financial circles. A bank is placed where the customer can safely keep

their money as long as they want. Some of the major strengths of the

bank:

Comprehensive and diversified product portfolio of the bank

Bad debt rate is low

Excellent credit rating of the bank Alfalah

Bank is financially strong and has a huge deposit reserve

Bank Alfalah has a wide network of branches at the ideal locations,

catering the financial needs of its clients.

Foreign Trade is the focus of bank. It has become an ideal bank for

the importers and exporters.

Bank has Wide National Branch NetworkINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

115

Goodwill and trust of the Bank Alfalah

Bank is in its growing stages so there is good financial position.

Professional and Committed workforce

Lowest markup is charged

On-line banking facility is provided

Bank follows customer relationship marketing concept.

It caters to all segments of class

Its client lists include some of the most prominent individuals and

companies from both public and private sector.

Weaknesses

Bank Alfalah has also some weaknesses. But their number is much less

than the strengths of the bank. Following factors need attention of the

management.

Bank Alfalah Limited does not possess foreign network

Lack of advertisement through electronic media.

There is no job rotation so skill set of employees is not up to mark

as

Foreign banks still are a little more prestigious

Most of the employees are overloaded with work. There is uneven

distribution of work and promotions are not very timely.

It is slow in the introduction of new services.

Few branches has ATM facility

Account is opened in few currencies.

Opportunities

Bank Alfalah has grown up its business with a very high pace and it has

tremendous popularity, even with in a very short span of time. There are


many opportunities for the bank and by availing that it can stand amongst

the top foreign banks.

Introduction of innovative products

Growth in deposits

Growth in textile sector

Tide down of money

Expansion in branch network

Bank Alfalah can fully avail the facilities of E-banking.

Extension of International network of the branches

Growing market

Threats

Political instability

Increase in competition with other banks

Revolving policies of State Bank Of Pakistan

Terrorist image of the country

Uncertain economic condition

Slow product development process

Change in Govt. policies

Internal audit system is not encouraging


Account opening department

Customer is a person who has some sort of account, either deposit or

current or some similar relation. A person becomes a customer the

moment the bank receives the money or cheques and agrees to open an

account.

It is contractual agreement between bank and customer after which both

concerned parties indulge in a mutually beneficial business relationship.

"Deposits are the blood of a Bank"

Acceptance of deposits is the real source of income of a bank. Deposits

department is the backbone of corporate banking. Deposit is often used to

describe the money, which customers of all kinds leave with the banks.

Deposits account can be defined as an account, which is opened to earn

interest.

The term deposit is highly misleading. It is not something deposited for

safekeeping, like currency in a safe deposit box. Bank deposits are not like

that. When one brings currency to a bank for "Deposit”, the bank does not

put the currency in a vault. It may put a small fraction of the currency in

the vault as "Reserves" but it will lend most of deposits to some one else

or buy an investment.

The entire banking system is based upon borrowing. Like all banks,

deposit department has acknowledged its worth as the most important.

Almost all the operations generate from the deposit department and with

due course of time reflect back to the deposit department.

In order to attract funds, bank has introduced various types of deposits

schemes that may suit the needs and tastes of a large body of depositors.


Types of Deposit Facility

Deposits are broadly classified into the following categories.

Current Account

Savings Account

Term/Fixed deposit

Royal Profit

Procedure to Open An Account

During my stay at Gulberg Branch of BAL, I worked and observed that

when a customer wants to open an account, the bank officer gives

application form to him. All information, which are necessary to be known

by the bank, are requirements of the application form. Following persons

can open an account:

Sole proprietors

Private accounts (individual a/c's)

Joint account

Limited Company

Partnership company

Trust and Association

Following information is required:

Name

Address

Telephone no.

Currency of account

Nature of Business


Residential status

Special instruction regarding the account

Signature of the applicant

Documents to be attached

Documents required to be attached are different for different categories.

First part of application form is compulsory for every applicant to fill. In

this part, special information about different categories & documents

required to submit with it is provided.

These different categories & list of required documents is given below:

Individual / Joint Account

Account Opening Form duly completed and signed by the

customer(s).

Title of Account must be same as on name CNIC.

Photocopy of CNIC/Valid Passport, which MUST be original seen

with complete signature not by an INITIAL.

Employer’s letter/ID Card in case of SALARY PERSON.

Business Card in case of BUSINESSMAN & NATURE OF

BUSINESS IN AOF (OCCUPATION & PEROFESSION).

Indemnity in case of Signature other than CNIC

Indemnity for NADRA CNIC verification.

Introduction (From existing BAL Client)

Sole Proprietor Account


Covering letter (Letter-Head) requesting for opening of an

account with BAL, Gulberg Branch, Lahore.

Account Opening Form duly completed (Corporate Section also

to be filled), signed and stamped by the customer.

Photocopy of CNIC/Valid Passport which MUST be original seen

with complete signature.

Sole Proprietorship Declaration on the bank’s prescribed format

required on the Letterhead.

Photocopy of NTN Certificate/Assessment Order, which MUST be

original seen with complete signature.

Vernacular Form on Stamp Paper of Rs.100/- in case of customer’s

signature is other than English.

Title must be same as on AOF ,Letter Head & Company

Stamp(Spell)

Stamp must contain the word Proprietor


Indemnity for NADRA CNIC verification.


Partnership Account

Covering letter (Letter-Head) requesting for opening of an

account with BAL, Gulberg Branch, Lahore.


to be filled), signed and stamped by the all partners.

Photocopy of CNIC/Valid Passport of all partners which MUST be



Partnership Deed duly NOTARIZED and signed by all partners,

which MUST be original seen with complete signature.

Partnership Mandate (Letter-Head) with clear Instructions

signed and stamped by all partners that also to be WITNESSED

(as per Bank format).

Photocopy of NTN Certificate/Assessment Order which MUST be


Photocopy of Registration Certificate (Form-C) which MUST be


Title must be same as on AOF ,Letter Head & Company

Stamp(Spell)

Stamp must contain the word Partner


Indemnity for NADRA CNIC verification of all Partners.


Private/Public Limited Company Account

Covering letter (Letterhead) requesting for opening of an account

with BAL, Gulberg Branch, and Lahore.


to be filled), signed and stamped by the Authorized Signatories.

Authorization from all directors for NADRA CNIC verification.

Specimen Signature Card (In Duplicate) Signed & Stamped by

the Authorized Signatories Only.

Photocopy of CNIC/Valid Passport of all Directors duly attested by

the Company Secretary / CEO.


Board Resolution attested by the Company Secretary / Chief

Executive Officer (CEO) resolving to open an account with BAL,

Gulberg Branch, Lahore, along with the signing instructions of the

authorized signatories to operate the account. This resolution must

bear the Company Embossing Seal, which must be signed by two

Directors as per the clause of Memorandum & Article of

Association.

List of Directors.

Photocopy of NTN Certificate/Assessment Order duly attested by


Memorandum & Article of Association duly attested on all pages by


Certificate of Incorporation duly attested by the Company

Secretary / CEO.

Latest copy of Form-29 duly certified by the SECP and attested by


Certificate of Commencement of Business (in case of Public Limited

Company).

Trust, NGO, Society

Covering letter (Letterhead) requesting for opening of an account

with BAL, Gulberg Branch, Lahore.



Photocopy of CNIC/Valid Passport of all Trustees duly attested by



Resolution of the governing body of the customer for opening the

account and authorizing the said persons for operating the account

and attested copy of NIC of the authorized operators of the

account.

The Company Embossing Seal, which must be signed by two

Directors as per the clause of By Laws.

List of Trustees.

Trust Deed.



Registration Certificate duly attested by the Company Secretary /

CEO.

Indemnity for NADRA CNIC verification of all Trustees.

An undertaking signed by all the authorized persons on behalf of

the institution mentioning that when any change takes place in the

persons authorized to operate the account, BAL will be informed

immediately

Foreign Company Accounts:-

Power of Attorney (P/A) for opening of an account with BAL,

Gulberg Branch, Lahore.



Authorization from all directors for NADRA CNIC verification.

Specimen Signature Card (In Duplicate) Signed & Stamped by

the Authorized Signatories Only.


Photocopy of CNIC/Valid Passport of all Directors duly attested by


List of Directors.



Memorandum & Article of Association duly attested on all pages by


Latest copy of Form-29 duly certified by the SECP and attested by


Certificate from the Company Secretary, Duly authorized by the

Board that the entity started its business form certain date and

that certificate of commencement of business is not issued in that

country.

General Observations:

Personal Information must be same, as on CNIC no abbreviation

will be used (only if on CNIC).

In case of cutting over writing must be signed by authorized

signatories.

Online Indemnity in case of Online Account.

NOTARIZED Vernacular Form on Stamp Paper of Rs.100/- in case of

customer’s signature is other than English / Thumb Impression.


In case of CNIC doesn’t contain a photo graph, a copy of CNIC and

two photographs duly attested by any Gazette Officer / Nazim

along with undertaking/confirmation in writing to the effect that

he/she doesn’t have any other documents bearing their

photograph.

QA-22 incase Foreign National Opening PKR Account.

If business Account we suggest you to bring company stamp at the

time of Account Opening.

Specific Business is to be mentioned in occupation/profession

column (if Business Man)

Note: - All relevant documents must be signed by all

Partners/Directors (online request etc).

Issuance of Chequebook

Now customer has opened an account with the bank, so he is provided

with chequebook for withdrawals of account. However, the first cheques-

book is given to the customer only when all the required documents are

checked. A cheques-book contains, ten twenty-five, fifty or hundred

leaves. The cheques-book also carries a requisition slip for the issuance of


the new cheques-book. This slip is duly filled and signed by the customer.

The bank verifies the signature of the customer, new cheques-book is

issued to the customer, and serial number of the cheque is duly entered in

the book of the bank. Along with the signature, person should also write

his full name & address.

Bank debits the client's account for excise duty of Rs.5.00/- per cheque

and keeps the chequebook ready for the customer, as on his/her advice.

The officer keeps and maintains the chequebook record.

Chequebook inventory and cheque -books issued are recorded in a

separate file. When the chequebook is issued, it is recorded in the

chequebook issuance file.

My Responsibilities as an officer in this regard were that:

Receive duly signed cheques-book requisition slip from customer.

Verify customer’s sign and stamped.

Enter this request in the list that has to be sent to the head office

at the day end.

With in two days, head office responds to the request and send

the required cheque books

When the customers come, he can get the chequebook by signing

the Checkbook receiving slip.

The Requisites of a Cheque

There is no prescribed form of words or design of a cheque, but I have

learned that in order to fulfill the requirements the cheque must have the

following:

It must be in writing.


It must contain an order to pay and addressed a specified bank.

The maker must sign the order.

The order must direct to pay on demand.

The sum ordered to be paid must be certain.

The payment should be ordered to be paid to a certain person or

to his order or the bearer.

Loose Cheque:

I did not observe any practice of loose cheques in bank but I have learned

the concept of loose cheques, which is following as:

It is necessary for issuing loose cheque that person should be customer of

the bank. So if any customer forgets or leaves his cheque book at his

home which is for away from the bank or there may be any other case,

the customer applies with the bank for the issuance of loose cheque by

the bank as he does not has his cheque book with him and the money is

urgently required, then this cheque is called as loose cheque. Bank keeps

a chequebook labeled as loose and issues loose cheque from this loose

chequebook. The cheque is issued on a written requisition by the

customer on which the name and address of the customer, his account

number is mentioned. His signature is verified with signatures on the

signatory card that was held by the bank at the time of opening of

account. After the verification of signatures, a loose cheque is issued to

the customer.

Stop Payment Instruction

If customer wants to stop his/her payment of cheque in case of stolen the

cheques then the procedure will be done in following way. In my whole


tenor of internship, I observed only one stop payment which process is

follows as

Receive written instruction from customer for stop payment of

cheque.

Verified customer sign on letter and affix sign verified stamp.

Inputted stop instruction in system in customer’s account.

How to close an account

The customer can close the account. I have received only one application

to close an account by customer. In this regard, the customer has

submitted an application for closing the account. Then the account was

closed out and his balance was paid to him after deducting the Closing

charges i.e. Rs.200 plus 16 % excise duty and the application was filed in

Account closing file. Chequebook was returned back to bank and the

officer cancelled the remaining cheques in cheques-book

In short the steps are:

Receive request for account closure from customer, either by mail.

Ensure that all account holders have signed account closure

request.

In case of corporate account, obtain necessary resolution.

In case of joint account, ensure all partners sign on letter.

Verify customer sign and stamp

Clearing department


Transferring of funds from person to person, and from place to place,

constitute the concept of a remittance. Remittance is very important

service provided by banks to customer as well as non-customer. It is not a

free service, hence is a continuous source of income for the bank.

PARTIES TO A REMITTANCE

1) REMITTER

One who make a remittance. He comes to the issuing or originating

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

remitted. The bank charges him for the remittance. He may or not be the

bank’s customer.

2) REMITEE

Also sometimes called the beneficiary, or the payee. The person to whom

the remittance is made. The one who receives the payment.

3) ISSUING BANK

The bank that affect the remittances, through the Demand Drafts,

Telegraphic Transfer, or Mail Transfer.

4) PAYING BANK

Also known as the drawee branch. The branch on whom the instrument is

drawn. It has to make the payment. (Usually located in a different city or

country)

MODES OF TRANSFERING FUNDS IN REMITTANCES

1. Demand Draft

2. Telegraphic transfer


3. Pay Orders

4. Rupee Traveler Cheques

5. Mail Transfer

During my stay at BAL I have learned about first four modes of

remittances.

Demand Draft

DD (Demand Draft) is a cheques issued by the bank drawn on the same

bank’s outstation branch. The bank charge nominal commission on

issuance of demand draft. If lost the holder must in personal request the

bank in writing for the duplicate. The bank if satisfied can issue a

duplicate demand draft after getting the indemnity.

Process For Outward Demand Draft Through Cash

When DD is made at customers request on cash the process goes as

under:

• First customer comes to bank and fills the DD application form.

• Designated officer verifies the signature and particulars of Application.

• Designated officer then fills in the charges/commission on application

form.

• Customer then deposits the money and gets the application stamped and

signed by the cashier.

• Cashier then make the entry and credits the Transit account in GL.

• Cashier sends the application back to designated officer who makes the

DD by debiting Transit.

• After Preparing DD two-attorney holder signs it.


• Three copies of DD are prepared

• Original goes to customer

• Office copy retains with designated officer for reconciliation.

• One copy sent as an advice to drawee bank.

Process For Outward Demand Draft Through Account

• When an account holder of Bank through his cheque makes DD then first

customer comes to bank and fills the DD application form. A cheque is

also required of the minimum amount of the DD.

• Designated officer verifies the signature and particulars of Application and

verifies its validity with the cheque.


form.

• Designated officer after verification on particular of cheque such as

balance, signature, date, figure in words and digits etc. debits customer

and credits the transit account.

• In next step officer debits the transit and makes DD.

• After Preparing DD two-attorney holder signs it.

• Three copies of DD are prepared

• Original goes to customer

• Office copy retains with designated officer fro reconciliation.

• One copy sent as an advice to drawee bank.


Process For Inward Demand Draft

When some other bank draws DD or branch on our branch process goes

as under. First the Branch receives the Advice from the issuing branch by

courier.

Following particular are verified.

• Name

• Date

• Attorney Holders Signature

• Amount in words and figures

• Cutting etc.

• The designate officer after verification enters the particulars in DD

register and makes the entry in system by giving credit to DD payable.

• In next part the officer through clearing receives the original instrument or

non-account holder physically presents the instrument.

• Officer again verifies the particulars and if the DD is received through

clearing then designated officer enters it in DD register and gives credit to

customer by debiting DD payable.

• If the customer needs the amount in cash then it is verified that the

instrument bears the NIC no of the beneficiary on it

• The instrument is marked as PAID and amount is transferred in the

account of the customer.


Telegraphic Transformation

TT stands for telegraphic transfer and MT stands for Mail transfer. In BAL I

observed that the TT is normally faxed to the other branch and then the

original copy is sent by mail.

Process For Outward Tele Transfer

When TT is made at customers request on cash the process goes as

under:

• First customer comes to bank and fills the TT application form.

• Designated officer verifies the signature and particulars of Application.


form.

• Customer then deposits the money (if TT is made against cash) or gives a

cheque (if it is made from his account when the customer is an account

holder of bank) and gets the application stamped and signed.

• Cashier/Officer then makes the entry and credits the Transit account in GL

and. (At this step cashier debits cash and officer debits customer account

against cheque.)

• Officer then make the entry in TT issued register and assign a TT No. that

must be next to the last TT drawn on the branch. TT must be entered in

register as Credit or Pay. (A TT will be prepared as Credit when it is to be

credited to an account holders account maintained in the bank at which

TT is drawn or another bank through clearing, on the other hand when

customer did not have account in the bank TT is drawn as Pay. Now TT is

not credited in customer account, as he does not have an account but it is


paid cash to him after prior verification of his name and NIC no. This is

written on TT made as Pay).

• Then officer prepares TT through inter branch credit advice. (IBCA).

Simultaneously officer makes entry in system by debiting Transit A/c

(credited by cashier/officer at the time of receiving cash/cheques.

• After Preparing TT two-attorney holder signs it.

• Four copies of IBCA are prepared.

• Original copy and responding copy along with a Telex Message goes to

the branch at which TT is drawn by mail (also called Mail Transfer/MT) or

by telegraphic transformation (Fax).

• M.O. copy retains with designated officer for reconciliation.

• Office copy is attached with the voucher where H.O. is credited after

debiting Transit.

Process Of Inward Tele Transfer

When some other bank draws TT or branch on our branch process goes as

under. First the designate officer receives the tested telex (TT).

Following particular are verified.

• Date

• Beneficiaries name and NIC (if any)

• Remitting Bank or Branch

• Disposal instruction (Credit or Pay)

• TT No (Which should be next to the last one received).

• Attorney Holders Signature

• Amount in words and figuresINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

136

• Cutting etc.

• The designated officer after verification enters the particulars in TT

Payable register and makes the entry in system by giving credit to TT

payable.

• Now if inward TT is drawn as Advice & Credit the TT payable is debited

and Credit is transferred to customer account.

• On the other hand, if inward TT is drawn as Advice & Pay then TT payable

is debited and credit is transferred to H.O. when customer whose name

and NIC no. is on the TT arrives at counter to receive cash. The copy of

NIC is kept as record.

• In case if inward TT is drawn on other bank a TTR is prepared for onward

transfer.

PAY ORDER

Payment order is meant for bank’s own payments but in practice these

are also issued to our customer for making payments. A pay order is

written authorization for payment, made in a receipt form issued and

payable by the bank, to the person named and addressed therein on his

giving a proper discharge thereon. It is issued by and drawn upon and

payable by the same branch of the bank. It is neither transferable nor

negotiable and as such it is payable to the payee named therein.

Pay order cannot be issued to a minor. Sometime banks don’t want to give

its deposits to customer. So in that case pay order is given to that

customer and he can use it for making payments. When customer wants

to cash the pay order then the amount of the pay order will be debited

from the bank. If pay order is submit to other bank like mcb, abl then the

process of clearing will be adopted.


RUPEE TAVELER CHEQUE

BAL always provides to its customer’s different type of services which are

safe and quality oriented. RTC is very popular among the people of the

country. The bank provides RTC in the following categories.

• 1,000

• 5,000

• 10,000

Purchases of RTC

The person who wants to purchase RTC is required to fill a form. The form

contains name, address, amount or denomination and other necessary

information. The purchaser deposits the amount in the bank and gets a

voucher from the cashier. And then RTC is provided to the purchaser.

Before handing over to the purchaser, signature is taken from him on the

RTC and on the copy of form. BAL rupee traveler’s Cheques are

acceptable in all the branches of BAL in Pakistan.

Features

Following are some features of RTC.

• It is acceptable in all the branches of BAL in Pakistan.

• In case of loss the purchaser inform the BAL in 24 hours. Then there is no

way of loss of purchaser and his amount is safe.

• Easily Available at all the branches of BAL, acceptable by major

businesses of Pakistan.


CLEARING

Clearing is the system by which banks exchange cheques and other

negotiable instrument, drawn on each other, within the specified area,

and secure payment for their clients through clearing house specified time

by book entries i.e., State Bank of Pakistan..

Nearly all the banks provide a wide variety of services to their depositors.

One valuable service provided is that of clearing. Clearing department

also plays an important role in performing the activities of the bank.

The basic function of clearing department is to provide services to

customers in collection of their cheques of other banks, whether they are

in city or outside the city. The customer can get the money in his account

at Bank Alfalah Limited from the cheques drawn on another bank. The

bank accepts the cheque in the clearing department & later on collects

these cheques from the bank on which it is drawn through the clearing

house

Every bank acts in two ways such as:

1) Paying Bank (The bank, which pays the cheques of his customers,

presented by other banks.)

2) Collecting Bank (The bank, which collects the fate of cheques on the

behalf of customers, presented by other banks.)

Different modes of transferring the money are follows as

• Transfer

• ClearingINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

139

• Collection

Transfer

A method which means simply we transfer amount from one account to

another account is called transfer.

Clearing

A system through which funds are transferred from one bank to another

bank within one (area specified by the SBP) clearing house. It may be

within city or outside the city. A process by which cheque is exchanged

between the collecting bank and paying bank and the ensuring financial

settlement is called clearing.

Clearing-house: Clearing house is a place where representative of the

member bank meet at given timings every day, to exchange cheques and

other instruments drawn on each other. Representative of the banks take

all the cheques and the instruments such as PO, DD etc drawn on banks in

the city, to the clearing house and bring back cheques and other

instruments drawn on our bank which are payable by us.

Classification of clearing

1) Outward clearing

2) Inward clearing

O/C Procedure

I have done following process in O/C


Receive cheque on the counter and scrutinize it on the following

lines

Cheque is drawn on a bank that is a member of clearing-house

It is deposited in an account that is being maintained in the branch

It is in order as to the name of payee, date, amount in words and

figure and correctly endorsed where required.

Check the pay-in slip and counter foils are correctly filled in.

Put the banks special crossing stamp & clearing stamp of the next

day.

Detach cheque from pay-in slip

Sort out cheque bank wise and branch wise.

Input in system for each bank

Prepare clearing schedule

Attach the cheques with clearing schedule

Handover the instruments to NIFT

Realization entries, if the branch is online then the fate of your

collection automatically transferred. If branch is not online then

the entry will be

Dr Account with main branch

Cr Branch accounts

In case of return, we will have to mark reversal of entry. In case of online

branch, the entry must pass because system will give credit to the

account and your return will be settled.

StampsINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

141

Special Crossing

Clearing stamp of next working day.

A/C payee’s only

Payee endorsement confirmed

Outward Return

Cheque returned will be treated as inward cheque. In the case of cheque

is returned because of wrong presentation e.g., clearing stamp not affixed

or wrong discharge given on the cheque etc. it should be relodged in the

next day clearing after rectification of the mistake.

If cheque is returned for any other reason then

Enter the cheque in cheque return register, mentioning the reason

as appearing on the cheque return memo received from the

paying bank

Advice the customer about fate

Return the cheque to the customer after getting sign on register

Collect the cheque return charges

Inward clearing procedure

Receive instrument payable by us in inward clearing


Time is the essence of clearing, if not returned unpaid then it is

presumed to be paid

Check the total number of instrument matches with the clearing

schedule and get signature on it.

Scrutinize the cheque on following lines

Signature verification

Proper presentation

The cheque is in order as to the name, date, amount in the words

and figure

Cheque is not damaged or torn nor post dated or stale, alteration,

correction and cutting have been authenticated with full signature

of the customer.

Display customer account on the screen and observe

Sufficient balance

Stop payment instruction

Cheque is from a series of cheques that has been issued to that

particular customer.

Inward return

Return may be of any reason. For example

Clearing stamp not affixed

Defect in cheques i.e., post dated cheque

Insufficient balance


Once the decision is made to return the cheque so deliver to NIFT.

Collection

Clearing department deals with money transfer form on place to another.

It uses various instruments for remittance purposes. These instruments

are:

1) OBC

2) IBC

OBC:

Outward Bill for collection, the cheques drawn on the bank that are out of

city. These cheques are not collected through NIFT. The banks clear these

by sending them to the relevant branch through mail. This service

includes all activities involved in collecting their claims on customers of

the other branches of same bank or of the other banks, located outside

the clearinghouse area.

Procedure

Receive instrument, this instrument

It is in the name of the account holding customer

Must not be post dated or stale

Must have same amount in words and figure

Affix special crossing stamp on the face of instrument

Affix OBC stamp on the instrument, and on pay-in slip

Entry in OBC register

Write OBC# on the instrument


Prepare outward bill for collection schedule

Role of Schedule

It is pre-printed covering letter of collecting/paying bank

OBC #

Cheque #

Name and location of drawee bank

Amount

OBC Realization

Enter realization particular in the OBC register

If paid IBCA received from our collecting branch

Deduct commission and courier charges.

II. IBC

The cheques drawn on the bank when comes from outstation, it is called

inward bills for collection. Cheques are entered in inward bills for

collection register. The date, signature, crossing etc. is checked and if all

things are in order, the amount is realized to the relevant bank. This

cheques should have the stamp by the branch i.e. our branch

endorsement is confirmed

Procedure

Receive instrument through mail and scrutinize the instrument

Must be drawn on a customer’s account INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

145

Must not be mutilated

Must not bear unauthenticated corrections

Must not be post dated or stale

Must bear regular endorsements, if any

Must have the same amount in words and figure

Entry in IBC register

Credit department

The principal responsibility of credit marketing is to attract good

customers to avail credit facility from Bank Alfalah limited. The people

who constitute the credit-marketing segment of the credits department

are termed as the credit officers. Credit Officers are supposed to be really

good at assessing and determining the financial soundness of a company

or an individual.

Credit administration

The major responsibility of the people working in the credit administration

is to issue Guarantees, monitor the periodic disbursement of Pledged

Commodities, and perform the job of providing finance against Imported

Merchandise and finance against Trust Receipt.INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

146

Types of Borrowers

Before a bank starts lending, it has to classify its target customers in to

groups of similar ones in order to simplify the provision of credit to them.

Bank Alfalah Limited has divided its clients into the following heads

Individuals

Existing account holders

Staff members

Close relatives of staff members

Employees of other banks

Joint accounts

Business entities

Sole proprietorship

Partnership

Limited/liability company

Joint venture

Group accounts

Others

Clubs and associations

Federal, provincial and local government bodies

Traders

Contractors / construction companies

Transport, storage and warehousing


Property dealers

Manufactures

Kinds of Credit – General Overview

Bankers do not decide about the time span for which the amount is going

to outstand. The time span is related to the purpose for which the loan is

taken for. The three basic kinds of credit have been transformed in to

various credit facilities/products by banks. These are;

Short term credit

Short-term credit is that type of credit that is to be repaid with in a time

span of one year. Short-term credit requirement is usually seasonal in

nature. There are four predominant purposes for which short term credit is

availed. These purposes are:-

Creation of current assets

Meeting of working capital requirement

Purchase of raw material

Repayment of current liabilities

Short-term credit secured by 100% cash margin is considered to be the

ideal way to extend this type of credit.

Medium term credit

In this age of contemporary banking, it is really very difficult to separate

medium term credit from long term credit when we talk with respect to

the view point of the purposes these two credits fulfill. Medium term credit


is a credit facility that is usually extended for a time span of some where

between one to three years. Business concerns normally utilize this type

of credit for the purposes of purchase of furniture, fixtures, and small-

scale machinery.

Long term credit

Long-term credit, theoretically speaking, is a type of credit that is

extended for a relatively long time (which may extend to ten years), but

practically speaking long-term credit facility is extended for a time span of

not more than five years. The purposes for which long-term credit is

availed are-

Capital Expenditure / Expansion of plant

Balancing, Modernization, and Replacement (BMR)

Purchase of Fixed Assets

Kinds of Credit Offered By Bank Alfalah Limited

Letter of credit (L/C)

Letter of credit is a short-term non-fund based finance facility. LC is a

bank’s written undertaking given to the exporter for payment of a certain

sum of money on behalf of the importer, provided the exporter tenders to

the bank, or its overseas agents, the specified documents within a

specified period in accordance with the terms of the undertaking.


Letter of guarantee (L/G)

Apart from letter of credit Bank Alfalah Limited also extends another non-

fund based credit facility for its customers i.e. Letter of Guarantee or more

commonly known as Guarantees. The basic difference between a letter of

credit and a letter of guarantee is that in case of L/G, the liability has to be

retired four or five days before the actual date of maturity, but in case of

L/C the customer can retire his liability after maturity after paying some

amount as interest.

Finance against imported merchandise (F I M)

In case of finance against imported merchandise, the importer gives the

imported goods into the effective pledge of the bank and avails the credit

facility against the pledged goods. There is a slight technical difference

between ‘pledge’ and ‘effective pledge’. In case of pledge the imported

goods come under the banks ownership when they reach the desired go

down that is under the supervision of the Macadam’s, appointed by the

bank. But on the other hand in case of ‘effective pledge’ the goods are

under the ownership of the bank even when they are being transported

from the port to the go down. So, in case of effective pledge the bank

must make sure that the goods are comprehensively insured.

Finance against trust receipt (F A T R)

The mechanism with which Finance against Trust Receipt works, is

identical to that of Hypothecation. The logical rationale behind FATR is

that all the imported goods cannot, by nature, be given to the effective

pledge of the bank; imported goods could be of perishable nature or they

could be of central importance for the operations of the business concern.

In such a case the goods are hypothecated and finance is extended.


Credit Proposal

In order to avail any of the credit facilities a proposal (case) has to be

approved by the Branch Credit Committee and then subsequently by the

Credit Division at the Head Office. The credit proposal can be categorized

in to two types

Credit Line Proposal (C L P)

A credit line proposal is made for those clients whose credit limit has been

approved by the banks’ credit department.

One Time Transaction (O T T)

An OTT is prepared for a client who has no approved credit limit, but the

bank is doing business with that client on a one-time basis.

Accounts department

It is probably the only department in the entire bank where there is

almost no direct customer dealing. Two types of accounts are there which

are as follows:

Inter-Branch Accounts

Like other banks, Bank Alfalah Limited has a network of branches all over

the country. These branches in different cities are interlinked with each

other through their correspondent accounts in other branches. So, all

payments from one branch to another branch (in the same city or

another) are made by debiting and crediting these inter-branch accounts. INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

151

The accounts department deals with various routine activities for the

bank. The main activities performed by it are

Budgeting

Reporting

Maintenance & depreciation of fixed assets

Miscellaneous functions

Budgeting

Accounts department of bank, for a year makes budget of branch. Fiscal

year of bank starts from January 01 and ends on December 31. The

accounts department starts preparing budget from October for the next

year.

Procedure:

The budget is based on forecasting through past performance

First, the bank reviews what are its sources of funds and where it can

utilize these funds?

The main sources of the bank are deposits, borrowing from other banks,

borrowing from SBP, bank’s paid-up capital, its reserve fund, profit

generated by the bank.

The budget is submitted to the head office for recommendation and

modification.


Monthly budget meeting is held by branch managers to analyze the

monthly performance. Budget and actual performances are employed and

variance is computed for analysis.

Reporting

The accounts department, in the form of reports, clubs the details of

various departments together. Each and every minute detail is provided in

weekly, monthly and annual reports. The reports are submitted to head

office, SBP and to the government.

The accounts department prepares many reports, of which the most

common are

Statement Of Affairs

Daily activity reporting

Income & Expenditure

Foreign Currency Report

Currency Wise Deposits Report

Maintaining Of Fixed Assets & Their Depreciation

Accounts department maintains the record of all the assets and charges

depreciation on them. The bank normally uses the straight-line method to

compute the depreciation.

The accounts department prepares asset purchase report and asset sale

report after every 6 months that helps in changing the depreciation. It is

calculated on monthly basis and charged yearly. Bank not only

depreciates the existing assets but also the assets transferred in and

transferred out.


Miscellaneous Functions

The accounts department also performs some other miscellaneous

functions like

Closing Entries

Reconciliation statements

The bank prepares reconciliation statement with head office and

SBP.

Head Office

Reconciliation with head office is done in reconciliation department. The

branches send their reports to the head office. They check the posting of

all the entries if outstanding, which has not been posted by branch or

head office. The reconciliation is carried out in the head office and

accounts department handles quarries.

State Bank of Pakistan

The SBP keeps the record of every scheduled bank. The bank statements

and statements of SBP are reconciled on daily basis. Reconciliation is

basically setting of outstanding entries. The reconciliation statement

contains two sides. One contains entries originated from bank but not

responded by SBP and on the other side entries originated by SBP but not

responded by bank.

Closing Entries

Accounts department also passes the closing entries on monthly, 6

monthly and yearly bases to calculate the profit and analyze the overall

performance for a certain period.


Statements

The predominant functions performed by the accounts department can be

categorized into two broad categories.

Daily Activity Checking

Report Generation

Daily Activity Checking

All the operations performed in various departments of branch are

computerized. The functions are performed through the customized

software of the bank called Bank Smart. In order to facilitate double-

checking of all the transactions done, every concerned official also passes

vouchers. At the day end all the vouchers passed by various officers

working in different departments are given to Accounts Department.

Furthermore the I.T. department also prepares a report which constitutes

of the computer print outs of all the transactions / entries which have

been fed into the computer system of the branch that day.

Report Generation

The exact number of reports generated by the accounts department on a

daily, weekly, monthly, bi-yearly and yearly basis is somewhere in the

bracket of 500. It is neither necessary nor possible to get acquainted by

all of these reports in a short period of time.

Some of the common reports are

Daily Advance And Deposit Position

Daily Exchange Position

Daily Fund Management

Closing Reports


Monthly Assets & Liabilities

Monthly Budget Review Report

Monthly Monitory Statement

Monthly Performance Review Report

CAR FINANCING

Sound marketing skills are required to actually attract the walk-in

customer to select Alfalah Car Finance; still stronger skills are needed to

scan the incoming customer for validity and long-term liquidity. This is

because the client has to pay only 10 % of the actual price of the car

(minimum) where as the bank has to put in the rest 90 %. The rate of

mark up charged by Bank Alfalah for the car Finance is 17.5%. Another

thing to note here is that Bank Alfalah Limited finances not only brand-

new cars but also the second hand cars whose mark up will be 19.5%.

The procedure followed to finance a car is briefly discussed in the

following lines:INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

156

Step 1: The Client Submits Application and Required Documents

The very first thing the client has to do is, he has to give an application

requesting the bank for financing of a car. Along with the application the

client is suppose to attach some documents which are

Copy of N.I.C

N.T.N

Copy of Utility Bill(s)

Bank Statement for last six months (from the date of application)

Signature Verification Form

Proof of Proprietorship/Partnership

The application form along with the personal data also contains the home

address, the address of the place of business (if the client is an

executive), and two references. These three things are of immense

significance for the verification officers. Moreover, in the application form

the client has to mention how much down payment he is going to make. It

is a policy matter of Bank Alfalah that the minimum percentage of down

payment is 10 % i.e. the client must at least pay 10 % of the sale price as

the down payment. If a client feels like paying a higher percentage as

down payment than there is no higher limit; he can pay as much he wants

to, provided that after he pays his down payment the amount to be

financed by the bank does not go below Rs.200,000 and above 2 million.

The down payment apart from 10% (minimum) of sale price also includes;

Processing charges


Advance first month’s installment (this is not included if the client opts for

deferred installment) First year’s insurance premium.

Registration charges

Step 2: Verification Process by the Verification Officers

This step embodies immense significance as the results of this very step

reveal whether the client is genuine and trustworthy and whether all the

details provided by him are true or not. What the verification officers do is

that they first visit the house of the client and certify that the client has

provided the bank with the correct residential address. Then they inquire

about the conduct, character, behavior, occupation, and other activities of

the client from at least two of his/her neighbors. After being satisfied the

verification, officers visit the place of business (if the client is a

businessperson). There they first make sure that the said business

actually exists and the factory/organization/company actually is situated

at the said place.

Then the verification officers either visit or call any one or both of the

references given by the client in the application form. When all aspects of

the verification process are complete then what the verification officers do

is that they prepare four reports namely

Business office verification report

Residence verification report

Reference verification report

Telephone verification report

These reports are than filed in the proposal file and these constitute an

integral part of the proposal.


Step 3: Preparation of the Proposal File

Once the customer’s credibility is verified then the file is prepared for

acceptance/approval by the branch Credit Committee. This preparation

calls for attachment of certain documents apart from those that were

provided by the client along with the application. These documents are

Borrower’s Basic Fact Sheet

The Proposal Sheet

A Check List

Credit Information Bureau Report

Verification Reports

Printed Statement of Customer Inquiry Generated by the System

Step 4: Execution of Legal Documents

After the approval stage, the client is called to the branch and the process

of legal documentation is under taken. For this purpose the operations

personnel gets the signatures of the client on all the legal documents

including the offer letter, which is of prime importance. The list of legal

documents the client has to sign is as follows;

The account opening form as a result of which the client could give the

post-dated cheques for payment of installments.

The letter in which the client acknowledges the Finance Limit that has

been provided to him by the bank

The agreement for financing the motor vehicle on Murabaha Basis

The schedule to Murabaha agreement


Letter of hypothecation of motor vehicle

Irrecoverable power of attorney

Letter of authorization to take possession of motor vehicle

Bill of exchange without recourse to the drawer

Delivery acceptance form

Transfer letter

Promissory note

Letter of hypothecation of movables

Apart from these legal documents one of the most important documents

is the offer letter. The offer letter basically consists of a brief description of

the following;

Amount Of Finance Facility

Mode Of Financing

Period Of Finance Facility

Purchase Price Payable

Rate of mark up

Payment Schedule Of Purchase Price

Insurance Premium

Prepayment

Documentation

Down Payment

Administration Fee / Processing Fee


Availability

Cancellation

Purchase Of Motor Vehicle

Disbursement Of Purchase Price

Step 5: Receipt of Down Payment and Post Dated Cheques

When all the legal documents are properly signed then the customer is

asked that his share of financing (the down payment) is required. The

down payment apart from 10% of the sale price also includes the

processing charges, the registration fee, the insurance premium of first

year, and advance first month’s installment. The customer comes to the

bank deposits this amount and also gives the bank post dated cheques,

duly signed. These cheques are of the amount of installment due to the

customer on monthly basis.

Step 6: Getting the Car Insured

Now comes the step to insure the car for which the financing is done. The

bank has to get the car insured, as it is a part of the car financing

agreement that the car has to be fully insured. What the bank does is that

it issues a letter addressing the insurance company specifying all the

details of the car to be insured and also communicates this to the

insurance company as to which show room the insurance inspector will

have to go to locate the said car. The inspector goes to that particular

show room and, after duly inspecting the car makes an inspection report.

The preparation of inspection report serves as an informal guarantee of

the preparation of the insurance policy. After two or three days of the

preparation of the inspection report the representative of the insurance

company comes and hands over the insurance policy to the bank. This


insurance policy is in the name of the respective client, but care of Bank

Alfalah Limited Liberty Branch is vividly marked.

Step 7: Establishment of Delivery Order and Demand Draft (In The

Name Of the Manufacturer)

When bank has got physical possession of the insurance policy the car

dealer is suppose to send the bank a quotation of the car being sold, on

his official letter head. On the basis of that quotation the delivery order is

being made, which contains the instructions for the dealer that now he,

should hand over that car to the customer. The bank will not pay to the

dealer the bank would make a Demand Draft in the name of the

manufacturer and hand it over to the dealer and the dealer would give it

to the manufacturer.

Step 8: Getting the Vehicle Registered

When the manufacturer gets the payment against the demand draft then

he sends the Invoice to the bank. This invoice contains all the details of

the vehicle namely; price, customer name, bank name, color of the

vehicle, mode of payment etc. If the car is completely ready for the

delivery this invoice will also contain the engine number and the chassis

number, but if the car is not ready for delivery, i.e. it is in the booking

process then the invoice will not contain these two items. The bank gets

the vehicle registered with the help of its private agents based on this

invoice.

CONCLUSIONS & RECOMMENDATION ON ANALYSIS

The bank maintained its position as the fifth largest bank of Pakistan in

terms of total assets. BAL’s advances witnessed sizeable growth (around

14%) funded by healthy deposit mobilization. The growth was above the

industry, further strengthening BAL’s system share. However, the bank’s


share in the industry’s deposit base experienced a marginal squeeze,

attributable to its cautious approach towards deposit mobilization to

achieve a favorable deposit mix for augmenting spreads. In addition, BAL

continued expanding its consumer base with main focus on credit cards,

followed by mortgage business. Bank Alfalah Limited is a well-known and

successful financial institution in the banking sector, it is said, nothing is

perfect in the world, and there is always space for deficiencies.

Although the bank has a vast network of nationwide branches but

it should spread its branch network throughout the world

especially in the countries involved in international trade with

Pakistan.

In order to compete with the other banks. ATM services should be

excellent as we can see the growing competition among the

banks.

The bank should acquire the services of the highly qualified people

accompanied by lucrative incentives to promote its status as

desirable in the next millennium.

In order to market its products it should accentuate to give

advertisements on both print and electronic media.

The quality of human resource lies at the center of every

organization’s success and no doubt, Bank Alfalah Limited is fully

aware of the importance of a satisfied and well-trained work force

that gives completive advantage but the problem, which I have

observed, is that employees of Gulberg Branch do not have

enough knowledge about their products. Therefore, the policy of

the bank should be to continually encourage its employees for

their knowledge enhancement about their products. The state of

the art training and development center at Bank Alfalah should

arrange workshops and seminars for employees at every level to

empower them professionally.


Bank Alfalah Limited operates as progressive and adaptive

organization maintaining dynamism and flexibility in all facets of

its operations but in this era of stiff competition it should consider

to launch new products to attract the customers.

Their aim should remain to provide customers with value pricing and to

ensure that quality of their portfolio is never compromised despite market

pressures.

Going forward, the bank intends to maintain the growth trend. While

preserving diversification in the credit portfolio, the management intends

to deploy additional funds in risk free avenues including direct/indirect

sovereign lending. Growth in consumer financing is expected to be fuelled

mainly by the credit card business. Meanwhile, BAL plans to add 49 new

branches to its network in the near-term with primary focus to build low

cost deposit base. Though BAL’s profitability is likely to improve, it is

expected to remain under pressure on account of rapid network

expansion. Meanwhile, the bank, in addition to exploring prospects of

entry into other regional countries, intends to fortify its existing overseas

operations with expansion in branch network and deployment of complete

suite of all financial products.

BAL is undergoing a revamping of its organizational structure with an aim

to improving the efficiency of decision making at all levels and enhancing

the quality and timeliness of its services. Besides, instilling a risk

conscious culture is also a key objective. BAL’s Risk Management Division

(RMD) has developed Credit Initiation and Internal Rating System (CIIRS)

in accordance with Basel II for generating obligor internal ratings. CIIRS

provides technological platform for assessing credit worthiness of new and

existing customers and enables structured analysis of customer data for

decision-making. The system is currently in validation phase. Moreover,

the bank is implementing Economic Capital Framework (ECF) across the

bank, which is expected to enable BAL to quantify and attribute cost to INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

164

various material risks besides facilitating in calculating the risk-adjusted

profitability of each business line.

BAL, with its relatively low advances-to-deposit ratio, maintains a sizeable

investment portfolio at end-07: PKR 85bln of which the major portion is

represented by Market Treasury bills (c. 80%). BAL’s exposure to the

interest rate risk remains limited. BAL’s equity portfolio is around PKR

6bln, with larger proportion being represented by strategic investments.

To improve the timeliness of its activities and the quality of services and

to support risk management, the bank is in the process of installing a new

comprehensive core banking software (Temenos T24). Although there

have been delays in the implementation process, the system is expected

to be fully operational across the branch network by end-09. BAL has one

of the lowest equity-to-assets ratios amongst peers. To support its growth

initiatives, the bank is contemplating to either have a right issue in 3Q08

or raise capital through IPO.

Annexure

Employees in various sections


Gulberg branch is the second biggest branch in Punjab, A lot of Employee

working in this branch. The name, designations and job assignments of all

those employees are as under with whom I worked.

GENERAL BANKING

Name: Agha Ali Akbar

Designation: Branch manager of Royal Banking

Qualifications: MBIT

Assignments:

o Team leader

o Attorneys Holder

o Supervision

o To acquire maximum deposits

Experience: 5 years

Name: Ch Imran Aslam

Designation: Corporate Head


Qualifications: MBA

Assignments:

o Supervision

o Online posting

o Attorneys

o Holder

Experience: 5 years

Operation Department

Name: Mr Subhan

Designation: Operational Manager

Qualifications: MBA

Assignments:

o Online posting

o Signature Verification

o Administrator of various tasks

o Attorney Holder

Experience: 10 years

Name: Azeem Khan

Designation: Operating Officer


Qualifications: M.com

Assignments:

o Supervision

o Attorney holder


Experience: 10 years

Name: Mr Asif

Designation: Local Remittance Officer

Qualifications: MBA

Assignments:

o Operating Pay Order and DD

o Receiving Pay Order And DD

FOREIGN REMITANCE DEPARTMENT

Name: Mr Husnain

Designation: Incharge Foreign Exchange

Qualifications: MBA

Assignments: Supervision of all the matters related to Foreign

remittance

Experience: 3 years

TRADE DEPARTMENT


Name: Muhammad Ali

Designation: Trade Manager

Qualifications: MBA

Assignments:

o Supervision

o Attorney holder


Experience: 10 year

Name: Mr Safdar

Designation: Import Officer

Qualifications: MBA

Assignments:

Operating All the Import Procedure

Experience: 6 years

I.T Department

Name: Mr Murtaza

Designation: System Administrator

Qualifications: MCS

Assignments: INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

169

o Supervision of IT infrastructure

o Maintenance of systems

Experience: 6 years

CASH DEPARTMENT

Name: Fahad Ahmad

Designation: Incharge cash Department

Qualifications: M.Com

Assignments:

o Supervision

o Attorney holder


Experience: 3 year

Name: Babar Riaz

Designation: Cash Officer

Qualifications: B.A

Assignments:

o Dealing in securities

o Cash handling

o Cash sorting

Experience: 3 yearsINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

170

SME DEPARTMENT

Name: Imran Choudhary

Designation: Manager of SME

Qualifications: MBA

Assignments:

o Supervision

o Attorney holder


Experience: 4 years

ACCOUNT OPENING DEPARTMENT

Name: Mr Khalid

Designation: Account Opening Officer

Qualifications: MBA

Assignments: Dealing all the matters related to account opening.

Experience: 3 year

ACCOUNTS DEPARTMENT:

Name: Salman Haider

Designation: Account Officer

Qualifications: M.COM

Assignments: INSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

171

o pervision

o Attorney holder


Experience: 6 years

CREDITS DEPARTMENT

Name: Rizwan Ahmed

Designation: Credits Incharge

Qualifications: MBA

Assignments: Supervision

Experience: 6 years

Name: Ch Irfan Aslam

Designation: relationship Manager

Qualifications: MBA

Assignments: Dealing with royal customer

Experience: 3 years

Consumer banking department

Name: Ali Raza

Designation: Manager of consumer banking

Qualifications: MBAINSTITUTE OF BUSINESS ADMINISTRATION, PU, LHR

172

Assignments:

o Attorney holder


o supervision

Experience: 10 Years

Name: Zunaira Naeem

Designation: CRO

Qualifications: MBA

Assignments:

o Providing information about account opening

o Solve the problems of customers

Experience; one year


Bank Alfalah Final Report 2008

Documents

Transcript of Bank Alfalah Final Report 2008