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kSUMMIT BANK LIMITED

MULTAN ROAD BRANCH

An Internship report

Submitted in Partial Fulfillment

For

The Degree of Masters of Science

In

Accounting & Finance

AMNA HAMID

Session (2008-2010)

Department Of Accounting & FinanceKinnaird College for Women, Lahore

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EXECUTIVE SUMMARY

THE PURPOSE OF STUDY WAS TO KNOW ABOUT SUMMIT BANK LIMITED

AND TO ANALYZE THE FINANCIAL STATEMENT.

In this report the Summit Banks 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.

Banking sector of Pakistan has been transformed within a short period of 5 years from a

sluggish and Government dominated sector to a much more agile, competitive and

profitable industry.Speed and sequencing of banking sector transformation and its role in

promoting economic growth is now a leading story of a sector succes.Within Pakistan

SBP offers a story of what effective leadership of regulator and change management and

corporate governance can achieve and offer.Outside pakistan it is serving to offer rich

lessons in what difference governance of regulator can make and how bank restructuring

and privatization can change the lanscape of of the industry.

Summit Bank Limited started operations in August 2006 and became a profitable entity

within one year.AHBL had started off with a high capital base and is positioned to take

advantage of the business synergies and complementaries afforded to it by its sponsoring

group.The bank has a quality management team, a first class technology platform, and

commitment to global practices.Its business strategy is based on the block-building

principle wherein profitable niches are tapped progessively.

I did my 12 weeks internship in Summit Bank Limited Multan Road Branch.During

internship I was rolled over in departments.

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Summit Bank made heavy investments towards enhancing its capabilities in the area of

automation and technology. It is well positioned to meet client needs, with improved

competitive advantage.

During my twelve weeks internship in Summit Bank Multan Road Lahore is spend one

or two weeks each in following departments:

Account opening department

Clearing department

Trade finance department

Working these departments was a great learning exposure for me. When I conduct

financial and trend analysis of Summit Bank I found that its financial position is

improving year by year. Comparative study with other banks shows that it is somewhat

better then other banks. I concluded that Summit Bank is performing very well.

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ACKNOWLEDGEMENT

My creator, my best friend and mentor, who bestowed on me the meaning of life.

ALLAH who granted me a wealth of knowledge, love and respect to share with my

fellow beings. He gave me courage to pursue my passion against all odds.

My Parents whose raising gave me character and a compassionate heart.

I pay my thanks to Dr. Nikhat Khan Head of Accounting & Finance Department of

Kinnaird College for Women enabled me to complete this assignment.

I also pay my gratitude to my teachers and Ms Manal Talat Coordinator, Accounting &

Finance whos cooperation on every step of this demanding task is highly appreciatable.

Without their cooperation it was not possible to complete this task.

My heartily thanks to Staff of Summit Bank limited, Multan Road Branch for theircooperation.

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Table of Contents

Description Page No.

Introduction of report------------------------------------------------02

History of the organization------------------------------------------07

Management of the organization------------------------------------21

Field of activities------------------------------------------------------26

Work done by me-----------------------------------------------------78

Financial analysis-----------------------------------------------------85

Dilemmas faced by organization------------------------------------103

Recommendation------------------------------------------------------104

Conclusion-------------------------------------------------------------105

Reference---------------------------------------------------------------106Annexure---------------------------------------------------------------107

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INTRODUCTION TO REPORT / OBJECTIVELY

The core objective of preparing this report is to express my learning during the 12

weeks period of internship. This is the mirror of my practical exposure that is

originated through time spent in Summit Bank Limited.

The report is about Summit Bank its products, field of activities and its financial

analysis. In the report, SWOT analysis is conducted so that I may able to give an

authenticated approach to problems and Dilemmas faced by the Branch. When I

conduct comparative analysis of operations, products offered and funds used, I

found it far better as compared to other banks working in Lahore.

Management style is somewhat participative and its culture is friendly and

cooperative.

I learnt a lot of different fields, and organizational behavior in real world

phenomenon which gave me practical knowledge of what I have studied theoretical

in Msc Accounting & Finance.

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WHAT IS A BANK?

A bank is a financial institution that offers the widest range of financial services. These

financial institutions play a vital role throughout the worlds economic system. Caircross

defines bank as:

A financial intermediary and a dealer to create credits

A bank or banker is a dealer in credit or more properly a dealer in money. It is an

intermediate party between the borrower and the lender. It borrows from one party and

lends to another.

The system of common settlement of receipts and payments have been derived from the

school of thought of the ancient Romans temple banking, to develop trade and trading

relations with each other nations. Banks are of different types. The term Commercial

Banking is a throwback of commercial loan theory. The theory holds that the bank

assets (except for cash) should consist exclusively of commercial loans that are short-

term loan to businesses to financing the production and transportation of goods.

Among the services provided by the commercial banks, two services are very important;

Accepting deposit

Lending loans

Other functions include safekeeping of valuables, financial advising, cash management,

offering trust service, selling insurance policies, retirement plans and offering security

brokerage services, etc.

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The banking structure of Pakistan

The banking structure of Pakistan consists of State Bank of Pakistan, Commercial Banks,

Exchange Banks, Cooperative Banks, Saving Banks and specialized Credit Institution.

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

money from public, repayable on demand or otherwise, and withdrawal by cheques,

drafts, order or otherwise.

VARIOUS ROLES OF BANKS

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The Intermediation Role

Transforming savings received primarily from households into credit (loans) for business

firm and others to make investments in new buildings, equipment, and other capital

goods.

The Payments Role

Carrying out payments for goods and services on behalf of their customers (such as by

issuing and clearing checks, wiring funds, dispensing currency and coin, etc.)

Role as a Guarantor

Standing behind their customs to pay off customer debts when those customers are

unable to pay (such as by issuing letters of credit to support international trade and to

back customer issues of commercial paper), which makes it both easier and cheaper for a

banks customers to obtain credit elsewhere in the financial marketplace.

The Agency Role

Acting on behalf of customers to manage and protect their property or issue and redeem a

customers securities (usually provided through the banks trust department).

The Policy RoleServing as a conduct for government policy in attempting to regulate the growth of the

economy and pursue social goals

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HISTORY OF SUMMIT BANK LIMITED:

Arif Habib Group is among the largest most, most innovative and fastest

growing business group in Pakistan.In addition to financial services(Asset

Management, Brokerage Services, Corporate Finance and Project Advisory,

Private Equity and commercial Bank), the group has also interest in

fertilizer, cement and real estate.

This has made possible by a strong brand franchise built on decades of first-

rate services to clients. Managing assets in excess of PRs.37 billion (US$

617 million), the group holds interests in the securities brokerage,

investment and financial advisory, investment management, commercial

banking, commodities, private equity, cement and fertilizer industries.

The Group takes pride in its orientation towards client service. It believes

that its key success factors include continuous investment in staff, systems

and capacity building, and its insistence on universal best practices at all

times.ARIF HABIB SECURITIES LTD:

The holding company o the group. Holds controlling interest in the

enterprises listed below.

ARIF HABIB LIMITED:

The securities brokerage company. Member of all three srock ewchanges

and the national Commodities exchange.Manages a number of mutual funds

investment plans.

The commercial bank with the mission to be The bank for everyone

The proposed private equity venture with the objective to develop a vast new

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Industry in Pakistan

The upcoming commodities firm at the (DMCC)

Arif Habib Limited is one of the fastest growing commercial Banks of the country

supported by the strong sponsorship of Arif Habib Group.

AHBL started off with a high capital base and is positioned to take advantage of

the business synergies and complementaries afforded to it by its sponsorship

group. The bank has a quality management team, a first-class technology platform,

and commitment to global practices. Its business strategy is based on the block-

building principle wherein profitable niches are tapped progressively.

Progressively.

The Bank has an Authorized Share Capital of 6.0 Billion and Paid-up Share

Capital of 5.0 Billion. The management intends to double it in a short period by

injection of fresh capital which will strengthen the bank further.

The bank has a network of 35 Branches/Sub Branches.the branch network covers

Sindh, Punjab, NWFP and Azad Jammu and Kashmir. The bank plans to open

further offices to better cover all four provinces within a short time span.

All branches are Real Time Online providing customers the facility to deposit at or

without incurring any additional charges making banking with us a faster, relable

and a convinient experience.

OBJECTIVE:

To be a Universal Bank in terms for providing products and services in all key

segments of Banking.

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BUSINESS APPROACH AND CORE VALUES:

It is their business objective to be a Universal Bank in terms of providing products

and services in all key segments of banking i.e. Corporate , Wealth Management,

Commercial Mid Market/ SMEs and Consumer Banking.

Branch expansion plan is carried out to have a network of 100 Branches by

2011.The projected Branch network is based on centralized processing centre

(factory and boutique concept) with secure and real time IT capability. Hence the

delivery Channel configuration is dependent upon the potential in each location in

terms of size, Product Delivery Template and Head count for each Branch.

In terms of Statuary capital Requirement, they are determined to meet and in fact

exceed the Minimum Capital Requirement-MCR benchmark via injection f capital

and retention of retained earnings. Mandatory allocation of 20% of after tax profit

as Free Reserves until such time our free reserves are equal to MCR will further

strengthen their equity base.

Business and branch Network:

Summit bank is currently operating with 40 branches throughout Pakistan

(breakup is given in coming part).The banks strategy is to establish a network of100 branches during the next three to five years. Several new sites have already

been identified at strategic locations. All branches are online, equipped with state

of the art technology capable of providing Real Time Banking services to the

clients. A professional team has been developed to meet the expectations of

demanding customers. This is line with the banks strategy to build infrastructure

of international standard to attract and retain a sizeable client base.

The growth in the economy provided them numerous opportunities and theyremained selective pursuing business through which strike a balance between

growths and prudent like risk taking and diversification. Summit banks

performance in 2007 was a result of the pragmatic and will planned efforts of the

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management to attain present strategic goals aimed at providing quality services to

their customers and at the same time enhance the shareholders value.

Despite the high growth level, they continued to ensure the high customer

satisfaction and service quality levels are maintained and they are appreciative of

the trust and confidence that their customers place in them. Management firmly

believe that the success of the Bank lies in expanding there way of financial

services and seamlessly delivering innovative solutions to meet customers

requirements across all the platforms.Accordingly, they work closely with their

customers in order to understand their business needs and to address them with

high quality tailored financial products so that they are viewed as a strategic

partner in the business growth. Management is pleased and encouraged to receive

a very favourable response to their endeavours from their respective customers.

In all, management believes that the economic outlook for the coming year is

bright with the right mix of products and services and their commited workforce;

they can deliver yet another superior performance next year.Bank will continue to

build infrastructure, leverage the cutting edge technology in plan introduce

products and services , manage risk efficiently and effectively and generatealternative revenue streams.Management has ambitious plans for the coming year

and they are all ready to make it happen to the benefit of their stakeholders

Banks focus and energy for the coming year evolve around customer base and

look to expand network of branches throughout the country.Summit Bank has a

network of 35 branches/Sub branches in major districts of Pakistan.The branch

network covers Sindh,Punjb,NWFP, and Azad Jammu and Kashmir and details are

as under:

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AUTOMATION & TECHNOLOGY

Information technology and its optimum use greatly facilitate work and increase

performance potential. Summit Bank is in the forefront of providing customers online

and timely services. For this, automated and technologically sophisticated work flows

and systems are a prerequisite.

Summit Bank continually invests in upgrading these systems and similarly training the

human resource. The ultimate aim is to achieve both service and cost optimization.

The in-house developed software hplus has been successfully installed in all the branches

and has been well received. Plans are underway for the installation of ATMs and joining

a Switch Group of other prominent banks.

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PRODUCTS & SERVICE LINE

Summit Bank has a dedicated team of banking professionals with a thorough knowledge

of Banking products and markets. Their aim is to contribute positively to the

development of Banking and Capital Markets by capitalizing on Summit Banks

expertise in product innovation and customer service.

Summit Bank offers the largest product range available with any Banking institution in

Pakistan. Their best selling products are:

Non stop banking

24/7 cash withdrawl facility

Real time online Banking

Free unlimited online transactions

CORPORATE BANKING

Current Accounts (Pak Rupees)

Foreign Currency Accounts

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Clearing and Fund Transfer

Trade Services

Project Financing

CONSUMER BANKING

Current Account (Pak Rupees)

PLS Account

Saving Accounts

Term Certificates Saving Deposit Lockers

CONSUMER FINANCE

Current Account (Pak Rupees)

Personal Loans

Personal accidental insurance

ATM withdrawl insuranse

Home finance

Foreign Currency Account

FREE E-SERVICES INCLUDING:

Free Ecash issuance-ATM card

Free ealerts-sms alerts for the transactions you do with them

Free etopup-recharge your mobile balance

Free evoice-24/7 customer care center at toll free number 080024252

Free ebanking-internet banking

free phone banking

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Summit Bank is committed to the personal welfare and professional development of all

its team members. It realizes that proper training of human resource is essential, not only

for a more productive and satisfied work force but also for a homogeneous corporate

culture.

The bank continues to follow its strategy of hiring batches of young and energetic

management trainees who are sent to a Training and Development Center for training in

all areas of banking. The Training and Development Center is a state of the art facility

with an impressive faculty. At the same time short courses are continually conducted forother team members to only enhance their skill levels but also increase their performance

potential.

Lately, Surroor investments Ltd(SIL) have taken over Summit Bank and the board of

directors of the bank has been changed.SIL has 60 percent shares of Summit bank

limited.

In addition, SIL has also signed share purchase agreements with the principal sponsors of

My Bank Ltd. And Atlas Bank Ltd, respectively, and made down payment in each case.

Acquisition of My Bank has been completed on August,18 2010 and after merging with

Atlas Bank it will have a branches over 160 and total assets of about Rs.100 billion.

The name of the new bank is Summit Bank Limited.

CREDIT RATING

The Summit Banks Medium to long term rating increased to A and A-2 in the short

term. These ratings have been assigned by PACRA, Pakistans

Leading rating agency. These rating denote better risk absorption capacity

Stemming from enhanced equity as well as well-maintained credit portfolio.

RATING DEFINITIONS:

A1+:

Obligations supported by the highest capacity for timely repayment.

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AA- VERY HIGH CREDIT QUALITY:

AA ratings denote a very low expectation of credit risk, the capacity for timely payment

of financial commitments. This capacity is not significantly vulnerable to foreseeable

events.

Organizational Structure

Head Office:Karachi

DECISION MAKING

The branch follows centralized patterns as all approvals are given by centralized authority

except for a few cases. Top management had set the procedures and regulations and now

the employee have to follow those regulations.

CULTURE

The bank has a bureaucratic culture. All the tasks performed are routine based and hardly

any change is done in procedures. The bank has stories and myths told through bi-annual

news letter. Interior of every branch is same carrying a very corporate look.

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VISION

We are committed to be recognized

as preferred supplier of financial

services to the markets we serve.

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MISSION

Our mission is to differentiate

ourselves as an institution built on

Trust, Integrity, Good Governance,

and Commitment to deliver value toall stakeholders i.e. customers,

creditors, employees, investors, andcommunity at large.

Reach out and provide financial

services to under-served and un-

served customer segment.

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CHAIRMANS MESSAGE

Our Core philosophy of honesty, transparency in customer

dealings Product innovation, excellence in customerservice and our commitment to be a responsible corporate

citizen.

H.E.Sheikh Hamdan Bin Mubarak Al Nahayan

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MANAGEMENT OF ORGANIZATION:

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HUSAIN LAWAI

PRESIDENT AND CEO

SYED MOHAMMAD ANWAR LUTFULLAH

HEAD OF OPERATIONS & INFORMATION TECHNOLOGY

MOHAMMAD ZAHIR ESMAIL

HEAD OF RETAIL/BRANCH BANKING, CONSUMER, SME, COMMERCIAL

BANKING, CORPORATE AND INVESTMENT BANKING DIVISIONS

ASIF QASIMHEAD OF TREASURY DIVISION

SYED ASIF ALI

HEAD OF RISK MANAGEMENT DIVISION & HEAD OF CREDIT AND

CREDIT ADMINISTRATION & CAD

PERVEZ MOBIN

HEAD OF HUMAN RESOURCE MANAGEMENT, ADMINISTRATION &

BRANCH EXPANSION

GULRAYS KHAN

HEAD OF CO-ORDINATION AND CONTROL DIVISION

MUHAMMAD AMIN BHOORI

CFO & COMPANY SECRETARY

AZIZ MORRIS

HEAD OF INTERNAL AUDIT DIVISION

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SYED MUHAMMAD ATIF

HEAD OF COMPLIANCE DIVISION

SUMMIT BANK MULTAN ROAD BRANCH LAHORE:

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Valid city markets have their unusual importance regarding import business. They are

known as business and commercial hub of Lahore. Major commoditieis and Industrial

raw materials are being imported in these markets. Major industrials are routing prefer to

route their business through the banks situated in these areas. These markets are highly

profitable and important for banking sector.

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MANAGEMENT OF SUMMIT BANK MULTAN ROAD BRANCH LAHORE

BRANCH MANAGER

OMER KHAN

MANAGER OPERATIONS

AHMER HAMEED

RELATIONSHIP MANAGER CREDITSAHMAD AWAIS

CUSTOMER RELATION OFFICER

ZAMURAD BUTTSARA AHMAD KHAWARIQBAL RAZA

BUSINESS DEVELOPMENT OFFICER

FARHAT QAYUM PIRACHA

CASH OFFICER

MUHAMMAD USMANZUBAIR NAWAZ

IT Officer

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DEPARTMENTS OF SUMMIT BANK MULTAN ROAD BRANCH:

Following departments operates in Summit Bank Limited;

Account Opening Department

Cash Dealing Department

Clearing Department

Local Remittance Department

Accounts Department

Trade Finance Department

Marketing Department

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FIELD OF ACTIVITIES

ACCOUNT OPENING DEPARTMENT

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

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

Details of the Account Opening Form

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

The first part establishes the Particulars of account which include title of account in block

letters as per CNIC, title to appear on ATM card and mailing address.

The second part is then Account information which include

Type of account to be maintained. The various choices offered are

Profit and loss saving

Current account

Daily Product

Basic banking

Other________

Customer relation

Individual

Joint

Currency in which the account is to be maintained/ operated. The currencies include

Pakistani Rupee

U.S. dollar

Pound sterling

Euro

JPY

The information to be provided in the account opening form is as follows

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The client should inform weather the zakat to be deducted or not .

The client is supposed to provide the information whether the account

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

jointly (two or more than two persons maintain the account).

Name of the person who intends to operate the account is to be provided.

Provision of either Fathers or the Husbands name is also a pre-requisite.

Occupation of the prospective account holder is also to be written.

Name and complete address of the employer is to be written.

Nationality is to be provided.

Country of residence is to be specified.

Telephone number is must.

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

application.

Passport number, if the prospective client has got one.

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

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

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

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

some peculiar circumstances arise, get the profit out of his account but this is not

the case. The name and address of a close relative is only recorded in order to

undertake necessary communication when needed.

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

the business.

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TYPES OF ORGANIZATION

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

Limited company

Public

Private

Partnership

Association/Club/Society

Sole-Proprietorship

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

date of

Incorporation, and place of incorporation, national tax number, telephone number and fax

number.

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

highlighted. Zakat is deducted out of a Profit and Loss sharing account and not out of any

account maintained in any other currency. Moreover exemption from Zakat would only

be granted if proper proof of exemption under a law presently enforced in Pakistan is

provided.

Details of other account/s maintained with other branches of Summit Bank or other

banks are also to be given.

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

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

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

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the branch as well.

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

would be maintained on the basis of either or survivor, jointly or any one of us.

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

concern then the rubber stamp of the company/organization is also needed below the

three signatures.

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

account to one person.

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

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

given below.

Limited Company:

Copy of certificate of incorporation

Memorandum of Association

List of Directors

Copy of board resolution

Certificate of Commencement of Business

Copies of NIC of Directors

Latest copy of Form-29

Partnership:

Partnership deed certified copy

NIC photocopies of all partners.

Partnership mandate for account signed by all the partners

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

the account also has to be taken

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Club/Society/Association:

Copy of rules/ by-laws

Copy of registration (if applicable)

List of Executive member management committee/management board etc

Sole Proprietorship / Individual:

NIC/ Passport photocopy

Letter from Proprietor confirming sole proprietorship

There are two things that always accompany an account opening form; Signature Specimen Card.

Cheques Book Requisition

PROCEDURE OF OPENING AN ACCOUNT

The Account Opening Form:

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

first gave him a prescribed application form.

Completion of the Form:

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

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

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

signatures and he would operate the account with them in future.

Specimen Signature Card (S. S. Card):

The signatures of the client are obtained on a specimen Signature card. These cards are

obtained in duplicate with two signatures on each card from the customer. Every time a

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cheques is received for a payment from the client, the signature on the cheques are

verified by comparing them with the S.S. Card.

Issuance of Account Number:

When all the formalities are completed then the final approval of account has to be taken

from the Branch Manager. After obtaining approval of the branch manager an account

number is allotted to the customer and all the information is entered into the computer.

Then that account number is printed on the Cheque Book, S. S. cards and account

opening form.

Issuance of a Cheques book:

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

name of bank for the issuance of a cheques book. The A/C holder mentions title of A/C,

A/C number, sign it properly and mentions the no of leaves he requires. Normally

Summit Bank issues a cheques book having at least 25 leaves. Every cheques book also

contains one leaf that is used for another issue of a cheques book.

Entry of Cheques Book:Before issuance of a cheques book, the employee performs certain functions. They

include:

Stamping every leaf if the account is photo account

Enters it in the cheques book issue register.

After entry in the manual register,and in the sysytem the employee issues the

cheques book to the A/C holder after his/her signature on the register.

Recording in Computer:

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

computer. Currently, a program named hplus is being used for this purpose. Record of all

the transactions regarding the account of a customer is kept updated in the computer.

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PROCEDURE FOR CLOSING AN ACCOUNT:

The procedure followed for the purpose of closure of an account is described in the

following steps

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

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

liability form (explained below). The client can also give an application on a plain paper,

but correct signatures are very necessary.

Then it has to be made sure that if the account to be closed is a Saving,, or Foreign

Currency Account then the account balance before closing should be zero. In case of

these types of accounts the bank does not take any closing charges. If a client wishes to

close a current account then the bank charges Rs.150, so at the time of closing the

balance should be Rs.150.

Along with the application to close the account clients Cheque book is also received

from him and then it is destroyed in order to prevent any misuse in the future.

A liability form is filled and sent to the Trade Finance Department and Credit Department

in order to check that the customer does not owe the bank a single penny in any regard. A

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

When both of these departments approve that the customer does not owe any money to

the bank and the form is returned to the account opening department then the original

account opening form pasted in the ledger when the account was opened is marked

account closed along with the date on which it is so marked. One thing has to be taken

into immediate consideration that the account number allotted to the client (who has

closed his account), after closure of the account becomes useless and is not allotted to any

one in the future.

After approval of the liability form, it is sent to either the Foreign Currency Accounts

Departments or the Cash Department, as the case may be so that the officer who scanned

it in the first place could return the specimen signature card to the account-opening

department.

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

the clients application along with the specimen signature card is pasted in the ledger

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right along side the original account opening form. The form has to be pasted with the

original account opening form even if the account was opened a decade ago. In the

computer as well all the entries and records related to that particular account are

permanently deleted by using the close account option.

IMPORTANT DOCUMENTS USED:

Liability Form

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

department, after filling in the name and account number of the client forwards this form

to the credit department and the trade finance department who upon receipt of such

liability form make required scrutiny so as to check whether or not the customer owes

some money to the bank or not.

Account Statement Request Form

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

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

up, gives it to the computer section that gives the statement to the client in printed form.

Issuance Requisition

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

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

Operations, give it to the person in-charge of issuance of stationary who on receipt of this

requisition (duly signed) issues the stationary.

Debit and Credit Vouchers

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

voucher shows as to how much amount has to be taken from the clients account and the

credit voucher shows as to hoe much amount has to be credited as Banks income, in

order to facilitate the account closing process.

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Application to Close the Account

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

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

to close his account with the Bank.

Application to Change the Address

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

number, telephone numbers and the new address so that he could communicate with the

bank and receive all the notices, statements and other necessary document which the bank

might send through mail depending upon the circumstances.

Mandate Form Used By an Individual to Enable a Third Party to Operate The Account

An individual to enable another individual to operate hi/her account without changing the

title of the account uses this form. In this form the account holder certifies that the person

to whom he is giving the mandate shall be fully authorized to embark upon all possible

transactions with regard to this account unless and until otherwise specified.

CASH DEALING DEPARTMENT

This department of bank is mainly responsible for the handling of cash deposits and

encashment of cheques issued by the account holders. The following are the sections of

the cash dealing department

Receipts of cash

Encashment of cheques

Cash receipt section

The depositor uses depositor slip/vouchers for depositing the amount. Client fills these

vouchers, fulfilling all requirements.

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Encashment of Cheques

Cheques encashment is made in four steps

Receiving of cheques

Verification of signatures

Computer terminal process

Payment of cash

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CLEARING DEPARTMENT

One of the basic economic functions of banks is to receive deposits and to honor cheques

drawn upon them. So, cheques are a most commonly used instrument for making

payments by account holders.

Now the question arises that how these cheques & other negotiable instruments drawn on

one bank are deposited in other banks and money is transferred from one bank to another.

Clearing House has provided this facility. Clearing house facilitates different banks to get

their cheques drawn upon other banks to be cleared.

Cheques lodged in clearing constitute two types of clearing

Outward Clearing

Inward Clearing

Outward Clearing

When cheques and other negotiable instruments drawn upon other banks like MCB,

ABN-AMRO of the same city (as Lahore) are presented in Summit Bank Limited to

deposit them in the respective payees accounts, these instruments are lodged in outward

clearing of summit Bank limited.

When the cheques are presented in Summit Bank to be deposited in their respective

payees accounts, different stamps are put on cheques before their lodgment in outward

clearing.

Crossing the cheques

Crossing means two parallel transverse lines, drawn across the face of the cheques withor without words written in between them. Crossing may be general or special. In

clearing, cheques are crossed specially. Cheques are stamped with banks name between

two transverse parallel lines to constitute special crossing. After the cheques have been

crossed specially, the holder cannot receive payment except through the banker named on

the cheques. Basic advantage of crossing is to save the instrument to go it from illegal

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hands. If, crossed cheques is lost or stolen, there is no risk of wrong payment. So it is an

effective means of minimizing the risk of loss or forgery.

Clearing Stamp

After the cheques have been crossed specially, clearing stamp is put on the cheques and

other instruments, with the following days date, as these cheques would have to be

presented in their concerned drawee banks on the subsequent day.

Endorsement Stamp

It means anything written or printed upon the back of an instrument. So, at the end, the

cheques are endorsed in full (endorsed specially) by putting the stamp with words

describing Payees account Credited in Summit Bank Limited , Multan Road Branch,

Lahore.

After putting these three stamps on cheques & other negotiable instruments, they are sent

to NIFT (National Institutional Facilitation Authority) with Add List. NIFT after

segregating the cheques of different banks delivers them to their concerned banks, which

constitute the inward clearing for those (drawee) banks.

Inward Clearing

Cheques and other negotiable instruments (PO, DD etc.) drawn on Summit Bank

Limited, Lahore, sent by other banks, constitutes the inward clearing of Summit Bank.

After having all the stamps and dates of cheques confirmed, the concerned drawers

accounts are debited (in Summit Bank Limited) and main branchs account is credited by

the total amount.

Collection

When cheques and other negotiable instruments drawn upon other banks outside the city

(Lahore) are presented in Summit Bank Limited, Multan Road Branch, Lahore to

deposit in payees accounts, then instead of clearing, these instruments are lodged in

collection and constitute outward bills for collection. Cheques of cities, where Summit

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Bank

Limited branch exists (e.g. Islamabad, Faisalabad etc.) are sent to that branch where these

cheques are lodged in is outward clearing. Otherwise, they are directly sent to the drawee

bank. Postage & other charges are deducted on account of payee according to Schedule

of Charges.

Accounts

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, Summit Bank 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.

Inter-Bank AccountsLike inter-branch accounts of a bank, different banks have correspondent accounts with

each other. Main branches of banks in a city maintain these inter-bank accounts. So,

money is transferred from one branch of a bank to another banks branch through these

inter-bank and inter-branch accounts.

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

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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 of all, 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, banks 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.

The management will then drive the reasons for the variance and take remedial measures

to achieve the targets.

ReportingThe 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

Income & Expenditure

Foreign Currency Report

Outstand Receipt Report

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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

Reconciliation Statements

Closing Entries

Foreign Exchange Forward Transaction

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.

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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.

Foreign Exchange forward transaction

In the past, the banks had to keep their foreign exchange with SBP on the agreement that

SBP will purchase the foreign exchange on book rate and charge a fee for covering the

risk. This whole transaction was known as foreign transaction. Now this facility is not

available. Now banks can avail it by renewing their limit on old accounts with SBP.

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 hplus. 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.

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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

Schedule Of Maturity Distribution

From these statements, five reports carry extreme importance. The five reports are

Daily position of advances and deposits

Statement of affairs

Daily exchange position report

Fixed assets statement

Month review of performance.

The Local Remittances Department

Besides cheques (the primary notes of exchange in a bank), banks also handle Promissory

Note, Bills of Exchange, Bank Drafts, Pay Orders, Traveler Cheques, Pay Slips, Call

Deposit Receipts; as negotiable instruments.

Pay Order (PO):

Pay Order is a negotiable instrument made by the bank, on account of a customer, to pay

on order the specified amount

Pay Orders are used to make payment or to transfer money, with in the same city. Pay

Order is always drawn on the bank that has issued it.

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Making of a PO:

When a person requires a Pay Order (made by Summit Bank Limited, Lahore), he is

asked to complete the prescribed application form in which the amount of pay order is to

be stated. Certain amount of commission and advance tax is charged on issuance of pay

order. After having the total amount deposited in the bank (in cash or through cheques, in

case of account holder), pay order is issued in favor of the payee.

Like cheques, when pay orders issued by Bank, are presented in other banks to get them

deposited in the payees accounts, they constitute the outward clearing for those banks

and inward clearing for Summit Bank Limited, Multan Road Branch Lahore.

Demand Draft (DD):

A Demand Draft is a negotiable instrument issued by the bank, on account of a person,

and drawn on its own branch in a specific city or on the branch of another bank in that

city (in case bank doesnt have any branch there), requesting it to pay the specified

amount to the person named on it.

Demand Drafts are used to make outstation payments or to transfer money, out of the

city. Therefore, a DD is always made for a particular city.

Making of a DD:

Suppose a customer requests his Summit Bank Limited, Multan Road Branch Lahore to

provide him a DD made on his account for a particular city like Islamabad.

Then, after having the total amount to be deposited with application form, demand draft

is issued in favor of the specified person in Islamabad (supposed) and is drawn on

Summit Bank Limited, Islamabad Branch. So, when this demand draft is presented by

payee in any bank, it constitutes the inward clearing of Summit Bank Limited, Islamabad

Branch.

Cancellation of PO & DD

After issuance of Pay Order, Demand Draft by Summit Bank Limited, Multan Road

Branch, Lahore, if any one of these has to be cancelled by the customer, it is returned in

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the bank. Then, after deducting the cancellation charges of Rs.100, the remaining (net)

amount is paid to the customer through Cash Payment Voucher.

Advance Tax against Remittances

Advance Tax is deducted on issuance of PO & DD (when customers dont have tax

exemption form) and credited in Tax on PO & DD account. Tax deducted has to be paid

to State Bank of Pakistan (SBP) with in one week of issuance of these instruments.

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TRADE FINANCE

Trade deals with entry / departure of goods into / from one country to another country.

International trade basically is a consequence of an agreement between buyer and a seller

separated by geographical boundaries.

To ensure secured transfer of goods to the right buyer and a right seller, the services of

the Financial Institutions are of great importance. In this relation the banks have proved

to be not only dealers but also the leaders.

Trade finance

The term Trade Finance encompasses all banking transactions that are embarked upon in

relation to exports and imports. Now-a-days banks have become a compulsory assistant

to almost all the International Trade transactions. When trade is taking place between the

representatives of two countries (exporter and importer), the exporter involves his bank

(the Advising Bank) in the transaction, as he wants to feel secure regarding timely

payment of his remuneration in the required currency. On the other hand the importer

involves his bank (the Issuing Bank), in order to get a sense of security regarding timelysupply of the required product, in the required manner.

The Trade Finance Department has two predominant dimensions namely Exports and

Imports. Thus there are two processes that take place in international trade i.e. the

buying process (the importer purchases the products from the exporter) and the selling

process (the exporter sells the goods to the importer).

The buying process

The buying act exchanges one thing, usually currency, for another of equivalent value.

The objective of the buyer is to obtain the most competitive price and delivery with the

best quality. The buying process begins with locating the source of a good or service, and

ends when it is resold, stocked in inventory, or the service is completed.

Within the global market place, companies worldwide become the potential source of

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goods and services. However, the objective remains the same for each purchase, to get

the best price with the best delivery and with the best quality.

The selling process

The selling process exchanges goods and services for currency of equivalent value. The

objective of a sale is to achieve the highest price for the goods while preserving the

relationship for continued business.

Trade finance can be categorized into two departments

Imports Department

Exports Department

The exporter and the importer might decide to carry on trade without the

IMPORTS DEPARTMENT

In the common words, import means bringing commodities into a country from outside

by sea or air. Stated differently, whenever there is a need of any commodity in a country

and if that commodity is not available the need for import arises.

Requirements to be fulfilled

When a person wants to import, he must have to register his name and his companys

name. The registration was previously granted by chief controller imports and exports but

now the Export Promotion Bureau of Pakistan performs this task.

For Import Registration, the following basic documents are required:

Questionnaire duly filled in

National Identity Card (attested copy)

Membership Certificate of Chamber of Commerce

National Tax Number / Certificate

Bank Certificate

Affidavit in case of Female Proprietor / Partner / Director

Sales Tax Registration

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The fulfillment of these requirements will give the registration to the importer and after

that he can open an L/C with any bank and can import anything.

The Letter Of Credit (L / C)

International trade involves numerous factors such as payment for imports in the

exporters country, shipment of goods within the limitations prescribed and difficulties of

enforcing legal rights in the foreign country etc. Therefore, to Overcome these

impediments a system has been enforced, this system is represented by Letter of Credit.

It is a conditional bank undertaking of payment.

An L/C is a commitment on the part of buyers bank to pay or accept draft drawn upon it

provided draft doesnt exceed a specified amount.

In simple words, it can be defined as; A banks 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.

Basic parties involved in a Letter Of Credit (L / C)

There are four basic parties involvedImporter & its Issuing Bank

Exporter (Beneficiary) & its Advising Bank

Various Shapes OF the Letter Of Credit (L / C)

There are various types of L/Cs used in trade. The main kinds are as follows

Revocable Letter of Credit:

It is the one, which can be cancelled or modified by the issuing bank at any time without

any notification to the seller. Since it offers little security to the seller, it is hardly used in

foreign trade by the exporter.

Irrevocable Letter of Credit:

It is the L/C that can be amended or cancelled only with the agreement of issuing bank,

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confirming bank and seller. This L/C gives more security to exporter as compared to

revocable L/C. In Pakistan, all banks including Bank Alfalah Limited-IBD are permitted

to open irrevocable L/Cs only.

Confirmed Letter of Credit:

The letter of credit is that which has the protection of credit standing of importer as well

as exporters bank. The exporters bank that confirms the Letter of credit takes the

liability of paying agents, in case of issuing bank fails to make payment to the exporter.

Unconfirmed Letter of credit:

Under the unconfirmed Letter of credit the advising bank (through whom the credit is

negotiated) does not give any kind of guarantee to the exporter that the issuing bank will

honor the bill drawn.

Types of letter of credit (L / C)

There are two main types of L/Cs.

Sight L/CIf the beneficiary of a credit is to obtain the payment immediately on presentation of

stipulated documents, it is sight credit. In this form of credit, the exporter draws a sight or

demand draft payable at the counters of the advising bank or the bank specified in the

letter of credit. The draft is paid on presentation if all the other terms of the credit have

been complied with.

In this form of letter of credit the beneficiary or exporter gets the credit from advising

bank immediately after completing all the requirements. Banks usually deal in this type

of letter of credit more because there is lesser risk for both the exporter and the bank.

Bank gets payment from importer before giving him the possession of documents. In

other words, we can say in this type of L/C when importer sights the document he makes

the payment to the issuing bank.

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Usance L/C

When a credit is to be paid upon the maturity of a bill of exchange drawn under the terms

of the credit, it is called an Acceptance Credit or Usance Credit or Terms credit. In this

type of letter of credit the payment will be made on maturity of a bill of exchange. This

maturity or tenor of this type of letter of credit varies e.g. 30, 60, 90, 120 days. Exporter

does not get payment on the receipt of documents rather he gets the acceptance on bill

exchange by importer that payment will be made on maturity.

Common Shipping terms used while opening Letter Of Credit (L/C)

C & F (Cost and Freight)

Insurance of shipment is borne by importer, while exporter pays the freight under this

condition.

CIF (Cost Insurance and Freight)

Exporter has to pay both insurance and freight under this condition, but not applicable in

Pakistan.

CIF & C I

When goods are shipped on CIF and C I (Commission and Interest) basis, it means the

price quoted includes cost, freight, insurance, commission and interest.

F O B (Freight on Board)

When freight of goods shipped, is not realized in advance by shipping company, it is

then to be paid by the importer on delivery of goods at the port of destination.

Documents required for opening letter of credit (L / c)

For getting an L/C issued, the importer has to submit the following documents

Performa Invoice:

The foremost document required by the bank for establishment of an L/C is the Performa

Invoice (signed by both the importer & exporter). The exporter issues it. It comprises all

the terms and a condition that has to be mentioned on L/C. Performa Invoice constitutes

the basis of the whole transaction.

Indent:

When the importer and exporter dont have direct relations and are connected to each

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other through an intermediary, called Indenter, then he (indenter) issues an indent form

containing all terms and conditions (like Performa Invoice).

Annexure B:

This is a form in triplicate and must be filled by the importer. The HS (Harmonized

Code) or ITC (International Trade Control) code of the imported goods must be

mentioned. Every commodity has a different universally applicable code. The banker

must check before opening the L/C that the HS code given by the importer is correct.

Form I:

This form is also a part of the SBPs efforts to check all transactions in which foreign

exchange is involved. The form I also contains all the information about the transaction

along with the importers import registration number.

L/C Form with Adhesive Stamp:

The application form for the opening of an L/C must possess a legal stamp with it. This

stamp is worth Rupees 100. Without a legal adhesive stamp, an application for opening of

an L/C will not be accepted.

Insurance:

It is necessary for the importer to get the consignment insured and provide proof of

having done so.

Promissory Note

It is an unconditional written promise signed by the maker, to pay on demand or at a

fixed or determinable future time, a certain sum of money to the specified person or to

the bearer of the instrument. Therefore, to make the payment (by importer) secure, bank

obtains a promissory note signed by the importer, along with the above stated documents.

L/C Margin:

It is a certain percentage of the value of L/C that is retained by the bank as security.

Clauses of letter of credit (l / c)

A letter of credit contains several clauses. The main ones are

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Type of Credit:

The heading of a credit indicates the type of credit and its purpose. For this purpose,

every bank has prescribed its own letter of credit forms.

Value of Credit:

The fixed amount to which the bank is liable is specially mentioned in the letter of credit.

Specifications of Documents:

The documents required are specially mentioned in the credit.

Description of Goods:

A brief description of goods that are required by the importer is given.

Part-Shipment and Trans-Shipment:

Part-Shipment means shipment of goods in lots or installments that is in more than one

shipment.

Trans-Shipment means the carriage of goods by more than one vessel or mode of

transport.

The credit must specify whether this can be trans-shipped / part-shipped or not.

Collection of Charges:

The buyer and seller should have been decided as to which party would bear the expenses

because of interest/ markup and other bank charges. The credit specifies the party that

would bear the charges.

Validity Period:

This is a very important clause and because every credit indicates an expiry date or the

validity period. This period is so fixed to provide sufficient time to complete the

transaction.

Reimbursement Clause:

This clause indicates the method for obtaining the reimbursement by the foreign

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negotiating bank. It will be discussed elaborately in later part.

Shipping Marks:

If the importer wants that the goods should be identifiable with some special packing

marks, it should be so specified in the credit. This clause is not found in all the credits.

Procedure Of Issuance Of Letter Of Credit (L / C)

After completing the documents necessary for opening the letter of credit the procedure

of issuance of letter of credit starts.

Letter Of Credit (L / C) application form

After having an L/C limit approved, the process of L/C opening starts with L/C

application form. The bank has prescribed a standard application form that contains the

required guidelines, instructions and other relevant terms and conditions under which the

L/C is to be opened and claims from the beneficiary are to be settled.

The application form contains the following

Description of the goods, detail of quantity, unit price, total price and currency

of credit

Instructions about the advice of credit, whether it should be sent by airmail, by

courier or telecommunicated

Form of credit: whether revocable or irrevocable, confirmed or unconfirmed.

Due to permission of irrevocable credit only, it is prescribed on form

The name and address of the beneficiary

Type of credit: whether sight, Usance etc

Validity period of credit and last dates for shipment and negotiation

Port of shipment and port of destination and whether trans-shipment and/or

part-shipment are allowed

Types and number of sets of documents required to be submitted by the exporter

Shipping terms in the contract of sale, e.g., FOB, C&F or CIF etc.

The application form must possess a legal stamp worth Rs. 100. Form without this

adhesive stamp is not accepted. This legal stamp is usually pasted on the

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application form before giving it to the applicant.

Banks involved in the processing of letter of credit (L / C)

Starting from the establishment of an L/C, till the retirement of documents, following are

the banks involved in the whole L/C Cycle. The number of banks involved in L/C

Processing may vary from 1 to 6. Only a single bank can perform all the functions

through its different branches.

Issuing Bank (Opening Bank):

Bank opening the letter of credit is called Opening Bank or Issuing Bank. Opening

banks undertaking under an irrevocable or confirming L/C is absolute. Therefore, once

an L/C has been communicated to the beneficiary through the bank, the banker has no

option, but to pay provided the other terms and conditions have been fulfilled.

Advising Bank:

The bank that advises the L/C i.e., the bank that physically delivers the L/C to the

exporter on the behalf of the issuing bank. It is a correspondent bank of the issuing bank

situated in the beneficiarys country or it can also be a branch of issuing bank.

Negotiating Bank:

The negotiating bank receives the documents and delivers to exporter. When the exporter

completes all the documents, after making shipment, the negotiating bank sends them to

the issuing bank.

Reimbursement Bank:

According to ICC Rules, Reimbursement against foreign currency has to be made

through the country originating that currency. Therefore, for dollar transactions,

reimbursement has to be made (received) through the banks situated in USA. Whenissuing bank dont have any branch in USA (for dollar payments), Summit Bankk has

Nostro Account, that bank is known as Reimbursement Bank or Drawee Bank. It is a

correspondent bank of issuing bank and makes payment by debiting the nostro account.

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Intermediary Bank (Collecting Bank):

Intermediary Bank is that where the negotiating bank has its Nostro Account and who

obtains reimbursement against L/C from reimbursing bank and gives credit to the

negotiating bank. For dollar payments, intermediary bank would have to be situated in

USA. Similarly, for transactions in GBP, both the Reimbursement & Intermediary banks

would be in UK.

Approval of Letter of Credit (L / C)

When the importer has provided all the required documents for the credit, an approval

sheet is put on top of them. This sheet shows the credit limit of the party and if the tenure

is Sight or Usance. After, the completion of the approval sheet, the L/C is presented to

the local credit committee of the bank for approval.

Communicating Letter of Credit (L / C)

After establishing the letter of credit, it is communicated to the beneficiary through many

intermediaries.

Transmission of Letter of Credit (L / C)

After issuance, the L/C is sent to the advising bank. There are many ways to transmit an

L/C to the advising bank. These are:

Through Airmail

Through Courier

Through Telex

The medium is used according to the instructions of importer mentioned on the top of the

L/C Application form.

Advising Letter of Credit (L / C)

After transmitting the L/C to advising bank, it is advised (physically delivered) to the

exporter, through advising bank. Summit Bank has collaboration with a number of banks

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worldwide, for advising its L/Cs. For example, if an L/C has to be advised in Australia,

it can be advised through ABN AMRO or Standard Chartered Bank, Australia.

Negotiating Letter of Credit (L / C) documents

Negotiating bank, after receiving the documents from advising bank, intimates the

exporter. When the exporter makes the shipment and completes all the documents, he

presents them to the negotiating bank. The negotiating bank sends these documents to the

issuing bank, according to the date of negotiation mentioned on L/C, and claims the

reimbursement

Documents sent by the Negotiating bank

Following are the documents sent by the negotiating bank for the settlement of L/C;

Bill of exchange

A Bill of Exchange is an instrument in writing containing an unconditional order, signed

by the maker, directing a certain person to pay a certain sum of money on demand or at a

future determinable period, to a certain person or to the bearer of the instrument.

It is drawn by the exporter through negotiating bank (drawer) and is an order for the

importer or issuing bank (Drawee; Summit Bank) to pay a specified amount. In case of

sight bill (for sight L/C), it has to be paid immediately.

Commercial Invoice

Commercial Invoice prepared by the exporter signifies the name and address of importer,

invoice price, invoice number and all the specifications of goods being imported.

Packing List

It is prepared by the exporter to show that the consignment is in accordance with the

order of importer.

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Shipment Advice

Shipment Advice is issued for the insurance company to provide every information and

specifications regarding shipment.

Certificate of Origin

This document is a certification for the origin of goods. It certifies that the goods being

imported (or exported) have the origin of a specific country.

Phytosanitary Certificate

The exporter in case of commodities, like medicinal herbs, sends this certificate. It

certifies that the use of goods is not harmful.

Bill Of Lading/ Airway Bill/ Railway Receipt

Bill of Lading is a document issued by the shipping company that stipulates the quantity

of commodity, weight, port of shipment & discharge, date of shipment and other

specifications

Insurance Policy (If Applicable)

If insurance is responsibility of exporter i.e. in case of CIF price, then the L/C issuing

bank also requires the insurance policy along with other documents. Usually, all the

transactions are carried out in FOB or C&F prices.

Covering Schedule

Along with the above stated documents, the negotiating bank sends its Covering

Schedule on which the instructions regarding the whole transaction are prescribed. It also

mentions the number of each document sent by the exporter.

Scrutiny of documents

After receiving all the documents, next and the most important step is to scrutinize the

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documents. For this purpose, a list called Check List of Import Documents is prepared.

All the documents must be in accordance with the requirements of L/C. In case of any

deviation the documents can be rejected and payment can be stopped. Negotiating bank

must be intimated about any discrepancy found, with in 7 days.

Retirement of Documents

The whole transaction of foreign trade in which an L/C is involved, completes with the

retirement of documents.

The documents that are first lodged in PAD are retired when the importer pays the total

amount (payable). This amount includes the PAD plus the mark-up charged on PAD and

other charges (mentioned on cost memo). Upon receipt of payment, when the documents

are retired, they are given to the importer and he gets the consignment cleared from

custom authorities (by submitting the Bill of Entry).

This completes the whole transaction of Foreign Trade, carried out through a Letter of

Credit.

The Exports Department

Export plays the major role in the economic development of the country; it is the one of

the major sources of earning foreign exchange without additional burden on theeconomy.

Conditions for Exporter

Like an importer, there are certain conditions that a person must fulfill to become an

exporter.

The person must be an account holder of Summit Bank Limited.

No one can export any commodity until and unless he/she is a Pakistani and

has a valid export registration with the EPB.

The person must process a valid membership certificate of Trade

Organization, licensed and recognized by Federal Government like a Chamber

of Commerce (e.g. Lahore Chamber of Commerce).

The person must possess a valid NTN (National Tax Number) certificate.

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A person cannot export any good unless he files a Form E (E stands for

exports) with his application to the bank.

The person must have the Sales Tax Registration Certificate.

Two key documents

Two major kinds of documents reach the export department;

Letter Of Credit

In simple terms a letter of credits is defined as a banks 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. Documentary credits as

they are called, L/Cs have been discussed in detail in the imports section.

Contract

A contract is defined as an agreement, certain and performable, made by competent

parties, with their free consent for the lawful object, and lawful consideration, and if not

expressly declared void.

Another way to define contract is that it is a Mutual understanding between the buyer and

the seller without the involvement of the L/C. involvement of a letter of credit. In this

situation, trade is carried out based on a mutual contract between them.

Complete Export Cycle

The process of export starts with the receipt of the Letter of Credit (or Contract) by the

bank. The issuing bank sends the L/C to Summit Bank Limited,

Branch,GUJRANWALA through the advising bank. Upon receipt of L/C, an intimation

letter is prepared and is sent to the beneficiary of the L/C, advising him that his reached

Summit Bank Limited, NGT Branch, Lahore and he should collect it immediately.

As mentioned earlier, an E-form is necessary for exports out of the country. It is a part of

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exchange control mechanism of the State Bank of Pakistan. When an exporter receives an

L/C, the next job is to get an E-form from the bank. After filling in the complete

information about the goods to be exported, the exporter Brings the E-form to the bank

for verification. The bank verifies the contents in accordance with the documents and not

by physical checking. The E-form is a quadruplicate and contains the following

information.

The Commodity

The quantity

The price

The port of shipment

The port of destination

Terms of shipment

Export registration number

After getting the E-form verified from bank, the exporter starts preparing for his

shipment. As the banks only deal in documents, so in order to receive the payment for his

good to be exported, the exporter has to send certain documents to the L/C issuing bank

via negotiating bank. These documents have already been discussed in import section.

A very important step in the export process is to scrutinize the documents, before sending

them to the issuing bank. It requires utmost care and attention of the bank officer. When

the documents are presented in the bank, they are always scrutinized and they must be in

accordance with the requirements stipulated on the L/C. Any deviation could result in

rejecting the documents by the importer, hence causing loss to the exporter or even to the

bank if the documents are to be negotiated.

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WORK DONE BY ME

This section is based on my observation and experience and rotation during my internship

at the Multan Road Branch of Summit Bank limited,Lahore. Some of the jobs that I

performed or assisted in performing or overlooked in the various departments were;

Account Opening Department

Inward outward mailing and filing the documents.

Trade Finance

Clearing Department/ Accounts Department/ Remittances Department

Cash department

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FIRST THREE WEEKS

Account Opening Department

In first week I was placed in account opening department. In account opening department

I learned about

Account Opening Procedure

The persons who are eligible to open an account

Kinds of Accounts offered by Summit Bank Limited

Documents required by different categories of persons

Issuance of Cheques Book

Details about Loose Cheques

Procedure of closing an account

Procedure of dormant accounts

I worked with Miss Sara in this department. She was often busy dealing with customers

as in this department lots of customers use to come daily. But still she told me a lot about

account opening procedure. She also briefed me how to use bank smart in account

opening department. She use to be very polite with customers as his job requires this. She

use to manage relationships with customers by providing them better services. Therefore,

customers are pleased.

In this department I worked for 15 days and in this span of time I learned different kind

of accounts offered by bank, stamping leafs, entering of books in cheques book issue

book and entries in system.

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FOURTH AND FIFTH WEEK

Clearing Department/ Accounts Department/ Remittances Department

As in clearing, accounts and remittances department has very less work to done so they

are combined in single department here in Summit Bank Limited. This department is

collectively called Operations department and 2 people work over here. I worked with

Miss Zamurad Butt .She told me about different activities of this department. Her

attitude was very nice.

First of all he told me about;

Procedure of clearing a cheques

Checking of cheques

Inward and outward clearing

Within bank transfer

Different reason of returning a cheques

Types of clearing stamps

Then she told me about the operations of Accounts department. I learned weekly,

monthly, bi-annually, annually and quarterly reports that are sent to main branch and

head office and even to SBP. Most of these are prepared by system automatically. Two

main functions performed by this department are daily activity checking, report

generation. Main reports prepared are;

Daily Advance And Deposit Position

Daily Exchange Position

Daily Fund Management

Closing Reports

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Monthly Budget Review Report

Monthly Monitory Statement

Monthly Performance Review Report

Next she told me about remittances. Here I gained knowledge about inward

clearing and outward clearing. She told me about following things;

Demand draft (D.D)

Pay order (P.O)

Local remittances and outgoing remittances

Schedule of bank charges for remittances

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SIXTH AND SEVEN WEEK

Trade Finance

Next week I worked in Trade Finance department with Mr.Iqbal Raza. He is a very kind

person and told me a lot about trade finance department. Although two week period was

very small to get knowledge of whole of this department but still he explained me

everything that she can in this short span of time.

Here I gained knowledge about shipping terms, shipping documents required, and procedure

to open L/C. He also told me about different kinds of banks involved in this procedure are

Issuing Bank, Advising Bank, Negotiating Bank, Reimbursement Bank, Intermediary Bank.

Then she told me role of these banks.

The main activities of this department are divided into two parts; Import and Export. And

requirements for importers and exporters are different. She also told me about Parties of

L/C, Types of L/c, Import license (registration of import in EPB), Import bill, checking a

scrutinizing of documents, Mode of payment.

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EIGHTH AND NINTH WEEK

CASH DEPARTMENT:

In eighth week I worked in the cash department with Mr.Usman. He is very

cooperative person he told me about the procedures which are involved in the

receiving and payment of the cash and cheques.

He told me about the things we should keep in mind while taking the cash.

Cheques should be properly checked, the name and account number of the client is

mentioned on the cheque, and it is matched with the entries in the system for the

scrutiny purpose

Utility Bills are also accepted in this department, proper entries are made on the

system hplus. After accepting the bill, the bill is stamped with Summit Bank Limited

stamp which is computerized to avoid frauds and errors.

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TENTH AND ELEVENTH WEEK

FINANCIAL ANALYSIS

1. Return on equity =Net income/ shareholders equity

Return on Equity

Years Ratio

2006 20.37

2007 25.72

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Interpretation

The return on equity measures return to both common and preferred stock holders. This ratio

has increasing trend in this case, actually the purpose of calculating this ratio is to measure

rate of return to the stock holders, and its increasing trend shows that the return rate is

satisfactory. We see slightly increasing trend in this ratio that is from 20.37 to 25.72 from

the year 2006 to 2007.

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2. Capital Adequacy= Total regulatory capital / total risk weightedexposure

Capital Adequacy

Years Ratios

2006 9.48

2007 9.85

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Interpretation

Capital Adequacy is the risk weighted assets to capital, calculated in accordance with

State Banks guidelines on capital adequacy. This ratio compares the amount of

eligible capital with the total of risk weighted assets (RWAs). Bank Alfalah monitors

and reports its capital ratios under SBP rules which ultimately determines the

regulatory capital required to be maintained by banks and DFIs. In case of this Bank,

ratio has been increased from 2006 to 2007, which shows that the Bank Alfalah has

eligible amount of capital as compared with total of risk weighted assets.

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3. Return on Assets = net income / average total assets

Return on Assets

Years Ratio

2006 0.67

2007 1.04

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Interpretation

This is the most important ratio of the entire profitability ratios. The return on

assets is the real determinant of the profit. The ratio shows that company hasincrease in this ratio, but this increase is very nominal i.e. 0.67 to 1.04.

Apparently it seems that company profitability increases.

In this ratio apparently it seems that banks return on asset increases but it

doesnt mean bank faces losses but it shows the loopholes in management. As

assets and sales