Internship Report Bank Alfalah LTD_part2

CHAPTER – 01

Introduction to the Report

This Internship report is aimed at studying and analyzing Bank Alfalah LTD (BAL) in

general and its branch office at Abbottabad, in particular. The main purpose of the

internship is to prepare and submit a report as a partial fulfillment for the award of

MBA degree from COMSATS Institute of Information Technology Abbottabad.

1.1 Background of the Study.

Pakistan’s economy is growing with an appreciable rate. Sound banking system for

this growing economy is the need of the day, which must meet the financial needs of

the growing agriculture, industrial and commercial/services sector.

Bank Alfalah since 1997 has played a pivotal role in the development of Pakistan.

Like other multinational banks, BAL has adopted a customer-oriented approach, in

order to provide quality products according to customer needs and stands as a role

model for the other banks. In this report I have tried to cover all the aspects of BAL

banking operations.

1.2 Purpose of the Internship

The primary purpose of the internship is to fulfill the academic requirements of my

study. The secondary purpose of the internship is to evaluate the banking practices, in

corporate world and to compare these practices with the contemporary banking

practices. The purpose of the study also is, to do practical work, in the field and apply

the knowledge of classroom lectures to the real life situations, which thus enables a

student to be a future banking practitioner. Besides this, some other purposes are

associated, which includes:

To give a comprehensive review of BAL.

To analyze BAL organizational, financial and other aspects.

To identify the areas of the bank where there is some room for improvement.

To present some feasible solutions for the problems pertaining to BAL.

To apply the knowledge gained in practical field.Mehraj Muhammad SP07-MBA-011

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1.3 Merits of the Report

The study conducted will benefit the finance students in particular and banking

students in general because the third chapter of this report comprehensively

encompasses most of the aspects of banking, followed by SWOT analysis, conclusion

and recomendations. Furthermore, BAL branch Abbottabad may also benefit from the

recommendations made at the end of the report.

1.4 Scope of Work/Report

Banking has a very broad scope. In only six weeks of internship, it is very difficult to

understand each and every aspect of bank. Due to the barriers of limited time and

space, the scope of work is usually confined. However this study of BAL will help the

management to identify their weaknesses and threats and over come them by using

their strengths and capitalizing on the opportunities. This internship report will be

source of financial data for all those who are interested in financial statement analysis

of BAL.

1.5 Methodology of the Report.

This study involves two types of data for report writing.

1.5.1 Primary Sources:

Interviews and discussion with staff members

Personal observations

1.5.2 Secondary Sources

Annual reports of BAL

Brochures & Manuals.

Websites

Newspapers

Previous Internship Reports.

Mehraj Muhammad SP07-MBA-0112

1.6 Limitations of the Report

As mentioned earlier, six weeks of time is very limited for a complete observation of

an institution like BAL. Moreover some of the data was confidential and was not

made available to me. Sometimes due to the busy schedule of the bank, complete

information regarding different activities was not provided in time.

1.7 Scheme of the Report

This internship report is divided into five chapters as:

Chapter one includes background, purpose, scope, limitations, methodology, and

scheme of the report.

Chapter two includes background and history of banking in Pakistan, background of

BAL, roles, functions and branches.

Chapter three includes organizational structure of BAL, organizational charts and

departments of BAL.

Chapter four includes financial, SWOT analysis and findings based on work in

chapter three.

Chapter five includes recommendations of the study based on the analysis in the

previous chapter.


CHAPTER – 02

Introduction to Bank Alfalah Limited

2.1 Evolution of Banking

Consensus on the origination of word “Bank” has not yet reached. According to some

authors this word is derived from the words “Bancus” or “Banque” that mean a bench.

The explanation of this origin is attributed to the fact that the Jews in Lombard

transacted the business of money exchange on benches in the market place, and when

the business failed, public destroyed the Banco. Incidentally the word bankrupt is said

to have been evolved from this practice. The opponents of this opinion argue that if it

was so, then how is it that the Italian moneychangers were never called Banchierei in

the middle ages?

Other authorities hold the opinion that the word Bank is derived from the German

word “Back” which means joint stock fund. Later on, when the Germans occupied

major part of Italy, the word “Back” was Italianized into “Bank” (Aslam, 1999)

It is therefore, not possible to decide as to which of the opinions is correct, for no

record is available to ascertain the validity of any of the opinion”.

2.1.1 Early Growth

“Banking in fact is as ancient as human society. For ever since man came to

realize the importance of money as a medium of exchange. Perhaps these were the

Babylonians who developed banking system as early as in 2000B.C. It is evident

that the temples of Babylon were used as banks because of the prevalent respect

and confidence in the clergy. (Siddiqui, 2004)

2.2 Brief History of banking

The Clay tablets of Banking have been found in Babylonia and Assyria, showing

some of the functions of banker, such as money changing, advances. King

Hummurabi, the founder of Babylonians Empire, developed rules and regulations for

banking operations that payments were made through a banker and by drafts against


deposits. Deposits bearing interest, letters of credit and other means of transferring

credits from one place to another were also know in anct Greece and Rome. In Italy

during the middle ages, continually from early times, it is now accepted that the first

public ‘bank’ properly so called, was the Banco di Rialto, established, at Venice by

acts of senate in 1584 and 1587. In 1587 Banco di rialto was formed at Genoa, the

famous Bank of St George; this was a private bank of deposits. In 1619 the Banco del

Giro was founded; this become the only public bank in the state, and was long famous

as the Bank of Venice. Later in 1609 the Bank of Amsterdam was also formed. This

bank rendered valuable services to the Netherlands trader up to the year 1820. In 1619

the Banco del Giro was founded; this become the only public bank in the state, and

was long famous as the Bank of Venice. Bank of Hamburg cant into existence in

Hamburg with the business of accepting deposits of fine silver or foreign currency.

The bank rendered great services to the merchants as well as the countries. It dealt

with them until 1873, when it was merged with the Reich bank. Their business lay in

the assistance of commerce not by loans but by the local manufacturers.

2.3 Role of Banking in the Economy

Banking principal roles in the Economy are as follows:

2.3.1 The Intermediation role:

Transforming savings received primarily from households into credit (Loans)

for business firms and others in order to make investments in new buildings,

equipment, and other goods.

2.3.2 The payments role:

Carrying out payments for goods and services on behalf of their

customers(such as by issuing and clearing checks, wiring funds, providing a

conduit for electronic payments, and dispensing currency and coin).

2.3.3 Guarantor role:

Standing behind their customers to pay off customer debts when those

customer are unable to pay (such as by issuing Latter of Credit).


2.3.4 Risk Management role:

Assisting customers in preparing financially for the risk of loss to property and

persons.

2.3.5 Savings/investment advisor role:

Aiding customers in fulfilling their long-range goals for a better life by

building, managing and protecting savings.

2.3.6 Policy role:

Serving as a conduit for government policy in attempting to regulate the

growth of the economy and pursue social goals.

2.4 Banking in Pakistan

Banking started in Pakistan after the bold and emergent decisions of formulation of

SBP on July 30, 1948. Thereafter this sector was witnessed enormous growth. In 1974

banks were nationalized, in the hope that new era of growth could be achieved

through it. However the process is reverse since 1991, up till now MCB, ABL, ACBL

and HBL have been privatized.

2.5 History of Bank Alfalah Limited

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

company under the Companies Ordinance 1984. Its banking operations commenced

from November 1st, 1997. Bank Alfalah Limited started its life as “Pakistan

Operation” of BCCI. A multi-national conglomerate based in Luxembourg and Grand

Cayman. BCCI was the 7th largest bank in the world. The estimated assets of BCCI

were 20 billion dollars. The operations of the Bank were in 70 different countries of

the World. In July 1991, the Bank of England and International Liquidators accused

BCCI of being involved in money laundering to the tune of 1.54 billion dollars.

Upon closing down of BCCI, in 1992 the operations of BCCI in Pakistan were

acquired by Habib Bank Ltd, and were run as a wholly owned subsidiary by the name

of Habib Credit & Exchange Bank (HCEB). HCEB was later acquired (through the


process of privatization) by the Abu Dubai Group, in 1997 and its 70% ownership

was transferred to Abu Dubai Group. The agreement was signed on July 7, 1997.

The bank is engaged in commercial banking and related services as defined in the

Banking companies ordinance, 1962.

2.6 Bank Alfalah Today

The strength and stand of Abu Dhabi Group, principal owners of BAL, have helped

Bank Alfalah Limited launch high quality consumer and corporate banking operations

in Pakistan. Bank Alfalah Limited have embarked upon a rapid expansion program to

make sure that the services reach more and more people, BAL is headed towards an

optimum sized network reaching major urban centers in Pakistan.

The Bank is well positioned and geographically poised, to cater for increased business

demands, from its existing and potential clientele. The bank is not only making its

contribution in accelerating Pakistan’s economy.

There are 238 Branches of Bank Alfalah Limited in 75 different cities of Pakistan,

with the registered office at B.A.Building, I.I.Chundrigar, Karachi.

With the implementation of the office automation and communication system BAL

will be poised to compete with the best in quality and speed of customer services.

During the period under review, Bank Alfalah made notable progress in business

volume, efficiency and profitability following its increased involvement in trade

finance, commercial lending, and foreign exchange and money market operations.

Good clientele is at the heart of good business. The Bank is very selective of its

clients and carefully checks all references. Referrals are excellent sources of new

accounts as they give the Bank an opportunity to learn about a potential client before

establishing a relationship. This helps protect the integrity of the Bank and ensures

that the client will share values necessary for a long-term and stable relationship.

Bank Alfalah Limited continually endeavors to develop wider spectrum of innovative

financial products based on consumer needs.

2.7 Vision of BAL

Vision statement identifies where the organization intends to be in the future or where

it should be to best meet the needs of stakeholder. Vision statement incorporates a


shared understanding of the nature and purpose of the organization and uses this

understanding to move the organization toward a greater purpose.

The Vision of Bank Alfalah is:-

Bank Alfalah is one of the leading financial institutes; Bank Alfalah operates only in

Pakistan now soon it will go internationally, and Bank Alfalah day by day increasing

its products for all the segments in Pakistan i.e. for Businessmen, Industrialists,

Agriculturists and for the Government bodies in the country. Bank Alfalah is trying to

reach each segment in Pakistan, and trying to provide its products at lowest charges

and with easiest way, under one roof.

2.8 Mission Statement

Mission statements are "enduring statements of purpose that distinguish one business

from other similar firms. A mission statement identifies the scope of a firm's

operations in product and market terms." It addresses the basic question that faces all


V I S I O N

“To be the premier

organizations operating

locally and internationally

that provided the complete

range of financial services

to all segments under one

roof”

strategists. A clear mission statement describes the values and priorities of an

organization. A mission statement broadly charts the future direction of an

organization.

Mission statement of Bank Alfalah is:-

In the above Mission the Management of Bank Alfalah emphasis on the following

areas:

To provide the new and more innovative products than the other banks to the

customers.

To take and manage the ideas of the valuable customer for the Bank


MISSION“To develop and deliver the

most innovative products,

manage customers experience,

deliver quality service that

contributes to brand strength,

establishes a competitive

advantage and enhances

profitability, thus providing

value to the stakeholders of the

bank

This is a one of the main component of Bank Alfalah Mission Statement that

to deliver high quality and quick services to the customers, who are keep great

value for Bank Alfalah.

Bank Alfalah tries to promote those activities which give the fruitful result to

the customers and the stakeholder of the bank.

2.9 Core objectives of BAL

Objectives can be defined as specific results that an organization seeks to achieve in

pursuing its basic mission. Objectives are essential for organizational success because

they state direction; aid in evaluation; create synergy; reveal priorities; focus

coordination; and provide a basis for effective planning, organizing, motivating, and

controlling activities.

Bank Alfalah Limited objectives are as follows:-

To create maximum economic value for share holders through a constant

relationship focuses on financial services.

Leveraging BAL Investments in the IT field.

On going assessment of opportunities for customers, leading to the constant

development of new products and services.

To promote industrial, agricultural and socio economic processes through the

active participation of private and public sector in the country.

2.10 BAL Credit Rating

Pakistan Credit Rating Agency – the leading credit agency in the country – has rated

Bank Alfalah very favorably. The Bank has been awarded an AA- (double A minus)

and an A1+ (A one plus) in the long and short term respectively. These ratings denote

very high credit quality and very low expectation of credit risk. The bank also issued

TFC’s in the year 2002. These were very well received in the market and were

oversubscribed by 6 times. PACRA awarded an A+ (A plus) rating to these

certificates.


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2.11 Branch Network of BAL

Since the privatization in 1997, Bank Alfalah Limited has remained consistent in its

mission to excel in providing innovative products and services to its customers. As a

result of that, the yare 2003 has been most favorable for bank in spite of varying

market conditions. The Bank recorded significant increase in its business volumes

coupled with the broadening of network and clientele base.

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

that it provides to its customers. In the year 2003, nine (9) commercial banking

branches and five (5) Islamic banking branches were added to the Bank. In 2004,

Alfalah network extend the courage to 72 branches in 30 cities nationwide. Currently

Bank Alfalah has 238 Branches in 75 different cities. Bank Alfalah is confident that a

well-integrated branch network, offers greater potential for serving a larger client base

through high value products.

BRANCH NETWORK OF BAL

Figure 2.1; Branch Network of Bank Alfalah Limited


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2.12 Organizational Structure of BAL

Figure 2.2; Organizational Structure of Bank Alfalah Limited


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2.13 Departmentation

Every organization is divided into definite departments. Each department performs

different kind of job and requires staff with specialized skill to handle the particular

job. This increases the efficiency of workers and makes the job of the employees

easier.

There are several aspects on which departmentalization in an organization can be

based. The division can be done on the basis of functions or product or customers or

geographical location.

In Bank Alfalah Abbottabad City Branch, departments are e made on the bases of

functions performed by the bank. The following are the major departments of the

BAL Abbottabad City Branch:

2.13.1 Accounts Department

Accounts Department is known as the backbone of any bank, this department

shows the performance of a bank in a particular area. The first step towards the

banker customer relationship is the opening of a customer’s account. Bank

Alfalah Abbottabad City Branch provides different types of accounts for various

business segments.

Figure 2.3; Accounts Department


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Procedure of Opening an Account

Figure 2.4; Procedure of Opening an Account


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Types of Accounts

a) PLS Saving (Rupee) Accounts

Saving accounts are designed to mobilize savings primarily from a

large number of individuals and house hold. Any one or more

individuals or partners can open a PLS saving account with the Bank.

Salient features of PLS account are as follows:

Minimum initial deposit is Rs.500/-

A smaller deposit can be accepted at the discretion of branch

management if average deposit is expected to remain above

Rs.5,000/-

Profit on PLS saving accounts is calculated on minimum

monthly balance basis.

Profit rates are announced and paid biannually in January and

July respectively.

Profit rate on the PLS saving is 2.25% per annum. However

profit rates are subject to change in response to change in the

return earned by the Bank on deployment of funds.

Checking Facility of the account is unlimited.

25, 50, leaves Cheque Book is issued to the clients.

With holding Tax is deducted from the profit and Zakat on total

amount.

b) Current Rupee Account

Individual, partnerships, companies, associations, clubs, societies and

NGOs are eligible to open current accounts. This type of account is

further classified as individual account and Joint Account. Salient

features are as follows:

Minimum initial deposit is Rs.5,000/-

Minimum average balance is Rs.10,000/-

There is no restriction on number of transactions.

There is no limitation on amount of withdrawal.


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No profit is paid on credit balance in current accounts.

Checking Facility of the account is unlimited.

25, 50,100 leaves Cheque Book is issued to the clients.

There is no Tax application on this type of account.

c) Term Deposit

It is one of the popular account types. The amount is deposited in this

account for fixed time period i.e. from one month to five years. The

interest is various with the variation of time limitation. The rate of

profits increases as per increase in time period. The customer cannot

withdraw money before maturity. The profit on this account is paid

after the maturity. But if a customer want to withdraw before maturity,

so he will give a notice to the bank 7 days before borrowing.

d) Royal Profit Savings (Rupee) Accounts

Royal profit is a high yield rupee account intended to provide higher

rates of profit to high net worth customers and greater flexibility and

convenience in terms of transactions. Current rates of profit are as

follows:

Table 2.1 Royal Profit Savings Account Proposed Rates

e) Royal Patriot (Rupee Term Deposit)

Royal Patriot is a rupee term deposit scheme with competitive rate of

profit. Current rates of profit are as follows:Mehraj Muhammad SP07-MBA-011

Amount Proposed Rates (P.A)

FFrom 50,000 To 999,999 1.50%

FFrom 1,000,000 To 9,999,999 1.75%

FFrom 10,000,000 To 49,999,999 2.00%

FFrom 50,000,000 To 149,999,999 2.50%

FFrom 150,000,000 & Above To be quoted by treasury

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Table 2.2 Royal Profit Rates

f) Foreign Currency Accounts

This Account is offered to resident and non-resident Pakistani’s as well

as foreigners can open foreign currency accounts. A foreign currency

account is opened either as savings account or current accounts.

Foreign currency accounts are opened and maintained subject to local

laws and regulations in force from time to time. Profit on foreign

currency saving account is paid on half-yearly basis and on term

deposit it is paid on maturity. No interest is paid on foreign currency

current accounts.

g) Notice Deposit

The notice deposit is selected by the customer indication his intention

to withdraw the funds. Notice desists are usually held for pre-specified

tenors of seven days and thirty days. A deposit is placed for minimum

of 7 days in order to qualify for accruing profit.

h) Call Deposit

It is a non interest bearing deposit account with a mandatory 7 or 30

days notice period preceding the release of funds. This account can be

maintained in PKR. Call deposits are exempted from all/any

encumbrances and no profits are paid on them. In this type of deposit

there is no checking facility.

i) Minor’s AccountMehraj Muhammad SP07-MBA-011

Tenure 25,000-999,999 1,000,000-4,999,999 5,000 & Above

1 Month 1.50 % 1.60 % 1.70%

3 Month 1.75 % 1.85 % 1.95%

6 Months 2.00 % 2.10% 2.20%

1 Year 2.25 % 2.35 % 2.45%

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In respect of an account opened in the name of a minor, the bank

follow those instructions which is received from the guardian named

on the Account Opening Form, irrespective of whether the minor

account holder continue to be a minor or not unless the Bank receives

written instructions from the guardian or a notice to the contrary for an

appropriate authority. The minor’s account can be opened in any type

of account i.e. current or saving account.

j) Statement of Account

BAL issue quarterly or at such other interval as it may deem fit to send

to the customer statement of account, from which the customer can

check the entries made therein. In case of any discrepancy or error in

the statement of account, the customer notifies the bank within the 14

days of receipt of the statement of account.

k) Hold Mail Facility

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

provide a “Hold Mail” facility whereby the Bank shall retain for

periodic collection by the customer, or his duly authorized agent, all

communications or statements of account relating to the customer’s

account.

l) Stop Payment Instruction

BAL, in its absolute discretion, accept stop payment instruction for the

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

detail of the lost/stolen cheque are give by the customer on a

prescribed form. The customer is further liable to give charges of the

stop payment of a lost/stolen cheque.

m) Closure of Account

If a customer wants to close his account, so on closure of the account,

the customer must return to the bank the unused cheque(s), relationship


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card, ATM card(s) and Credit Card for cancellation. And the bank has

the right to close the account without assigning any reason by giving

14 days notice.

2.13.2 Remittances Department

Remittances department is a very important department in every bank. One of

the most frequently used banking services is the transfer of funds through the

banking channels. Transfer of funds shows the high efficiency and security of

the bank.

Local Remittances

The transfer of funds within the Country or within the city is called

Local Remittances. The following are the different types of the local

remittances in BAL Abbottabad City branch:

a) DD (Demand Draft)

Demand Draft is drawn by one branch on another branch or on

the Head Office of the same bank or vice versa. Demand Draft is

basically a bill of exchange, that is, an order to pay money, drawn

by one office of a bank upon another office of the same bank for

a cum of money payable o order on demand, purports to be

issued by or on behalf of the payee, the bank is discharge by

payment in due course.

b) TT (Telegraphic Transfer)

Telegraphic Transfer is a message transmitted via telegraph;

fax or telephone after the customer fills in and signs the

application form for transferring funds from one place to

another. The bank receives the amount to be transferred,

charges commission on the transfer. The schedule of charges of

Tele-graphic transfer is given in the appendix. The customer is

given the receipt and the TT officer sends coded instructions in

the form of test numbers to the drawee branch telegraphically.

The code is decoded at the drawee branch and payment made to


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the beneficiary at the time of presentation. The amount of TTs

issued in a day are posted in the Branch’s online software

system by the related officers and then verified by the

supervising officers to balance the accounts in which

transactions occurred in the day. After the full verification the

payment is made to the customer. The following points are

scrutinized:

The full name of payee along with his address and /or

account number

The amount in words and figures should tally

Currency in which the payment is to be made

Signatures of the remitter/ purchaser should be present in

their respective box on the form.

The bank/branch where the payee’s account is being held.

c) MT (Mail Transfer)

When the money is not required immediately, the remittances

can also be made by mail transfer. In this method of

transferring funds, the sending bank sends instruction in writing

by mail to the paying bank for the payment of certain sum

money. When MT received by the paying bank, be make

payment.

d) Pay Order


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Figure 2.5; Pay Order Processing

e) Travelers Cheques

Traveler Cheques are generally issued for the convenience of

persons traveling in the Pakistan or abroad. These are issued to

applicants without any excise duty or commission. These are

the safest way of carrying cash when traveling anywhere in

Pakistan. Before issuing, the officer receives an amount equal

to the face value of the cheques, and also chare a small

commission. The charges of traveler’s cheques are mentioned

in the appendix. The traveler’s cheques are for fixed amount

and are treated as order cheques payable only to the purchaser

whose specimen signature appears on each traveler’s cheque

itself. Bank Alfalah presents Rs.1, 000, 5,000 and 10,000

denominations of traveler’s cheques.

Foreign Remittances

Foreign Remittances can be either inward or outward. In case of

Inward Remittances where the authorized dealers purchase foreign

exchange received in the form of MTs, DDs, TTs, Travellers

Cheques and Foreign Currency Notes it flows in and in case of


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Outward Remittances where the authorized dealers sell foreign

exchange by issuing the above mentioned instruments, it flows out.

Instruments of Inward Remittances

The following are the different Instruments used for inward

Remittances

Foreign Currency Cheques and Foreign Demand Drafts

deposited by BAL’s customers for collection.

Foreign Money Transfers or Foreign Telegraphic transfers

received from foreign banks to the credit of its customers’

accounts.

Rupees, DDs, MTs, and TTs drawn by one of the banks

correspondents/ branches on their Non-Resident Rupee

Account maintained with the branch.

Encashment of Foreign Currency Travellers cheques and

Foreign Currency Notes.

Export proceeds whether under Letters of credit or without

Letter of credit.

Instruments of Outward Remittances

Foreign Demand Drafts issued by BAL, Abbottabad City

Branch.

Foreign Outward Bill for Collection (FOBC)

Foreign Telegraphic Transfers/ Money transfers

Travellers Cheques

Corresponding Banks for Remittance

Since Bank Alfalah does not have branches in all countries, it has

correspondence with the following banks for remittance.

US dollar ($)


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Citi Bank, American Express, ABN Amro, Banker trust and Habib Bank New York.

Pond Sterling Habib Bank London

Deutch Mark (DEM) National Bank of Pakistan

Frankfurt

Euro Commerce Bank

Frankfurt

Money Gram

Money gram is a world wide setup. Money gram is a machine

setup, through which a customer deposit money. The customer fills

a form and deposit the money, the banker gives him a message.

The customer give that message to the other party either he is in the

country or outside the country. He visits that bank which is listed in

the money gram setup. He gives that message and takes his money.

It is a type of international online facility. 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.

2.13.3 Cash Department

The Cash Counter

The cash counter is occupied by four cashiers which is headed by a

head cashier that pay and receive cash from the customers after

carefully checking the instruments presented for payment and cash

presented for depositing or paying. Besides, there is a officer

responsible for issuing RTCs, DDs, TTs, MTs, Pay Orders etc. and a

senior Grade I officer who supervises the transactions and gives

necessary advice in case of any doubtful activity. After closing of the

business hours, the tellers verifies the amount of cash , physically,

which is cross verified by the manager operations and tailed with the

general ledger account. Tellers take extreme are to detect counter fag

notes and if such notes are detected, the matter is referred to the

manger operations.


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Receipt and Payment of Cash

For cash collection a cash deposit slip is filled by the customers, which

include the branch name, branch code, title of account, the date,

amount which is deposited in the account and the signatures of the

depositor. The senior officer maintains with himself a “Cash Received

Stamp” that is affixed on the paying in slip after the cashier signs it.

Cash or any other instrument presented for depositing in the

customer’s or a beneficiary’s account is accepted and the account

credited only after the paying in slip has been signed and

countersigned by the officer.

For payment customer present cheque over the counter, the cheque

should not be crossed. Crossed cheque payment is made after the

clearing. Before the payment the cheque is verified by the officer. It is

verified for staling, post dated, payee’s name, crossing, signatures,

amount both in words and in figures and authentication of alterations.

If there is any ambiguity in the cheque so the cheque is than returned.

After making the full verification, the cheque is posted, supervised and

cancelled by the authorized officers before the cashier pays cash to the

presenter of the instrument.

Counting Cash

The authorized officer checks and counts cash in the afternoon after

the transactions by the customers have been closed for the day. The

number of stitched bundles and sealed bags containing coins are

properly checked and the results tallied with the recorded balance in

the cash register.

2.13.4 Clearing Department

Banks collect cheques for their customers that are drawn on other banks. This

function of clearing its customers’ cheques by a bank is performed for settling

payments through the clearing houses in the State Bank of Pakistan. In cities


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with no SBP coverage, the clearing is than supervised by National Bank of

Pakistan.

Types of Clearing

a) Inward Clearing

The process where instruments drawn payable on Bank Alfalah

Abbottabad City Branch are deposited by the holder with other

banks/ branch and presented for payment.

b) Outward Clearing

The process where the instrument drawn payable on some other

bank/ branches is deposited for collection with Bank Alfalah

Abbottabad City Branch.

Process of Clearing

A clearing house is a place where clearing officers of all scheduled

banks get together to settle payments and receipt of cheques drawn

on each other. Cheques received at BAL Abbottabad City Branch

are sorted and entered in the outward registers by the officers and is

sent to the BAL Abbottabad Supply Branch. Than in the Supply

Branch a copy of the clearing schedule prepared sent to the

clearing house supervised by the State Bank of Pakistan in all the

major cities of Pakistan and in the smaller ones by the National

Bank of Pakistan as an agent of the central bank. In the Clearing

House each bank receives from other banks cheques drawn upon it

and delivers to other bank cheques drawn upon them. The net

difference is settled by Dr, Cr. To their account with the

supervising bank.

2.13.5 Credit Department


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MANAGER

Figure 2.6; Hierarchy of Credit Department

Commercial banks are so named because they specialize in loans to

commercial and industrial businesses. Banks make three types of loans:

commercial and industrial loans, consumer loans, and mortgage loans.

Commercial and industrial loans are loans to businesses or industrial firms.

These are primarily short-term working capital loans (loans to finance the

purchase of material or labour) or transaction or longer-term loans (loans to

purchase machines and equipment).

Whether a bank will make a loan or not depends on the credit and loan history

of the borrower, the borrower’s ability to make scheduled loan payments, the

amount of capital the borrower has invested in the business, the condition of

the economy, and the value of the collateral the borrower pledges to give the

bank if the loan payments are not made.

Types of Advances

a) Running Finance

This is the most common for m of bank advances. When a borrower

requires temporary accommodation, the BAL allows withdrawals on


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his account excess of the balance with the borrowing customer have

in credit, and a running finance thus occurs. This accommodation is

generally allowed against collateral securities to reduce risk of the

bank. The borrowing customer is in an advantageous poison in

running finance, because he has to pay service charges only on the

balance outstanding against him. In case of default the bank has the

right to sell off the collateral and recover the amount outstanding.

b) Term Finance

This is very common form of borrowing by commercial and

industrial concerns, and it is made available either against pledge or

hypothecation of goods, produce or merchandise. In term finance, a

borrower is allowed to borrow money from the bank up to a certain

limit, either at once or as and when required. The mark-up is only

given on the amount actually utilized. It is a short term, self-

liquidating commercial loan. It is given for one year and renewed

after one year.

c) Loans

When a customer borrows a fixed amount repayable either in

periodic instalments or in lump sum at a fixed future time, it is called

a “loan”. BAL Abbottabad city branch allows loans to their

customers. The bank first takes collateral securities against the loan.

Bank Loans are classified into:

i. Loan by Security

This type of loans is secured by security. The main types of

securities pledged with the bank are as follows:

Equipment

Real Estate

Ware House Receipt

Stock Bonds


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ii. Loan by Maturity

This type of loans is classified according to maturities, which

are as follows:

Short term Loans (payable within one year or on short

notice)

Intermediate term Loans (It is paid in instalments, it is

for one to five years)

Long term Loans ( This type of loans is for longer

period than the intermediate loans, it can be paid before

maturity)

iii. Loan by Purpose

A borrower can get the loan from BAL for various purposes;

BAL Abbottabad City Branch advances loans for the following

purposes to its customers:

Commercial Loans

Industrial Loans

Personal Loans

2.13.6 Credit Cards Department

Bank Alfalah visa cards introduced in 2002. During the fierce competition in

the market today, the Alfalah Visa Credit card has captured a significant

make share. It is accepted at nearly 30 million merchants and 870,000 ATMs


228

in more than 150 countries around the globe and over 10,000 establishments

in Pakistan.

Alfalah VISA helps to pay for shopping, travel, entertainment, meals and

much more. Card members are facilitated through a number of promotions

from time to time like Matchless Discounts (discounts at nationwide

merchants’ outlets, making each shopping spree an exciting one), Dine’a’

Discount (the best discounts at a wide range of selective restaurants) ,

Fortunes Rewards Program (exchange of fortune points against an array of

attractive products and services), etc. 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 (SB S) monthly

installment plan with free home delivery at lowest interest rates.

Features

No Joining Fee

No Annual/Renewal Fee

Lowest Markup

Auto Debit Card

Global Acceptability

Cash Withdrawal

Revolving Credit

Free Supplementary Cards

24-Hours phone Banking Service.

Zero Loss Liability.

All Billing in Pak Rupees.

Comprehensive Travel Protection .

Categories of Alfalah Visa Credit Card

i. Alfalah gold card

(Is impressive combination of higher spending limits and

superior card services)


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ii. Alfalah classic cards

(An extremely appealing product with features not available

on any other credit card in Pakistan)

iii. Alfalah blue card

(This card is specially for Graduates or the persons who has

just started his career)

iv. Women exclusive

(For the first time in Pakistan, BAL has introduced a credit card

exclusively for women. this card has its unique features which

have been tailor-made for the women in Pakistan)

(Forget your wallet and chill out with Alfalah Visa Mini)

v. Auto Debit Card

(This is especially designed for the BAL account holder,

giving option of making minimum or full payment through

BAL saving and current PKR account specified on Alfalah

Visa monthly statement)

Young Professional card

Student card

Scholarship card

Supplementary Cards

All Bank Alfalah basic card members can apply for supplementary

cards in separate categories like;

Daughter’s card (children who are above 13 years of age)

Son’s card

House staff card(for the cook and driver etc )


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2.13.7 Auto Finance & Leasing Department

Car Finance

Alfalah car scheme enables customers to own

a car at easily affordable and flexible installments

with minimum down payment and insurance.

Corporate & Individual Car Leasing

BAL recently introduced car leasing facility for individuals and

corporate sector has set new dimensions for the product. Now

customers are provided with the option of either to get the vehicle

leased or financed.

2.13.8 Home Finance Department

Home finance scheme as launched BAL during last quarter of 2003. This

product has received overwhelming from the customers due to its lowest

mark-up and high quality services provided by bank. Home finance

Department started its operation in September 12, 2003


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Major Purposes of Home Finance

Bank provides the loan for three major purposes:

Purchase

Construction

Renovation

2.13.9 Foreign Exchange Department

BAL Abbottabad City Branch Foreign Exchange Department deals almost in

all types of foreign banking transactions such as:

a) International Trade

Banks play a very important role in settlement of rights and claims that

arises as a result in the contest of international trade between sellers

and buyers. There are four methods available through which

international trade debts are settled

Payment Against Documents

Documentary Credits (Revocable, Irrevocable and Confirmed

L/Cs)

b) Authorized Rates for Foreign Exchange Transactions

State Bank announces the rate for foreign exchange transactions. The

authorized dealers are given general permission to determine their own

rates of exchange, both for spot and forward transactions for the public

subject to the condition that the margin between the buying and selling

rate should not exceed 50 paisa per US Dollar or its equivalent in other

currencies. This condition does not apply to inter bank transactions.

c) Collection Services

BAL provides collection services on foreign bills for collection to its

clients such as Foreign Currency Cheques, Travelers Cheques, Foreign

Demand drafts deposited by its customers for its collection.


332

d) Payment against Documents (PAD)

Payment against Documents is created at retirement of L/C or

Acceptance. It is a temporary loan to the importer and is adjusted as

soon as the payment is received and documents are delivered to

importer. At the lodgments are delivered to importer. At the lodgment

date the L/C amount is converted at prevailing or booked rate.

e) Documentary Credits (Letter of Credit)

International trade involves numerous factors such as payment for

imports in the exporter’s country; shipment of goods within the

limitation prescribed under Trade Control regulations, and difficulties

of enforcing legal rights in a foreign country, etc. therefore, with a

view to overcome these impediments a system has been enforced in

order to deal with the above and other related factors so as to protect

importers and exporters of goods against unwanted risks. The system is

represented by ‘Letter of Credit’ and their operation is controlled under

the articles of the “Uniform Customs and Practice for Documentary

Credits” as adopted by the Council of the International Chamber of

Commerce and enforce with effect from January, 1994 in the Brochure

No 500


333

Figure 2.7; L/C Flow Chart

Types of Credit

There are various types of documentary credits and its

commercial value depends on its type but the two main

classifications are:

i. Revocable Credit

It can be amended or cancelled at any time without prior

warning or notification to the seller. It therefore, involves

risk as the credit may be amended or cancelled while the

goods are in transit and before the documents are presented

or although presented, before payment has been made. The

seller would then face the problem of obtaining payment


334

directly from the buyer. On the other hand it gives the buyer

maximum flexibility, as it can be amended or cancelled

without prior notice to the seller up to the moment of

payment by the bank at which the issuing bank has made

the credit available.

ii. Irrevocable Credit

This type can be amended or cancelled only with the

agreement of all parties thereto. It gives the seller greater

assurance of payment, but he remains dependent on an

undertaking of a foreign bank. It is lesser flexible as the

credit can be only amended or cancelled if all parties agree.

iii. Confirmed Irrevocable Credit

As there are often two banks involved, the issuing bank and

the advising bank, the buyer can ask for an irrevocable

credit to be confirmed by the advising bank. If the advising

bank agrees, the irrevocable credit becomes a confirmed

irrevocable credit. It gives the seller a double assurance of

payment, since a bank in the seller’s country has added its

own undertaking to that of the issuing bank. Since it

represents an additional requirement on the part of the

seller, it is more costly.

iv. Sight Letter of Credit

In this type of Credit, when the document is received by the

importer, after the receiving of document he makes

payment to the other party. Sight Letter of Credit is also

called PD (Payment against documents).

Parties to a Letter of Credit

Usually the following five parties are involved in a letter of

credit:


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The buyer who is the importer and the account party,

this party request the bank for opening of Letter of

Credit.

The bank issuing the Letter of Credit or the opener bank

i.e. BAL

The advising bank or the correspondent in the

exporter’s country, which advises the exporter of the

opening of a Letter of credit

The negotiating bank to which the beneficiary presents

his documents for payment.

The confirming Bank adds it conformation (for a fee),

thereby guaranteeing that it will pay if the terms of L/C

met irrespective of the opening banks’ ability to pay.

The reimbursing Bank is the correspondent bank of the

issuing bank for reimbursing funds to the negotiating

bank. It only provides the services.

The seller or exporter who is the beneficiary of the

credit

Credit Application

The instruction to be given by an applicant (customer) to BAL

covers the following

The full and correct name and address of the beneficiary

(seller)

The amount of the credit

Whether the credit is to be available by payment,

acceptance or negotiation

The party on who drafts, if any are to be drawn and the

tenor of such drafts

A brief description of the goods, including details of

quantity and unit price, if any

Details of the documents required


336

The place of shipment or dispatch or taking in charge and

the destination

Whether the transfer of the goods from one vessel to the

other, or from one mode of transport to another i.e.

transshipment is allowed or not

Whether partial shipments are prohibited or it is a

transshipment

The latest date for shipment, dispatch or taking in charge

(if applicable)

The period of time after the date of issuance, for the bills

of lading or other shipping documents within which they

must be presented for payment, acceptance or negotiation

The date and place of expiry of the credit

How the credit is to be advised, i.e., by mail, or by cable,

telegram or telex

Chick List for Applicant

Category of import----to understand and describe

category example commercial sector, industrial sector

and public sector and sub-field of interest to which

credit will relate.

The importing item must be a regulated one.

National Tax Number of applicant.

National identity card of the applicant.

Client of the issuing bank ----must have current

account.

Client must have sanctioned limit for opening letter of

credit.

Application form of credit

Is the Performa invoice/indent/purchase order which

shows

i. Description of goods


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ii. Specification of goods

iii. Unit price of goods

iv. Total price of goods

v. Terms of sales of goods

“Form I” in triplicate----is forwarded to SBP for

reporting of sale of foreign exchange.

Draft or Bill of Exchange, which include

i. Amount of draft is checked

ii. Tenure of L/C

iii. Name of the importer and account number

iv. Date of draft not later than validity date of L/C

and date of negotiation

v. The period between date of draft and date of

shipment on Bill of Lading should not exceed 21

days.

vi. Draft should be signed by the beneficiary and

drawn on opener

Insurance cover note/ Marine insurance policy must be

issued in the joint name of the issuing bank and the

importer.

Amount in the insurance cover note must be equal to

L/C amount.

The date on the insurance policy must not be later then

that of the shipment date.

Marks if asked to be put on packages must be clearly

defined

Transport Documents (Bill of Lading for import of

goods on ship, Airway Bill for import Air Cargo, or

truck receipt if the import is by road)

Packing List

Issuing a Credit


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i) The buyer and the seller conclude a sales contract

providing for payment by Letter of Credit.

ii) The buyer instructs BAL, the issuing bank, to issue a

credit in favor of the seller, the beneficiary.

iii) BAL asks Bank “X”, usually in the seller’s country to

advise or confirm the credit.

iv) The advising or confirming bank informs the seller that

the credit has been issued.

v) The seller then sends the documents evidencing the

shipment to the bank where the credit is available (this

may be the issuing or the confirming bank or any other

named in the credit as the paying, accepting or

negotiating bank). Suppose, the credit is available at

BAL.

vi) As soon as the seller receives the credit and is satisfied

that he can meet its terms and conditions, he is in

position to load the goods and dispatch them.

vii)BAL checks the documents against the credit. If they

meet the requirements of the credit, it either

effects payment in accordance with the terms of

the credit, either to the seller if he has sent the

documents directly to BAL or to the bank that

has made funds available to him in anticipation

reimburses in the pre-agreed manner the

confirming bank or any bank that has paid,

accepted or negotiated under the credit after

checking the documents by BAL, they are

released to the buyer upon payment of the

amount due, or upon other terms agreed between

him and the bank. The applicant sends the

transport document to the carrier who will then

proceed to deliver the goods.


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Settlement

The following are the methods for settlement of a Letter of

Credit’s transaction:

i) By Payment/Sight/DP

In this method of the settlement the seller sends the

documents to BAL evidencing the shipment. After

checking that they meet the credit requirements, BAL

makes payment.

ii) By Acceptance/Usance

The seller sends the documents to BAL evidencing the

shipment accompanied by a draft drawn on it at the

specified tenor. After checking that they meet the credit

requirements, BAL accepts the draft and returns it to the

seller. By accepting, the bank signifies its commitment

to pay the face value at maturity. In this method bank

take some collateral securities because title document

are released just against acceptance.

2.14 Management of BAL

BAL is managed by a 6-member Board of Directors headed by a Chairman. There

is an Executive officer, who runs the Executive Committee. In Executive

Committee there are 7 members.

The names of members of the Chairman, Board of Directors and Executive

Committee along with their designations are given in the annexure.

CHAPTER – 03


440

Bank Alfalah Services and Products

3.1 Bank Alfalah Products

Bank Alfalah has achieved a competitive advantage over other banking institutions by

offering a complete range of banking solutions for its valued clients. The concepts

entail creation of a financial super Market where a large variety of banking products

and services are available to meet diverse needs of the customers.

A summary of Bank Alfalah products and services is as follows:

3.1.1 Deposit Products

a) PLS Saving (Rupee) Accounts

Saving accounts are designed to mobilize savings primarily from a

large number of individuals and house hold. Any one or more

individuals or partners can open a PLS saving account with the

Bank.

b) Current Rupee Account

Individual, partnerships, companies, associations, clubs,

societies and NGOs are eligible to open current accounts.

This type of account is further classified as individual account

and Joint Account.

c) Term Deposit

It is one of the popular account types. The amount is deposited in this

account for fixed time period i.e. from one month to five years. The

interest is various with the variation of time limitation. The rate of profits

increases as per increase in time period. The customer cannot withdraw

money before maturity. The profit on this account is paid after the

maturity. But if a customer want to withdraw before maturity, so he will

give a notice to the bank 7 days before borrowing.


441

d) Royal Profit Savings (Rupee) Accounts

Royal profit is a high yield rupee account intended to provide higher rates

of profit to high net worth customers and greater flexibility and

convenience in terms of transactions. Current rates of profit are as follows:

Table 3.1 Royal Profit Savings Account Proposed Rates

e) Royal Patriot (Rupee Term Deposit)

Royal Patriot is a rupee term deposit scheme with competitive rate of

profit. Current rates of profit are as follows:

Table 3.2 Royal Patriot Competitive Rates


Amount Proposed Rates (P.A)

From 50,000 To 999,999 1.50%

From 1,000,000 To 9,999,999 1.75%

From 10,000,000 To 49,999,999 2.00%

From 50,000,000 To 149,999,999 2.50%

From 150,000,000 & Above To be quoted by treasury

Tenure 25,000-999,999 1,000,000-4,999,999 5,000 & Above

1 Month 1.50 % 1.60 % 1.70%

3 Month 1.75 % 1.85 % 1.95%

6 Months 2.00 % 2.10% 2.20%

1 Year 2.25 % 2.35 % 2.45%

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f) Foreign Currency Accounts

This Account is offered to resident and non-resident Pakistani’s as well

as foreigners can open foreign currency accounts. A foreign currency

account is opened either as savings account or current accounts.

Foreign currency accounts are opened and maintained subject to local

laws and regulations in force from time to time. Profit on foreign

currency saving account is paid on half-yearly basis and on term

deposit it is paid on maturity. No interest is paid on foreign currency

current accounts.

g) Safe Deposit Lockers

Bank Alfalah provides safe deposit lockers facilities to its customers

for safe keeping of their valuables like documents, securities and

jewellery etc. Important features of lockers facility are as follows:

Various sizes to choose from small to extra large: small,

medium & large

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

Locker rent is waived for customers maintaining a minimum

deposit of Rs.2 million.

Current account or above US $25,000/- in a current account or

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

The key deposit of the Locker is Rs.1,000/- which is

refundable

Locker Size Charges per annum

Small Rs.1000/-

Medium Rs.1500/-

Large Rs.3000/-

Special Rs.3500/-

Table 3.3 Locker Rates


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3.1.2 Consumer Finance Products

Consumer finance is a fast growing segment of banking business in Pakistan.

Credit cards, car finance, personal loans, loans for purchasing household

appliances, computers and related accessories and housing financing are the

principal consumer finance products.

Being a market oriented bank; Bank Alfalah also has a strong focus on

consumer banking and consumer finance. A brief description of products is as

follows:

a) Auto Leasing and Financing

Car Finance

Alfalah car scheme enables customers to own a car at easily

affordable and flexible installments with minimum down payment

and insurance.

Corporate & Individual Car Leasing

BAL recently introduced car leasing facility for individuals and

corporate sector has set new dimensions for the product. Now

customers are provided with the option of either to get the

vehicle leased or financed.

b) Credit Cards

Credit Cards are increasingly becoming way of life in Pakistan. Bank

Alfalah (visa) Credit Card product was launched in Dec, 2002. In a

short period of time, it has achieved a unprecedented success. BAL

Credit Card is unique in the sense that there is no cared issuance fee as

it is free forever.

c) Alfalah Hilal Card

Bank Alfalah through its commitment to provide superior and

improved services to its valued customers, has unveiled a nationwide

network of ATMs. Bank Alfalah introduce Alfalah Hilal Card the

revolutionary, new-age form of cash that provides greater freedom,


444

security and convenience combined with the wide reach of Visa

Network. This card can be use for all financial needs around the world,

round the clock, wherever; Visa electron cards are accepted locally and

internationally. It gives an unlimited access to the current/Saving

account with a simple swipe, at millions of retail shops or ATMs,

worldwide.

Bank Alfalah Limited ATM network is geared up to exploit the latest

technology, and is equipped to meet the highest standards of security

andefficiency.

d) Consumer Durables

Bank Alfalah continually strives to improve and add products to its

consumer Banking service. BAL launched Micro-Financing of

consumer durables on August 04, 2003, which is yet another milestone

towards its commitment of meeting all the financial needs of esteemed

customers.

The scheme is basically a term finance facility repayable in monthly

installments, giving customers an opportunity to own housed products.

In this way, this product is facilitating the customers and helping them

out to improve their standard of living.

e) Home Finance

This product which was launched on September 01, 2003, provides a

wider range of Home Finance tailor-made plans, designed specially to

meet customers’ need at a very competitive rate. At present, Bank Alfalah

is the only Bank in the market, which offers a house finance scheme for

non-resident Pakistani customers based in the UAE besides Pakistani

residents. Housing finance is available from Rs.0.500 million to Rs.7.50

million to purchase, renovate or construct a house/apartment. Important

points are as under:

Payment period ranges from 3 to 20 years.

Owner only invest 30% of the value of property.


445

Loan can be repaid before maturity without any penalty.

Borrower’s age must be between 25 to 65 years.

Salaried persons, businessmen and self-employed people are

eligible.

Financing is also available for purchase of residential land.

Complete freedom to move between floating and fixed rates.

Financing available to resident & non-resident Pakistanis.

Minimum amount will be Rs.05.500 million & maximum of

Rs.7.50 million.

Mark-up option available for floating & fixed rates.

f) Alfalah Karobar Finance

Alfalah Karobar Finance is a new Product of BAL, which is launched

recently.

It is a hassle-free running finance facility for SMEs that meets all the

business needs like no other.

g) Alfalah Zarie Sahulat

Bank Alfalah Ltd. (BAL) agri finance program has been named as "Bank

Alfalah Zarie Sahulat”. Bank Alfalah is extending this service to the

clients on a competitive markup rate. The scheme now covers financing of

a multitude of activities related to crop production, harvesting,

transportation, marketing, storage, processing, packing, export, agri

development, working capital and fixed investment financing of agri non

crop activities, storage, silos, etc. making it quite exhaustive and

comprehensive. The products have been, therefore, designed keeping in

mind objectivity of practical applicability in market scenario and to cater

to the most commonly demanded items of agricultural financing by

farmers.

Products:


446

Products of Alfalah Zarie Sahulat along with the nature of facility and

their purpose are quoted below.

Table 3.4 Alfalah Zarie Sahulat Products

Product Nature Of Facility Purpose

Alfalah Paidawari Zarie Sahulat Short Term Processor, agri producer, exporters

and other eligible items.

Alfalah Musalsal Zarie Sahulat Short Term (Running finance

limit for 3 years with annual

clean up)

Credit needs under working capital

Alfalah Tractor and Transport

Zarie Sahulat

Medium Term Purchase of tractors, trolleys, pick-

up, motor cycle, trucks, milk van or

other such items including repair of

tractors, as per eligible items.

Alfalah Machinery &

Equipment Zarie Sahulat

Medium/Long Term To finance machinery and

equipments, such as, combine

harvester, thresher, picker, digger,

trolley, planter, sowing drill,

cultivator, plough, power tiller,

harrow, sprinkler, cane crusher,

tobacco curing equipment etc.

Alfalah Aabpaash Zarie Sahulat Medium Term To meet irrigation water needs of

the farmers.

Alfalah Islah-e-Araazi Zarie

Sahulat

Medium Term Land development and

improvement, land leveling laser

leveling, clearance of jungle, farm

field layout, terracing,

contouring, soil reclamation,

embankment, land formation, bund

construction, water management,

water course improvement etc.

Alfalah Poultry Zarie Sahulat Short/Medium Terms Working capital and fixed

investment needs for broiler and


447

layer production, breeder flock, GP

flock, hatchery, product

processing, packing, transportation,

storage, compound feed making

etc.

Alfalah Dairy & Livestock Zarie Sahulat Short/Medium

Term

Working capital and fixed

investment financing of dairy and

milch animals, feed lot and

fattening station structure and

equipment, livestock farm structure

and equipment, fattening of animal,

milk chilling plant, construction of

sheds for animal, opening of

private veterinary clinics

(veterinary equipment), opening of

veterinary store, milk plant and

other eligible items.

Alfalah Fisheries Zarie Sahulat Short/Medium Terms Inland:

Fish seed and feed, manure

charges, running charges of tube

well pumps, construction

excavation, expansion and

rehabilitation of pond, installation

of tube wells, water channels,

fencing, boats, net twine, rope, fish

yards etc and other eligible items.

Marine:

Fuel, ration, and ice for marine

fisheries, engine and spare parts,

new boat and trawler, boat

equipment etc. and other eligible

items.

Alfalah Silos/Storage Zarie

Sahulat

Short/Long Term Construction of cold storage,

godown, bins, silos, structure for

storage of wheat, steel/metal

capsules, hire charges for storage


448

of raw agri product etc. and other

eligible items.

Alfalah Marketing Zarie

Sahulat

Short Term To facilitate the marketing of the

produce and also for export of

cotton, cotton yarn, mutton, beef,

fruits, vegetables etc and all other

eligible items.

Alfalah Agri Industrial Zarie

Sahulat

Medium/Long Term For setting up seeds processing

units, installation of fruit and

vegetables machinery, milk chilling

units, polishing , grading,

packaging of fruits and vegetables

cotton ginning factories under

BMR, Bio – gas plant etc.

Alfalah Bills / Guarantees Zarie

Sahulat

(For growers’ corporate client

only)

Short Term Financing against agri produce

procurement receipt, purchase of

bills, deferred payment leaf

vouchers issued by tobacco

companies, continuing guarantees

etc.

Alfalah Lease Zarie Sahulat Medium/Long Term For leasing tractors, farm

machinery, equipment etc

Alfalah Bio Gas Zarie Sahulat Medium /Long Term Setting up plants. This shall be an

alternate use of entry

Source: www.BankAalfalah.com

h) 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


449

http://www.BankAalfalah.com/

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,

IPOs 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

Financial restructuring

Private placement of Term Finance Certificates (TFCs) and equity

underwriting

Guarantee syndications

Mergers & Acquisitions (M&As)

Fostering joint ventures

Privatization – Sale side and buyers side advisory

Structuring new financial instruments

i) Travelers Cheques

Bank Alfalah presents Rs.1,000, 5,000 and 10,000 denominations of

travelers cheques, making it very convenient to carry money while

traveling or keeping your emergency cash safe.

j) 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.


550

k) Online Banking

CHAPTER – 04

Analysis of Bank Alfalah

This chapter is about the financial and general analysis of BAF based on the

observation during the six week internship period and also from the discussion with

the cooperative staff of BAF

4.1 Common Size Analysis

BAL today represents a bank that has grown with time and experience. At

present it is a major financial institution in scope and size. It symbolizes a fully

grown tree, ever green, strong and firmly rooted

4.1.1 Vertical Analysis

Based on Total Assets of Balance Sheets


551

Bank Alfalah now offers the facility of on-line banking to

its customers through its country wide network of branches.

Customers can use the ATMs or the banking counters of any

branch for day-to-day banking needs, irrespective of branch

where they maintain their accounts.

For Corporate customers centralized Cash Management

facility is also offered through on-line banking.

Table 3.5; Vertical Analysis Based on Total Assets of Balance Sheets

Based on Total Revenue of Income Statements


552

Table 3.6; Vertical Analysis Based on Total Revenue of Income Statement

4.1.2 Horizontal Analysis/Trend Analysis

Summarized Balance Sheets Trend Analysis (Base Year 2002)


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Table 3.7; Summarized Balance Sheets Trend Analysis (Base Year 2002)

Summarized Income Statements Trend Analysis (Base Year 2002


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Table 3.8; Summarized Income Statements Trend Analysis (Base Year 2002)

4.2 Financial Analysis

Financial analysis is the process of identifying the financial strengths and weaknesses

of the firm by properly establishing relationships between the items of balance sheet

and profit an loss account, Financial analysis can be undertaken by management of

the firm, or by parties outsides the firm viz, owners, creditors, investors and others.

The nature of analysis depending on the purpose of the analyst. Such analysis is of

special interest to the following groups:

Bankers, Creditors

Investors, Shareholders and owners

Government agencies


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Management

The various stakeholders of business are all interested in the analysis of financial

statements. But the focus of interest of all is not the same. For example Trade

creditors are interested in firm’s ability to meet their claims over a very short period

of time. Their analysis will, therefore, confine to the evaluation of the firms liquidity

position.

Suppliers of long term debt on the other hand are concerned with firm’s long-term

solvency and survival. They analysis the firms profitability over time, its ability to

generate cash to be able to pay interest and repay interest and repay principal and the

relationship between various sources of founds (Capital structure relationship). Long-

term creditor do analyses the historical financial statements by they place more

emphasis on the firms projected financial statement s to make analysis about its future

solvency and profitability

Investors who have invested their money in the forms share are most concerned about

the firms that steady growth in earnings. As such, they concentrate on the analysis of

the firm’s present and future profitability. They are also interested in the firms finical

structure of the extent it influences the firms earnings ability and risk.

Management of the firm would be interested in every aspect of the financial analysis.

It is their overall responsibility to see that the resources of the firm are used most

effectively and efficiently and that the firm’s financial condition is sound.

The financial growth of any organization can be measured in terms of the profits it

generates at the end of its financial year. In the case of banks this financial expansion

can further be measured by the increase in its base of equity, deposits and profits. The

increase in its advances to customers as well as its financing of imports and exports

emphasizes a bank’s financial enrichment. These factors give a clear indication of the

enlargement and progression of the bank’s operations.


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4.2.1 Financial Highlights (Graphical Representation)

a) Profit After Tax (in Rupees)

Graph 4.1; Profit after Tax (in Rupees)

b) Earning Per Share (in Rupees)

Graph 4.2; Earnings per Share (in Rupees)


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c) Investment (in Rupees)

Graph 4.3; Investment (Rupees)

d) Net Asset Value Per Share (in Rupees)

Graph 4.4; Net Asset Value per Share (in Rupees)

e) Earning Assets to Total Assets


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Earning Assets to Total Assets= Earning Assets/ Total Assets *100For Year 2003: 81%For Year 2004: 78%For Year 2005: 82%For Year 2006: 82%For Year 2007: 80%

The ratio shows improvement in 2003, 2005 and 2006 from the previous year

f) Advances to Deposit

Credit Advances to Deposit Ratio= Advance/ Deposits and other Assets *100For Year 2003: 70.84%For Year 2004: 83.58%For Year 2005: 81.54%For Year 2006: 87.25%For Year 2007: 83.44%


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g) Return on Assets

Return on Assets= Net Profit/ Average Total Assets *100For Year 2004: 1.2% For Year 2005: 2.2%For Year 2006: 2.8% For Year 2007: 2.7%

h) Net Interest Margin

Net Interest Margin=Interest Income-Interest Income/Average earning Assets *100For Year 2004: 3.05%For Year 2005: 5.1%For Year 2006: 6.07%For Year 2007: 5.9%


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i) Operating Profit Margin

Operating Profit Margin=net interest income-Operating Profit/Total interest income *100For Year 2003: 22.8%For Year 2004: 26.2%For Year 2005: 36.0%For Year 2006: 37.8%For Year 2007: 38.4%

j) Cost to income Ratio

Cost to income Ratio=Operating Profit/Net Interest Income +Non Interest Income *100For Year 2003: 41.4%For Year 2004: 38.0%For Year 2005: 20.8%For Year 2006: 19.1%For Year 2007: 18.6%


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k) Net Non Performing Assets

Net Performing Assets= Net Performing Assets/loans given *100For Year 2003: 1.04%For Year 2004: 0.7%For Year 2005: 0.9%For Year 2006: 0.97%For Year 2007: 1.38%

l)


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4.2.2 Financial Highlights/Financial Ratio Analysis (for Last Six Years)

Table 4.1; Financial Highlights


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4.3 SWOT Analysis


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This SWOT analysis of Bank Alfalah Limited takes into consideration the

external as well as the internal environment internal structure of the bank.

4.3.1 Strengths

The predominant strengths of Bank Alfalah Limited are

Humble Management

Strength And Commitment Of Sponsors

Efficiency

Phenomenal Growth

Vastly Experienced Management

Highly Professional Human Resource Department

Crucial Location Of Branches

Image Building Activities

Bank is financially strong and has a huge deposit reserve

Its cost of funds is less as compared to many of its competitors

Personnel of Alfalah are well trained and highly skilled. Majority of

employees has many years of experience in banking sector and are an

asset for the bank

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

4.3.2 Weaknesses

The chief weaknesses are

Small Size

Less Efficient Computer And I. T. System

Disproportionate Presence Of Old Staff In The Upper Management

Hierarchy

Skill Set Of Employees Is Not Up to The Mark As There Is No Job

Rotation


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Foreign Banks Still Are A Little More Prestigious

Bank Alfalah Limited Does Not Possess Foreign Network

No Advertising In Electronic Media

It is a step behind in using new technology as compared to other banks

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

4.3.3 Opportunities

The opportunities on which bank Alfalah can capitalize upon are

Extension of local branch network

Establishing foreign branch network

Capitalizing on information technology

Unexplored market of multinational corporations

Growth in textile sector

Adopt E-banking

4.3.4 Threats

The predominant threats Bank Alfalah is facing at the moment are discussed in

the following lines.

Private sector banks

Heavy reliability on only one market segment i.e. Textile.

Network expansion by foreign banks

If Pakistani banks (especially state owned banks), backed by huge

network improve the service they give and their employee skill set

Terrorist image of the country

Inconsistency in government policies


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4.4 Market Structure of BAL

Definition

A market consists of all the actual and potential buyers and sellers of a particular

product. Market structure refers to the competitive environment in which the

buyers and sellers of the product operate.

4.4.1 Types of Market Structure

The following are the main types of the Market structure

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

4.4.2 Market Structure Bank Alfalah Limited

The Bank Alfalah Limited Comes under the Monopolistic Competition Because;

There are large number of Financial Institutions in the Market.

Habib Bank Limited

United Bank Limited

Allied Bank Limited

Muslim Commercial Bank Limited

National Bank of Pakistan

Bank of Khyber

National Saving Centre

Al-Faysal Bank Limited

Saudi Pak Bank Limited

Standard Charted Bank Limited

First Women Bank Limited

Bank Al-Habib Limited

PICIC commercial Bank Limited

KASB Bank Limited

NIB Bank Limited


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There is large number of customers in the Market.

In the Market there are number of substitutes are available

National Saving Centre

Stock Exchange

Government Securities

Advances

The products characteristics are different according to:

Rate of Interest

Mode of delivery

Duration of delivery

Services

Communication

The products are relatively homogenous

Types of Accounts

Credit Cards

Debit Cards

Car Finance

Advances

Consumer Durables

Foreign Exchange dealings


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CHAPTER – 05

Findings, Recommendation & Conclusion

5.1 Findings

The findings and analysis of Bank Alfalah Limited are as follows:

Good Image

Bank Alfalah has the benefit of having better reputation and image because of

having the strength of Abu Dhabi consortium and under the leadership of His

Highness Sheikh Nayan Mabarak Al-Nahayan. People feel lesser risk for

investing their money with the bank.

World Class Services:

The bank is providing its customers world class and excellent services. This is the

main reason for the growth of the bank.

Coordination:

Meetings are held very frequently which keeps the head-office well informed

about the performance of its branches and also provides officials with the

opportunity to communicate, discuss and deals with different situations as they

arise.

Employee Behavior:

The employees of Bank Alfalah Limited are very committed to their work. They

are very hard working and punctual but some of them have problems with he

environment of the bank and they feel that the branch environment is not very

encouraging.


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5.2 Recommendation

Based on my six weeks stay with Bank Alfalah Limited, I want to give some

suggestions for improvement in its operations as under:

Misdistribution of work:

In Bank Alfalah, there is misdistribution of work; some people are over burdened

with the work. So I suggest that there should be fair distribution of work in all the

departments.

Participative management:

Participative management concept should be adopted, where ideas from the

employees should also be taken, not only for developing products but also on

service, efficiency, employee morale etc. in order to improve them.

Fax Machines and Photocopying Machine:

The number of Fax machines and photocopying machine in the bank are also less

than they are needed. For photocopying one has to go upstairs. So there should be

more machines and also their placement should be at the right place.

Training programs

BAL should introduce more training programs for their employees. It will help

less educated and less experienced staff to grow and be a valuable part of the

bank.


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5.3 Conclusion

The six weeks spent at Bank Alfalah Limited, Abbottabad branch were, no doubt a

source of great learning for me about a lot of things particularly working in bank’s

atmosphere and system of bank. It’s my quite first experience to do work practically

in some organization. This practical training program did not only help me acquire

loads of knowledge about the predominant functions performed by banking

companies, but also imparted a lot of training as regards the set of behavioral traits

which distinguish a particular person from the rest of the lot in a professional

environment.

During my internship I concluded that currently bank Alfalah has a high

market share and is not facing any type if risk.

Due to highly trained professionals it is used to make progress leaps and

bound.

The main objective of bank is to build strong relationship with the

customers and make them believe that bank Alfalah is right for them by

providing effective and efficient services.

It has also created a strong goodwill and trust in the market.

At this point it is significant to write a word of gratitude for the institute,

which makes it sure, that all the students get an exposure to practical life

in relatively well-reputed organizations

I must underscore the fact that writing this internship report was an

evenly memorable experience as actually doing the internship. I

honestly tried my level best to come up with an original piece of

writing that could serve as a vivid proof of the fact that students at

COMSATS Abbottabad are certainly doing the internship.


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References

Annual Report BAL; 2008

Aslam, S (1999); Banking & Finance.

Adnan, Credit Officer , Bank Alfalah Abbottabad.

Bilal Maqbool, Manager Operations, Bank Alfalah Abbottabad

Hussain, S; Rana,K & Shabbir, A (1991); Banking Currency and Finance. , Lahore:

Ilmi

Iffland, Charles & Langueton, Pierre ; International Banking. New York: Irwin Book

Co.

Siddiqui, A.H; Practice and Law of Banking in Pakistan.

www.bankalfalah.com

http://www.bankalfalah.com/about/financial_performance.asp (last time Accessed on

January 15, 2009)


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http://www.askaribank.com.pk/

Annexure

Annexure A

BOARD OF DIRECTORS & MANAGEMENT

CHAIRMAN

H.E. Sheikh Hamdan Bin Mubarak Al Nahayan

BOARD OF DIRECTORS

H.E. Sheikh Hamdan Bin Mubarak Al Nahayan

Mr. Abdulla Khalil Al-Mutawa

Mr. Abdulla Nasser Hawaileel Al-Mansoori

Mr. Khalid Mana Saeed Al Otaiba

Mr. Ikram Ul-Majeed Sehgal

Mr. Nadeem Iqbal Sheikh

CHIEF EXECUTIVE OFFICER

Mr. Mohammad Saleem Akhtar

EXECUTIVE COMMITTEE

Mr. Mohammad Saleem Akhtar

Mr. Ikram Ul-Majeed Sehgal

Mr. Parvez A. Shahid

Mr. Mohammad Yousuf

Mr. Tanweer A. Khan

Mr. Sirajuddin Aziz

Mr. Mahmood Ashraf


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Annexure B


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Eight years Financial Summary [2000 - 2008]

Annexure C


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Source: Bank Alfalah Annual Report 2007


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Annexure D



777

Annexure E



778

Annexure F



779

Annexure G



880

Annexure H



881

Annexure I


882


Annexure J

Formulae of Financial Ratios

1. Net Profit Margin

Net Profit

Total Revenue

2. Gross Profit Margin

Gross Profit

Total Income

3. Return on Investment

Net Profit

Total Assets

4. Return on Equity

Net Profit

Total Equity

5. Total Asset Turnover

Mark-Up Revenue

Total Assets

6. Fixed Asset Turnover

Mark-up Revenue

Operating Fixed Assets

7. Current Asset Turnover

Mark-Up Revenue

Total Current Assets


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x 100

x 100

x 100

x 100

8. Current Ratio

Current Assts

Current Liabilities

9. Cash Ratio

Cash

Current Liabilities

10. Debt to Equity Ratio

Total Debt

Share holders Equity

11. Debt to Total Assets

Total Debt

Total Assets

12. Interest Coverage Ratio

Earnings before Interest and Taxes

Interest Expense

13. Advances to Deposits

Advances

Deposits

14. Investment to Deposits

Investments

Deposits

15. Op. Expenditure to Tot. Income

Operating Expenses


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Total Income.

16. Interest Earned to Advances

Interest Earned

Advances

17. Interest Expense to Deposits

Interest Expense

Deposits

18. Earning Per Share

Profit after Tax

Shares Outstanding


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Internship Report Bank Alfalah LTD_part2

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