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1. Objectives of Studying the Organization

Purpose of studying this organization is that, I have my own interest in this bank, because

of my friend and good repute of this bank. My friend is doing job in this bank and I thinkthis bank provide better jobs opportunity as compare to other organizations, thats why I

choose this organization for internship.

Another reason for studying this organization is that, the bank manager was my father

friend, therefore my father recommend this bank for internship program and here I gained

practical experience related with my course and I come to know how bank use the policies

and strategies and how evaluate its performance.

I feel pleasure and honor that I got the opportunity to work in such a privileged and

reputable bank of the country. During my internship program I tried my every best to equip

myself with all important knowledge. In this report, I have tried to humble endeavor to

cover various aspects of bank like, introduction, its history, main departments, culture,

objectives and working financial analysis.

2. Overview of the Organization

2.1 Brief History of the OrganizationAskari Bank Limited works as a Unit of Army Welfare Trust was established for the

Welfare of Army Officials. The office of Army Welfare Trust is situated at AWT Plaza,

Rawalpindi. AWT offers the AWT Saving Scheme to the army officials only. AWT has

its units as under:

Askari Associates.

Askari Leasing.

Askari General.

Private Business.

Textile Mills.

Cement Industry.

Askari Bank Limited.

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Askari Bank Limited was incorporated on October 9, 1991, as a Public Limited Company,

and is listed on Karachi, Lahore and Islamabad Stock Exchanges. The Bank obtained

business commencement certificate on February 26, 1992 and started operations form April

1, 1992. Askari Bank is scheduled Commercial Bank and is principally engaged in the

business of Banking as defined in the Banking Companies Ordinance 1962.

Askari Bank Limited continues to scale new heights in all areas of its operations. The safety

and security of depositors funds, high productivity and optimum use of technology are the

hallmarks of its corporate strength. In 1994, Askari bank limited earned international

recognition as Asia Money Award and the title of Best Bank of Pakistan for the year

1994, while Euro money declared the Bank as best domestic Bank of Pakistan for the year

1995.2.1.1 Askari Bank Limited Multan

Askari Bank Limited Multan was inaugurated on December 28, 1994. It is located on

Abdali Road Opposite to PIA Office. The location is connected to all the main trade centers

in Multan. It is a prosperous branch streaming towards great achievements. At the time of

its establishment the factored that were considered are as follows

Multan is zone covering a large population.

Multan City is linked to many big cities.

Agro based area constituting growers and gainers

Army Offices & Fort Colony

Educational Institution

2.2 Nature of the Organization

It is a commercial band providing lending services to consumers and corporate bodies, the

basic purpose of the bank is to earn profit. This bank is known as Askari bank Ltd. Askari

bank Ltd. The head office of Askari bank Ltd. is situated in Rawalpindi. In view of

deteriorating operating environment, bank slowed down the expansion plan and added one

branch in 1998 making a total number of branches 27. In 2001, the total number of

branches increased to 30 all over the country (Pakistan). Multan is a cotton city, so to get

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the export market of cotton Askari Bank Ltd. open its branch in Multan in December, 1994.

In a short span of time this branch increases their business remarkably. In 2001 this branch

gets the trophy of highest profit for the year 2001. This branch has highest deposits and

advances as compare to other banks working in Multan. In 2007, the total numbers of

branches are 115 all over the country. Every bank deals in money, accept the money from

those people who have spare it, and give them who have need it, basically band is a

business of money.

Askari bank Ltd. deals in money accept the deposits from people and lend them who need

it. Basic purpose of the bank is to earn the profit. Bank lends the money in shape of

consumer finance and agriculture finance and auto finance and many more facilities which

provide the bank to its customers.

2.3 Business volume of the Askari Bank Limited

In 2008, the profit of the Askari Bank Ltd. Abdali road Multan Branch was 113.5 Million.

But if we look towards the Business volume in terms of revenue, deposits, advances of the

Askari Bank of all branches is such as given bellow:

Current, Savings and other Deposits.

Customer deposits increased to Rs. 1318 billion by end 2008, an increase of 11% over lastyear. A compensation of deposits by type reveals that current accounts i.e. non

remunerative accounts increased by 19% followed by saving deposit accounts, which

increased by 11% over the previous year. The fixed deposits increased by 6%.

Earnings per share.

Earnings per share increased by 11% fro Rs. 10.09 last year restated for issue of bonus

shares during the year, to Rl. 1123 at the close of year.

NPLs and provisions against NPLs.

NPLs increased by 54% during the year to Rs. 3656 million from Rs.2373 million from last

year due to further downgrade of few large exposures. While these NPLs are being closely

monitored for recovery, Rs.1128 million has been appropriated as provisions against non-

performing advances, against previous years Rs. 639 million. During the year, the base of

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general provision was revised from judgmental to consistent vases and now general

provision is maintained @ 5% on all performing advances except consumer advances-

general provision on consumer advances is maintained as per SBP prudential regulations

for consumer finances.

Rs. In Million

Business Volume

Business Volume

-

20,000,000

40,000,000

60,000,000

80,000,000100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

Revenues Deposits Advances Share Capital

Source

Value'000

2008

2007

2006

2005

2004

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2.4 Number of Employees

Total number of staff in the Askari Bank Limited, Abdali Road Multan is 57, including five

Executive, three peons, one president and remaining are the employees. Total number of

employees of all the branches of Askari Bank is almost 6500.

2.4.1 Corporate Information

Lt. Gen. Javed Zia Chairman

Mr. M.R. Mehkhari President

& Chief Executive

Lt. Gen. (R) Imtiaz Hussain Director

Mr. Kashif Mateen Ansari Director

Mr. Zafar Alam Khan Sumbal Director

Mr. Muhammad Riyazul Haque Director

Mr. Shahid Mahmud Director

Mr. Noormahomed Rattensey Director

Dr. Bashir Ahmad Khan Director

Mr. Tariq Iqbal Khan Director

(NIT Nominee)

Mr. Saleem Anwar Company

Secretary

Audit Committee

Dr. Bashir Ahmad Khan Chairman

Mr. Noormahomed Rattensey Member

Mr. Zafar Alam Khan Sumbal Member

Auditors

A.F.Ferguson & Co. Chartered Accountants

Legal Advisors

Rizvi, Isa, Afridi & Angell

Shariah Advisor

Dr. Muhammad Tahir Mansoori

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2.4.2 Branch Level Hierarchy2.4.2 Branch Level Hierarchy

7

AVP/Operation

Manager

Mr. Noor Ul Islam

Area Manager

Mr. Sajjad Ali

OPERATION

DEPARTM

FOREIGN

EXCHANGE

CREDIT

DEPARTM

General Banking

Manager

Mr. Bilal Naeem

Cash Department

Mr. Shahzad

Remittance Deptt.

Mr. Asad Bhutta

Accounts Dept.

Mr. M.Shahzad

ImportsMr. Rizwan Azad

ExportsMrs. Saima Naz

Incharge

Mr.Sohail

Agriculture deptt.

Mr. waseem Faiz

VP/Branch Manager

Zubair Ahmed Sheikh

Personal Finance

Mr. Shafique

Credit Card

Mrs. KiranA/C Opening

Mr. Sheraz

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2.5 Product Lines/Services offered by the Askari Bank Limited

Askari bank offered the following products and service to its customer,

2.5.1 Consumer Banking Services

Personal Finance

Mortgage Finance

Business Finance

Smart Cash

Askari Debit card

Travelers cheques

Value plus Deposits

Profit / Markup Rates on Products

2.5.2 Islamic Banking Services

Islamic Corporate Banking

Islamic Investment Banking

Islamic Trade Finance

Islamic General Banking

Islamic Consumer Banking

2.5.3 Agriculture Finance

Kissan Ever Green Finance

Kissan Farm Mechanization Finance

Kissan Aabpashi Finance

Kissan Livestock Development Finance

Kissan Farm Mechanization

Kissan Farm Transport finance

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2.5.4 Corporate & Investment Banking

Corporate Banking Division

Investment Banking Division

3. Organizational structure

3.1 Main offices (Head office and Branches)

The head office of the Askari bank Ltd is situated AWT Plaza, The mall, Rawalpindi and

the total branches are 115. The branch network is given in Annexes.During the year,

Islamic Banking was launched under the Askari Islamic Banking, by opining 6 dedicated

Islamic Banking branches in major cities of the country. Further expansion is planned with

improved capabilities for offering products conforing to the shariah principles.

3.2 Review of the Various Departments of the Organization

The bank has following department:

Account Opening department

ATM Department

Accounts Department

Credit Department

Credit Card Department

Remittance Department

Foreign Trade Department

Cash Department

Clearing Department

3.2.1 Account Opening Department

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

enterprises. But in the case of a bank borrowing funds from outside parties is al l the more

vital because the entire banking system is based on it. The borrowed capital of a bank is

much greater their own capital. Banks borrowing is mostly in the form of deposits. These

deposits are lent out to different parties. Such deposit creation is done through opening an

account in the Bank.

In Askari Bank Limited Multan Mr. Sheeraz Hassan is operating the account opening

department along with performing some auxiliary functions of Check Book Issuing

3.2.1.1 Types of Accounts

In Askari Bank Limited, there are the following types of accounts:

Current account.

Saving Account.

Askari Special Deposit Account.(ASDA)

Term Deposit.

3.2.1.1.1 Current Account

In current account there is no interest on it. It is for only transaction purposes. They are

paid on demand. When a banker accepts a demand deposit, he incurs the obligation of the

paying all cheques drawn against him to the extended of the balance in the account. As

there is no profit paid on this account it is also called chequing account because cheques

can be drawn on it. Current account is mostly opened for business.

3.2.1.1.2 Saving Account

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

neighborhood. The minimum deposit for opening the account is Rs.1050/- (as obvious in

the Annexure).

Though individuals open such accounts for saving purpose, persons belonging to Armed

forces and different military institutions are free to use this account on current basis.

3.2.1.1.3 Askari Special Deposit Account

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ASDA account is an interest bearing current account interest is paid. The payment of return

is monthly, where as the rate of return with aspect to the amount of minimum deposit clear.

It is also chequing account because cheques can be drawn on it. It is necessary for this

account that the client must maintain a minimum balance of Rs. 50,000 at the end of the

month. Thats why it is similar to current account. It is mostly opened by Business but

individuals too open this account.

Tax of 0.3% would be deducted on ASDA if withdrawals are more than Rs.25, 000.

3.2.1.1.4 Term Deposits

A term deposit is a deposit that is made for a certain periods of time at the end of the

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

AKBLs Term deposits are of types clear in the deposit scheme. One of them is "Askari"

Advantage one month. The rate of return on this account is set by head office. The term

deposit account varies one month to 1 year for all following accounts.

The amount of profit is given to depositors in three ways:

By cash

By sending a bank Draft to depositors Home address or Officers or whichever is

specified as mailing Address.

The amount is credited in any one of the checking Accounts of the depositor.

3.2.1.2 Account Opening Procedure

For the chequing accounts (C/A, ASDA, SAVING), there are different types of account

holders are required for all these types of account holders. The operation /procedure

requirement that is needed for " Individual Account " differ greatly from " Joint account "

proprietorship "Partner ship , "Limited Company" And "Club society or Association as

explained below.

3.2.1.3 Individual's Account

When a single man or women opens an account in his/her own name and has the right to

operate it is called individual Account.

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Documentation

For literate person copy of National Identity Card is required as a primary requirement. For

illiterate person and Veiled Women, along with the copy of National Identity Card

requirement he or she must come in person for opening the account.

Operation

The person place a "Check Mark " in the type of account and type of operation

required

He/She fills in part-I of the form , a fix his /her either two or four similar signature

(or thumb expression in the signature space and get it introduced and signed by a

person who already has an account with the bank and write his account no in the

specific rows in a specific space.

The person fills in "next of Kin " position where he/she father, mother,

husband/wife or any other relative's name, his /her address, phone no and affix

his/her signature to certify this requirement. This requirement is needed because in

his/her absence bank can have correspondence with the specific person.

The person put her /his signature (" or thumb expression) on the signature Specimen

Card (SS CARD) similar in the area on the form. One the back of S.S card mailing

address, telephone no, Person to contact and introducer space is filled in. All these

requirement are necessary for future

The person deposits the initial amount for opening account on to the cash counter.

The person put his signature on form -A (check book requisition) on two places in"authorized signature" and fills in the "Title of Account space by writing his name.

If the person put his signature in Urdu or any language other than English, he signed

a "Vernacular form" where under take that affixed signature are original and his

own signature and two postal size photos are needed.

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The next day is the opening of account.

3. 2.1.4 Joint Account

When two or more persons, neither partners, nor trustees, open an in their name is called

Joint Account. Husband and wife or two persons of same sex can open joint account.

Documentation

For joint account copy of National Identity Card of all the persons is obtained other things

remaining same as in individuals account.

Operation

The person checks the type of amount and type of operation required in the

respective box on the form.

The persons fill in the Part-I and part-II in the form.

Signatures of both persons are obtained on the form in the area specified for

signature and S.S. Card.

In the title of account space names of all the persons are mentioned.

Accounts holder specified in the form that they will operate the form singly or

jointly.

3.2.1.5 Proprietorship Account

When an owner of a firm operating singly, opens an account in his firm name, this account

is called a proprietorship Account the proper himself liable for all his acts.

Documentation

For this kind of account, an application for opening the account on the firm letter -pad

(having the firm name) is required along with the NIC Card of proprietor.

Operation

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All operation remains the same except that the firm name is written in the "Title of the

Account area and signature of the proprietor are affixed in the S.S. Card and the area

specified for signatures on the form.

3.2.1.6 Partnership Account

The account is opened in the firm name and all partner designate one two persons to act on

behalf of the partner ship firmer all acts on behalf of firm. The partners in the partnership

firm are liable for the acts of the firm jointly and severely. Every partner has in a firm has

an implied authority bind his co. partners by drawing and enclosed cheques.

Documentation

Copy of N.I.C card of all partners

Application to open the account on the firm letter pad.

Partner ship deed in case registered partnership firm.

Letter showing the implied Authority of one or more partners to act on behalf of the

firm.

In case of non -registered partnership firm, understanding on behalf of the firm to

remain liable for all acts of the firm.

Name, address of all partners is written on the pad.

Operation

All other requirement remain same except that the form is dully signed by all partners cards

are signed by all those partners who will act on behalf of the firm and along filling part-I ,

Part-Iv is also filled.

3.2.1.7 Limited Company Account

This account is for limited companies. In order to facilitate their transaction with outside

parties, bank provides many facilities.

Documentation

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Memorandum of Association.

Articles of the Association

Resolution of the Board of Director.

Certificate of Incorporation.

Certificate of commencement of business

N-I-C

Operation

The persons authorized in the Resolution of the Board of Directors put their signatures on

S.S Cards. Next of kin "requirement "is not need in case of a Limited Company. After

completing each and every formality, introducer signature is verified by S.S card and is

stamped "Verified" customer signatures are admitted by stamping Admitting" near

signature and again signatures on S.S card are admitted in the same way. The same process

of verification and admission of the signatures is repeated on Form-A and next of Kin area.

After completing each and every formality, Accountant is open in the computer by writing

name, address, A/C Number etc.

3.2.1.8 Receiving Inward Cheques

Another responsibility and function of account Opening Department is to receive Inward

cheques for collection of other Banks as well as of Askari Bank Limited. Then these

cheques are sent to clearing official who clears these checks at SBP from other banks.

3.2.1.9 Account Closing

Account is closed on the written request of the customer Askari Bank Limited free of cost.

But to surrender the cheque book yet if some leaves are yet to be write to the bank as a

necessary requirements for closing the account.

3.2.2.0 Procedure

The customer for individuals account write an application to the manager of the

bank an a simple paper about the closing of his account with the bank (In case of

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proprietor ship partnership and limited company account the application should be

written an firm or company letter head)

The individual or in case of other type- proprietor firm and company surrender the

cheque book to the bank.

The cheque book is then torn from one side and is attached with the application.

In case of Ltd. Company account resolution of the board of directors is also

obtained to attach it with the application.

The account opening form of the account holder is taken from the account-opening

file, and the application, cheque book, and resolution of board of directors in case of

limited company account are attached with the form.

Lastly, it is written in Red Ink on the form that account closed and Date of

account closing.

3.2.2 ATM- Cards Department

This department deals in issuing ATM-Card, term deposits and Askari Bachat Certificate.

Mr. Sheeraz Hassan deals this department.

3.2.2.1 ATM Card

ATM Cards are only issue to Account Holder

Issuing Procedure

The person, first open the account within the blank.

Then he fills the ATM application form in which name of account holder, Fathers

name account number and N.I.Card number are mentioned.

A copy of N.I. card is also attached with the application form.

After completing this process, the application package is sent to head office

Askari Bank Limited head office takes a period of 3-4 days for preparing and

processing of ATM cards. First, list of card holder is issued and then after 15 days

cards are send to Askari Bank Limited issuing branch. The card and list are not sent

simultaneously in order to avoid any mishandling.

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Askari Bank Limited takes Rs. 350/- for 1st time issuance as charges for a $card

Biannually takes Rs 75.

3.2.3 Accounts Department

Accounts department is a department which deals and checks all the activity of all the

department .It also deals in expression of finance of the bank. Salary payment is also one

function of the bank.

3.2.3.1 Checking Banks Daily ActivityAccounts department deals and checks the entire working of the Branch; all the vouchers

that have been posted at the computer are scrutinized in accounts department. The End of

Day i.e. computer print is also received from the computer. The next day the activity is

separated some statements from the End of Day. Then next day activity separated some

statements from the End of Day. The vouchers are sorted out head wise. The vouchers

are matched with the entries in the statements.

Any abnormality if occurs, is immediately dealt with. All the vouchers and instruction are

checked individually are checked individually against the computer printouts. After

checking they are signed by Mr. .Naeem Shehzad and the internal auditorMr. Shafiq.

3.2.3.2 Other Activities

Preparation of daily bank positions statement

Payment of salaries

Preparation of the statements

Depreciation calculation

Lockers Issuance

3.2.4 Credit Department

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Lending or financing is one of the basic functions of banks of all categories, through which

they gain major part of their profits. A bank accepts deposits of money and repays cash to

its depositors on demand. But this is not to say that; bank gives this service for nothing.

Bank borrows money at a lesser rate of interest and lends to the borrower at higher rate of

interest. And the difference between these two is the profit of the bank. Credit department

deals in the following categories.

3.2.4.1 Consumer Banking Services

3.2.4.1.1 Personal Finance

One can avail unlimited opportunities through Askari Banks Personal Finance. With

unmatched financing features in terms of loan amount, payback period and most affordable

monthly installments, Askari Banks Personal Finance makes sure that you get the most out

of your loan. No matter what your need is, Askari Bank has more ways to serve you than

ever before.

3.2.4.1.2 Auto Finance

Askari Bank offers you the most convenient and affordable vehicle financing scheme to

help you own your favorite brand new car.

3.2.4.1.3 Business Finance

You always wanted to put in that extra money into your business, which makes it grow...

and grow!. Now you can stop worrying about your daily cash requirements, and start

enjoying our unique Askari Business Finance facility.

3.2.4.1.4 Debit card

Askari Debit Card means freedom, comfort, convenience and security, so that you can have

retail transactions with complete peace of mind. Askari Debit Card is your new shopping

companion which enhances your quality of life by letting you do shopping, dine at

restaurants, pay your utility bills, transfer funds, withdraw and deposit cash through ATM

anywhere, anytime.

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3.2.4.1.5 Mortgage Finance

Ever since the inception of life, shelter has been rated among the primary needs of

mankind. Owning a home for oneself still remains an exclusive dream for many. AskariBank has made the realization of your dream to have a house of your very own possible.

Whether you plan to build a house, tailor made to your requirements or buy a constructed

house, Askari mortgage finance enables you to pursue your goal without any problems.

3.2.4.1.6 Travelers Cheques

Askari Bank offers you its "Rupee Traveler Cheques" eliminating all financial risks while

traveling. So avoid risk of carrying cash through Askari Bank's Rupee Traveler Cheques.

Free Issuance.

Free Encashment.

Nationwide acceptability.

Facility of encashment in cash to the purchaser.

Facility of encashment through clearing.

No purchasing limit.

Valid until encashed.

Easily Transferable.

Account relationship not mandatory.

Fastest refund procedure in case of loss/theft.

3.2.4.2 Agriculture Finance

3.2.4.2.1 Kissan Ever Green Financing

Askari Bank has launched this program with the sole motive to provide dignity, prosperity

and freedom to the tiller of the land. The program is designed to help small, medium and

large farmers in meeting their short-term input requirements against one time sanction and

automatically renewable up to 3 years subject to its stipulated utilization/periodical

adjustment. The credit line is sanctioned in the light of available cash flows and input

requirements i.e. Seeds, Fertilizer & Pesticides etc.

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3.2.4.2.2 Kissan AabPashee Financing

Agriculture farming is impossible without adequate water. We can combat the prevalent

water scarcity by harnessing more natural resources. Increased use of mechanical meansthus provides a ready alternative. Keeping in view the scarcity of water, which is the

lifeblood of arable lands, Askari Bank has started a program for farmers, to finance

installation of Tube-Wells (electric, diesel and solar energy units) water management

equipments and water channel development etc., which will help farmers to make optimum

use of limited water resources.

3.2.4.2.3 Kissan Tractor Finance

Traditional modes of cultivation viz Bullocks, Camels, horses etc can no longer keep pace

with the demands of present times due to manifold increase in the population. Power in the

form of modern technology is therefore the need of the hour. To meet this emergent

requirement, Askari Bank has launched a Askari Kissan Tractor Finance to bring power to

the fields.

3.2.4.2.4 Kissan Farm Mechanization Finance

Beside Power at the farm i.e. Tractor, the benefits / advantages of power are maximized

with the use of Mechanical Support i.e. modern and improved equipments which essentially

complement one another due to their cost effectiveness and time efficiency. Askari Bank

has launched an Askari Kissan Farm Mechanization Finance for the assistance of the small

farmers and provides finance for farm equipment, trailer, thresher, drills & rotavators etc.

3.2.4.2.4 Kissan Farm Transport Finance

A grave handicap that afflicts our farmers is their inability, due to lack of proper facilities,

to take their produce to the market through efficient means of transportation. This adversely

affects the freshness, quality of the product and denies them the desirable Price-Fetching

opportunity. Conversely, they lack mobility to acquire much needed inputs essential for

their farming needs. One can safely conclude that if provided with appropriate and speedy

transport, the farmer can benefit by enhancing his selling ability and thus increase his

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income / cash flow. it is pertinent to mention that a number of Banks, Leasing Companies

and Private Agencies have geared their marketing efforts to concentrate on and have mainly

captured the urban markets.

3.2.4.2.4.1 Kissan Live Stock Development Finance

In order to supplement the income of the farmer, Askari Bank has launched a program

enabling the farmer to purchase Milk Animals, Goats, Sheep, Poultry and Fisheries without

incurring extra expenditure because of availability at his farm. He will be able to get milk,

meat and eggs etc., which normally do not form part of his diet. This program has the added

advantage that besides fulfilling his own familys consumption needs he will be able to

market the surplus and earn additional income. This will further improve their cash flows to

repay their other Loans / Revolving Credit on due date.

3.2.4.3 Fund Based Loan

3.2.4.3.1 Running Finance (R/F)

It is popularly known as overdraft. It is offered for working capital requirement of the

customer. It is created in current account adjustment from time to time finally on expiry

date. This facility is normally issued against hypothecation of immovable property. It is

allowed to the borrower under a pre-sanctioned limit. A current account is opened and the

conduct of this account is kept under review for a period of three to six months. Repayment

in monthly installments is not required.

3.2.4.3.2 Cash Finance (C/F)

It is also offered for the working capital requirement of the customer. It is the type of loan

in which client is given cash in lump sum it is offered against the pledge of moveable

property or stock of borrower. In majority of the cases this finance is allowed against

pledge of stock. The amount of finance is credited to borrowers CD account and he/she

utilizes it for business purposes. Repayment is not made by monthly installments.

Adjustments are linked with delivery of goods kept under banks pledge. Goods are

depledging when the payment is done on delivery order of the bank.

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3.2.4.3.3 Term Finance(T/F)

Term finance is offered to client for investment in any project or business. It is issued for

fixed time period. The amount of finance is credited to borrowers personal account bydebiting the Term Finance Account. The amount of finance is credited to borrowers

personal account by debiting the Term Finance Account. The amount of Finance is

disbursed in lump sum. The repayment of Term Finance is usually in installments and with

other documents a letter of installments is taken from the borrower at the time of

disbursement. By that letter, the borrower binds him to pay the installments at regular

intervals. Monthly repayment amount is calculated by dividing the principal amount by

time period plus mark-up.

3.2.4.4 Non-Fund Based Facilities

3.2.4.4.1 Letter Of Credit

Letter of Credit issued by the bank can broadly be classified as under: -

Sight letter of credit.

Usance letter of credit.

The sight L/Cs calls for the draft to be drawn at sight. Documents negotiated and receivedagainst sight are held as security till their retirement. Drafts drawn under usance are for a

tenure specified in the L/C and are payable by the customer on due date. Credit line

proposal must clearly state the type of letter of credit the branch is intended to issue.

3.2.5 Credit Card Department

Mss. Kiran deals this department. He told me that the bank is authorized to issue the credit

card of two companies, which are under bank of America.

Master Card

Visa Card

But due unavailability of visa card machine in Multan, AKBL Multan branch deals n only

3.2.5.1 Master Card

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There are following types of master card.

Silver card

Local silver card

Gold card

These are different due to their credit amount limit. For example for silver card, cardholder

can take the maximum amount ranging between Rs. 25,000 to Rs, 200,000. While the local

silver cardholder can use this card up to Rs. 25,000 to 500,000 for gold cardholder this limit

has been extended to Rs. 300,000.

3.2.5.2 Issuing Charges

When the card is given to cardholder, there are certain fee charges to by the bank, which isdifferent for different cards.

Local cardholder is charged Rs. 1200 but if the cardholder is Army officer there

is special discount for him. And he is special charged Rs. 750.

Silver cardholder is charged Rs. 2500.

Gold cardholder is charged Rs. 3500.

3.2.5.3 Issuing Procedure

Credit card is issued to three types of parties.

Professional (Govt & private officers)

Business man

Landlord.

3.2.5.4 Professionals

For professionals bank require

Authorized letter from the concerned organization in which he works. This letter shows allparticulars about the person, on the basis of these particulars; bank open on account and

some feasible amount is required.

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3.2.5.5 Business Men

In the case of businessman bank need

Balance sheet of businessman.

Type of business.

Turnover of 5 years.

And then when it is sured that the business has the ability to cover the expenses of credit

card and to pay it at any time, the bank issues the credit card.

3.2.5.6 Land Lord

In the case, the person is totally new, and the bank doesnt know anything about him. For

this bank need an account having the amount over and above the credit card limit of that

credit card. Usually, there is more chance of default in this case; so, the bank avoids issuing

credit card to that person.

3.2.5.7 Payment Procedure

The cardholder should have to pay all the amounts what he has consumed. But in order to

facilitate the cardholder, 5% is the minimum limit that the bank requires and that should be

paid monthly. If you paid only 5% then 2% interests will be charged on remaining amountand it is added into the next month payments.

If that 5% is not paid then Rs. 100 are the additional charges charged to the next month

payment a part form the 2% interest.

3.2.6 Remittance Department

The need of remittance is commonly felt is commercial life particularly and in everyday life

generally. The main function of the remittance department is to transmit money from one

place to another. By providing this service to the customer, Bank earns a lot of income.

Also customer is able to meet its day to day financial requirements.

3.2.6.1 Demand Draft

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It is an instrument payable on demand for which value has been received, issued by the

branch of the Bank drawn i.e. payable at some other place (branch) of the same Bank. If

two Banks are involved then the DD is sent to other Bank but in other case it is handed over

to the applicant.

Issuance Procedure

A demand draft application is given to the customer; he fills in relevant information

and signs it.

The officer checks the information form.

The Bank charges such as commission, excise duty is charged as per effective

schedule of charges. If he fills the tax exemption form, tax is not charged.

In case of cash deposit, the cashier counts the amount and signs the DD application

and enters it in the register.

Then the officer of remittance department signs it and operation manager counter

signs it.

The entry is made in the DD issuing register, DD is given to the customer.

Vouchers are prepared and posted.

DD advises are printed and mailed to the respective branch.

Payment Procedure

The Bank receives DD.

The DD credit advice is received through mail. The numbers are checked and

signatures are verified.

An entry is made on the DD payable register and the vouchers are made.

DD credit is attached with the vouchers and given for posting to the computer.

When DD is received the test numbers are checked and the payment is made.

Vouchers are given for posting and the entry that was made in the register is closed

i.e. DD payable is Nil.

3.2.6.2 Pay Order

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It is an instrument issued for payment in same city. Pay order issued from one branch can

only be payable from the same branch. It is normally referred to as Bankers cheque. It is

also called confirmed cheque, because Bank issues this on it own guarantee.

Issuance Procedure

The standard form is given to the customer. He fills in the details and signs it.

The concerned officer checks the form.

Bank charges (or commission) as per the schedule of charges and the withholding

tax of 0.3% are applied.

The cash amount of the pay order is received.

A cash memo is signed, stamped and handed over to the applicant as a receipt. Then the pay order receipt is filled accordingly.

Counter foil is also filled.

An entry is made in the pay order issue register.

Then the authorized officer signs it after checking the pay order.

The order is then handed over to the applicant after obtaining his signature on the

PO Form.

A voucher is also made and posted at the computer.

Payment Procedure

On presentation of the pay order receipt, two authorized officers of the branch sign

the receipt.

PO entry is made in the PO issue register.

Then the amount is credited to the account of the customer or pain in cash.

PO is posted at the computer.

3.2.6.3 Outward Bills for Collection

The bills, which are received by the Bank and sent to other cities (branches) for the local

clearing in that city, are called Outward Bills for Collection.

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Procedure:

The cheques that are of other cities are separated.

They are entered in the OBC Register and OBC numbers are given to them.

The OBC forwarding schedules are prepared for different branches.

The respective cheques are attached with the schedule.

The office copy is filled and original schedule is mailed.

On clearing, the respective Banks send back the OBCs along with the IBCA (Inter

Branch Credit Advice).

The OBC numbers are checked from the OBC register, after those entries are made.

Commission charges are deducted from the account.

3.2.6.4 Inward Bills for Collection

The bills, which are received by the Bank from other branches out of the city for local

clearing, are called Inward Bills for Collection.

Procedure

The OBC of other branches will be the IBC of this branch. So an OBC forwarding

schedule is received by mail.

The cheques are entered in the IBC register. The IBC numbers are allotted to them.

The cheques are lodged for clearing.

After realization, an IBCA is prepared and mailed to the branch from where the

cheque was received.

At the end of the day, two vouchers are prepared and posted.

3.2.7 Foreign Trade Department

Foreign trade department deals in:

Foreign currency account

Exports

Imports

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3.2.7.1 Foreign Currency Account

Mainly this account deals in individual, personal and companies account

Criteria for Opening Foreign Currency AccountThere are not hard and fast rules for becoming the Foreign Currency Account holder. Bank

wants only introduction of the Client and very little about the background. I.D card is also

not necessary, if someone has; well and good, otherwise no restriction will be there for him.

Features of Foreign Currency Accounts

There will be legal protection for the account holders.

According to foreign exchange rules and regulation every citizen of Pakistan, either

within the Pakistan or outside the Pakistan, can open the foreign currency account.

Resident firms and Resident Companies including investment Banks can open

Foreign Currency Accounts.

All foreign nationals and foreign Companies in Pakistan or abroad can open Foreign

Currency Accounts.

Opening of Foreign Currency Accounts in the joint names of residents/non-

residents is permissible. Foreign Currency can be deposited by:

Remittance received from abroad

Foreign Currency Notes

There will be no restriction and questioning to him about the currency, which he

wants to deposit that from where he got that money.

No Zakat will be deducted on these accounts; no Income Tax deduction, no Wealth

Tax deduction will be there.

These incentives reinforce and motivated the people to invest in foreign currency

accounts rather to keep the foreign currency idle.

Foreign currency accounts can easily be transferred from one person to another, one

place to another, with in the ACBL Branches or in other Bank.

The account holder can transfer the funds freely, in any currency to any part of the

world.

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Foreign currency Accounts can be used for payment of purchases at Duty Free

shops.

Facilities

This account provides following facilities:

Traveling quota

Out ward remittances

In ward remittances receiving

To make remittances procedure flexible

3.2.7.2 Export

The international trade transaction in which one country sells its goods to other country iscalled Export. The controlling body of export in Pakistan is Export Promotion Bureau; it

gives different incentives to the businessmen for enhancing the exports and reducing the

Balance of payment deficit. It restricts the export of some goods and reinforces export of

other. The steps involved in import are described earlier from the importers point of view.

The procedure of export is same, as it can be described from exporter's point of view. The

activities, which are different, described here.

3.2.7.2.1 Foreign Bill Purchased (FBP)

Following requirements must be fulfilled before the purchase of Foreign Export Bills.

Exporter should be account holder of the bank. Bank issues the Form-E. Form-E should be

filled correctly and then bank authenticates the E-Form. Exporter goes to the custom

authorities for custom clearance. Shipping Company issues Bill of Lading or Airway Bill.

Exporter should bring other documents like certificates of Origin, commercial invoice,

packing list etc. Bank scrutinizes the documents.

After fulfilling these requirements, bank purchases the export bill and makes payment forthe value of goods in Pak Rupee to the Exporter.

Lodgment

Lodgment means making the payment to exporter by bank against the purchase of bill.

Before the lodgment, bank records the export bill in the FBP register where name of

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exporter, importer, the name of bank which open the LC, Tenor of bills maturity. Two

types of rates are used in evaluating the amount:

OD Buying rate/At sight rate

It is the rate of export bill, payment of which is to be received within 12

days from the date of lodgment.

Usance rate

It is the rate payment of which is to be made at a future date, normally

within 30, 60, 90, 120, 150, or 180 days.

Realization

Realization means receiving the payment from the foreign bank for the export of goods.

ABL receive the credit advice from the treasury office situated in Karachi that the payment

of the FBP Number this receive. If the payment FBP is less than the amount it was lodged

than remaining amount will receive from the exporter.

3.2.7.2.2 Foreign Documents Bill for Collection (FDBC)

In FBP bank purchase the export bills from the exporter and make payment to the exporterbefore the maturity of that bill, while in FDBC banks collect the export bill on the behalf of

exporter on the date of maturity. In FDBC bank acts as a intermediary party. Bank gets

little amount of commission for the collection of FDBC. Like FBP exporter deposit all the

important documents of export bill to the bank, bank lodged this FDBC, it means bank

record this export bill in the FDBC register where name of exporter, name of importer,

bank which open the LC, Tenor, maturity date is written.

Advance Payment of Bills

This is another function which the export department of ABL Multan branch performs. In

advance payment bank pay the amount of export bill to the exporter before the shipment of

goods. For this purchase of bill bank gets more charges as compare to FBP. Mainly export

deals in:

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Negotiation of documents

Sending the documents for collection

Pre-shipment financing

Post-shipment financing

Remittance against agent commission

Forward covered booking

Handling the documents for negotiation according to the UCP 500 (uniform custom

and practices)

Handling the documents for collection according to URR (uniform rules for

collection)

Submission of monthly returns to SBP regarding the export on form A-2/O-2

3.2.7.3 Import

Opening the letter of credit

Scrutinize the documents receive from flowing bank under letter of credit. Account

to UCP 500 and extending the credit facility to the importer informs FIM (finance

against imported merchandise) FATR (finance against trust receipt).

Arrange forward cover booking regarding import payments

Also arrange forward cover booking for letter of credit open other then ABL

Submission of monthly returns to SBP regarding the import on form I

The international trade transaction, in which one country buys goods from other country, is

called import. Import and Export Act of 1950 governs the import trade in Pakistan.

Previously, the regulating body of imports was controller of Import and Export. But this

function has been shifted to Trade Development Authority. Foreign Exchange Departments

of all banks are restricted to work under the rules and regulations of government.

Import License and Registration

The individuals and firms who interested to import goods from the foreign countries are

required to obtain import license. Import licenses are a type of artificial restraint on the

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import trade of a country. To acquire import license, the importer has to submit applications

to the licensing authority. The importers can only get their merchandize cleared from the

custom authorities if they have the import license duly issued in their names. The import

licenses issued by the Import Trade Controller are required to be registered with the State

Bank of Pakistan.

Contract of sale

After getting the license, the importer then negotiates with the exporter. When they reach to

an agreement on all terms of sale, they sign a contract. Thus contract includes all

information of terms and condition of sale.

Letter of credit

Foreign trade payment problems are mainly solved by a letter of credit. A letter of credit is

issued by the importers bank. If guarantees payment to the exporter up to specified amount

of money provided the terms and conditions laid down the L/C are fulfilled. A letter of

credit is a commitment on the part of buyers bank to pay or accept draft drawn upon it,

provided drafts do not exceed a specified amount.

A letter of credit thus is a (I) written undertaking by an importers bank to exporters bank.

(II) That it will pay or accept draft drawn upon it up to a stated amount with a specified

time. (III) The payment will only be made to the exporter if he compliers with the terms of

credit.

Parties to a letter of credit

There are four parties involved in letter of credit.

Account party: The buyer or the importer on whose account and request the

letter of credit is opened is known as account party or opener.

Issuing bank: The bank which issues or opens a letter of credit at the request of

importer is called issuing bank.

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Exporter or seller: The seller or the party in whose favor L/C is drawn is the

exporter. He is also called beneficiary.

Negotiating bank: The paying bank in the exporters country, on which the draft

is drawn, is called negotiating bank or paying bank.

Opening of letter of credit

The main steps involved in the opening of the letter of creditor as follows:

Application for letter of credit

The importer will request with own bank or any other bank, which deals in foreign trade

transactions to issue a letter of credit in favor of the exporter. He will prepare an applicationon the prescribed form available from the bank. The information, which are supplied in the

application are based on the contract of sale and include only the important feature of

contract, such as value of merchandise, port of shipment, documents to be presented, port

of unloading, brief description of goods, import license etc.

Scrutiny of application

Before issuing a letter of credit, the bank will scrutinize whether the importer is of good

financial standing, possesses the import license issued by import control. Authorities, the

amount available covers the letter of credit applied for, market demand of goods, collateral

offered to cover the credit etc.

Cash margin

The bank asks the importer to deposit cash or securities with the bank. The bank depending

upon the credit worthiness of the importer decides the proper margin of cash or securities to

be deposited.

Issue of the letter of credit

The importer bank after being fully satisfied will issue a letter of credit in favor of the

exporter. The L/C may be sent directly to the exporter or the advising bank in the exporters

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county. In such a case, the advising bank will inform the exporter about opening a letter of

credit.

Shipment of goodsWhen the exporter receives L/C, he examines it to ensure that it conforms to the terms of

contract of sales. He then shifts the goods and presents all required documents along with

the bill to negotiating bank.

Role of negotiating bank

The negotiating bank after receiving all the documents and the bill from the exporter will

scrutinize them whether these conform with the terms of letter of credit. If the documents of

title accompanying the bill are in order, these will be sent to the importers bank for

payment.

Liability of the issuing bank

On receipt of documents and the bill, the issuing bank will examine them. If the documents

on the face appear to be in order, the payment would be released by the bank. In case any

defect is found in the documents and the draft is honored by the issuing bank the importer

can claim damages on the issuing bank. The issuing bank is only accountable for the

completeness of documents, not to see whether goods conform to the contract of sale.

Payment by importer to the bank

First the importer pays all his obligations the bank then bank releases the documents. In

case of sight draft, the importers bank pays the amount on the same day charging the

importing customers account. In case of a time draft, the importer discharges his

obligations to the accepting bank on or before the maturity date of acceptance. The

accepting bank will then release all the shipping documents to the importer.

Payment to the exporter

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The exporter can obtain payment from the negotiating bank by discounting the draft (L/C)

immediately after shipping the goods and obtaining shipping documents.

Submission of Monthly ReturnsIt includes reporting of Form-M and Form-E to SBP.

Reporting of Form-E

Every Exporter is required to submit a declaration to custom authorities for goods exported.

This declaration is submitted on prescribed Form-E in quadruplicate, which is certified by

authorized dealer. Four copies of Form-E are maintained. Form-E is reported to SBP at the

end of the month, in which the amount is realized. There is a prescribed Performa used for

the reporting of Form-E. It includes the reporting period, currency, Serial No. of Form-E,

amount, Code No. of country and commodity.

Reporting of Form-M

Every foreign bank deducts some charges form the value of goods. It is for miscellaneous

purposes like foreign bank charges or foreign agent commission. Form-M is used to declare

this outflow of foreign currency. At the end of the month of realization of the amount,

Form-M is reported. It includes the list of Serial No, amount and purposes of every Form-

M.

3.2.8 Cash Department

Cash department deals in money, this department accept the money on counter and

withdrawals on the counter. Cheques are cashes on the cash counter. Cash officer accept the

utilities bills and perform different function with respect to bonds, cheques and other

primary functions. Credit card bills can be deposited on the cash counter. Cash officer after

identification pays the money to the cheque holder at that time. Cash department is theresponsible for any fraud or any replacement of cash, thats why this department is very

carefully fulfill his duties, efficiently and effectively perform his duties.

3.2.9 Clearing Department

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The word clearing has been derived from the word Clear and is defined as a system by

which banks exchange cheques and other negotiable instruments draw on each other within

a specified area and thereby secure payment for their client through the clearing house at

specified time in an efficient way.

Advantages of Clearing

Since clearing does not involve any cash etc and the entire transaction take place

through book entries, the number of transactions can be unlimited.

No cash is needed as such the risks of robbery, embezzlements and pilferage is

totally eliminated.

As major payments are made through clearing, the banks can manage cash payment

at the counters with a minimum amount of cash in vaults.

A lot of time, cost and labor are saved.

Since it provides an extra service to the customers of banks without any service

charger or costs, more and more people are inclined and attracted towards banking.

3.2.9.1 Clearing House

It is a place where representatives of all scheduled banks sit together and interchange their

claims against each other with the help of controlling staff of State Bank of Pakistan and

where there is no branch of State Bank of Pakistan the designated branch of National Bank

of Pakistan acts on behalf of State Bank of Pakistan.

Working of clearing house

All the banks which are the members of clearing house maintain their accounts with State

Bank of Pakistan by debit and credit to which the clearing settlements are made. If on a

particular day, a bank delivers cheques and other negotiable instruments worth more than

the total amount of Cheque received by it that banks accounts with State Bank of Pakistan

will be credited with the differential amount. If on the other hand the total amount of

cheques and other negotiable instruments draw on a certain bank by other bank is more

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than the total amount receivable by it from other banks, then this banks account will be

debited on that day.

The cheque delivered to the representatives of other banks for clearing are called outward

clearing, whereas cheques received from the representatives of other banks for payment are

called inward clearing.

Procedure of Settlement

Presume that ABL got the cheques which are drawn on HBL, NBP and MCB for amounts

Rs. 50,000/-, Rs. 15,000/- respectively, its total being amounts Rs.95,000/-, it means that

this amount is to be credited to ABL A/C with S.B.P. on the other hand the cheques drawn

on ABL are from HBL, NBP and MCB of Rs.15,000/-, Rs.75,000/- and Rs.30,000/-

respectively, its total being Rs.1,20,000/-, it means that this amount is to be debited from

ABL account. The difference between Rs.95,000/- credit and debit Rs.1,20,000/- debit is

Rs.25,000/- debit which means the house is against ABL for Rs.25,000/-.

The brief detail is following.

ABL has t receive Rs.50, 000/- from HBL and to pay Rs.15, 000/- to HBL so

difference is Rs.35, 000/- credit.

ABL has to receive Rs.30, 000/- from NBP and to pay Rs.75, 000/- to NBP so

difference is Rs.45, 000/- debit.

ABL has to receive from MCB Rs.15, 000/- and to pay Rs.30, 000/- to MCB so

difference is Rs.15, 000/- debit.

GRAND TOTAL:

35,000-45,000-15,000 = -25,000

I.e. Rs. 25,000 debit

Hence ABL A/C with State Bank of Pakistan will be debited with Rs.25, 000/- and the

contra will be other banks accounts respectively. This called as Debit and Credit Rule.

3.2.9.2 Outward Clearing at the Branch

The following points are to be taken into consideration while an instrument is accepted at

the counter to be presented in outward clearing:

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The name of the branch appears on its face where it is drawn on

It should not be stale or post dated or without date

Amount in words and figures does not differ

Signature of the drawer appears on the face of instrument

Instruments is not mutilated

There should be no material alteration if so, it should be properly authenticated

If order instrument, suitably endorsed and last endorsees account being credited

Endorsement is in accordance with the crossings if any

The amount of the instrument is same as mentioned on the paying-in-slip and

counterfoil

The title of account on the paying-in-slip is that of payee or endorsee (with the

exception of bearer cheque).

If an instrument is in order then out banks special crossing stamp is affixed across the face

of the instrument. Clearing stamps is affixed on the face of the instruments, paying-in-slip

and counterfoil (The stamp is affixed in such a manner that half appears on paying-in-slip

and half on counterfoil). The instrument is suitably discharged, where a bearer cheque does

not required any discharge and also an instrument in favor of a bank need not be

discharged. The instrument along with paying-in-slip is retained while the counterfoil is

given to the customer duly signed. Then the following steps are to be taken:-

The particulars of the instruments and the pay-in-slip or credit vouchers are entered

in the Outward Clearing Register.

Serial number is given to each voucher

The register is balanced, the credit voucher are separated form the instrument and

are released to respective departments against instrument and are released to

respective departments against acknowledgement in the register

The schedules are arranged bank-wise

The schedules are prepared in triplicate, two copies of which are attached with the

relevant instrument and the third is kept as office copy

The house page is prepared from schedules in triplicate

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The schedules and house pages are signed by the officer incharge with branch stamp

The grand total of the house page is taken and agreed with that of the outward

clearing register

The instruments along with duplicate and house page are sent to the Main Office

3.2.9.3 Inward Clearing of the Branch

The particulars of the instruments are compared with the list

The instruments are detached and sort out department wise

The entry is made in the Inward Clearing Register (serial number, instrument

number, account number, amount of the instrument is written).

The instruments are sent to the respective departments against acknowledgement in

the Inward Clearing Register.

The instruments are scrutinized in each respect before honoring the same

4. Structure and Functions of the Accounts/Finance/Audit Department

4.1 Organizational Chart of Finance Department

39

BOARD OF DIRECTORS

PRESIDENT(Chief Executive Officer)

VICE PRESIDENTOperations

VICE PRESIDENTFinance

(Chief Executive

VICE PRESIDENTMarketing

TREASURES Capital budgeting

Cashmanagement

Commercialbanking andinvestmentbankingrelationships

Creditmanagement

Dividenddisbursement

Financialanalysis andplanning

Investor relations

Pensionsmanagement

Insurance/riskmanagement

Tax analysis

and planning

CONTROLLER Cost

accounting

Costmanagement

Dataprocessing

Generalledger(Payroll,accountsreceivable/payable)

Internalcontrol

Preparingfinancialstatements

Preparingbudgets

Pre arin

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The above figure is the structure of finance department of Askari Bank Ltd. The Vice

President of finance or Chief Financial Officer (CFO), generally reports directly to the

president or Chief Executive Officer (CEO). In Askari Bank Ltd. Financial operations over

seen by the CFO will be split into two branches such as:

Controller

Treasurer

Controller

The controllers responsibilities are primarily accounting in nature. Const accounting as

well as budgets and forecasts, concerns internal consumption. External financial reporting

is provided to the Internal Revenue Service (IRS), to the securities and exchange

commission (SEC) and to stockholders.

Treasurer

The treasurers responsibilities fall into the decision areas most commonly associated with

financial management:

Investment (Capital Budgeting, Pension Management)

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Financing (Commercial Banking and Investment Banking relationships, Investor

relations, Dividend disbursement).

Asset Management (Cash Management and Credit Management).

4.2 Finance and Accounting Operations

Askari bank deals in finance and accounting operations. They check the daily voucher and

posting. They note all the banks charges and expanses. The main focus on bank financial

statement, they prepare the financial statement annually and semi annually of the bank. All

accounting and financing activities are checked in this department.

Preparation of daily bank positions statement

Payment of salaries

Preparation of the statements

Depreciation calculation

Expanses, Income, Liabilities

Generation and Allocation of funds

Manager Accounts

Finalize the Accounts on monthly basis.. Preparation of special reports as per instruction by Branch Manager.

Supervise all the working of other staff members.

Verify the partys payment & all other expenses payments

Deputy Manager Accounts

Posting in the Accounting System.

Supporting to Manager Accounts to finalize the Accounts on monthly basis.

Supporting to make the monthly budget of the company.

Preparation of Debtors and Creditors reconciliation reports and aging schedules.

Preparation of Special reports for decision making of Management.

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Accounts Officer

Prepare fund flow statement on daily basis.

Supporting to prepare weekly budget.

Posting of Funds Received from parties.

Tax Officer

Handle all sales tax and income tax matters.

Preparation of Refund case & Processing in department.

E-Filing of both (Sales tax & Parties tax payment)

E-Filing of both (Sales tax & Parties tax payment)

4.3 The Role of Financial Manager

Financial manager stands between the firms operations and financial markets. Financial

manager must have considered the interest rates on the load and concluded that it was not

too high. Achievement of goals and objective based on financial manager how he can get

them and what activities he applies. Financial manager also involve in financing decision.

Financial use the policies and strategies how to generate a fun and where have to invest.

Financial manager is responsible for all kind of operations of the bank. Our financial

manager uses the decision making and ratio analysis to earn a profit and decrease the

expanses of the ABL.

Financial manager is responsible for maintaining the record of accounts, cash management

and credit management. He monitor all kind of cash management activities in which area

more cash should be invested and for whom people should grant the loan, he control the

other activities of credit management.

The role of CFO in this bank is very important. He control and monitor the all the banks

department and also check the performance of the bank and make necessary decisions. He

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is responsible to control the bank efficiency and checks all the staff of the bank and also

check the performance of financial manager.

4.4 Use of Electronic Data in Decision Making

Now this is the age of information technology. So the banking system is also become

computerized. For this purpose Askari bank used software which name is:

Uni-Bank Software

Its working is so simple and it is user interfering software.

It is very important for decision making and it is helpful in the

following ways:

1. Used for entering the daily Deposits, Advances, Markup, A/R

and Revenue.

2. Used for preparing the daily Reports.

3. Used for calculate the Profitability of the Bank.

So on the bases of these reports Manager decide the future planning

for the Askari bank.

4.5 Source of FundsMajor sources of funds are as follows.

SOURCES OF FUNDS

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Sources of Funds

-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

Share Capital Reserves Deposits &

Other Accounts

Due to Financial

Institutions

Source

Value'000

2008

2007

2006

2005

2004

4.6 Generation of Funds

Funds are generated from interest, markup and consumers; these are the important source of

funds. ABL generate fund from interest over loan and markup over load and consumers are

the most important source of generation of funds. ABL provide a facility of loan to its

consumers and generate funds. ABL generate funds from mark up.

4.7 Allocation of Funds

Askari bank allocates the funds in the following fields.

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%

Transport, Storage & Communication 3%

Commercial & Trade 45%

Construction 2%

Electricity, Gas & Water Supply 4%

Manufacturing 32%

Mining & Querrying 1%

Other Private Business 4%

Community & Other Personal Service Activities 7%

Education 2%

Allocation of Fund

3%

45%

2%4%

32%

1%

4%7%

2%

Transport, Storage &

Communication

Commercial & Trade

Construction

Electricity, Gas & Water Supply

Manufacturing

Mining & Querrying

Other Private Business

Community & Other Personal

Service Activities

Education

Policy of Allocating Funds

Our bank adopts different kind of strategies and policies for the allocation of funds. This

bank allocates the funds among different department according to the annual budgets

prepared at the start of every financial year. This fund is allocating in different areas like

agricultural, retail banking, and corporate, commercial and small and medium enterprise.

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Remaining fund which left this fund is allocated in other areas such as bank invest in

something or purchase something for the benefit of bank.

5. Critical Analysis

5.1 Financial Analysis

5.1.1 Balance Sheet

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ASSETS

Cash and balances with treasury banks

Balances with other banksLending to financial institutions

Investment

Advances

5.1.2 Profit & Loss Account

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M ark-up / return / interest earned

M ark-up / return / interest expensed

N et mark-up / interest income

Provision aga inst non-performin

Provisions fo r impairment in the

FO

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14,000,000

16,000,000

18,000,000

20,000,000

0

INTEREST INCOME 4,48

2

200,000,000

250,000,000

0

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5.1.3 Ratio Analysis

PK

162

206

162

4,

IN T E R E S T C O V E R A G E

RATIO

NE T PROFIT M ARG IN

E A R N IN G T O A S S

R E T U RN O N E A R N

A S S E T S

E Q U IT Y C A P IT A L

L O A N T O D E P O S IT

100

C U R R E N T R A T IO

E A R N I N G A S S

T O T A L A S SE

R O F IT A F T E R

E A R N I N G A S S

T O T A L E Q U I

L O A N

D E P O S IT S

P R O F IT A F T E R T A XX

C U R RE N T A S S E T S

EBIT

IN T E R E S T E X P E N S E

R A TIO FO R M U LA

Key Figure 3

RATIO

EARNING TO ASSETS

RETURN ON EARNING ASSET

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EARNING TO ASS ETS

0.7000

0.7200

0.7400

0.7600

0.7800

0.8000

0.8200

0.8400

0.8600

2008 2007 2006 2005 2004

RETURN ON EARNING

ASSETS

-

0.0050

0.0100

0.0150

0.0200

0.0250

2008 2007 2006 2005 2004

Earning and Return On Earning Assets

Earning assets are the assets which are very important for any company for the bank. Ratio

tells that on what percentage earning assets contribute the total assets. While bank also has

increased its earning assets ratio shows the more profitability of the bank as it can be

shown by the profit and loss account of the different year that shows the net mark up

income more for the year as compared to the previous years so bank is going gradually to

the more profitability by giving more advances and loans.

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Earning assets ratio in 2004 is 0.79; in 2005 it is 0.75 which is little decrease as compare to

previous year. This ratio in 2006 is 0.80 a little increase from previous year and in 2007 it is 0.82

and it is little increase in last year 2008 which is 0.84. It has been gradually increases year to year

due to its performance.Return on earning assets ratio in 2004 is 0.0024; in 2005 it is 0.0195 which is little increase in as

compare to previous year. In 2006 are 0.0168 decreases as compare to previous year and in 2007 it

be 0.0169 and it is highest in last year 2008 which is 0.0214.

EQUITY CAPITAL TO

TOTAL ASSETS

-

0.0050

0.0100

0.0150

0.0200

0.0250

2008 2007 2006 2005 2004

Equity to Total Assets

Equity capital to assets is a common measure used to analyze capital adequacy of a bank,

while bank has decreased its capital adequacy ratio in the year. But banks total assets has

increased but increase in the equity is so small because of less profit in the year and this

less profit is due to more provisions.

Equity capital to total assets in 2004 is 0.0197; in 2005 it is 0.0165 which is decreases as

compare to previous year. In 2006 is 0.0121 again decreases from previous year and in

2007 it is 0.0104 and in last year 2008 which is 0.0117. Equity capital to total assets ratio in

is almost decreases year to year.

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LOAN TO DEPOSIT

0.6000

0.6500

0.7000

0.7500

0.8000

0.8500

2008 2007 2006 2005 2004

Loan to Deposits

While there is a concept that banks loans are its assets while its deposits are liabilities. But

if a bank has low deposits then obviously it will give low loans because bank gives its loans

by the deposits and earn on the loans then pay mark up on the deposits to the customers.

Loan to deposits ratio in 2004 is 0.77; in 2005 it is 0.70 which is little decrease as compare

to previous year. Loan to deposits ratio in 2006 is 0.75 a little increase from previous year

and in 2007 it is 0.72 and loan to deposits ratio is highest in last year 2008 which is 0.84.

Loan to deposit ratio in 2005 and 2007 is almost equal. It is lowest in first year in 2003.

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CURRENT RATIO

0.9800

0.9900

1.0000

1.0100

1.0200

1.0300

1.0400

1.0500

2008 2007 2006 2005 2004

Current Ratio

The ratio is mainly used to give an idea of the bank ability to pay back its short-term

liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The

higher the current ratio, the more capable the bank is of paying its obligations. A ratio

under 1 suggests that the company would be unable to pay off its obligations if they came

due at that point. While this shows the bank is not in good financial health, it does not

necessarily mean that it will go bankrupt - as there are many ways to access financing - but

it is definitely not a good sign.

Current ratio in 2004 is 1.00; in 2005 it is 1.03 which is little increase as compare to

previous year. Current ratio in 2006 is 1.04 a little increase from previous year and in 2007

it is 1.04 and current ratio is almost same in last year 2008 which is 1.04.

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INTEREST COVERAGE

RATIO

-

0.5000

1.0000

1.5000

2.0000

2.5000

3.0000

2008 2007 2006 2005 2004

Interest Coverage Ratio

A ratio used to determine how easily a bank can pay interest on deposits and other

accounts. The ratio is calculated by dividing a bank's earnings before interest and taxes

(EBIT) of one period by the bank's interest expenses of the same period: The lower the

ratio, the more the bank is burdened by debt expense. When a bank's interest coverage ratio

is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest

coverage ratio below 1 indicates the bank is not generating sufficient revenues to satisfy

interest expenses.

Interest coverage ratio in 2004 is 0.043; in 2005 it is 0.26 which is increases as compare to

previous year. Interest coverage ratio in 2006 is 0.48 increases from previous year and in

2007 it is 0.67 and interest coverage ratio is highest in last year 2008 which is 2.54.

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NET PRO FIT MARG IN

-

5.0000

10.0000

15.0000

20.0000

25.0000

30.0000

35.0000

40.0000

45.0000

2008 2007 2006 2005 2004

Net Profit Margin

A ratio of profitability calculated as interest income divided by revenues, or net profits

divided by interest income. It measures how much out of every rupee of interest income a

bank actually keeps in earnings. Profit margin is very useful when comparing bank in

similar industries. A higher profit margin indicates a more profitable bank that has better

control over its costs compared to its competitors. Profit margin is displayed as a

percentage.

Net profit margin in 2004 is 2.099; in 2005 it is 17.70 which is increase as compare to

previous year. Net profit margin in 2006 is 17.86 is almost equal from previous year and in

2007 it is 23.03 and net profit margin is highest in last year 2008 which is 42.86.

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NET INTEREST MARGIN

-

0.0050

0.0100

0.0150

0.0200

0.0250

0.0300

0.0350

0.0400

2008 2007 2006 2005 2004

Net Interest Margin

Net Interest Margin (NIM) is a measurement of the difference between the interest income

generated by banks or other financial institutions and the amount of interest paid out to

their lenders (for example, deposits). It is considered similar to the gross margin of non-

financial companies.

Net interest margin in 2004 is 0.038; in 2005 it is 0.035 which is little decrease as compare

to previous year. Net interest margin in 2006 is 0.034 a little decrease from previous years

and in 2007 it is 0.031 and Net interest margin in last year 2008 which is 0.031. Net interest

margin is almost equal in all years.

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AVERAGE YIELD O N

ASSETS

-

0.0100

0.0200

0.0300

0.0400

0.0500

0.0600

0.07000.0800

0.0900

0.1000

2008 2007 2006 2005 2004

Average Yield on Assets

Annual or other periodic rate of return on investments because banks act as custodians of

deposits for many years until money must be paid out the depositors, They invest it to

achieve a yield adequate to meet these obligations. Yield is also important to the depositors

that include a specific investment element.

Average yield on assets in 2004 is 0.089; in 2005 it is 0.083 which is decrease as compare

to previous year. Average yield on assets in 2006 is 0.076 a little decrease from previous

year and in 2007 it is 0.0605 and average yield on assets is minimum in last year 2008

which is 0.042. Average yield on assets in 2004 and 2003 is almost nearly. It is highest in

last year in 2007.

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INTEREST EXPENS E TO INTEREST INCO ME

-

0.1000

0.2000

0.3000

0.4000

0.5000

0.6000

0.7000

2008 2007 2006 2005 2004

Interest Expense to Interest Income

Interest expense to interest income ratio in 2004 is 0.58; in 2005 it is 0.57 which is little

decrease as compare to previous year. This ratio in 2006 is 0.55 a little decrease from

previous year and in 2007 it is 0.49 and ratio is lowest in last year 2008 which is 0.25.

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5.1.4 Horizontal and Vertical Analysis

An analysis of percentage financial statements where all balance sheet or income statement

figures for abase year equal 100% and subsequent financial statement items are expressed

as percentages of their values in the base year. A percentage analysis of financial

statements where all balance sheet items are divided by total assets and all income

statement items is divided by net sales or revenues.

Comparing analytical data for a current period with similar computations for prior years

affords some basis for judging whether the condition of the business is improving or

worsening. This comparison of data over time is called as horizontal analysis, to express

the idea of reviewing data for a number of consecutive periods. It is distinguished from

vertical analysis which refers to the review of the financial information of only one

accounting period.

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5.1.4.1 Horizontal & Vertical Analysis of Balance Sheet

AS SET S

C ash and balanc es w ith t rea sur

B alanc es w ith o ther ban k s

L end ing to financ ia l and o ther Inves tmen t

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5.1.4.2 Horizontal & Vertical Analysis of Profit & Loss Account

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2

Mark-up / return / interest earned

Non Mark-Up / Interest Income

Fee, commission and brokerage

income

Dividend income

Income from dealing in foreign

currencies

Gain on sale of investmentUnrealised gain/loss on

Other income 2%

Total non mark-up / interestincome

FOR

`

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5.1.4.3 Interpretation of Horizontal and Vertical Analysis

Interpretation of Horizontal Analysis

An analysis of percentage financial statement where all balance sheet or income statement

figures for a base year equal 100 (percent) and subsequent financial statement items are

expressed as percentages of their values in the base year. So the above situation shows that

the trend of progress is positive. But the Administrative expanses increase during the 2007

due to new customer services, introducing new products and car financing. Administrative

expanses are increasing by year to year we need to control over it. Profit before taxation

fluctuate between different years and gradually increase and in the last year 2008 it is little

bit decrease. Total assets of our bank are also increasing from year to year which is useful

for our bank. Liabilities of our bank are also increasing from year to year we need to

control over it; we need to more focus on it.

Interpretation of Vertical Analysis

An analysis of percentage financial statements where all balance sheet items are divided by

total assets and all income statement items divided by net sales of revenues. In the balance

sheet the ratio of the advances and the deposits are high which is good. Deposits are

increase in 2006 due to high interest rates. Administrative expanses are fluctuating during

the different years it is maximum in the year of 2008. Profit before taxation is also

increasing in first four years and it is decrease in the last year 2008. We need to control

over the expanses and improve the performance of the bank.

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5.2 Organizational Analysis With Reference to the Industry

Symbol Volume Open Rate High Rate Low RateCurrent

Rate

Price

Change

%

Change

Index

Weightage

(%)

Index

Points

Outstanding

Shares

(million)

Market Capt.

(million)

Oi l and Gas Dev.XD 27,735,400 123.55 126.45 124.50 125.40 1.80 1.46 14.28 30.27 4,300.93 539,336.42

Pak Petroleum 25,330,500 277.25 287.20 279.40 285.60 8.35 3.01 5.19 21.79 685.82 195,870.59

National Bank 20,648,600 274.90 281.00 273.10 278.85 4.00 1.46 6.02 12.25 815.43 227,383.19

Askari Bank 20,441,900 100.25 105.25 102.80 105.25 5.00 4.99 0.84 5.72 300.65 31,643.40Bank Al-Falah 19,183,900 59.15 62.10 61.40 62.10 2.95 4.99 1.07 7.29 650.00 40,365.00

NIB Bank 18,447,000 21.40 22.45 21.60 22.45 1.05 4.91 1.31 8.79 2,201.80 49,430.34

B.O.PunjabXB 12,861,000 105.00 110.25 107.50 108.70 3.25 3.10 1.22 5.95 423.04 45,984.22

Fauji Fert BinXD 12,605,500 45.90 46.70 46.00 46.20 0.35 0.76 1.14 1.07 934.11 43,155.88

The company's financial year end is DEC. Its year of listing was 2000. Calculated against

2008's annual report and today's closing price, ABL's book value was Rs 105.25.

5.3 Future Prospects of the Organization

Going in 2008, the reduction in the interest rate environment will overall have a negative

impact on the financial sector's profitability in the short term. To meet these challenges

NBP will focus on building our loan portfolio, both on corporate and retail side. On the

retail side focus will be on additional fee business while maintaining stringent controls over

cost. Longer term we will be focusing on those sectors in the country, which have

traditionally received less attention from the financial sector, i.e. agriculture, small and

medium enterprises and of the entire range of retail products. ABL key strength remains i