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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
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