Summit Bank

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SUMMIT BANK LIMITED MARCH BAZAR BRANCH SUKKUR An Internship report Submitted in Partial Fulfillment For The Degree of MBA In Finance SHAHID HUSSAIN ABBASI Session (2009-2011) Department Of BUSINESS

Transcript of Summit Bank

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SUMMIT BANK LIMITED

MARCH BAZAR BRANCH SUKKUR

An Internship report

Submitted in Partial Fulfillment

For

The Degree of MBA

In

Finance

SHAHID HUSSAIN ABBASI

Session (2009-2011)

Department Of BUSINESS

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EXECUTIVE SUMMARY

“THE PURPOSE OF STUDY WAS TO KNOW ABOUT SUMMIT BANK LIMITED AND TO ANALYZE THE FINANCIAL STATEMENT. “In this report the Summit Bank’s history, mission, vision and services as well asmanagement is mentioned. After this the analysis of financial statements is conducted which shows where the Banks is standing. Banking sector of Pakistan has been transformed within a short period of 5 years from a sluggish and Government dominated sector to a much more agile, competitive and profitable industry.Speed and sequencing of banking sector transformation and its role inpromoting economic growth is now a leading story of a sector succes.Within Pakistan SBP offers a story of what effective leadership of regulator and change management and corporate governance can achieve and offer.Outside pakistan it is serving to offer rich lessons in what difference governance of regulator can make and how bank restructuring and privatization can change the lanscape of of the industry. Summit Bank Limited started operations in August 2006 and became a profitable entity within one year.AHBL had started off with a high capital base and is positioned to take advantage of the business synergies and complementaries afforded to it by its sponsoring group.The bank has a quality management team, a first class technology platform, and commitment to global practices.Its business strategy is based on the “block-building” principle wherein profitable niches are tapped progessively. I did my 12 weeks internship in Summit Bank Limited Multan Road Branch.During internship I was rolled over in departments. Summit Bank made heavy investments towards enhancing its capabilities in the area of automation and technology. It is well positioned to meet client needs, with improved .

Competitive advantage

During my twelve weeks internship in Summit Bank Multan Road Lahore is pend one or two weeks each in following departments:

Account opening departmentClearing departmentTrade finance department

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Working these departments was a great learning exposure for me. When I conduct financial and trend analysis of Summit Bank I found that its financial position is improving year by year. Comparative study with other banks shows that it is somewhat better then other banks. I concluded that Summit Bank is performing very well.

ACKNOWLEDGEMENT

My creator, my best friend and mentor, who bestowed on me the meaning of life.“ALLAH” who granted me a wealth of knowledge, love and respect to share with my fellow beings. He gave me courage to pursue my passion against all odds.My Parents whose raising gave me character and a compassionate heart.I pay my thanks to Dr. Nikhat Khan Head of Accounting & Finance Department ofKinnaird College for Women enabled me to complete this assignment. I also pay my gratitude to my teachers and Ms Manal Talat Coordinator, Accounting &Finance who’s cooperation on every step of this demanding task is highly appreciatable. Without their cooperation it was not possible to complete this task.My heartily thanks to Staff of Summit Bank limited, Multan Road Branch for theircooperation.

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Table of Contents

Description Page No.

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

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

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

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

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

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

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

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

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

Reference---------------------------------------------------------------106

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Annexure---------------------------------------------------------------107

INTRODUCTION TO REPORT / OBJECTIVELY

The core objective of preparing this report is to express my learning during the 12weeks period of internship. This is the mirror of my practical exposure that is originated through time spent in “Summit Bank Limited”. The report is about Summit Bank its products, field of activities and its financial analysis. In the report, SWOT analysis is conducted so that I may able to give an authenticated approach to problems and Dilemmas faced by the Branch. When I conduct comparative analysis of operations, products offered and funds used, I found it ar better as compared to other banks working in Lahore. Management style is somewhat participative and its culture is friendly and cooperative. I learnt a lot of different fields, and organizational behavior in real world phenomenon which gave me practical knowledge of what I have studied theoretical in Msc Accounting & Finance.

WHAT IS A BANK?

A bank is a financial institution that offers the widest range of financial services. These financial institutions play a vital role throughout the world’s economic system.

Caircross defines bank as:

A financial intermediary and a dealer to create credits A bank or banker is a dealer in credit or more properly a dealer in money. It is an

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intermediate party between the borrower and the lender. It borrows from one party and lends to another.The system of common settlement of receipts and payments have been derived from the school of thought of the ancient “Romans” temple banking, to develop trade and trading relations with each other nations. Banks are of different types. The term “Commercial Banking” is a throwback of commercial loan theory. The theory holds that the bank assets (except for cash) should consist exclusively of commercial loans that are shorter mloan to businesses to financing the production and transportation of goods. Among the services provided by the commercial banks, two services are very important; Accepting deposit Lending loans Other functions include safekeeping of valuables, financial advising, cash management, offering trust service, selling insurance policies, retirement plans and offering security brokerage services, etc.

The banking structure of Pakistan

The banking structure of Pakistan consists of State Bank of Pakistan, commercial Banks, Exchange Banks, Cooperative Banks, Saving Banks and specialized Credit Institution. “ Banking means the accepting, for the purpose of lending or investment, of deposits of money from public, repayable on demand or therwise, and withdrawal by cheques, drafts, order or otherwise”.

VARIOUS ROLES OF BANKS

The Intermediation RoleTransforming savings received primarily from households into credit (loans) for business firm and others to make investments in new buildings, equipment, and other capital goods.

The Payments RoleCarrying out payments for goods and services on behalf of their customers (such as by issuing and clearing checks, wiring funds, dispensing currency and coin, etc.)Role as a GuarantorStanding behind their customs to pay off customer debts when those customers are unable to pay (such as by issuing letters of credit to support international trade and to back customer issues of commercial

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paper), which makes it both easier and cheaper for a bank’s customers to obtain credit elsewhere in the financial marketplace.

The Agency RoleActing on behalf of customers to manage and protect their property or issue and redeem a customer’s securities (usually provided through the bank’s trust department).The Policy RoleServing as a conduct for government policy in attempting to regulate the growth of the economy and pursue social goals

HISTORY OF SUMMIT BANK LIMITED:

Arif Habib Group is among the largest most, most innovative and fastest growing business group in Pakistan.In addition to financial services(Asset Management, Brokerage Services, Corporate Finance and Project Advisory, Private Equity and commercial Bank), the group has also interest in fertilizer, cement and real estate.This has made possible by a strong brand franchise built on decades of firstrate services to clients. Managing assets in excess of PRs.37 billion (US$ 617 million), the group holds interests in the securities brokerage, investment and financial advisory, investment anagement, commercial banking, commodities, private equity, cement and fertilizer industries. The Group takes pride in its orientation towards client service. It believes that its key success factors include continuous investment in staff, systems and capacity

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building, and its insistence on universal best practices at all times.

ARIF HABIB SECURITIES LTD:The holding company o the group. Holds controlling interest in theenterprises listed below.

ARIF HABIB LIMITED:The securities brokerage company. Member of all three srock ewchanges and the national Commodities exchange.Manages a number of mutual funds investment plans. The commercial bank with the mission to be “The bank for everyone” The proposed private equity venture with the objective to develop a vast new Industry in Pakistan The upcoming commodities firm at the (DMCC) Arif Habib Limited one of the fastest growing commercial Banks of the country supported by the strong sponsorship of Arif Habib Group. AHBL started off with a high capital base and is positioned to take advantage of the business synergies and complementaries afforded to it by its sponsorship group. The bank has a quality management team, a first-class technology platform, and commitment to global practices. Its business strategy is based on the “blockbuilding” principle wherein profitable niches are tapped progressively. Progressively. The Bank has an Authorized Share Capital of 6.0 Billion and Paid-up Share Capital of 5.0 Billion. The management intends to double it in a short period by injection of fresh capital which will strengthen the bank further. The bank has a network of 35 Branches/Sub Branches.the branch network covers Sindh, Punjab, NWFP and Azad Jammu and Kashmir. The bank plans to open further offices to better cover all four provinces within a short time span. All branches are Real Time Online providing customers the facility to deposit at or without incurring any additional charges making banking with us a faster, relable and a convinient experience.

OBJECTIVE:To be a Universal Bank in terms for providing products and services in all key segments of Banking.

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BUSINESS APPROACH AND CORE VALUES:It is their business objective to be a Universal Bank in terms of providing products and services in all key segments of banking i.e. Corporate, Wealth Management, Commercial Mid Market/ SMEs and Consumer Banking. Branch expansion plan is carried out to have a network of 100 Branches by 2011.The projected Branch network is based on centralized processing centre (factory and boutique concept) with secure and real time IT capability. Hence the delivery Channel configuration is dependent upon the potential in each location in terms of size, Product Delivery Template and Head count for each Branch. In terms of Statuary capital Requirement, they are determined to meet and in fact exceed the Minimum Capital Requirement-MCR benchmark via injection f capital and retention of retained earnings. Mandatory allocation of 20% of after tax profit as Free Reserves until such time our free reserves are equal to MCR will further strengthen their equity base.Business and branch Network:Summit bank is currently operating with 40 branches throughout Pakistan(breakup is given in coming part).The bank’s strategy is to establish a network of 100 branches during the next three to five years. Several new sites have already been identified at strategic locations. All branches are online, equipped with state of the art technology capable of providing Real Time Banking services to the clients. A professional team has been developed to meet the expectations of demanding customers. This is line with the bank’s strategy to build infrastructure of international standard to attract and retain a sizeable client base. The growth in the economy provided them numerous opportunities and they remained selective pursuing business through which strike a balance between growths and prudent like risk taking and diversification. Summit bank’s performance in 007 was a result of the pragmatic and will planned efforts of the management to attain present strategic goals aimed at providing quality services to their customers and at the same time enhance the shareholders value. Despite the high growth level, they continued to ensure the high customer satisfaction and service quality levels are maintained and they are appreciative of the trust and confidence that their customers place in them. Management firmly believe that the success of the Bank lies in expanding there way of financial

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services and seamlessly delivering innovative solutions to meet customers requirements across all the platforms.Accordingly, they work closely with their customers in order to understand their business needs and to address them withhigh quality tailored financial products so that they are viewed as a strategic partner in the business growth. Management is pleased and encouraged to receivea very favourable response to their endeavours from their respective customers. In all, management believes that the economic outlook for the coming year is bright with the right mix of products and services and their commited workforce; they can deliver yet another superior performance next year.Bank will continue to build infrastructure, leverage the cutting edge technology in plan introduce products and services , manage risk efficiently and effectively and generate alternative revenue treams. Management has ambitious plans for the coming year and they are all ready to make it happen to the benefit of their stakeholders Bank’s focus and energy for the coming year evolve around customer base and look to expand network of branches throughout the country.Summit Bank has anetwork of 35 branches/Sub branches in major districts of Pakistan.The branch network covers Sindh,Punjb,NWFP, and Azad Jammu and Kashmir and details are as under:

AUTOMATION & TECHNOLOGY

Information technology and its optimum use greatly facilitate work and increaseperformance potential. Summit Bank is in the forefront of providing customers online and timely services. For this, automated and technologically sophisticated work flows and systems are a prerequisite.Summit Bank continually invests in upgrading these systems and similarly training thehuman resource. The ultimate aim is to achieve both service and cost optimization.The in-house developed software hplus has been successfully installed in all the branches and has been well received. Plans are underway for the installation of ATMs and joining a Switch Group of other prominent banks.

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PRODUCTS & SERVICE LINE

Summit Bank has a dedicated team of banking professionals with a thorough knowledgeof Banking products and markets. Their aim is to contribute positively to the development of Banking and Capital Markets by capitalizing on Summit Bank’s expertise in product innovation and customer service.Summit Bank offers the largest product range available with any Banking institution inPakistan. Their best selling products are:Non stop banking24/7 cash withdrawl facilityReal time online BankingFree unlimited online transactionsCORPORATE BANKINGCurrent Accounts (Pak Rupees)Foreign Currency AccountsClearing and Fund TransferTrade ServicesProject FinancingCONSUMER BANKINGCurrent Account (Pak Rupees)PLS AccountSaving AccountsTerm CertificatesSaving Deposit LockersCONSUMER FINANCECurrent Account (Pak Rupees)Personal LoansPersonal accidental insuranceATM withdrawl insuranseHome financeForeign Currency AccountFREE E-SERVICES INCLUDING:Free Ecash issuance-ATM cardFree ealerts-sms alerts for the transactions you do with themFree etopup-recharge your mobile balanceFree evoice-24/7 customer care center at toll free number 080024252Free ebanking-internet bankingfree phone bankingSummit Bank is committed to the personal welfare and professional development of all its team members. It realizes that proper training of

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human resource is essential, not only for a more productive and satisfied work force but also for a homogeneous corporate culture.The bank continues to follow its strategy of hiring batches of young and energeticmanagement trainees who are sent to a Training and Development Center for training in all areas of banking. The Training and Development Center is a state of the art facility with an impressive faculty. At the same time short courses are continually conducted for other team members to only enhance their skill levels but also increase their performance potential.Lately, Surroor investments Ltd(SIL) have taken over Summit Bank and the board of directors of the bank has been changed.SIL has 60 percent shares of Summit bank limited.In addition, SIL has also signed share purchase agreements with the principal sponsors of My Bank Ltd. And Atlas Bank Ltd, respectively, and made down payment in each case.Acquisition of My Bank has been completed on August,18 2010 and after merging with Atlas Bank it will have a branches over 160 and total assets of about Rs.100 billion.The name of the new bank is Summit Bank Limited.

CREDIT RATINGThe Summit Bank’s Medium to long term rating increased to A and A-2 in the short term. These ratings have been assigned by PACRA, Pakistan’s Leading rating agency. These rating denote better risk absorption capacity Stemming from enhanced equity as well as well-maintained credit portfolio.

RATING DEFINITIONS:A1+:Obligations supported by the highest capacity for timely repayment.AA- VERY HIGH CREDIT QUALITY:‘AA’ ratings denote a very low expectation of credit risk, the capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.Organizational StructureHead Office:KarachiDECISION MAKINGThe branch follows centralized patterns as all approvals are given by centralized authority except for a few cases. Top management had set the procedures and regulations and now the employee have to follow those regulations.CULTURE

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The bank has a bureaucratic culture. All the tasks performed are routine based and hardly any change is done in procedures. The bank has stories and myths told through bi-annual news letter. Interior of every branch is same carrying a very corporate look.

VISION

We are committed to be recognized as preferred supplier of financialservices to the markets we serve.

MISSION

Our mission is to differentiate ourselves as an institution built on Trust, Integrity, Good Governance,and Commitment to deliver value to all stakeholders i.e. customers,creditors, employees, investors, and community at large.Reach out and provide financial services to under-served and unservedcustomer segment.

CHAIRMAN’S MESSAGE“Our Core philosophy of honesty, transparency in customerdealings Product innovation, excellence in customerservice and our commitment to be a responsible corporatecitizen.”H.E.Sheikh Hamdan Bin Mubarak Al Nahayan

MANAGEMENT OF ORGANIZATION:HUSAIN LAWAI(PRESIDENT AND CEO)

SYED MOHAMMAD ANWAR LUTFULLAH(HEAD OF OPERATIONS & INFORMATION TECHNOLOGY)

MOHAMMAD ZAHIR ESMAIL(HEAD OF RETAIL/BRANCH BANKING, CONSUMER, SME, COMMERCIALBANKING, CORPORATE AND INVESTMENT BANKING DIVISIONS)

ASIF QASIM(HEAD OF TREASURY DIVISION)

SYED ASIF ALI(HEAD OF RISK MANAGEMENT DIVISION & HEAD OF CREDIT ANDCREDIT ADMINISTRATION & CAD)

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PERVEZ MOBIN(HEAD OF HUMAN RESOURCE MANAGEMENT, ADMINISTRATION &BRANCH EXPANSION)

GULRAYS KHAN(HEAD OF CO-ORDINATION AND CONTROL DIVISION)

MUHAMMAD AMIN BHOORICFO & COMPANY SECRETARYAZIZ MORRISHEAD OF INTERNAL AUDIT DIVISIONSYED MUHAMMAD ATIFHEAD OF COMPLIANCE DIVISIONSUMMIT BANK MULTAN ROAD BRANCH LAHORE:Valid city markets have their unusual importance regarding import business. They areknown as business and commercial hub of Lahore. Major commoditieis and Industrialraw materials are being imported in these markets. Major industrials are routing prefer toroute their business through the banks situated in these areas. These markets are highlyprofitable and important for banking sector.MANAGEMENT OF SUMMIT BANK MARICH BAZAR SUKKUR

BRANCH MANAGERABDUL HAFEEZ QURESHI

MANAGER OPERATIONSMUZAFFAR ALI SOOMRO

RELATIONSHIP MANAGER CREDITSSIRAJ AHMED MEMON

CUSTOMER RELATION OFFICERSAIMA DURRANI

CASH OFFICERSASIF RAZA SHAIKHASADULLAH MAHESSARNAVEED MAHMOOD

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DEPARTMENTS OF SUMMIT BANK MARICH BAZAR SUKKUR.

Following departments operates in Summit Bank Limited;Account Opening DepartmentCash Dealing DepartmentClearing DepartmentLocal Remittance DepartmentAccounts DepartmentTrade Finance DepartmentMarketing DepartmentFIELD OF ACTIVITIESACCOUNT OPENING DEPARTMENTThe department that is responsible for opening and closing an account assumes immensesignificance and holds a central place in the basic banking operations.Details of the Account Opening FormIn the account opening form the client is required to provide the following information.The first part establishes the Particulars of account which include title of account in blockletters as per CNIC, title to appear on ATM card and mailing address.The second part is then Account information which includeType of account to be maintained. The various choices offered areProfit and loss savingCurrent accountDaily ProductBasic bankingOther________Customer relationIndividualJointCurrency in which the account is to be maintained/ operated. The currencies includePakistani RupeeU.S. dollarPound sterlingEuroJPYThe information to be provided in the account opening form is as followsThe client should inform weather the zakat to be deducted or not .The client is supposed to provide the information whether the account

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would be maintained singly (only one person operates the account) orjointly (two or more than two persons maintain the account).Name of the person who intends to operate the account is to be provided.Provision of either Father’s or the Husband’s name is also a pre-requisite.Occupation of the prospective account holder is also to be written.Name and complete address of the employer is to be written.Nationality is to be provided.Country of residence is to be specified.Telephone number is must.The national identity card, of course is an integral part of the account openingapplication.Passport number, if the prospective client has got one.Another requirement is the date and place of issue of the national identity card.The prospective client also has to provide the name, address and relationship ofany one of his/her close relatives in order to facilitate the communicationproblem. The clients often have a misconception that there next of kin might, ifsome peculiar circumstances arise, get the profit out of his account but this is notthe case. The name and address of a close relative is only recorded in order toundertake necessary communication when needed.In case of a business concern there are two more things that are to be provided bythe business.TYPES OF ORGANIZATIONThe various types of organization which are present in Pakistan at present are:Limited companyPublicPrivatePartnershipAssociation/Club/SocietySole-ProprietorshipThe business concerns also have to give their full name, brief description of the business,date ofIncorporation, and place of incorporation, national tax number, telephone number and fax

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number.The choice of either the deduction or non-deduction of Zakat also needs to behighlighted. Zakat is deducted out of a Profit and Loss sharing account and not out of anyaccount maintained in any other currency. Moreover exemption from Zakat would onlybe granted if proper proof of exemption under a law presently enforced in Pakistan isprovided.Details of other account/s maintained with other branches of Summit Bank or otherbanks are also to be given.The name, signatures, and account number of the introducer is a very essentialprerequisite in order to facilitate the opening of an account. The introducer is a personwho already has an account in the same branch. It can also be a person from the staff ofthe branch as well.Then the client also has to put forth the instructions regarding as to whether the accountwould be maintained on the basis of ‘either or survivor’, ‘jointly’ or ‘any one of us’.After this three signatures of the client are needed and if it is an account of a businessconcern then the rubber stamp of the company/organization is also needed below thethree signatures.In case of a joint account all the persons unanimously might give the right to operate theaccount to one person.In case of account opened by a business concern there are some documents that areneeded to be attached with the account opening form. The details of these documents aregiven below.Limited Company:Copy of certificate of incorporationMemorandum of AssociationList of Director’sCopy of board resolutionCertificate of Commencement of BusinessCopies of NIC of Director’sLatest copy of Form-29

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Partnership:Partnership deed certified copyNIC photocopies of all partners.Partnership mandate for account signed by all the partnersA letter duly signed by all the partners containing the operating instructions ofthe account also has to be takenClub/Society/Association:Copy of rules/ by-lawsCopy of registration (if applicable)List of Executive member management committee/management board etcSole Proprietorship / Individual:NIC/ Passport photocopyLetter from Proprietor confirming “sole proprietorship”There are two things that always accompany an account opening form;Signature Specimen Card.Cheques Book RequisitionPROCEDURE OF OPENING AN ACCOUNTThe Account Opening Form:When a client comes to the bank, and makes a request for opening of an A/C. The officerfirst gave him a prescribed application form.Completion of the Form:The name, occupation, and complete address of the person opening the account arewritten in the columns provided in the form. One signature of the person is taken on theface of the form and one is taken on the backside. These signatures should be usualsignatures and he would operate the account with them in future.Specimen Signature Card (S. S. Card):The signatures of the client are obtained on a specimen Signature card. These cards areobtained in duplicate with two signatures on each card from the customer. Every time acheques is received for a payment from the client, the signature on the cheques areverified by comparing them with the S.S. Card.Issuance of Account Number:When all the formalities are completed then the final approval of account has to be takenfrom the Branch Manager. After obtaining approval of the branch manager an account

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number is allotted to the customer and all the information is entered into the computer.Then that account number is printed on the Cheque Book, S. S. cards and accountopening form.Issuance of a Cheques book:After opening an A/C with the bank, the A/C holder once again makes a request in thename of bank for the issuance of a cheques book. The A/C holder mentions title of A/C,A/C number, sign it properly and mentions the no of leaves he requires. NormallySummit Bank issues a cheques book having at least 25 leaves. Every cheques book alsocontains one leaf that is used for another issue of a cheques book.Entry of Cheques Book:Before issuance of a cheques book, the employee performs certain functions. Theyinclude:Stamping every leaf if the account is photo accountEnters it in the cheques book issue register.After entry in the manual register,and in the sysytem the employee issues thecheques book to the A/C holder after his/her signature on the register.Recording in Computer:After opening of account, all information regarding the account is entered into thecomputer. Currently, a program named hplus is being used for this purpose. Record of allthe transactions regarding the account of a customer is kept updated in the computer.PROCEDURE FOR CLOSING AN ACCOUNT:The procedure followed for the purpose of closure of an account is described in thefollowing stepsThe client who wishes to close an account first has to give an application, duly signed onthe pre-printed application of the bank. The client has to attach this application with theliability form (explained below). The client can also give an application on a plain paper,but correct signatures are very necessary.Then it has to be made sure that if the account to be closed is a Saving,, or Foreign

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Currency Account then the account balance before closing should be zero. In case ofthese types of accounts the bank does not take any closing charges. If a client wishes toclose a current account then the bank charges Rs.150, so at the time of closing thebalance should be Rs.150.Along with the application to close the account client’s Cheque book is also receivedfrom him and then it is destroyed in order to prevent any misuse in the future.A liability form is filled and sent to the Trade Finance Department and Credit Departmentin order to check that the customer does not owe the bank a single penny in any regard. Adebit voucher and a credit voucher are also attached to the liability form.When both of these departments approve that the customer does not owe any money tothe bank and the form is returned to the account opening department then the originalaccount opening form pasted in the ledger when the account was opened is marked‘account closed’ along with the date on which it is so marked. One thing has to be takeninto immediate consideration that the account number allotted to the client (who hasclosed his account), after closure of the account becomes useless and is not allotted to anyone in the future.After approval of the liability form, it is sent to either the Foreign Currency AccountsDepartments or the Cash Department, as the case may be so that the officer who scannedit in the first place could return the specimen signature card to the account-openingdepartment.Once the S. S. Card is received back from the concerned official then the liability form,the client’s application along with the specimen signature card is pasted in the ledgerright along side the original account opening form. The form has to be pasted with theoriginal account opening form even if the account was opened a decade ago. In the

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computer as well all the entries and records related to that particular account arepermanently deleted by using the ‘close account’ option.IMPORTANT DOCUMENTS USED:Liability FormThis particular form is used when an account is to be closed. The staff of account openingdepartment, after filling in the name and account number of the client forwards this formto the credit department and the trade finance department who upon receipt of suchliability form make required scrutiny so as to check whether or not the customer owessome money to the bank or not.Account Statement Request FormThis small form is used to request for the account statement for the desired period. Theclient gets this Performa from the account-opening department and then, after filling itup, gives it to the computer section that gives the statement to the client in printed form.Issuance RequisitionThis requisition is used by the staff to order for any thing (e.g. stationary) they need.They write the type and quantity of the stationary they need, get it signed by the ManagerOperations, give it to the person in-charge of issuance of stationary who on receipt of thisrequisition (duly signed) issues the stationary.Debit and Credit VouchersThese two vouchers are basically used when an account has to be closed. The debitvoucher shows as to how much amount has to be taken from the client’s account and thecredit voucher shows as to hoe much amount has to be credited as Bank’s income, inorder to facilitate the account closing process.Application to Close the AccountThis is a pre printed application of the bank in which the client fills in the accountnumber, the title of the account and the type of account and requests the branch managerto close his account with the Bank.Application to Change the Address

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This is again a pre printed request form in which the client fills in his name, accountnumber, telephone numbers and the new address so that he could communicate with thebank and receive all the notices, statements and other necessary document which the bankmight send through mail depending upon the circumstances.Mandate Form Used By an Individual to Enable a Third Party to Operate The AccountAn individual to enable another individual to operate hi/her account without changing thetitle of the account uses this form. In this form the account holder certifies that the personto whom he is giving the mandate shall be fully authorized to embark upon all possibletransactions with regard to this account unless and until otherwise specified.CASH DEALING DEPARTMENTThis department of bank is mainly responsible for the handling of cash deposits andencashment of cheques issued by the account holders. The following are the sections ofthe cash dealing departmentReceipts of cashEncashment of chequesCash receipt sectionThe depositor uses depositor slip/vouchers for depositing the amount. Client fills thesevouchers, fulfilling all requirements.Encashment of ChequesCheques encashment is made in four stepsReceiving of chequesVerification of signaturesComputer terminal processPayment of cashCLEARING DEPARTMENTOne of the basic economic functions of banks is to receive deposits and to honor chequesdrawn upon them. So, cheques are a most commonly used instrument for makingpayments by account holders.Now the question arises that how these cheques & other negotiable instruments drawn on

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one bank are deposited in other banks and money is transferred from one bank to another.Clearing House has provided this facility. Clearing house facilitates different banks to gettheir cheques drawn upon other banks to be cleared.Cheques lodged in clearing constitute two types of clearingOutward ClearingInward ClearingOutward ClearingWhen cheques and other negotiable instruments drawn upon other banks like MCB,ABN-AMRO of the same city (as Lahore) are presented in Summit Bank Limited todeposit them in the respective payee’s accounts, these instruments are lodged in outwardclearing of summit Bank limited.When the cheques are presented in Summit Bank to be deposited in their respectivepayee’s accounts, different stamps are put on cheques before their lodgment in outwardclearing.Crossing the chequesCrossing means two parallel transverse lines, drawn across the face of the cheques withor without words written in between them. Crossing may be general or special. Inclearing, cheques are crossed specially. Cheques are stamped with bank’s name betweentwo transverse parallel lines to constitute special crossing. After the cheques have beencrossed specially, the holder cannot receive payment except through the banker named onthe cheques. Basic advantage of crossing is to save the instrument to go it from illegalhands. If, crossed cheques is lost or stolen, there is no risk of wrong payment. So it is aneffective means of minimizing the risk of loss or forgery.Clearing StampAfter the cheques have been crossed specially, clearing stamp is put on the cheques andother instruments, with the following day’s date, as these cheques would have to bepresented in their concerned drawee banks on the subsequent day.Endorsement Stamp

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It means anything written or printed upon the back of an instrument. So, at the end, thecheques are endorsed in full (endorsed specially) by putting the stamp with wordsdescribing “ Payee’s account Credited in Summit Bank Limited , Multan Road Branch,Lahore”.After putting these three stamps on cheques & other negotiable instruments, they are sentto NIFT (National Institutional Facilitation Authority) with Add List. NIFT aftersegregating the cheques of different banks delivers them to their concerned banks, whichconstitute the inward clearing for those (drawee) banks.Inward ClearingCheques and other negotiable instruments (PO, DD etc.) drawn on Summit BankLimited, Lahore, sent by other banks, constitutes the inward clearing of Summit Bank.After having all the stamps and dates of cheques confirmed, the concerned drawer’saccounts are debited (in Summit Bank Limited) and main branch’s account is credited bythe total amount.CollectionWhen cheques and other negotiable instruments drawn upon other banks outside the city(Lahore) are presented in Summit Bank Limited, Multan Road Branch, Lahore todeposit in payee’s accounts, then instead of clearing, these instruments are lodged incollection and constitute outward bills for collection. Cheques of cities, where SummitBankLimited branch exists (e.g. Islamabad, Faisalabad etc.) are sent to that branch where thesecheques are lodged in is outward clearing. Otherwise, they are directly sent to the draweebank. Postage & other charges are deducted on account of payee according to Scheduleof Charges.AccountsIt is probably the only department in the entire bank where there is almost no direct

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customer dealing. Two types of accounts are there which are as follows:Inter-Branch AccountsLike other banks, Summit Bank Limited has a network of branches all over the country.These branches in different cities are interlinked with each other through theircorrespondent accounts in other branches. So, all payments from one branch to anotherbranch (in the same city or another) are made by debiting and crediting these inter-branchaccounts.Inter-Bank AccountsLike inter-branch accounts of a bank, different banks have correspondent accounts witheach other. Main branches of banks in a city maintain these inter-bank accounts. So,money is transferred from one branch of a bank to another bank’s branch through theseinter-bank and inter-branch accounts.The accounts department deals with various routine activities for the bank. The mainactivities performed by it areBudgetingReportingMaintenance & depreciation of fixed assetsMiscellaneous functionsBudgetingAccounts department of bank, for a year makes budget of branch. Fiscal year of bankstarts from January 01 and ends on December 31. The accounts department startspreparing budget from October for the next year.ProcedureThe budget is based on forecasting through past performanceFirst of all, the bank reviews what are its sources of funds and where it can utilize thesefunds?The main sources of the bank are deposits, borrowing from other banks, borrowing fromSBP, bank’s paid-up capital, its reserve fund, profit generated by the bank.The budget is submitted to the head office for recommendation and modification.

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Monthly budget meeting is held by branch managers to analyze the monthlyperformance. Budget and actual performances are employed and variance is computed foranalysis.The management will then drive the reasons for the variance and take remedial measuresto achieve the targets.ReportingThe accounts department, in the form of reports, clubs the details of various departmentstogether. Each and every minute detail is provided in weekly, monthly and annualreports. The reports are submitted to head office, SBP and to the government.The accounts department prepares many reports, of which the most common areStatement Of AffairsIncome & ExpenditureForeign Currency ReportOutstand Receipt ReportMaintaining Of Fixed Assets & Their DepreciationAccounts department maintains the record of all the assets and charges depreciation onthem. The bank normally uses the straight-line method to compute the depreciation.The accounts department prepares asset purchase report and asset sale report after every 6months that helps in changing the depreciation. It is calculated on monthly basis andcharged yearly. Bank not only depreciates the existing assets but also the assetstransferred in and transferred out.Miscellaneous FunctionsThe accounts department also performs some other miscellaneous functions likeReconciliation StatementsClosing EntriesForeign Exchange Forward TransactionReconciliation statementsThe bank prepares reconciliation statement with head office and SBPHead OfficeReconciliation with head office is done in reconciliation department. The branches send

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their reports to the head office. They check the posting of all the entries if outstanding,which has not been posted by branch or head office. The reconciliation is carried out inthe head office and accounts department handles quarries.State Bank of PakistanThe SBP keeps the record of every scheduled bank. The bank statements and statementsof SBP are reconciled on daily basis. Reconciliation is basically setting of outstandingentries. The reconciliation statement contains two sides. One contains entries originatedfrom bank but not responded by SBP and on the other side entries originated by SBP butnot responded by bank.Closing EntriesAccounts department also passes the closing entries on monthly, 6 monthly and yearlybases to calculate the profit and analyze the overall performance for a certain period.Foreign Exchange forward transactionIn the past, the banks had to keep their foreign exchange with SBP on the agreement thatSBP will purchase the foreign exchange on book rate and charge a fee for covering therisk. This whole transaction was known as foreign transaction. Now this facility is notavailable. Now banks can avail it by renewing their limit on old accounts with SBP.StatementsThe predominant functions performed by the accounts department can be categorized intotwo broad categories.Daily Activity CheckingReport GenerationDaily Activity CheckingAll the operations performed in various departments of branch are computerized. Thefunctions are performed through the customized software of the bank called hplus. Inorder to facilitate double-checking of all the transactions done, every concerned officialalso passes vouchers. At the day end all the vouchers passed by various officers working

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in different departments are given to Accounts Department. Furthermore the I.T.department also prepares a report which constitutes of the computer print outs of all thetransactions / entries which have been fed into the computer system of the branch thatday.Report GenerationThe exact number of reports generated by the accounts department on a daily, weekly,monthly, bi-yearly and yearly basis is somewhere in the bracket of 500. It is neithernecessary nor possible to get acquainted by all of these reports in a short period of time.Some of the common reports areDaily Advance And Deposit PositionDaily Exchange PositionDaily Fund ManagementClosing ReportsMonthly Assets & LiabilitiesMonthly Budget Review ReportMonthly Monitory StatementMonthly Performance Review ReportSchedule Of Maturity DistributionFrom these statements, five reports carry extreme importance. The five reports areDaily position of advances and depositsStatement of affairsDaily exchange position reportFixed assets statementMonth review of performance.The Local Remittances DepartmentBesides cheques (the primary notes of exchange in a bank), banks also handle PromissoryNote, Bills of Exchange, Bank Drafts, Pay Orders, Traveler Cheques, Pay Slips, CallDeposit Receipts; as negotiable instruments.Pay Order (PO):“Pay Order is a negotiable instrument made by the bank, on account of a customer, to payon order the specified amount”Pay Orders are used to make payment or to transfer money, with in the same city. PayOrder is always drawn on the bank that has issued it.

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Making of a PO:When a person requires a Pay Order (made by Summit Bank Limited, Lahore), he isasked to complete the prescribed application form in which the amount of pay order is tobe stated. Certain amount of commission and advance tax is charged on issuance of payorder. After having the total amount deposited in the bank (in cash or through cheques, incase of account holder), pay order is issued in favor of the payee.Like cheques, when pay orders issued by Bank, are presented in other banks to get themdeposited in the payee’s accounts, they constitute the outward clearing for those banksand inward clearing for Summit Bank Limited, Multan Road Branch Lahore.Demand Draft (DD):“A Demand Draft is a negotiable instrument issued by the bank, on account of a person,and drawn on its own branch in a specific city or on the branch of another bank in thatcity (in case bank doesn’t have any branch there), requesting it to pay the specifiedamount to the person named on it”.Demand Drafts are used to make outstation payments or to transfer money, out of thecity. Therefore, a DD is always made for a particular city.Making of a DD:Suppose a customer requests his Summit Bank Limited, Multan Road Branch Lahore toprovide him a DD made on his account for a particular city like Islamabad.Then, after having the total amount to be deposited with application form, demand draftis issued in favor of the specified person in Islamabad (supposed) and is drawn onSummit Bank Limited, Islamabad Branch. So, when this demand draft is presented bypayee in any bank, it constitutes the inward clearing of Summit Bank Limited, IslamabadBranch.Cancellation of PO & DDAfter issuance of Pay Order, Demand Draft by Summit Bank Limited, Multan Road

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Branch, Lahore, if any one of these has to be cancelled by the customer, it is returned inthe bank. Then, after deducting the cancellation charges of Rs.100, the remaining (net)amount is paid to the customer through Cash Payment Voucher.Advance Tax against RemittancesAdvance Tax is deducted on issuance of PO & DD (when customers don’t have taxexemption form) and credited in Tax on PO & DD account. Tax deducted has to be paidto State Bank of Pakistan (SBP) with in one week of issuance of these instruments.

TRADE FINANCETrade deals with entry / departure of goods into / from one country to another country.International trade basically is a consequence of an agreement between buyer and a sellerseparated by geographical boundaries.To ensure secured transfer of goods to the right buyer and a right seller, the services ofthe Financial Institutions are of great importance. In this relation the banks have provedto be not only dealers but also the leaders.Trade financeThe term Trade Finance encompasses all banking transactions that are embarked upon inrelation to exports and imports. Now-a-days banks have become a compulsory assistantto almost all the International Trade transactions. When trade is taking place between therepresentatives of two countries (exporter and importer), the exporter involves his bank(the Advising Bank) in the transaction, as he wants to feel secure regarding timelypayment of his remuneration in the required currency. On the other hand the importerinvolves his bank (the Issuing Bank), in order to get a sense of security regarding timelysupply of the required product, in the required manner.The Trade Finance Department has two predominant dimensions namely Exports and

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Imports. Thus there are two processes that take place in international trade i.e. ‘thebuying process’ (the importer purchases the products from the exporter) and ‘the sellingprocess’ (the exporter sells the goods to the importer).The buying processThe buying act exchanges one thing, usually currency, for another of equivalent value.The objective of the buyer is to obtain the most competitive price and delivery with thebest quality. The buying process begins with locating the source of a good or service, andends when it is resold, stocked in inventory, or the service is completed.Within the global market place, companies worldwide become the potential source ofgoods and services. However, the objective remains the same for each purchase, to getthe best price with the best delivery and with the best quality.The selling processThe selling process exchanges goods and services for currency of equivalent value. Theobjective of a sale is to achieve the highest price for the goods while preserving therelationship for continued business.Trade finance can be categorized into two departmentsImports DepartmentExports DepartmentThe exporter and the importer might decide to carry on trade without theIMPORTS DEPARTMENTIn the common words, import means bringing commodities into a country from outsideby sea or air. Stated differently, whenever there is a need of any commodity in a countryand if that commodity is not available the need for import arises.Requirements to be fulfilledWhen a person wants to import, he must have to register his name and his company’sname. The registration was previously granted by chief controller imports and exports butnow the Export Promotion Bureau of Pakistan performs this task.For Import Registration, the following basic documents are required:Questionnaire duly filled in

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National Identity Card (attested copy)Membership Certificate of Chamber of CommerceNational Tax Number / CertificateBank CertificateAffidavit in case of Female Proprietor / Partner / DirectorSales Tax RegistrationThe fulfillment of these requirements will give the registration to the importer and afterthat he can open an L/C with any bank and can import anything.The Letter Of Credit (L / C)International trade involves numerous factors such as payment for imports in theexporter’s country, shipment of goods within the limitations prescribed and difficulties ofenforcing legal rights in the foreign country etc. Therefore, to Overcome theseimpediments a system has been enforced, this system is represented by ‘Letter of Credit”.It is a conditional bank undertaking of payment.An L/C is a commitment on the part of buyer’s bank to pay or accept draft drawn upon itprovided draft doesn’t exceed a specified amount.In simple words, it can be defined as; “A bank’s written undertaking given to the exporterfor payment of a certain sum of money on behalf of the importer provided the exportertenders to the bank, or its overseas agents, the specified documents within a specifiedperiod in accordance with the terms of the undertaking”.Basic parties involved in a Letter Of Credit (L / C)There are four basic parties involvedImporter & its Issuing BankExporter (Beneficiary) & its Advising BankVarious Shapes OF the Letter Of Credit (L / C)There are various types of L/C’s used in trade. The main kinds are as followsRevocable Letter of Credit:It is the one, which can be cancelled or modified by the issuing bank at any time withoutany notification to the seller. Since it offers little security to the seller, it is hardly used inforeign trade by the exporter.Irrevocable Letter of Credit:

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It is the L/C that can be amended or cancelled only with the agreement of issuing bank,confirming bank and seller. This L/C gives more security to exporter as compared torevocable L/C. In Pakistan, all banks including Bank Alfalah Limited-IBD are permittedto open irrevocable L/Cs only.Confirmed Letter of Credit:The letter of credit is that which has the protection of credit standing of importer as wellas exporter’s bank. The exporter’s bank that confirms the Letter of credit takes theliability of paying agents, in case of issuing bank fails to make payment to the exporter.Unconfirmed Letter of credit:Under the unconfirmed Letter of credit the advising bank (through whom the credit isnegotiated) does not give any kind of guarantee to the exporter that the issuing bank willhonor the bill drawn.Types of letter of credit (L / C)There are two main types of L/Cs.Sight L/CIf the beneficiary of a credit is to obtain the payment immediately on presentation ofstipulated documents, it is sight credit. In this form of credit, the exporter draws a sight ordemand draft payable at the counters of the advising bank or the bank specified in theletter of credit. The draft is paid on presentation if all the other terms of the credit havebeen complied with.In this form of letter of credit the beneficiary or exporter gets the credit from advisingbank immediately after completing all the requirements. Banks usually deal in this typeof letter of credit more because there is lesser risk for both the exporter and the bank.Bank gets payment from importer before giving him the possession of documents. Inother words, we can say in this type of L/C when importer sights the document he makesthe payment to the issuing bank.Usance L/C

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When a credit is to be paid upon the maturity of a bill of exchange drawn under the termsof the credit, it is called an Acceptance Credit or Usance Credit or Terms credit. In thistype of letter of credit the payment will be made on maturity of a bill of exchange. Thismaturity or tenor of this type of letter of credit varies e.g. 30, 60, 90, 120 days. Exporterdoes not get payment on the receipt of documents rather he gets the acceptance on billexchange by importer that payment will be made on maturity.Common Shipping terms used while opening Letter Of Credit (L/C)C & F (Cost and Freight)Insurance of shipment is borne by importer, while exporter pays the freight under thiscondition.CIF (Cost Insurance and Freight)Exporter has to pay both insurance and freight under this condition, but not applicable inPakistan.CIF & C IWhen goods are shipped on CIF and C I (Commission and Interest) basis, it means theprice quoted includes cost, freight, insurance, commission and interest.F O B (Freight on Board)When freight of goods shipped, is not realized in advance by shipping company, it isthen to be paid by the importer on delivery of goods at the port of destination.Documents required for opening letter of credit (L / c)For getting an L/C issued, the importer has to submit the following documentsPerforma Invoice:The foremost document required by the bank for establishment of an L/C is the PerformaInvoice (signed by both the importer & exporter). The exporter issues it. It comprises allthe terms and a condition that has to be mentioned on L/C. Performa Invoice constitutesthe basis of the whole transaction.Indent:

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When the importer and exporter don’t have direct relations and are connected to eachother through an intermediary, called Indenter, then he (indenter) issues an indent formcontaining all terms and conditions (like Performa Invoice).Annexure B:This is a form in triplicate and must be filled by the importer. The HS (HarmonizedCode) or ITC (International Trade Control) code of the imported goods must bementioned. Every commodity has a different universally applicable code. The bankermust check before opening the L/C that the HS code given by the importer is correct.Form I:This form is also a part of the SBP’s efforts to check all transactions in which foreignexchange is involved. The form I also contains all the information about the transactionalong with the importers import registration number.L/C Form with Adhesive Stamp:The application form for the opening of an L/C must possess a legal stamp with it. Thisstamp is worth Rupees 100. Without a legal adhesive stamp, an application for opening ofan L/C will not be accepted.Insurance:It is necessary for the importer to get the consignment insured and provide proof ofhaving done so.Promissory Note“It is an unconditional written promise signed by the maker, to pay on demand or at afixed or determinable future time, a certain sum of money to the specified person or tothe bearer of the instrument”. Therefore, to make the payment (by importer) secure, bankobtains a promissory note signed by the importer, along with the above stated documents.L/C Margin:It is a certain percentage of the value of L/C that is retained by the bank as security.Clauses of letter of credit (l / c)A letter of credit contains several clauses. The main ones are

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Type of Credit:The heading of a credit indicates the type of credit and its purpose. For this purpose,every bank has prescribed its own letter of credit forms.Value of Credit:The fixed amount to which the bank is liable is specially mentioned in the letter of credit.Specifications of Documents:The documents required are specially mentioned in the credit.Description of Goods:A brief description of goods that are required by the importer is given.Part-Shipment and Trans-Shipment:Part-Shipment means shipment of goods in lots or installments that is in more than oneshipment.Trans-Shipment means the carriage of goods by more than one vessel or mode oftransport.The credit must specify whether this can be trans-shipped / part-shipped or not.Collection of Charges:The buyer and seller should have been decided as to which party would bear the expensesbecause of interest/ markup and other bank charges. The credit specifies the party thatwould bear the charges.Validity Period:This is a very important clause and because every credit indicates an expiry date or thevalidity period. This period is so fixed to provide sufficient time to complete thetransaction.Reimbursement Clause:This clause indicates the method for obtaining the reimbursement by the foreignnegotiating bank. It will be discussed elaborately in later part.Shipping Marks:If the importer wants that the goods should be identifiable with some special packingmarks, it should be so specified in the credit. This clause is not found in all the credits.Procedure Of Issuance Of Letter Of Credit (L / C)

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After completing the documents necessary for opening the letter of credit the procedureof issuance of letter of credit starts.Letter Of Credit (L / C) application formAfter having an L/C limit approved, the process of L/C opening starts with L/Capplication form. The bank has prescribed a standard application form that contains therequired guidelines, instructions and other relevant terms and conditions under which theL/C is to be opened and claims from the beneficiary are to be settled.The application form contains the followingDescription of the goods, detail of quantity, unit price, total price and currencyof creditInstructions about the advice of credit, whether it should be sent by airmail, bycourier or telecommunicatedForm of credit: whether revocable or irrevocable, confirmed or unconfirmed.Due to permission of irrevocable credit only, it is prescribed on formThe name and address of the beneficiaryType of credit: whether sight, Usance etcValidity period of credit and last dates for shipment and negotiationPort of shipment and port of destination and whether trans-shipment and/orpart-shipment are allowedTypes and number of sets of documents required to be submitted by the exporterShipping terms in the contract of sale, e.g., FOB, C&F or CIF etc.The application form must possess a legal stamp worth Rs. 100. Form without thisadhesive stamp is not accepted. This legal stamp is usually pasted on theapplication form before giving it to the applicant.Banks involved in the processing of letter of credit (L / C)Starting from the establishment of an L/C, till the retirement of documents, following arethe banks involved in the whole L/C Cycle. The number of banks involved in L/CProcessing may vary from 1 to 6. Only a single bank can perform all the functionsthrough its different branches.

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Issuing Bank (Opening Bank):Bank opening the letter of credit is called Opening Bank or Issuing Bank. Openingbank’s undertaking under an irrevocable or confirming L/C is absolute. Therefore, oncean L/C has been communicated to the beneficiary through the bank, the banker has nooption, but to pay provided the other terms and conditions have been fulfilled.Advising Bank:The bank that advises the L/C i.e., the bank that physically delivers the L/C to theexporter on the behalf of the issuing bank. It is a correspondent bank of the issuing banksituated in the beneficiary’s country or it can also be a branch of issuing bank.Negotiating Bank:The negotiating bank receives the documents and delivers to exporter. When the exportercompletes all the documents, after making shipment, the negotiating bank sends them tothe issuing bank.Reimbursement Bank:According to ICC Rules, Reimbursement against foreign currency has to be madethrough the country originating that currency. Therefore, for dollar transactions,reimbursement has to be made (received) through the banks situated in USA. Whenissuing bank don’t have any branch in USA (for dollar payments), Summit Bankk hasNostro Account, that bank is known as Reimbursement Bank or Drawee Bank. It is acorrespondent bank of issuing bank and makes payment by debiting the nostro account.Intermediary Bank (Collecting Bank):Intermediary Bank is that where the negotiating bank has its Nostro Account and whoobtains reimbursement against L/C from reimbursing bank and gives credit to thenegotiating bank. For dollar payments, intermediary bank would have to be situated inUSA. Similarly, for transactions in GBP, both the Reimbursement & Intermediary banks

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would be in UK.Approval of Letter of Credit (L / C)When the importer has provided all the required documents for the credit, an approvalsheet is put on top of them. This sheet shows the credit limit of the party and if the tenureis Sight or Usance. After, the completion of the approval sheet, the L/C is presented tothe local credit committee of the bank for approval.Communicating Letter of Credit (L / C)After establishing the letter of credit, it is communicated to the beneficiary through manyintermediaries.Transmission of Letter of Credit (L / C)After issuance, the L/C is sent to the advising bank. There are many ways to transmit anL/C to the advising bank. These are:Through AirmailThrough CourierThrough TelexThe medium is used according to the instructions of importer mentioned on the top of theL/C Application form.Advising Letter of Credit (L / C)After transmitting the L/C to advising bank, it is advised (physically delivered) to theexporter, through advising bank. Summit Bank has collaboration with a number of banksworldwide, for advising its L/C’s. For example, if an L/C has to be advised in Australia,it can be advised through ABN AMRO or Standard Chartered Bank, Australia.Negotiating Letter of Credit (L / C) documentsNegotiating bank, after receiving the documents from advising bank, intimates theexporter. When the exporter makes the shipment and completes all the documents, hepresents them to the negotiating bank. The negotiating bank sends these documents to theissuing bank, according to the date of negotiation mentioned on L/C, and claims thereimbursementDocuments sent by the Negotiating bank

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Following are the documents sent by the negotiating bank for the settlement of L/C;Bill of exchange“A Bill of Exchange is an instrument in writing containing an unconditional order, signedby the maker, directing a certain person to pay a certain sum of money on demand or at afuture determinable period, to a certain person or to the bearer of the instrument”.It is drawn by the exporter through negotiating bank (drawer) and is an order for theimporter or issuing bank (Drawee; Summit Bank) to pay a specified amount. In case ofsight bill (for sight L/C), it has to be paid immediately.Commercial InvoiceCommercial Invoice prepared by the exporter signifies the name and address of importer,invoice price, invoice number and all the specifications of goods being imported.Packing ListIt is prepared by the exporter to show that the consignment is in accordance with theorder of importer.Shipment AdviceShipment Advice is issued for the insurance company to provide every information andspecifications regarding shipment.Certificate of OriginThis document is a certification for the origin of goods. It certifies that the goods beingimported (or exported) have the origin of a specific country.Phytosanitary CertificateThe exporter in case of commodities, like medicinal herbs, sends this certificate. Itcertifies that the use of goods is not harmful.Bill Of Lading/ Airway Bill/ Railway ReceiptBill of Lading is a document issued by the shipping company that stipulates the quantityof commodity, weight, port of shipment & discharge, date of shipment and otherspecificationsInsurance Policy (If Applicable)If insurance is responsibility of exporter i.e. in case of CIF price, then the L/C issuing

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bank also requires the insurance policy along with other documents. Usually, all thetransactions are carried out in FOB or C&F prices.Covering ScheduleAlong with the above stated documents, the negotiating bank sends its CoveringSchedule on which the instructions regarding the whole transaction are prescribed. It alsomentions the number of each document sent by the exporter.Scrutiny of documentsAfter receiving all the documents, next and the most important step is to scrutinize thedocuments. For this purpose, a list called “Check List of Import Documents” is prepared.All the documents must be in accordance with the requirements of L/C. In case of anydeviation the documents can be rejected and payment can be stopped. Negotiating bankmust be intimated about any discrepancy found, with in 7 days.Retirement of DocumentsThe whole transaction of foreign trade in which an L/C is involved, completes with theretirement of documents.The documents that are first lodged in PAD are retired when the importer pays the totalamount (payable). This amount includes the PAD plus the mark-up charged on PAD andother charges (mentioned on cost memo). Upon receipt of payment, when the documentsare retired, they are given to the importer and he gets the consignment cleared fromcustom authorities (by submitting the Bill of Entry).This completes the whole transaction of Foreign Trade, carried out through a Letter ofCredit.The Exports DepartmentExport plays the major role in the economic development of the country; it is the one ofthe major sources of earning foreign exchange without additional burden on theeconomy.Conditions for ExporterLike an importer, there are certain conditions that a person must fulfill to become an

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exporter.The person must be an account holder of Summit Bank Limited.No one can export any commodity until and unless he/she is a Pakistani andhas a valid export registration with the EPB.The person must process a valid membership certificate of TradeOrganization, licensed and recognized by Federal Government like a Chamberof Commerce (e.g. Lahore Chamber of Commerce).The person must possess a valid NTN (National Tax Number) certificate.A person cannot export any good unless he files a Form E (E stands forexports) with his application to the bank.The person must have the Sales Tax Registration Certificate.Two key documentsTwo major kinds of documents reach the export department;Letter Of CreditIn simple terms a letter of credits is defined as a bank’s written undertaking given to theexporter for payment of a certain sum of money on behalf of the importer, provided theexporter tenders to the bank, or its overseas agents, the specified documents within aspecified period in accordance with the terms of the undertaking. Documentary credits asthey are called, L/C’s have been discussed in detail in the imports section.ContractA contract is defined as an agreement, certain and performable, made by competentparties, with their free consent for the lawful object, and lawful consideration, and if notexpressly declared void.Another way to define contract is that it is a Mutual understanding between the buyer andthe seller without the involvement of the L/C. involvement of a letter of credit. In thissituation, trade is carried out based on a mutual contract between them.Complete Export CycleThe process of export starts with the receipt of the Letter of Credit (or Contract) by thebank. The issuing bank sends the L/C to Summit Bank Limited,

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Branch,GUJRANWALA through the advising bank. Upon receipt of L/C, an intimationletter is prepared and is sent to the beneficiary of the L/C, advising him that his reachedSummit Bank Limited, NGT Branch, Lahore and he should collect it immediately.As mentioned earlier, an E-form is necessary for exports out of the country. It is a part ofexchange control mechanism of the State Bank of Pakistan. When an exporter receives anL/C, the next job is to get an E-form from the bank. After filling in the completeinformation about the goods to be exported, the exporter Brings the E-form to the bankfor verification. The bank verifies the contents in accordance with the documents and notby physical checking. The E-form is a quadruplicate and contains the followinginformation.The CommodityThe quantityThe priceThe port of shipmentThe port of destinationTerms of shipmentExport registration numberAfter getting the E-form verified from bank, the exporter starts preparing for hisshipment. As the banks only deal in documents, so in order to receive the payment for hisgood to be exported, the exporter has to send certain documents to the L/C issuing bankvia negotiating bank. These documents have already been discussed in import section.A very important step in the export process is to scrutinize the documents, before sendingthem to the issuing bank. It requires utmost care and attention of the bank officer. Whenthe documents are presented in the bank, they are always scrutinized and they must be inaccordance with the requirements stipulated on the L/C. Any deviation could result inrejecting the documents by the importer, hence causing loss to the exporter or even to thebank if the documents are to be negotiated.

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WORK DONE BY METhis section is based on my observation and experience and rotation during my internshipat the Multan Road Branch of Summit Bank limited,Lahore. Some of the jobs that Iperformed or assisted in performing or overlooked in the various departments were;Account Opening DepartmentInward outward mailing and filing the documents.Trade FinanceClearing Department/ Accounts Department/ Remittances DepartmentCash departmentFIRST THREE WEEKSAccount Opening DepartmentIn first week I was placed in account opening department. In account opening departmentI learned aboutAccount Opening ProcedureThe persons who are eligible to open an accountKinds of Accounts offered by Summit Bank LimitedDocuments required by different categories of personsIssuance of Cheques BookDetails about Loose ChequesProcedure of closing an accountProcedure of dormant accountsI worked with Miss Sara in this department. She was often busy dealing with customersas in this department lots of customers use to come daily. But still she told me a lot aboutaccount opening procedure. She also briefed me how to use bank smart in accountopening department. She use to be very polite with customers as his job requires this. Sheuse to manage relationships with customers by providing them better services. Therefore,customers are pleased.In this department I worked for 15 days and in this span of time I learned different kindof accounts offered by bank, stamping leafs, entering of books in cheques book issuebook and entries in system.FOURTH AND FIFTH WEEK

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Clearing Department/ Accounts Department/ Remittances DepartmentAs in clearing, accounts and remittances department has very less work to done so theyare combined in single department here in Summit Bank Limited. This department iscollectively called Operations department and 2 people work over here. I worked withMiss Zamurad Butt .She told me about different activities of this department. Herattitude was very nice.First of all he told me about;Procedure of clearing a chequesChecking of chequesInward and outward clearingWithin bank transferDifferent reason of returning a chequesTypes of clearing stampsThen she told me about the operations of Accounts department. I learned weekly,monthly, bi-annually, annually and quarterly reports that are sent to main branch andhead office and even to SBP. Most of these are prepared by system automatically. Twomain functions performed by this department are daily activity checking, reportgeneration. Main reports prepared are;Daily Advance And Deposit PositionDaily Exchange PositionDaily Fund ManagementClosing ReportsMonthly Budget Review ReportMonthly Monitory StatementMonthly Performance Review ReportNext she told me about remittances. Here I gained knowledge about inwardclearing and outward clearing. She told me about following things;Demand draft (D.D)Pay order (P.O)Local remittances and outgoing remittancesSchedule of bank charges for remittancesSIXTH AND SEVEN WEEKTrade Finance

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Next week I worked in Trade Finance department with Mr.Iqbal Raza. He is a very kindperson and told me a lot about trade finance department. Although two week period wasvery small to get knowledge of whole of this department but still he explained meeverything that she can in this short span of time.Here I gained knowledge about shipping terms, shipping documents required, and procedureto open L/C. He also told me about different kinds of banks involved in this procedure areIssuing Bank, Advising Bank, Negotiating Bank, Reimbursement Bank, Intermediary Bank.Then she told me role of these banks.The main activities of this department are divided into two parts; Import and Export. Andrequirements for importers and exporters are different. She also told me about Parties ofL/C, Types of L/c, Import license (registration of import in EPB), Import bill, checking ascrutinizing of documents, Mode of payment.EIGHTH AND NINTH WEEKCASH DEPARTMENT:In eighth week I worked in the cash department with Mr.Usman. He is verycooperative person he told me about the procedures which are involved in thereceiving and payment of the cash and cheques.He told me about the things we should keep in mind while taking the cash.Cheques should be properly checked, the name and account number of the client ismentioned on the cheque, and it is matched with the entries in the system for thescrutiny purposeUtility Bills are also accepted in this department, proper entries are made on thesystem hplus. After accepting the bill, the bill is stamped with Summit Bank Limitedstamp which is computerized to avoid frauds and errors.TENTH AND ELEVENTH WEEKFINANCIAL ANALYSIS1. Return on equity =Net income/ shareholders equity

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InterpretationReturn on EquityYears Ratio2006 20.372007 25.72The return on equity measures return to both common and preferred stock holders. This ratiohas increasing trend in this case, actually the purpose of calculating this ratio is to measurerate of return to the stock holders, and its increasing trend shows that the return rate issatisfactory. We see slightly increasing trend in this ratio that is from 20.37 to 25.72 fromthe year 2006 to 2007.2. Capital Adequacy= Total regulatory capital / total risk weightedexposureInterpretationCapital AdequacyYears Ratios2006 9.482007 9.85Capital Adequacy is the risk weighted assets to capital, calculated in accordance withState Bank’s guidelines on capital adequacy. This ratio compares the amount ofeligible capital with the total of risk weighted assets (RWAs). Bank Alfalah monitorsand reports its capital ratios under SBP rules which ultimately determines theregulatory capital required to be maintained by banks and DFIs. In case of this Bank,ratio has been increased from 2006 to 2007, which shows that the Bank Alfalah haseligible amount of capital as compared with total of risk weighted assets.3. Return on Assets = net income / average total assetsReturn on AssetsYears Ratio2006 0.672007 1.04

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InterpretationThis is the most important ratio of the entire profitability ratios. The return onassets is the real determinant of the profit. The ratio shows that company hasincrease in this ratio, but this increase is very nominal i.e. 0.67 to 1.04.Apparently it seems that company profitability increases.In this ratio apparently it seems that bank’s return on asset increases but itdoesn’t mean bank faces losses but it shows the loopholes in management. Asassets and sales both increases in the year of 2007 as compare to 2006, bank’smanagement couldn’t manage this increasing trend properly in 2006 but theymanage increase in sales in 2007. Management fails to give as much increasein sale in 2006 as the ratio seems in the increase in assets but they stable theirsales in 2007.4. Earnings per Share = net income / total number of sharesEarning per ShareYears Ratio2006 2.912007 4.82InterpretationEarning per share is the amount of income earned on a share of common stock duringan accounting period. Earning per share varies from the bank’s point of view becauseit receives much attention from financial community like investors and potentialinvestors. Therefore bank’s annual report supposed to provide full report of earningper share. This ratio increases from the year 2006 to 2007, it directly mean banksearning per share increase, which is a very healthy sign for the company. To attract

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the investors company should be increase in this ratio.5. Stock holder’s returnStockholder ReturnsYears Cash Dividend2006 02007 0InterpretationThis stock holder return in terms of cash dividend shows that in year 2006 and 2007the bank fails to give any cash dividend to its stock holders.6. Stock holder’s returnStockholder ReturnsYear Stock Dividend2006 33.332007 30.00InterpretationThis stock holder return in terms of stock dividend shows that in 2006 the shareholders has given 33.33% stock dividend but in year 2007 the bank give stockdividend of 30.00% to its stock holders which is less as compare to 2007. It is goodsign to give stock dividend to share holders.7. Shareholders equityShareholders EquityYears Amount[Millions]2006 105732007 13767InterpretationAs compare to year 2006, in year 2007 the share holders equity increase whichmeans that the investment in the bank increase, the increase in the number ofinvestors increase their portion of equity in the bank.8. Liquidity and funding ratio = total advances / total depositsliquidity andfundingyears ratio2006 62.632007 62.67

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InterpretationAn advance to deposits is also liquidity ratio. It shows the relationship and variationbetween the advances and the deposits. The trend is declining in 2006 but in 2007 itincreases significantly.Mostly bank advances the loan on the basis of fixed and saving deposits. We see thatin 2007 bank increase its advances significantly as compare to 2006, the main reasonof this significant increase is that banks fixed deposits and saving deposits in 2007.

TREND ANALYSISDuring a year the bank’s profit before provision and tax stood at Rs. 6906 million comparedto Rs. 3264 million the previous year registering an increase of 53%. This increase in profitis primarily attributable to overall increase in business volumes.The above graph is about the values of deposits, advances, imports and exports in 2006 and2007. There are increase in the value of deposits, advances, imports and exports in2007 as compared to 2006. Increase in deposits exports are good for bank butincrease in imports are not good.TWELVTH WEEKSWOT ANALYSISStrengthsStrengths BAL-IBD is that Pakistan Credit Rating Agency Bank has beenawarded an AA-an A1+ (A one plus) in the long and short term respectively.Strength is shown from its ratios in most of the ratios it is better than others.Strength is that assets are increasing and the major asset cash and lending tofinancial institutions are increasing which shows the strength.Earning to total assets is also improving from previous year and it is somewhatdifferent from others.BAL-IBD has strong online network system.Weaknesses

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As I have thoroughly study the Bank’s management and financial there is nosuch major weak point but one point is that there liabilities are increasing fromyear to year and in 2005 it become very high as compared to the previous year.Another is Bank is decreasing which in my opinion is a weak point.Equity to total assets is decreasing from previous year.OpportunitiesAs far as opportunities are concerned BAL-IBD is growing day by day and itsprofits are increasing it has an opportunity to develop more branches to expandthe business.And there is acceptance of its services so Bank has to increase its services tomeet its customer’s needs.ThreatsThere is an increase in the debts of Bank so this can be a threat for the Bank and theyshould look upon this.Another is that debt ratios are increasing due to increase in debts and other bankshave improved ratios so they have to look upon it.DILEMMAS FACED BY ORGANIZATIONAll these problems are faced by the BAL-IBD Wahdat road Branch Lahore1. BAL-IBD area location is not appropriate. It is far away from the main city.2. BAL-IBD building is also not properly build and it doesn’t meet the needs of theBank3. Software security is not good. It is open to all restriction. Internal control is notefficient. Use of Flash drive can cause virus in the system.4. In BAL-IBD non availability of IT professionals.5. BAL-IBD direct hiring the staff.No training after selectionNo proper HRNo proper appraisal to evaluate performance of employees.2. Employees are not holding the proper position.Finance manager & IT professional is a same person.3. Sale promotion/marketing department are same in the BAL-IBD.

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RECOMMENDATIONo ATM Machine is not working in the bank. ATM is need of the era.o BAL-IBD branch must be relocated.o There must be a training before the employees start working in bank.o Software need a greater security.o There is an ambiguous authority to utilize the software.o Account opening dept, has the authority to give reports and show customero balance but the same function is also performed by foreign trade, credit andother depts. It shows that they have ambiguity in utilizing the software as it isopen to all.o Marketing of Islamic banking products like:- Musharka etc.o Proper back up should be made available for existing employees.o In networking, no input control on data.o Floppy disk, USB should not be allowed, Uninstalled in systems.o Tests of employees should be conducted on Islamic banking. So thato employees should become aware of Islamic terms and their meanings.o IT professional must be hire.o Human Resource officer should be hired.CONCLUSIONAs I have studied and analyzed BAL-IBD I found out that this a good bank as its working,management is concerned. First of all the reason of this is that there is no directive style inthe management of Bank Alfalah and which shows that there is decentralization in the Bankand every branch manager can take decision according to the situation.Bank Alfalah is providing their customers with wide range of services including onlinebanking, phone banking and some of their new products in the pipeline, include ATMnetwork Royal ………….etc shows that Bank Alfalah is taking good care of theircustomers. Bank Alfalah made heavy investments, towards enhancing its capabilities in thearea of automation and technology. Bank Alfalah is well positioned to meet client needs,with improved competitive advantage.

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And from the financial and when I conduct comparative analysis with other banks I foundthat it is somewhat better than others, and from the analysis of previous year I concludedthat it is improving and in 2007 profits are more than the previous year. So I can say thatBank Alfalah is performing very well.

REFRENCES

Annual report Annual report 2009 of Summit Bank Limited (formerly Arif Habib Bank).Websiteswww.summitbank.com.pk