An Internship Report on Habib Bank

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An Internship Report on

HABIB BANK LIMITED

BANK SQUARE BRANCH,MINGORA, SWAT

Submitted By

IRFAN ULLAH

Institute of Management Studies

University of Peshawar

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HABIB BANK LIMITED

BANK SQUARE BRANCH,MINGORA

Internship report submitted to the Institute of

Management Studies, University of Peshawar, in

partial fulfillment of the requirements for the degree of

“ Master Of Business Administration.”

Session 2004-2005

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UNIVERSITY OF PESHAWAR

RESEARCH AND DEVELOPMENT DIVISION

INSTITUTE OF MANAGEMENT STUDIES

UNIVERSITY OF PESHAWAR

HABIB BANK LIMITED

BANK SQUARE BRANCH, MINGORA

Supervisor:

Signature :

___________________

Name:

MR.Mehboob-ur- Rashid

Designation:

Lecturer

Coordinator Research & Development Division:

Signature:

______________________

Name:

Mr. ZIAUDDIN

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PREFACE

After studying so much about accounting, management and banking theoretically, one always develops a desire to work in a bank. After completion of my course-work at the Institute of Management Studies I had a chance to course-work as an internee at Habib Bank, Bank Square branch, Mingora Swat.

Banking is both a sacred and sophisticated profession. In Pakistan Habib Bank has always been in the forefront of this profession.

During my stay at Habib Bank I tried my best to acquaint myself with the operations of the bank and as a result learned a lot. What I have learned during my stay at the bank is being presented here for the reader.

Banking industry has always played a vital role in the success of economies. The practice is carried out since primitive ages. Multinational banks are now dealing in money and are laying the foundations for countries to stand on their own feet. The internship proved to be extremely helpful in learning about the functions and operations of a bank and how different kind of procedures at bank are carried out. Although and eight weeks internship is not enough time to know delicately about every aspect, but somehow it had the initial touch of being in a practical world. I owe very much to so many people whose help and support at different stages of my work enabled me to write this report.First of all I would like to thank Mr. Latif who’s help made it possible for me to have an internship in HBL Bank Square Branch,Mingora. I would also express my gratitude to my uncle, Mr. Aman Ullah who’s kind words are always guidelines for me. I feel proud also to mention my father, Nadir Khan who is accountant in HBL & his endless support and encouragement was a major reason that enabled me to do my internship. I would also like to mention my younger uncle Nasir, support in this report.

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TABLE OF CONTENTS

Preface i

List of Tables v

List of Graphs vi

List of Charts vii

List of Acronyms viii

Executive Summary ix

SECTION I INTRODUCTION OF REPORT Chapter 1: Introduction of the Study

1.1 Background of the study 1.2 Purpose of study

1.3 Scope of work

1.4 Methodology of the report 1.5 Scheme of the report

1 .6 Merits of the study

SECTION II REVIEW

Chapter 2: Introduction of HABIB BANK LIMITED (HBL) 2.1 History of banking

2.2 Banking in Pakistan 2.3 History of HBL

2.4 Mission statement of HBL

Chapter 3: Overview of HABIB BANK LIMITED 3.1 Organizational Structure 3.2 Marketing policies

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3.3 Management policies

3.4 HR Techniques used in HBL

3.5 Organizational Units of HBL & their products 3.6 Technological Framework & equipments used in

HBL

Chapter 4: Different Departments of HBL 4.1 Deposits department 4.2 Advances department 4.3 Remittance department 4.4 Bills department 4.5 Clearing department

4.6 Safe deposit-lockers department 4.7 Sales Department.

4.8 Cash Department. 4.9 Data Centers.

SECTION III ANALYSIS Chapter 5: Critical Analysis

5.1 Financial Analysis 5.2 SWOT Analysis

SECTION IV RECOMMENDATIONS Chapter 6: Recommendations

SECTION V IMPLEMENTATION PLAN Chapter 7: Implementation Plan

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LIST OF TABLES

Title Page No.

1. Balance Requirements for different accounts 2. Financial Ratios

LIST OF GRAPHS

Title Page No

1. Gross profit margin

2. Return on Assets (Before Taxes) 3. Return on Assets (After Assets) 4. Net Interest Income to Assets 5. Assets turnover Ratio

6. Fixed Assets Turnover 7. Operation Cost to Assets 8. Debt to Equity Ratio 9. Operation Cost to Deposits 10. Total Expenditures to Deposits

LIST OF CHARTS

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LIST OF ACRONYMS

A/C Account

ATM Automated Teller Machine DD Demand Draft

DFIs Developmental Financial Institutes DSC Defense Saving Certificate

FCY Foreign Currency FTS Funds Transfer System HBL Habib Bank Limited HMT Home Mail Transfer

IBTS Inter Branch Transaction services LCY Local Currency

L/C Letter of Credit

MDI Management Development Institutes MT Mail Transfer

OBC Outward Bills for Collection

ODBC Outward documentary Bills for Collection RF Running Finance

SSC Special Savings Certificate SBP State Bank of Pakistan SVP Senior Vice President SME Small & Medium Enterprise

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TT Telephonic Transfer US $ United States Dollar

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EXECUTIVE SUMMARY

Habib Bank is the largest and oldest bank among Pakistani Banks. Founded in 1941 it emerged as a Muslim Bank in undivided India. In 1947, when Pakistan came into being Habib Bank shifted its operations from India to Pakistan. Since then it is carrying on its operations with more than 1424 local and 52 foreign branches.

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The purpose of this report is to evaluate the performance of HABIB

BANK LIMITED (HBL),

Bank Square Branch,Mingora

. The internship experience of the students of Institute of Management Studies is a partial requirement for the fulfillment of their MBA Program. The internship experience in the form of an internship report also carries an attempt to explain domestic as well as international banking operations of Habib Bank.

2. The report aims at appraising the working of HABIB BANK LIMITED, its functions and operation and also attempts to asses its performance. Certain recommendations are presented for the potential areas of

improvement. An implementation plan of the recommended steps is given at the end of the report.

3 HABIB BANK LIMITED is the oldest & the first bank in Pakistan. Its

name is generally considered for quality and reputation. It offers a broad range of products to target different market segments.

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Main problems indentified during the course of internship are as following a) Absence of proper information technology tools

b) Lack of efficiency of employees.

c) Presentation styles of bank specially at retail level is not good. d) Management style is centralized.

The recommendations are as follow:

a) Establishment of Data bank at Zonal office, so that information can be obtained in time.

b) Proper designing of the jobs should be performed similarly clear- cut division of work to increase efficiency.

c) Special attention should be given to exterior/interior layouts, cleanliness and office furnitures.

d) Decentralization of authority at different level to fasten the decision making process.

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CHAPTER 1

INTRODUCTION OF STUDY

1.1

BACKGROUND OF THE STUDY

It is a common practice at universities during the completion of the masters and bachelors program to attain practical experience in different fields. Institute of Management Studies, University of Peshawar requires students to undergo a eight weeks internship program. The selection of the firm is based on the choice of the student. The institute requires an internship report based on the theoretical and practical learning of the student. The concern of this report is to study and analyze the performance of HABIB BANK LIMITED (HBL) in the banking industry of Pakistan.

HABIB BANK LIMITED is considered to be one of the most prominent and outstanding bank as far its reputation and progress is been concerned. It was established in 1941 and since then, it has expended its network,

becoming the largest commercial Bank of the country. It offers different products of services to its customers.

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PURPOSE OF STUDY

The purpose of the report is to review and analyze the functions performed by HBL in Pakistan. The report also explores the strengths and weaknesses of the HBL and also gives recommendation where any improvement can be possible.

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This report is concerned with the performance of the HBL Bank Square Branch,Mingora. It enlightens the consumer banking functions at the Bank Square Branch,Mingora however the financial analysis is based on the national operations of the bank.

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METHODOLOGY OF THE REPORT

The biggest source of information is my personal observation while working with staff and having discussion with them. Formally arranged interviews and

discussions also helped me in this regards.

Another methodology used for the collection of information and data was based on the two primary modes of data.

Sources of Primary data:

Personal Observation. Interviews of Personnel. Sources of Secondary data:

Previous internship Reports & HBL Annual Reports. Brochures.

Books & Magazines. Web sites.

1.5

SCHEME OF THE REPORT

The report is arranged in the following sequence.

SECTION I

This section has one chapter.

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This is an introductory chapter which describes the background, purpose, scope, methodology, scheme of the report & merits of the study.

SECTION II

This section includes the review of HABIB BANK LIMITED. This section is comprised of three chapters.

Chapter 2:

These chapters encompasses a brief history of banking, and over all banking sector in Pakistan. It also tells about the history of HBL, its mission statement and its role in the economy of Pakistan.

Chapter 3:

This chapter goes in detail study about the organizational structure, an overview of Management policies, Marketing policies, HR techniques applied and the different banking groups of HBL and the products it offers, additionally it tells about the Technological Framework i.e the equipments used and services offered at HBL Bank Square Branch,Mingora.

Chapter 4:

This chapter is the lengthiest chapter of the report. It precisely tells about the several departments working at HBL Bank Square Branch,Mingora and their functions. The departments discussed are Deposits Department, Advances Department, Remittance Department, Bills Department, Clearing Department, Safe Deposit-lockers Department, Sales Department, Cash Department and Data Centers.

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This section also have one chapter and it is about the analysis of HBL.

Chapter 5:

This chapter makes the critical analysis of HBL. Financial analysis is made on the National performance of the bank, followed by a SWOT analysis of the HBL Bank Square Branch,Mingora.

SECTION IV

This section also contains one chapter.

Chapter 6:

This chapter gives the recommendations based on the critical analysis of the organization.

SECTION V

This section contains the conclusive chapter of the report.

Chapter 7:

This chapter is about the implementation plan that has been devised for HBL Bank Square Branch,Mingora on the basis of the room of improvements.

1.6 MERITS OF THE STUDY

The study done will benefit the finance students in particular and all type of Management students in general, because the financial analysis section of this report comprehensively encompasses all respects of financial analysis.

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Furthermore, HBL Bank Square Mingora, may also benefit from the recommendations made at the end of the report.

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CHAPTER 2

INTRODUCTION OF

HABIB BANK LIMITED

2.1 HISTORY OF BANKING

Banking in primitive societies also existed in some form. The greatest invention of all times is considered to be the invention of wheel which made transportation easy and transportation opened a gateway to business and exchange of goods flourished. The initial business was done on “barter” which meant an exchange of “commodity for commodity”. There is a myth also about the invention of money, which tells that king Midas of Libya invented money in 800 B.C. Another statement states that the king of Babylonian empire named as King Hummorabi in 1700 B.C. made all the rules and regulations of lending and borrowing and interest etc. He wrote them on an eight feet stone in the center of the city. Two famous temples are also remembered for the lending and borrowing in different transactions. One was the temple of Ephesus and the second was known as the temple of Delphi.

It is said that the first bank was established in Barcelona in Spain. Another statement tells that “Venice” and “Genoa” were the hub of financial transactions and the first bank was founded there in 14th century. The first public bank that was

formed was in Germany in later part of the time.

2.2 BANKING IN PAKISTAN

Before the partition of India and Pakistan in 1947, branches of British banks dominated banking in Pakistan. The first domestic banking institutions emerged in the 1940s, immediately after Pakistan's independence.These institutions include

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the Australasia Bank (today, Allied Bank Limited) , Habib Bank Limited, Muslim Commercial Bank, and the National Bank of Pakistan (NBP). The NBP was wholly government owned but prominent merchant families established the other three. In 1948, the SBP was formed. It assumed the supervisory and monetary policy powers of the State Bank of India. From 1960 to 1970, a number of specialized development finance institutions (DFIs) such as Industrial Development Bank of Pakistan and the Agricultural Bank emerged. These DFIs were either controlled directly by the state or through the SBP, and were intended to concentrate on lending to long-term projects in specific priority sectors.

Banking and Financial services sector in Pakistan comprises the commercial banks and the non-banking financial institutions, including the development finance institutions (DFIs), leasing companies, modarabas (Islamic Mutual Funds) and investment banks. These are controlled and regulated by the State Bank of Pakistan (SBP). Pakistan is in the process of adopting an Islamic (Shariah) financial system, under which interest-based banking is not allowed. However, this has not been made into a law as yet, and exists only on paper, and most banks provide an anticipated profit rate in advance. Since 1990 the Government of Pakistan has introduced various reforms in the financial services sector enhancing the level of autonomy enjoyed by the SBP. The number of banks operating in Pakistan has increased, which in turn has resulted in increased competition. The banking sector, in general, has shown good progress during the last few years. During previous five years, the combined total assets of domestic banks, showed an average annual increase of 22 percent, while combined deposits have recorded an increase of 27 percent per annum. A total of forty-six commercial banks, including twenty-one foreign banks, are operating in Pakistan. Additionally, sixteen Investment Banks, twenty-nine Leasing Companies and fifty-three Modarabas Companies provide a mix of financial services.

Opportunities for new foreign banks exist in consumer banking, corporate bonds, investment banking, leasing and housing finance sectors. Good reputation

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challenges, however, do exist in the form of weak economic conditions in Pakistan and the turnaround possibilities in shape of privatization.

2.3 HISTORY OF HABIB BANK LIMITED

Habib Bank has a long and very rich history of deeds and sacrifices. All this has been possible on account of sustained efforts. In 1841, a family business company was established in the name of Khoja Mithabhai Nathoo in Bombay which was dealing in steel within and outside the Indian Sub-Continent. In 1891, a young Muslim lad Habib Ismail got employment, in this company. By dint of his ability and sincerity to duty, at the age of just 18, he not only became share-holder of the company but President of the Steel Market. His four children namely Ahmed Habib, Daud Habib, Muhammad Ali Habib and Ghulam Ali Habib, after having educated and grown up, were inducted in the business of the company and there-after the name of the company was changed as "Habib & Sons".

Habib Ismail died in 1928 at the age of 53. After the death of their father, the business was run by all the four brothers. Muhammad Ali Habib was younger and ranked third in age but was the most intelligent among his brothers and a successful businessman. Under his able guidance, the business made progress and expanded in size. At that time there was no Muslim Bank in the Sub-continent. The Muslims were a poverty-stricken and weaker nation. When Pakistan Resolution was passed at Lahore, on 23rd March, 1940, the Quaid seriously felt the need of a Muslim bank. As a result of the desire of Quaid-e-Azam, Habib Family established the first Financial Institution of the Muslims with the name of "Habib Bank Limited" on 25th August, 1941. The establishment of a financial institution by a weak and subjugated Muslim nation in the un-divided Hindu-dominated Sub-Continent was, in itself, a very great achievement having far-reaching consequences.

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The first branch of Habib Bank started functioning on 30th August, 1941 at Muhammad Ali Road Bombay. The first account holder of Habib Bank was no less than Quaid-e-Azam Muhammad Ali Jinnah. In those times in India, branch banking was non existent, so like other sub-continental banks Habib Bank also has to carry-out unit banking i.e. in which a bank has only one location (branch) to carry carry-out its operations. Since Habib Bank Ltd was founded at the advice of Muhammad Ali Jinnah, so it was seen as a Muslim Bank by all other banks and financial institutions in undivided India. And they tried their utmost to make it a failed project. For that purpose they conjoined various stories about Habib Bank but the owners of Habib Bank handled all the adverse situations professionally and proved their business acumen.

After a few years of unit banking operations it was Habib Bank which started branch banking with 34 branches at Bombay and outside it. In 1947 on the desire of Quaid-e-Azam, Habib family migrated to Pakistan and later on shifted the Bank's Head Office from Bombay to Karachi on 7th August 1947, a week prior to independence to play its role in the development of this newly born country. During the migration process in 1947 many of its Muslim account holders put all their monetary assets into it to be remitted to them in Pakistan. But due to the unfortunate incidents during the course of migration in which hundreds of thousands of Muslims were killed, many of the remitter and account holders could not claim back their amounts. And even now so many accounts and other valuables in the from of gold, and silver etc are lying at the bank's head office Karachi awaiting for claims to be lodged.

Habib Bank is the pioneer of Banking Industry in Pakistan. It has helped in the re-building of our country since its inception.

Since its inception in August, 1941, Habib Bank has played a memorable role in the commercial and industrial life of Muslims of the Sub-Continent. It was the first

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Muslim financial institution that made its entry in the field of banking thereby breaking the Hindu-British monopoly in this crucial sector.

After the inception of Pakistan on August 14, 1947 there were only two Muslim Banks namely Habib Bank and Australasia Bank. The rest of banks were either Hindu or foreign banks. Since State Bank of Pakistan was not founded so for the first few months after the birth of Pakistan Habib Bank had to work as the banker to the government and paid for its debts and liabilities. A few years later when a need was felt to have a Muslim bank to help assist in international trade. Habib Bank came to the fore and opened its branches in foreign countries with its first branch at Colombo, Sri Lanka. On January 1, 1974 Habib Bank was nationalized by the Bhutto government along with other banks. After nationalization its branch network increased rapidly and so its assets and liabilities. At present Habib Bank has a very large domestic branch net work, with 65 branches in all the continents of the world making it a truly transnational company.

Habib Bank is the bank of many firsts in all the areas of banking. Habib Bank has always introduced new vistas, be it the deposits side, the advances side, the remittances side or social services to the community. Recently Habib Bank was the first bank to offer a golden handshake scheme to its employees making the other commercial banks to follow suit. Habib Bank has been a pioneer in providing innovative banking services. These have included the installation of the first mainframe computer in Pakistan followed by the first ATM and more recently, internet banking facilities in all the domestic branches. Habib Bank has today 1424 branches, 48 zones, 9 regional general manager head quarters and 2 subsidiaries. A part form these the bank’s overseas operations are in 25 countries include 65 branches, 2 subsidiaries, 2 joint ventures and 2

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2.4 MISSION STATEMENT OF HABIB BANK LIMITED.

MISSION STATEMENT of HABIB BANK LIMITED

“To be recognized as the leading financial institution of Pakistan and a dynamic international bank in the emerging markets, providing our customers with a premium set of innovative products and services, and granting superior value to our stakeholders, customers and employees. ”

OBJECTIVES OF HBL

Objectives are the ends towards which activity is aimed. These are the result to be achieved. As a commercial bank the primary objectives of HBL is to earn profit and maximize it as far as possible, keeping in view the society. The Habib Bank Ltd has following main objectives.

 To take measure to promote business in the country.

 To procure beforehand self-employment schemes to the people.  To supply or provide employment opportunities to the people.  To help in development and industrialization of the country.  To earn profit for the bank itself and for its shareholders.

VALUES & POLICIES OF HBL

Policies & Values are general statements, procedures or the understanding that guide or channel thinking in decision making. It provides direction for action and regularizes the decision making in certain circumstances. .A policy defines area within which a decision is to be made, and ensure that the decision will be

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The HBL defines & practice its policies / values as :

Humility

We encourage a culture of mutual respect and treat both our team members and customers with humility and care.

Integrity

For us, integrity means a synergic approach towards abiding our core values. United with the force of shared values and integrity, we form a network of a well-integrated team.

Meritocracy

At every level, from selection to advancement, we have designed a consistent system of human resource practices, based on objective criteria throughout all the layers of the organization. We are,

therefore, able to achieve a specific level of performance at every layer of the organization.

Team Work

Our team strives to become a cohesive and unified force, to offer you, the customer, a level of service beyond your expectations. This force is derived from participative and collective endeavors, a common set of goals and a spirit to share the glory and the strength to face failures together.

Culture of Innovation

We aim to be proactively responsive to new ideas, and to respect and reward the agents, leaders and creators of change.

References:

1. Asrar H. Siddiqui. Practce and Law of Banking in Pakistan 5th Edition Karachi: Royal Book Company. 1993

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2. An internship Report on HBL by Mohd. Salman MPA, 1997-99, pp-4

3. Mushtaq A Khan, Success Story of Habib Bank Ltd. And Presentation Volume, 1991, pp 142-143

4. An Internship Report on HBL by Amir Nadeem, MPA, 1998-99, pp5 5. HBL, Presentation Volume Karachi 1993, pp 47

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CHAPTER 3

OVERVIEW OF HABIB BANK LIMITED, BANK

SQUARE BRANCH,MINGORA,SWAT

The HBL Bank Square Branch,Mingora is headed by the manager. He is the responsible person for any activity that is happening inside the premises of the bank. He looks over different issues in the bank. There are also sub managers heading each department. The manager of the bank heads the front office and the back office is headed by another senior member of staff. However detailed description about the organization is presented here below & overall organizational structure is focused rather than the branch`s structure.

3.1 ORGANIZATIONAL STRUCTURE

Organizing is a function of management. Organization is end result of organizing. So organizing is a part of management that involves establishing intentional structure of roles for the people to fill an enterprise. It is a process of breaking down the overall tasks of the enterprise into individual assignments/ activities and then getting them put together in units or department or groups along with the delegation of authority to a manager of a unit/ department/ group.

Organizational structure implies a formalized intestinal structure of Roles/ position. This is not the end in its self, rather mean which help achieve certain objectives.

A well-developed and properly coordinated structure is an extremely important requirement for the successful operation of any organization. It provides the basis framework with in which functions and procedures are performed. The

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ORGANIZATIONAL STRUCTURE of

HABIB BANK LIMITED

PRESIDENT

Board of Directors

Director Director Director Director Director Director

CHAIRMAN

Executive Committee

Member Member Member Member Member Member

SEVP SEVP SEVP SEVP SEVP SEVP

E.V.P.S.V.PV.P.A.V.P

OGI OGII OGIII Clerical Staf N.C.S.

3.2 MARK

ETING POLICIES:

Marketing is the process of playing and executing the conception, pricing, promotion and distribution of ideas, good and services to create exchanges that

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HBL also adopts certain marketing techniques to enhance the image of the bank. Most of the marketing takes place through various deposits mobilization schemes through advertising in news paper and other media and there is more emphasis on customer services to have more satisfied client who can recommend to their associates and friends. The HBL has recently launched a strong marketing

campaign through the electronic media(net, television etc) which encompasses the different products offered to different segments.

3.3 MANAGEMENT POLICIES:

Managerial policies, are those, which deals with the management issues and formulation of strategies.

HBL is headed by a president, then there are 5 banking groups, each one headed by a group executive. Each group executive has the client responsibilities for his group. Similarly these group are also responsible for developments in their respective fields. This new structure was developed 1997, prior to which bank was working on geographical basis. According to this structure affairs of Habib Bank are controlled though President and Members Executive Committee who are normally Senior Executive Vice Presidents of the Bank based at head office. Each province has a provincial head quarter headed by provincial Chief and assisted by regional general managers. Each provincial headquarter control branches in their area of jurisdiction through circle offices. Each circle office supervises various zones headed by zonal chief comprising 25 to 40 branches in each zone.

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Human Resource Management has always been the key factor in an organization’s achievements. The employees of an organization forever determine the route of success for the business. The primary concern of HRM has been on the subject to mould the personality of employees in a manner which formulates the individual goal of the staff into the organizational objective.

HBL has devised its own policies for the recruitment, training and motivation of employees.

3.4.a RECRUITMENT OF STAFF

Recruitment is the development of a pool of applicants for a job. The selected one’s serve the organization with their skill and qualification.

The requisites of HBL recruitment policy are as follows:

Qualification requisite is Masters in Business or Public Administration, Management Sciences, and Honors/first degree from International Universities.

3rd Division or D- Grade in any examination after Matriculation onwards

of is unacceptable.

26 years is the age requirement.

Method of Recruitment

HBL has started a banking course in association with Institute of Business Administration (IBA), Karachi. When the graduates of IBA completes their degree program, they find a number of vacancies at HBL waiting for them. The interested candidates apply against the seats. A few steps are involved in the recruitment process of IBA Graduates.

The interested candidates are called of for an interview at the Head Office in the initial process of recruitment.

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The committee including the Manager of Retail Banking services and Treasury manager evaluates the candidates on the basis of personality, communication skill and educational qualifications.

Short listing restricts a small group of candidates selected for the final interview. The committee including Chief Manager Administration seeks the potential candidates, evaluating their subject knowledge, analytical experience, general know how and particular information about the job. The successful candidates are enlisted for the job.

The selected candidates go through a medical check up as well. After that they are engaged in a 3 months service training program. This enables them to get acquainted with all the functions in the bank. Their appointment as Grade 7, Sub Managers is made eventually.

3.4.b TRAINING AND DEVELOPMENT

Training enables the employees to explore their potential; development polishes that talent and skill, as well as it seeks the opportunities to use their expertise professionally. HBL exercise many kind of training and development programs for the employees. There are three staff training centres of Habib Bank in Pakistan located at Karachi, Lahore and Islamabad. These centres are called Management Development Institutes (MDI). Every MDI has a faculty of staff with the principal as its head. The teaching staff are called directing officers. The principal is always a person of the level of Vice-President, with sound knowledge of all aspects of banking. The directing officers are well versed in their fields of specialty.

The various training programmes available at Habib Bank Management Development Institutes.

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Training Course In International Banking.

Short Courses Offered. Basic banking training

This is the most important training programme available, with a duration of six months. This training is imparted to the newly recruited officers in Grade III & II. Apart from them the newly promoted officers from clerical cadre also get this basic training.

In this programme the entire operations of domestic banking are explained to the trainees, in detail. The various subjects/courses taught in this program are, (1) Deposits (2) Advances (3) clearing (4) Bills (5) Remittances (6) General administration and staff matters (7) Business communication (8) Accounting

The main theme of this training course is that about 30 trainee officers are selected for a class. All the above mentioned subjects are not taught at a time but are taught one after another. For a week or two a subject is taught theoretically in the class room and then all the trainee officers are sent to various branches of the bank where they get a practical touch of all those taught in class-room. And the same method is repeated for all the subjects. At the return of trainees from branches, they are put to test by taking their examination. Question papers are mostly objective type, having one hour time duration to solve. All the papers carry a maximum of 100 marks. Marking of the papers is done not by a single person but every directing staff is responsible to mark his own section of the paper, which is normally having 25 marks. This is done to keep the examination system transparent. Then the marks of papers are totalled and result declared. Answer sheets are handed-over to the trainees to look into the mistakes they have made and they are allowed to raise objections if they do not agree with the marking of their papers.

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Those students who get failed in three subjects are sent back to their places of posting and are not considered fit for training. If they are fresh recruits they are sent back home during their probation period.

Pass percentage in examination is 60%. Those trainees who secure 70% or above marks are awarded one grade increment. Trainees getting first and second position in the group are awarded three and two grade increments respectively. At the end of six months training there is a passing out ceremony; and then all the trainees report back to their zonal offices for further placement in various offices and branches.

Training course in international banking

This is a three months training course in foreign exchange and International Banking. The first five trainees from various groups of basic training are selected for this course. In this programme only the dynamics of international banking and international trade are touched upon. The main topics of this course are (1) Imports (2) Exports (3) Inward remittances (4) Outward remittances (5) Foreign currency deposits.

These trainees after getting theoretical knowledge of the subject for a week or two are sent to foreign exchange dealing branches to get practical training of whatever they have learnt in the institute.

After completion of the said course trainees are posted in various foreign exchange dealing branches.

Short courses

Apart from the above, various short and refresher courses on various topics/subjects are arranged by MDIs throughout the year. Their time duration varies from three to 15 days. These course can be

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- Short/refresher course on advances for officers dealing in advances. - Short/refresher course in foreign exchange for the personnel working

in foreign exchange department.

- Short/refresher course on audit, for internal auditors of the bank, in which various ways and means are taught to the auditors, how to carry out a successful audit of a branch.

- Short/refresher course for managers of branches to refresh their memories about the modus-operandi of how to better manage a branch.

- Short/refresher course for staff-officers and admin. officers, on how to manage human resources of the bank in a better way.

- Short/refresher course on business communication and presentation skills.

- Seminars on various new developments in banking industry, like new currency exchange rate system.

- Seminars on the introduction and process-flow of various new products of Habib Bank like Carore-Pati Deposit Certificates, Muhafiz traveller cheques, Visa Cards,ATM etc.

- Seminars on customer service, and complaint handling. - Seminar on cash management.

These short-courses and seminars are held by Management Development Institutes in a continuous manner, and officers from various branches/offices are constantly coming to and going form MDIs.

Besides this the MDIs arrange training courses for clerical and non-clerical staff in which various functions of the clerical and non-clerical staff are taught; how to deal bank's customers in a better way. The non-clerical staff are trained how to give

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courteous service to staff members and customers and how to take care of security of branch premises.

Apart from MDIs, zonal and regional offices also arrange short training courses at local levels, on various topics/subjects, according to the needs and requirements of the zone and region concerned.

3.4.c TECHNIQUES OF TRAINING

All the known and recognized techniques of pedagogy are used while imparting training to the trainees at Habib Bank Management Development Institutes.

- Lectures - The directing staff deliver lectures to the trainees in class rooms, on daily basis. Time duration of a lecture is 1 ½ hour. There are four lectures a day.

- Question/Answer - Trainees are encouraged to put questions at the end of each lecture.

- Presentations - Trainees are called upon to present various topics/subjects before the class.

- Projectors - Projectors are used to explain intricate problems like exchange rates.

- On job training - Trainees are sent to branches to practice what has been taught to them in class room.

3.4.d MOTIVATION

Motivation refers to forces that energize, direct, and sustain a person’s efforts. A highly motivated person will work hard towards achieving performance goals. With adequate ability and understanding of the job, such a person will be highly productive.

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Diverse techniques are exploited at HBL for the motivation and performance appraisal of employees. The procedures are as follows:

Audit Report

These reports are prepared by auditors and are sent to the Head Office for performance appraisal.

Salaries

There is no preset pay scale in HBL Many people obtain dissimilar salaries even though they had been chosen for the same batch under similar conditions with identical qualification.

House Rent Allowance

House Rent allowance is paid to all categories of staff This allowance is not payable to those who are provided with accommodation by the bank.

Sanctions

Punishment may be conferred in case of misconduct by halting promotion and bonus. It’s an efficient means for improving the performance of the employees.

Inspections

Inspection teams are sent from time to time from the Head Office to check the performance of various employees and identify any irregularities to take steps accordingly.

Medical Allowance

The Bank compensate the expenses of medical advice and medicines, claimed by the employees for themselves and their dependants up to a maximum amount of

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Rs,2500. On production of medical certificates by employees indicating payment made by him the bank compensate the charges.

Promotion

Promotion is chiefly on the base of capability, aptitude, talent and performance of the employees.

3.5 THE DIFFERENT BUSINESS UNITS OF HBL 3.5.1 Retail Banking Group:

1.a Consumer Financing

Consumer financing is relatively new phenomena & is still in infancy.This area of financing is currently enjoying the high priority among the financial institutions in the country.The expansion of consumer financing in the past two years has been an important factor in driving the overall economy forward. The overall demand of durables, housing, automobiles units etc has increased & as a result the

production level has increased which has led to the creation of greater employment opportunities.

HBL has taken a lead role in this segment as it continues to capture additional market shares. In this endeavor HBL has developed a complete range of products to meet the requirements of all the segments.

This segment of HBL include the following products

 Auto Financing.  House Financing.

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 Consumer Loans. (Flexi-Loans,Top-Up-Facility,Running Finance etc)  Consumer Durable Finance. (Life Styles, Fast Transfer etc )

 Balance Transfer Facility.  Internet Banking.

 Online Banking.

 ATM/Debit Cards. (Visa Cards,Value Cards,Auto Cash, iCards)

1.b Agriculture Financing

In this sector HBL has disbursed over Rs 13 billion during the year & has proved the largest contributer to agriculture financing in Pakistan. Through the bank`s wide network of branches of which 52% are located in rural areas, the bank enhanced its products offering to retain its lead position in the market. The bank offers products to support all facets of this industry. Specially it provides facility for a period of 3 years instead of financing being confined just to harvest season, in this way farmers find convenient to this condition & this has a wide acceptability in the market. HBL intervention has enabled the industry to develop, by bringing within the reach of thousand of farmers access to modern farming technology, which was not previously available to them.

This unit of the HBL offers the following products  3 year Revolving Finance

 Tractor Lease Finance  Livestock Finance  Fish Farming Finance

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 Combined Harvester Finance

1.c Commercial Banking

The Commercial Banking division serves clients mainly comprising of mid sized businesses that consist of manufacturers, traders , importers & exporters of engineering products, sports goods, & textile made ups. Commercial Banking operates through 18 branches which are spread throughout the country. Over 1500 middle market customers have benefited from banks dedicated support. Overall HBL remains a market leader in this sector & has a total disbursements of over Rs 19 billion. HBL stands side by side with the Govt to promote this sector.

This unit of the HBL offers the following products

 SME Financing

 Long Term Fix Assets Finance  Trade & Working Capital Finance

 Import & Export Finance ( Receivables, Pre & Post Shipments)

3.5.2. Corporate & Investment Banking

HBL has an integral development partner for corporates in Pakistan since 1947. The Bank has remained at the forefront of financial support by assisting in the development of the country industrial sector & the fuel and energy sector. In the early days of WAPDA, HBL provided support by establishing Letters of Credits and providing capital of millions for its several projects such as Warsak Dam, Mangla Dam, Tarbela Dam. The bank has continues this tradition & today is a key

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partner not only in Govt sponsored projects but also in rapidly developing private projects such as telecommunication, power, oil & gas & construction.

The Corporate division operates in 10 branches & it serves over 500 client.

This unit of the HBL offers the following products

 Industrial & Project Finance  Structured Trade Finance  Capital Market Investments  Cash Management Services  PC Banking

3.5.3. International Banking

HBL has the largest international branch network with presence in 25 countries. HBL is synonymous with Pakistan in the international banking arena.

The international banking division of HBL is known as active trade finance facilitator for Pakistan`s trade partners. Over the year HBL has provided a one window financing facility to meet local & foreign currency requirements for corporates in Pakistan. In the year 1990 HBL was the first Pakistani bank to start dollar financing for the needed imports, its was such an era where there was a shortage of foreign exchange in the country.

Home remittances form an integral part of the country`s foreign exchange reserves & the bank has devoted considerable efforts to enhance the inflows in a secure manner. In this regard the bank has introduced the IBTS(inter branch transaction services) at the dedicated branches that ensures timely credits to the

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remittances was through HBL branches. In this way HBL has proves a true global relationship to its corporate, institutional and individual clients.

This unit of the HBL offers the following products

 Trade Finance

 Retail / Consumer Banking

 Multi-currency Payments & Clearing Service  Home Remittances

 Treasury & Investment Services

3.5.4. Technology

HBL remains committed to service its clients with banking system based on state of art technology. Over the past years the bank has taken strategic decision to concentrate on upgrading the domestic & international operations. More than US$ 15 million have been spended on sourcing and implementing the MISYS system throughout the HBL network. The system helps to centralize data from HBL`s 1424 domestic branches to the head office. This struggle also have benefited the clients to access their funds through the 119 ATMs which are located at the different branches of HBL across Pakistan. HBL is also the member of the “1 Link” ATM switch network that ensures the customers to access 508 locations throughout the country.

This unit of the HBL offers the following products

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 VPN Connectivity of the 1424 domestic branches

 State Of The Art Banking (-trade finance –treasury – branch automation – CRM)

3.5.5. Corporate & Social Responsibility

HBL is a responsible corporate citizen and is conscious of the role it needs to play in the field of social development, such as health, education & sports etc. HBL actively supported the recently victims of the earthquake. It has been an active sponsor of sporting event since its inception. In 1969 the bank formed its own Hockey team.

In 1975 the bank established its separate sports division with the specific aim of participating in the sporting events at domestic and international level. Over the years HBL has actively supported sports such as Cricket, Hockey, Table Tennis, Football, Badminton & Golf.

The contribution of this unit are in the fields of

 Education

 Health & Medical  Environment  Sports

3.6 TECHNOLOGICAL FRAMEWORK AT HBL

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New banks are emerging and with modern day equipments the atmosphere is getting more competitive than ever. HBL has also become online, which means that all the branches of HBL access one central database and customers can retrieve information of other branches from the local one’s. The overall computerization system at HBL comprise of the following equipments.

3.6.1 Equipments Used At HBL

A diverse variety of useful machinery is brought into practice at HBL to help the employees of different departments in handling varied tasks. Some of the equipments provided to the staff are as follows:

POS Machines

POS stands for “Point Of Sale”. This machine is used for the credit cards. Whenever sales are made on credit cards, it is used to record the sales.

Validator

This is a small sized electronic device used for checking the dollar currency whether genuine or fake The Bank is mostly in the business of currency. Validator makes the job easier for the cashier, because he is always involved in money payments and receipts.

FAX Machine

Fax machine is used to communicate the messages from one Bank to another, for sending important letters or any other, documents for correspondence.

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Auto Telex

This machine has increased the efficiency of service. In 42 hours message or telex reaches the required destination. But this arrangement is only within the HBL Branches not with other banks.

Scanner

Bank makes the use of scanner for verification of the customers signatures in the computers. The customers’ signatures are scanned with the help of this appliance, so that signature can be confirmed every time customer makes transactions in his account.

ATM – Automated Teller Machine

This machine is used by the customers to make transactions in their accounts even after banking hours.

Signature Card

This instrument is used to keep a record of the customer’s signature. This card is filled by the customer at the time of account opening. It consists of the customer’s name, account number, amount, and specimen signature. All the signature cards are kept in the stationary in the order of account numbers. So whenever the card is needed for any purpose, it can be easily found.

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References

1. Hienz Weihrich and Harold Koontz. Management, 10th Edition , New York: Mc. Graw – Hill Inc. 1994: pp-122

2. Ibid, pp-123

3. HBL Annual Report 2004, pp.21--30

4. Joel R. Evans and Barry Borman. Marketing, 4th Edition , New York; Mac Millan Publishing Company, 1990, pp-8.

5. Naz, Nadia, “Internship Report on HABIB BANK LIMITED”, Department of Public Administration, IMS, Section 1999, p.30

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CHAPTER 4

DIFFERENT DEPARTMENTS OF HBL

Every organization is divided into definite departments. Each department perform different kind of job and requires staff with specialized skill to handle the particular job. This increases the efficiency of workers and makes the job of the employees easier.

There are several aspects on which departmentalization in an organization can be based. The division can be done on the basis of functions, product, customers or geographical location.

The Bank Square Branch,Mingora of HBL is comprised of several departments. The division is made on the basis of functions and job they perform. Hence it can be concluded that HBL has adopted to the policy of functional departmentalization.

The main departments at the HBL are mentioned below. Also included is the detailed study at the specific function these departments perform.

1) Deposits Dept. 2) Advances Dept.

3) Remittances Dept. 4) Bills Dept.

5) Clearing Dept.

6) Safe-deposit lockers etc Dept. 7) Sales Dept.

8) Cash Dept. DataCentre

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4.1 DEPOSITS:

Accepting deposits is one of the two basic functions of a bank. The other being advances. So the mainstay of Habib Bank as like other banks is deposits. Because with out deposits any bank can not even think of its existence. Deposits is a trust reposed in a banker by the deposit holders who are commonly the people at large. With the initial deposit of money by a person with a banker the Banker-customer relationship comes into being. To establish this relationship one has to open an account with a bank.

Opening of an Account

This is the most important and basic contract between a customer and a banker. A customer offers money to the banker to be kept as a deposit and the banker accepts that offer and a contractual relationship develops. To open an account with Habib Bank one has to deposit Rs 5000/- as initial deposit. Below this one can not open an account in HBL. Previously even Rs. 100/- were enough to open and maintain an account with Habib Bank but the new management after assessing the book keeping cost has come to the conclusion that it is not economical to open and keep an account with a balance less than Rs. 5000/-. To keep an account alive and earn profit on it one has to retain an average balance of Rs. 5000/-. If the average balance is less than it, Rs. 150/- will be deducted as incidental charges after every six months. To be able to open an account with Habib Bank one should be sane, major (18 or more years of age), solvent and not debarred by law from opening a bank account. The account opening form is a very simple document wherein one has to put in his signature, and has to arrange for his introduction to the banker through an old customer of the bank.

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After depositing money and signing the account opening form a cheque book is issued to the account holder through which he can withdraw his money from the bank as and when he requires. The form for ATM is also filled by the customer, but it is optional. An account holder can use this advantage any time with a Rs 200 charge per year.

Accounts can be of three categories. a Current account

b Saving account

c Fixed deposit account

a) Current account is zero profit account and is mostly opened by businesses. There is no limit/bar on withdrawal of money from a current account. Deposits in current account are considered demand liabilities of a bank, because such deposits can be withdrawn at any time, without any prior notice to the banker.

b) Saving account is a profit bearing account. Profit, as certain percentage is given to saving account holders, after every six months. Saving deposits of a bank have both the characteristics of current and fixed deposits, i.e. some portion of these deposits is demand and other portion is time liabilities. An account holder can draw cheque on his saving account freely but not like a current account. A major chunk of the deposits of Habib Bank are saving deposits. The current profit rate on saving accounts is 7% per annum, which can increase or decrease with profitability of the bank's operations. Saving accounts are called Profit- Loss Sharing (PLS) account, meaning that the account holder will take the profits and incur/bear the losses if the bank earns profits or makes losses, respectively. Uptill now Habib Bank have never declared loss and is continuously giving profits to its account holders.

Term deposit accounts as the name indicates are fixed for a certain period of time. They are considered as the time liabilities of a bank as the banker knows as to when a certain deposit is going to be withdrawn. Fixed deposits can be of various types depending upon the nature and time duration of deposits. Time duration of fixed

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deposits at Habib Bank ranges from one week to five years. Fixed deposits with time duration and profit rates are shown here under.

1. Short Notice Time Deposit (SNTD-7): Time duration 7 days profit rate 6% 2. Short Notice Time Deposit, (SNTD-30) 30 days, 7 %

3. TDR (Term Deposit Receipt) (3 months) profit rate 8% 4. TDR (6 months) P.rate 9%

5. TDR (12 months) P.rate 10 % 6. TDR (18-24 months) P.rate 10.50 % 7. TDR (30-36 months) P.rate 11 % 8. TDR (42-48 months) P.rate 11.50 % 9. TDR (60 months & above) P.rate 12.50%

Profit on these deposits is paid out on six monthly basis, while the principal amount is paid at maturity.

Khas term deposit receipt (KTDR)

It is like a term deposit receipt but profit is paid at the time of encashement, and not on six monthly basis. The rates of profit are as like TDR.

Golden investment scheme (GIS)

The life period of these deposit certificates is three years. The main feature of this scheme is that profit is paid on monthly basis, and hence the effective rate of profit is increased.

Monthly income scheme (MIS)

Life period of these deposit certificates is three and five years. As its name indicates, profit is paid on monthly basis, and with this the effective rate of profit is increased from the actual rate i.e. 14.5%.

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Carore Pati Deposit Certificate

The new craze in deposit market is the recently introduced product, the Carore Pati Deposit certificates. This product has set new standards of popularity and success. It is one of the many firsts by Habib Bank Ltd in the deposit sector of banking. It is a highly innovative product, no one has ever thought of it before. The name of the product "Carore Pati" is at the same time highly expressive and attractive. This product has driven the depositors and savers' market crazy. And everyone is trying to become "Ratoon Raat Karore Pati".

Habib Bank is carrying on a very aggressive and effective advertising strategy using electronic and print media at the same time. This product is so heavily advertised that almost all the people having bank accounts anywhere in Pakistan in any bank are aware of its attractive features.

The target market for this product is the middle and upper classes of society. People who can afford to part-away with Rs. 50,000/- of their savings for at least 3 months can avail of this product. The salient features of this product are

- Face value of Carore Pati deposit certificate is Rs. 50,000/-- Time duration is 3, 6 and 12 months.

- Rate of profit is 6, 7, 8% respectively.

- Lucky draw is held on every 15th day of each calendar month.

- A certificate purchased on or before last of preceding month is eligible to be included in the up coming draw.

- Bumper prize is Rs.10,000,000/- grand prize is Rs.500,000/- and a number of other small prizes which total comes to 67 prizes.

Habib Bank has received deposits of Rs. 20 billion under this scheme. Seeing the amazing results of this product other banks have also started similar schemes, like

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Due to these schemes national savings have increased and liquidity problem of commercial banks solved resulting in easy availability of credit to the traders and businessmen.

4.2 ADVANCES

To advance loans and to finance businesses and in return to earn mark-up is the main operational activity of Habib Bank. Deposits are a liability on which a bank has to pay profit to its account holders. Unless and until these deposits are advanced in the form of loans to traders, these are a burden for a bank.

Advances / finances can be of two types.  Fund-based financing

 Non fund based financing  Fund-based Financing

In this case funds of a bank or financial institution are involved or in other words we can say that there is an actual outflow of cash from the bank. It has various types. (i) Running finance (ii) Demand finance (iii) Over draft (iv) Purchase and discounting of bills

Running Finance

This is the most common type of finance availed by businessman to meet their working capital requirements. It is extended for a period of one year. Securities against such finance are normally hypothecation of stock, mortgage of property etc. The rate of mark-up is 50 paisa per 1000 per day which comes to 18.25% per annum. A certain limit is sanctioned by the bank upto which the trader can withdraw funds from his finance account, for which a cheque book is issued to him.

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Upon sanctioning of the loan the borrower withdraws funds from the Running finance (RF) account according to his daily requirement and is free to deposit the funds back when he is no more in need of these, thus bringing back the outstanding balance in the account to the minimum possible. Mark-up is applied on the resultant balance of each day. The advantage of such finance for a trader is that he can use funds of the bank upto his need level and can deposit surplus funds thus saving himself from the extra mark-up. Mark-up on R/F account is applied on monthly basis and recovered on quarterly basis.

Demand Finance

This finance is also sanctioned for a period of one year. In this case the entire amount of finance is credited to party's personal account by debiting finance account, and mark-up is applied on the entire amount of finance. Installments are fixed to be recovered on monthly basis, along with mark-up.

Temporary Running Finance

This is also a common form of bank lending when a borrower requires temporary accommodation, he is allowed to withdraw on his account in excess of the balance which the borrowing customer has in credit and an overdraft occurs. This accommodation is generally against collateral securities, when such securities are present it is called secured overdraft and when no securities are there, it is called clean overdraft. The borrowing customer is in advantageous position because he has to pay mark-up only on the balance outstanding against him.

Purchase & Discounting of Bills

Habib Bank purchases outstation cheques from its reliable customers. These cheques can be in the form of clean bills drawn on an account or trade-bills accompanied by documents of title to good called documentary bills. Clean bills and documentary

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and mark-up is applied on the amount disbursed upto the day when these cheques or bills are realized.

Non-fund-based Finances

In this case funds of the bank are not involved rather the bank undertakes to pay upto a certain amount at the happening of an event. In other words it is a contingent liability of the bank.

Letter of Credit

Documentary letter of credit is a bank's written undertaking given to the exporters for payment of certain sum of money on behalf of the importer provided the exporter tenders to the Bank or its overseas agents the specified documents within a specified period in accordance with terms of L.C. The L.C. may be Inland as well as well as Import at sight or usance basis. L.C. will be called restricted if specific Negotiating Bank is mentioned therein, otherwise it will be considered as unrestricted and freely negotiable in country of beneficiary.

Sight L .C

In this form of credit, the exporter draws a sight or demand draft payable at the counter of advising Bank or the Bank specified in teh letter of credit. The draft is paid on presentation provided that all the other terms and conditions of L.C. have been complied with. In this case the negotiating Bank can either reimburse itself or demand reimbursement from opening Bank depending upon terms of L.C.

D.A. Or Usance L .C

Where L.C. stipulates payment to the exporter upon maturity of bills of Exchange, it is called usance credit. In this form of credit, exporter draws draft for particular usance i.e. 30, 60, 90 or even longer period payable upon either the correspondent Bank or opening Bank. However, the exporter can get the bill discounted at fine

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rates of presentation of shipping documents at counter/or after acceptance of draft by opener as per terms of Letter of Credit.

SECURITIES Sight LCS

1. Cash Margin 2. L.C. application

3. Personal guarantee of third party of from directors in case of limited companies.

USANCE L/C

1. Cash Margin 2. L.C. application

3. Accepted Bills of Exchange 4. Collateral acceptable to Bank

5. Personal guarantee of third party or directors in case of limited companies.

LETTER OF GUARANTEE

A Bank Guarantee is a legal document which may be defined as an irrevocable undertaking of a bank to pay to the beneficiary of the guarantee a certain amount of money if the expected result of a transaction does not occur or in the event of non-performance of a contractual obligation of a third party by specific time. However, with a bank guarantee, the bank does not guarantee the success of the transaction itself. guarantees are as a rule, subject to the laws of the country in which the issuing bank is located.

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The parties involved are: (1) The beneficiary (2) The principal (3) The guarantor (Bank) LG's categorized as

i. Demand Guarantees ii. Conditional Guarantees

Securities for Advances

Habib Bank obtains following types of securities from the borrowers while advancing loans. (1) Hypothecation (2) Pledge (3) Mortgage (4) Guarantee (5) Charges (6) Lien

Hypothecation

In hypothecation the property in goods is charged as security for a loan, from the bank but the ownership and possession of goods remain with borrower. It is a weaker security and is mostly accepted for running finances, as a certain percentage of loan amount. To create this charge a letter of hypothecation on a stamped paper is signed by the borrower.

Pledge

Section 172 of the contract Act 1872, defines a pledge thus"The bailment of goods as security for payment of a debt or performance of a promise is called pledge". In case of pledge the ownership remains with the pledger, but the pledgee has the exclusive possession of property until the advance is repaid in full, while in case of default the pledgee has the power of sale after giving due notice.

Mortgage

Section 58(a) of the transfer of property Act, 1882 defines that, "A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, and existing or future debt, or the performance of an engagement which may arise to a pecuniary

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liability". In Habib Bank Ltd., Peshawar two types of mortgages are in practice. Legal mortgage and equitable mortgage. The main difference between the two is that the prior one is to be registered with the registrar of properties even if the amount is less than Rs.100/- and this requires a handsome amount of fees to be paid to the registerer office while in equitable mortgage the mortgagor deposits title deeds of properties with the banker, with the specific purpose of creating a mortgage. Here no fees are to be paid to the government. In Habib Bank, for the facility of borrowers, certain portion of property is mortgaged by way of legal mortgage and the rest by equitable mortgage thus saving the borrower from paying extra fees to the registrar of properties.

Guarantee

Section 126 of the contract Act 1872, defines guarantee , "A contract to perform the promise or discharge the lability of a third person, in case of his default" when an applicant for an advance can not offer any tangible security he is asked to provide a guarantee, which can be personal or third party, to protect the bank against any loss.

Charge

It is a right of payment out of certain property. The charge is created by the act of parties i.e. the borrower and the bank. Charge on property is created when extending loans to private or public limited companies, on company's assets. Such a charge is registered with registrar of companies with in 21 days of creation of charge.

Lien

Lien is a right of the banker to retain the property of the borrower until the claim on the property is paid. Banker's lien is applicable to all documents or properties which come into the banker's hands in the course of his normal business as the banker to his customer. Lien is marked on financial instruments pertaining to the borrower at

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4.3 REMITTANCES

It denotes transfer of money from one place to another. Banks are the most important players of money market, and one of the characteristics of a developed money market is that transfer of funds from one place to another should be cheap and speedy. Habib Bank has a very wide network of branches throughout the length and breadth of country, that is why it has got an edge over other commercial bankes in Pakistan in the field of remittances. Several modes of remitting funds are available at Habib Bank which are explained below:

Demand Draft (DD)

It is a bill of exchange in which a branch of the bank orders another branch of the bank to pay a certain sum of money to the order of a person. Demand draft is the classical way of remitting funds from one place to another. For this purpose remitter comes to a branch and fills up a request from for the purchase of DD, in which he mentions the amount of money, name of the beneficiary and place of beneficiary and puts his signatures. The branch officials after charging bank commission, with-holding tax and excise duty, hand over a printed demand draft with the particular of beneficiary given in and signed by two attorneys of the branch.

The remitter after receiving the same, sends it to the beneficiary through mail or if he himself is a beneficiary takes it with him to the city where he is going and after presenting it at the counter of the drawee branch receives payment. The drawer branch after handing over the draft to the purchaser prepares an advice and mail it to the drawee branch, giving particulars of the beneficiary therein. In case of a draft of Rs.25000/- or more, test is applied and written down on the advice which is a coded message and testifies the bonafides of the instrument. In case of a draft of Rs. 50000/- or more instead of sending advice through mail coded telegraphic message is conveyed to the drawee branch.

Figure

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