internship report on askari-bank

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INTERNSHIP REPORT

BANKING IN PAKISTAN

Monetary policy and banking system play an important role in the development of all economic fields of the country because necessary finances for completion of economic plans are provided by them. therefore an organize banking system and the financial institutions plays an active role in this matter.

The stable an organize banking policy is much effective to improve the level of saving and consequently the level of investment. The monitory policy is adopted and controlled by the bank but its success depends upon the cooperation of commercial banks. availability of the credit is a big problem for LDCs. The shortage of supply of capital can be improved better and organized banking system because the banks can increasing the saving through launching the various attractive schemes in various productive sectors banks also produce credit money and through this way resources are supplied to productive sectors of the country.

KINDS OF BANKS

:

In Pakistan following types of banks are operating in the business circle like economics.

COMMERCIAL BANKS:

These banks are set up on commercial basis. Therefore, their primary objective is to earn profit And maximize it is far as possible. For this they received cash deposits from the people in different accounts. They give loans to different business enterprises and thereby create credit money.

The State Bank of Pakistan is the central bank of Pakistan, Commercial Banks, financial institutions and cooperative banks are the other components of the banking system.

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AGRICULTURAL BANK

These banks are provide long term and short term credit facilities to landlords and tenant farmers.

INDUSTRIAL BANK

These banks are medium and long term loans to industrialists to set up new industries for the extension of industries already in operation.

MORTGAGE BANKS

These banks provides the loans to the people against their moveable and

immoveable property.

EXCHANGE BANKS

These banks deal in foreign exchange. They provide credit to importers and exporters by discounting foreign bills of exchange.

SAVING BANKS

These banks are set up to induce the people to accumulate their small saving in these banks.

CENTRAL BANKS

Each country in the world has its own central bank. This bank does not deal with public directly. This means that it neither receives cash deposits from the people nor its give them loans. Therefore it is not a profit making institution.

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Askari Bank was incorporated on October 09, 1991 as a Public Limited Company and is listed on the Karachi, Lahore and Islamabad Stock Exchange. It started its operations from April 01, 1992. The bank was declared as “Best Bank in Pakistan” in 2001 in Global Finance. The bank’s registered office/Head Office is situated in AWT Plaza, The Mall, P.O.Box No. 1084, Rawalpindi, (Pakistan).

Askari Bank Limited has expanded into a nation wide presence of over a 100 branches, comprising commercial and Islamic banking branches, connected online and supported by a network of Automated Teller Machines (ATMs). It also enjoys an offshore banking unit in Bahrain. Over the years, Askari Bank Limited has proven its strength as a leading banking sector entity with ever increasing commitment to its clients, through a strategic investment in electronic technology. It has A1+, the highest possible credit rating, for short-term obligation, and AA+ for long-term rating. Beside day-by-day banking solutions, Askari Bank Limited has a wide range of Corporate, Consumer, and Islamic Banking products.

Askari Commercial Bank Limited was the first bank in Pakistan to offer Internet banking Services and B2B e-commerce (Business to Business electronic Commerce) solutions for merchants looking to purchase on credit. They believe that balanced growth is the key to survive in the today’s global banking environment.

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Mission Statement:

-The mission statement of the bank is

“To be the leading private sector bank in

Pakistan with an international presence,

delivering quality services through

innovative technology and effective

resource management in a modern and

progressive organization culture of

meritocracy, maintaining high ethical and

professional standards, while providing

enhanced value to all their stakeholders,

and contributing to society”

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Core Values:

We understand that our commitment to satisfy customers’ needs must be fulfilled within a professional and ethical framework. We subscribe to a culture of high ethical standards, based on the development of right attitudes. We believe in our 'core values' as the essential and enduring tenets of our organization - the very small set of guiding principles that have a profound impact on how everyone in the organization thinks and acts. They have an intrinsic value for us and bear significant importance to all our employees. They are the few extremely powerful guiding principles; the soul of the organization - the values that guide all our actions.

The intrinsic values, which are the corner stones of our corporate behavior, are:

• Commitment • Integrity • Fairness • Team-work • Service

Vision:

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CORPORATE PHILOSOPHY:

I n s p i r i n g R e l a t i o n s h i p s I n s p i r i n g R e l a t i o n s h i p s

From knowing our customers requirements to understanding employee needs, from utilizing modern technology to making responsible social contributions, from enhancing stake-holders value to practising corporate ethics.... We are continuously and consistently striving to address newer challenges with a single motivation: “the power to inspire and be inspired”

OBJECTIVES:

Ζ Deliver solutions that meet customer’ financial needs. Ζ Build and sustain a high performance culture.

Ζ Build trusted relationships with all stakeholders.

Ζ Build and manage the Banks’ portfolio of business to achieve strong and sustainable shareholder return.

Ζ Create and leverage strategic assets and capabilities for competitive advantage.

Ζ

To facilitate the bank with modern banking technique.

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Corporate Information

Lt. Gen. Imtiaz Hussain

(HIM)

Chairman

Lt. Gen. (R) Zarrar

Azim

Chairman Executive Committee

Mr. Shaharyar Ahmad

President & Chief Executive

Brig (R) Muhammad

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Brig (R) Asmat Ullah

Khan Niazi

Director

Brig (R) Muhammad

Bashir Baz

Director

Brig (R) Shaukat

Mahmood Chaudhari

Director

Mr. Zafar Alam Khan

Sumbal

Director

Mr. Kashif Mateen

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Mr. Muhammad Najam

Ali

Director

Mr. Muhammad Afzal Munif

Director

Mr. Tariq lqbal Khan Director

(NIT Nominee)

Mr. A.J.Mubbashar

Company Secretary

Audit Committ

y

Brig (R) Asmat Ullah Khan Niazi Chairman

Brig (R) Muhammad Shiraz Baig Member

Mr. Kashif Mateen Ansari

Member

Auditors

A.F.Ferguson & Co.

Chartered

Accountants

Legal Advisors

Rizvi, Isa, Afridi & Angell

Registrar & Share Transfer Office

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M/s THK Associates (Private) Limited,

Ground Floor, State Life Building # 3,

Dr. Ziauddin Ahmad Road, Karachi – 75530

P.O.Box No. 8533, Karachi.

Tel : (021) 5689021, 5686658, 5685681

Fax: (021) 5655595

Registered Office /Head Office

AWT Plaza, The Mall,

P.O.Box 1084, Rawalpindi.

Tel :

(051) 9063000

Fax:

(051) 9272455

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Executive Profiles

• Mr. Agha Ali Imam- Senior Executive Vice President

M.R Mehkari - Senior Executive Vice President

Suhail Ahmad Rizvi- Executive Vice President

Mr. Nazimuddin A. Chaturbhai, Senior Executive Vice President

Malik Asad Ali Noon, Executive Vice President

Mr. Tahir Aziz, Executive Vice President

Mr. Israr Ahmed, Executive Vice President

Mr. Riaz Khan Bangash, Senior Vice President

Mr. Nauman Bashir Khan, Senior Vice President

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Product and services:

Personal Finance

Personal Finance is a parameter driven product for catering to the needs of the general public belonging to different segments. One can avail unlimited opportunities through Askari Bank's Personal Finance. With unmatched finance features in terms of loan amount, payback period and most affordable monthly installments, Askari Bank's Personal Finance makes sure that one gets the most out of his/her loan. Once a good credit history is established, the door to opportunity opens much wider.

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Mortgage Finance

Askari "Mortgage Finance" offers the convenience of owning a house of choice, while living in it at its rental value. The installment plan has carefully designed to suit both the budget & accommodation requirements. It has been designed for enhancing financing facility initially for employees of corporate companies for purchase/ construction/ renovation of house.

Business Finance

Smart Cash

In pursuance of the National objectives to revive the economy of the country, ACBL is providing loans to small and medium size business enterprises under Askari Bank's Business Finance Scheme. Our goal is to offer a loan, which enables business community to receive the financing required by them based on their cash flows. Our valued customers can enjoy the convenience of getting financing on attractive terms with the minimum processing turnaround time.

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This personal line of credit would be set up with a specified credit limit upto Rs. 500,000/-

Auto Financing

ASKARI CARD

ASKCARD means freedom, comfort, convenience and security, so that you can have retail transactions with complete peace of mind. ASKCARD is your new shopping companion which enhances your quality of life by Yet another of our products, Askar offers the most

convenient and affordable vehicle- financing scheme, which provides our valuable customers an opportunity to own a brand new vehicle of their choice. With minimum down payment, lowest insurance rates and widest range of available car makes and models, Askcar offers the best value to our esteemed customers

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letting you do shopping, dine at restaurants, pay your utility bills, transfer funds, withdraw and deposit cash through ATM anywhere, anytime.

TYPE OF CREDIT CARD.

There are three types of credit cards issued.

i.

Silver card

ii.

Gold card

iii.

Local card

* Silver card has limit upto 2 lac. * Gold card has limit upto 5-lac.

* Local card has limit upto 2 lac.

Silver and Gold card can be used internationally for shopping and also can be used for internet shopping.

* Local card can be used in Pakistan.

Travelers Cheques

The range of our products and value added services enhances with introduction of Rupee Travelers Cheques (RTCs) launched in March 2002. In spite of our constraint on issuing higher denomination of RTCs against restrictions imposed by the Central Bank of Pakistan we have been striving to attain our shares with sizeable portfolio.

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The first liability product launched by this unit is showing a remarkable acceptability in the market. The growth of this product is witnessed by its share, which has presently reached at Rs. 1,079 Million even after lowering down the profit rates due to sufficient liquidity in the market.

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FUNCTIONS OF ASKARI COMMERCIAL BANKS

1. Accepting Deposits

Cash in the hand of the people is unsafe because it can be lost. moreover, because some people lack entrepreneurial talents and therefore do not make investment in any enterprise, but they want income on the amount of money they have. Bank promises to solve these problems of people.

Banks receives three types of deposits from the people.

 Current deposits  Fixed Deposits.  Saving Deposits.

Advancing Loans

Every bank has learn experience that depositors do not draw whole of their deposits at a time. They only draw a part of it for day to day transactions. Therefore, a bank keeps a part of total deposits as “cash reserve” to meet the cash demand of depositors and advances the remaining part of deposits to businessmen on interest.

A bank gives loans entrepreneurs/businessmen in the following ways:

 By Opening a loan account.  By means of overdraft.

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 By purchasing bonds and securities.

Creation of the safest medium of exchange:

It is neither safe nor easy to make payment in the form of metallic coins or paper notes. Therefore, payments are made by cheques these days.

Agency Services

A commercial bank performs many services as an agent of its clients or depositors. It makes payments on order cheques issued by its depositors. It receives the amount of money on crossed cheques issued in the favour of its clients and deposits the amount in their accounts.

General Utility Services

A bank provides general utility services to its clients as well, for example it keeps their precious documents, gold ornaments, bonds and shares etc. in safe custody in its lockers.

Financing of Foreign Trade.

A commercial bank receives foreign exchange earned by exporters and makes payment also in foreign exchange in foreign countries on behalf of importers. It also advances loans.

Departments Of Askari Commerical Bank

 Accounts Department

 Cash Department  Clearing Department

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 Credit Department

DEPOSIT & ACCOUNT OPENING

DEFINITION OF BANKERS

As defined in section 3(b) of negotiable instrument act 1881, ‘”bankers” means the person transacting the business of accepting for the purpose of lending on investment of deposits of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft, or otherwise, and include the post office savings the bank.

DEFINATION OF THE CUSTOMER:

A customer is the person who maintains a regular bank accounts without taking in to consideration the duration and frequency of operation of his accounts it means that the person becomes a customer of the bank as soon as he open his accounts deposit money in the same and the bank accepts the said deposit.

QUALIFICATION OF CUSTOMER:

He should not be a minor because a minor is not competent to contrect.according to section (3) of the majority act 1875 a person is deemed to have attained the age of majority when he has completed the age of (18) years.

He should be a person of sound mind

Section (12) of the contract act says that “the person is said to be of sound mind for entering into contract if at the time when he makes it he is capable of understanding it and of forming a rational judgement as to its effects upon his interest.

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There is an offer by the customer and acceptance by the banker. The customer offer the money to deposit and banker offers to accept it.

RIGHTS OF A CUSTOMER

A customer has the following universally accepted rights.

To draw cheques against his credit balance in the account. To receive pass book or statement of his account.

To sue the bank for the cost, loss and damages, when his cheque is wrongfully dishonoured by the banker.

To sue when the banker has not maintained the secrecy of his account, except when it is done under compulsion of law in the interest of the bank or as the duty to public.

DUTIES OF THE CUSTOMER

Section (72) of negotiable instrument act 1881 lays down that the customer must present the cheques for payment and collection with in the business hours of the bank.

To keep his cheque book under lock and key

To draw the cheques very carefully so that there is no room for any fraudulent additions or alterations.

To see that the cheque issued by him presented to the bank for payment with in a reasonable time.

OPENING OF ACCOUNT

The banking history is replete with various instances of fraud largely due to incorrect opening of accounts. These fraud could have been avoided in if the branch managers and other designated officers had taken due care and exercised required precautions at the time of opening of accounts.

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At the time of opening of accounts, officers should tactfully obtain as much information as possible about the integrate and character of the person, his correct name, address and occupation. This infect will be the only opportunity when they will be able to talk to the prospective customers in a friendly and frank atmosphere. This is the time when they have a slight edge over the customer. He or she at this point of time is willing to divulge as much information about his personal status and business etc to the bank manager. It is therefore necessary that due care and proper procedure be followed for opening different types of accounts for various types of customers.

Askari commercial bank limited has the following classifications of accounts,

A INDIVIDUALS ACCOUNTS

B PARTNERSHIP FIRM ACCOUNTS

C JOINT STOCK COMPANY ACCOUNTS

D AGENCY ACCOUNTS

E CLUBS, SOCIETIES & ASSOCIATIONS ACCOUNTS

F EXECUTORS AND ADMINISTRATORS ACCOUNTS

G TRUSTS

H LOCAL BODIES ETC.

I PROPERITORSHIP

J JOINT ACCOUNTS

K OTHER MISC ACCOUNTS

When a customer open an account under the law he enters into a contractual relationship with the bank.

At the time of opening the account, intended customer must have the following characteristics:

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A He must have reached the age of majority

In term of section 3 of the Indian majority act 1875 (as adopted in Pakistan) a person is a major if he attain the age of 18 years. However, the age of majority shall be 21 years in case of European nationals and also where guardian is appointed under the guardians and wards act.

A person who is under the age specified herein above is considered a minor. in term of section 11 of the contract act, a minor is declared incompetent to enter into a contract. As such, any contract with a minor is a void. However , the banks generally allows the minor to open accounts with a view to inculcate in them the habits of saving. Such account is opened jointly with their guardian and are allowed to be operated by the guardian. The guardian for the purpose will sign the account opening from and the specimen signature card.

B He must be of sane mind

A person is said to be of sane or sound mind it he understands the terms and the conditions of the contract and is capable enough to form rational judgement as the effects of the contract upon his interest.

C He must not be insolvent and bankrupt.

At the time of opening the account, he should not be adjudicated as insolvent. Generally a person is considered as insolvent if his liabilities exceeds the assets he is possessing. D He must not be debarred under any law from entering into any contract.

It is the duty of the banker to make sure that all above criteria is satisfied before he allow the opening of the account.

For general guidance of the officers, given below are the essential points that must not escape their attention while opening the accounts.

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As for as possible the account opening job should be handled by the branch manager himself. Only in exceptional cases in main branches, the job may be assigned to other officers.

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INFORMATION:

As much relevant information as possible must be elicited from the prospective customer relating to his means, line and place of business etc.

FORMS TO BE FILLED IN CAREFULLY:

Each and every column of the account opening form should be neatly and correctly filled in with necessary details.

INTRODUCTION OF ACCOUNT:

Account must be properly introduced. In this concern, the following precautions are to be observed.

I As for as possible, the person introducing the account should attend the personally with the prospective customer. This would serve the dual purpose.

A The branch manager shall have the opportunity of eliciting vital information as to the standing, respectability and the means of the person he is introducing.

B The identity of the customer must be properly established beyond any doubt.

Iintroducing from person having doubtful dealing with the bank should be discretely declined.

The staff member generally should not introduce the account. They will introduce accounts only for those persons who are personally known to them and whose credentials are absolutely clean.

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As for possible, the account opening form should be completed by the prospective customer in presence of the introducer who is then aware of the particulars furnished and can corroborate the same.

Specific information concerning the profession should be recorded in the account opening form. The description private Service’ or ‘Businessman’ is insufficient.

Signature on the account opening form must be put by the customer will attest them properly in presence of introducer.

No cheque book should be issued to the new accounts are properly introduced.

Account may be opened with cash or cheque. Initial deposits, it is incumbent upon the Branch Manager to satisfy themselves additionally that title of account holder is genuine for the cheque deposited. Prudent bankers avoid opening new accounts with cheque. Letter of thanks should be sent to the introducer the day the account is opened. This precaution would accomplish the purpose of intimating the introducer that the account has been opened on strength of his introduction thereby inviting disclaimer if untrue. A letter of thanks should be sent to the new account holder, preferably through registered mail, to verify his address.

In the evening, the officer of the branch should visit the customer’s area to establish that the address given by the customer is correct and the commands respect and honour in the neighbourhood/vicinity he is living.

Number of the customer’s national identity card should be correctly recorded in the account opening form and copy of it should be kept on record.

No account should be opened in the name of an undischarged insolvent.

TYPES OF ACCOUNTS

Let us now turn to procedure to be followed in case of each type of accounts.

INDIVIDUAL ACCOUNTS:

Such account may be classified as follows:  Accounts of literate ladies and gentlmen.

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 Accounts of parade observing ladies.

 Joints accounts.  Minor accounts.

1.In order to open the account for literate people an account opening form, signature card, form “A”, and an ID copy are required with Rs. 2500 for opening account and he must fulfil all customer characteristics.

2.In case of illiterate ladies and gents, the following precautions are observed in addition to those provided in the above guideline.

a) Two photographs are to be obtained one to be pasted on account opening form and the other specimen signature card.

b) Instead of signature left hand thumbs impression to be obtained on the specimen signature card from gents and right hand thumb impression from the ladies.

c) Each time such customers should attend the bank personally and will put their thumb impressions on the cheque before the passing officer.

d) Such customers should be advised not to issue cheque payable to third parties.

e) Cheque should be marked payment in person to ensure even if the cheque is presented through clearing that particular cheque can only be paid in person

3.When account is opened by more than one person but the relationship between them is neither of trustees nor partners it would be termed as joint account. Whenever such accounts are open-end, definite instruction regarding operations on the account and payments of balance in cased of death of any one of them should be obtained.

4.

A person who is under the age as specified above is considered as minor, a minor is declared incompetent to enter into a contract. However, the banks generally allow the

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minor to open accounts with a view to the condition of saving habits. Such account is opened jointly with their guardian and is allowed to operate by the guardian.

ACCOUNTS OF PARTNERSHIP FIRMS

While opening accounts of the partnership firms, the partnership deed from registered firms is required obtained in the addition to account opening form and specimen signature card. The partnership letter is attached with the accounts opening form, which must also be signed by all the partners of the firms whether registered or unregistered.

In these accounts, the following points should be remembered. 1.All the partners must sign the account opening form.

2.The names of persons authorised to operate the account must be neatly and correctly given in the account opening form.

3.For partnership concerns carrying on the business under impersonal name it is generally described that the title of accounts should show name of the partners or managing partner.

4.A cheque payable to the firm should not be accepted for credit to personal accounts of the partners without the written authority of all the partners.

5.The maximum numbers of partners in general business 20 and the minimum is 2 for the banking firms the maximum numbers of the partners is 10 in Pakistan however bank can not be opened by the partnership concern

6.Since these are the business concern they will be allowed to open current accounts. No saving s bank accounts be opened in partnership name.

Partnership account opening required following documents: 1) Account opening form (A.O.P)

2) A.O.P should be duly introduced 3) Copy of N.I.C Of all partners 4) Registration certificate (optional)

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5) Partnership deed

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7) Letter Head

8) Official capacity (It means that all the partners will sign and choose the singe for operation of account with the bank. And in account opening form the name of the official capacity is written in special instruction and recommended by all the partners).

ACCOUNTS JOINT STOCK COMPANIES

Joint stock companies include

 Private limited companies and  Public limited companies

PRIVATE LIMITED COMPANIES

Private limited companies are those where the share capital is not offered to the general public instead the offer is restricted to particular class of society or with in the family members. Generally their share are not transferable. The minimum number of shareholder is 2 and maximum, is 50 private limited company are not listed on stock exchanges and therefore their shares are not publicly quoted.

PUBLIC LIMITED COMPANIES:

In this case, the promoters and general public contribute share capital. Any Pakistani who is authorised to enter into contract can purchase share. Shares of these companies are transferable and brought and sold freely in stock exchanges. The minimum number of shareholder is 10 whereas there is no upper limit.

The following documents are required for joint stock companies account opening. a). Copy of resolution

While opening the company’s account, the manager must ensure that board of directors of the company is properly constituted and request for opening the account comes through resolution of the board of directors. The resolution for account opening should bear company seal and signed by the chairman of the meeting where such resolution is

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passed and counter-signed by the company’s secretary or authorised director must be submitted to the bank before an account can be opened.

b) A.O.F. duly signed.

c) Memorandum of Association & Articles of Association. d) Certificate of Incorporation.

e) Certificate of Commencement of Business (only required for public limited companies. f) National identity cards of directors.

g) List of director with their shareholding. h) Specimen signature card duly signed

ACOUNT OF PROPRIETOR:

1.A.O.F should be duly introduced 2.Copy of N.I.C of proprietor

3.Specimen signature card duly signed

4.Proprietorship declaration concerns on firm’s letterhead.s

ACCOUNTS OF CLUBS, SOCIETIES AND ASSOCIATION:

Clubs, societies and associations are non-profit and non-trading in nature. They have their own rules and regulations and committees mention their affairs, which is called Governing Bodies.

Documents that are required are: i) Account opening form ii) Specimen signature card

iii) Resolution to be passed by their governing bodies iv) Certified copy of rules and regulations or Bye-law v) Letter of registration

vi) Letter of undertaking to the effect that as and when change take place they will inform the bank of such changes.

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DEPOSITS:

Deposit is the lifeblood of a commercial bank. Main function of a commercial bank is to enhance the savings from the savers to the ultimate user of funds. The process of collecting savings is called Deposit Moblization.

FORMS OF DEPOSITS:

Two broad forms of deposits with reference to time period are:

A)

Demand deposit

: These are payable on demand. They include current account, sundry deposit (e.g. margin account) and deposit receipt. No profit is given on demand deposits.

i)

CURRENT ACCOUNT:

ii)

This type of account is usually opened for businessman or such persons who needs deposits and withdrawals facility without any restriction. Introduction is necessary when opening a current account, the procedure has already been explained else were in this book and account number is allotted and for withdrawals cheque book is issued and a statement of account is provided so that customer can reconcile his account with his own record.

No interest return is paid on such account is Pakistan, This account can be opened with Rs. 500. Banks usually recover service/incidental charges on current account if the required minimum balance is not maintained. Or when the maintenance of the account becomes expenses e.g. For example too many transactions take place on summing a large number of chequebooks and other stationary not consistent with the average balance.

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It is a contract for a specific deposit transaction and is used as a security for bidding etc. It is non-transferable and is payable only to beneficiary or purchaser.

iii) SUNDRY DEPOSIT -MARGIN ACCOUNT,

At the time of issuance of LG / LC or acceptance the party is supposed to deposit is kept in an account called sundry deposit. Margin account Similarly, at the time of allotment of locker the locker holder is supposed to deposit a certain sum as security, which is kept in sundry deposit account.

FEATURES OF MARGIN/SUNDRY DEPOSIT ACCOUNT.

Reduces risk/exposure.

Free of cost deposit enhances profitability Respective accounts are opened.

Non checking account- rather customer has no approach to this account. As far as

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Deposit

Accounts

Minimum

Balance (Rs)

Rate of

Return p.a. %

Payment of

Return

Product Base.

FISDA

(financial institutional special deposit account)

50,000 &

above

0.25%

Monthly

Daily

ASDA

(Askari special deposit account) 50,000to 999,999 1000000& above 1.00% 2.00% Monthly Monthly

Daily

Deposit

Accounts

Minimum

Balance (Rs)

Rate of

Return p.a. %

Payment of

Return

Product Base.

Value Plus

(saving account)

Minimum

Rs 10,000

2.00%

Monthly

Minimum monthly balance Notice deposits

5,000

0.50%

Maturity

Daily

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It relates to the liability L/C, L/C acceptance and is adjusted when liability is redeemed/released.

B)

TIME DEPOSIT:

Payable on demand with certain maturity. Attracts profit with respect to time.

 PLS Saving accounts

maturates Askari FISDA (ASDA)

Special notice time deposits are of two types: i account  Askari Special Deposit Account.e. 7 & 30 days notice.

All TDRS (term deposit receipt) of different, maximum one year.

SAVING ACCOUNT (INTEREST BASED SYSTEM)

As the name denotes savings accounts are basically meant for mobilizing saving of people. In the interest based system a saving account could be opened with only Rs. 2500 for new persons but regular customer’s saving account can be opened with Rs. 500 for single individual or for two or more individuals jointly, charitable institution, provident or other funds of benevolent nature for local bodies, autonomous corporation, companies, associations, educational institutions etc.

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CLOSING OF ACCOUNTS.

It is the prerogative of either party to the contact i.e. the banker or the customer whether to keep the account with a particular bank or close the same without assigning the any reasons. A customer generally uses this discretion.

• When the particular branch becomes out of the way or too far from his place of business.

• The purpose for which the account was opened has been served.

• The bank branch is unable to give him certain credit facility that he requires.

In such a case the customer should surrender the unused chequebooks to the bank and withdraw the balance lying to his credit after informing the bank formally.

Bank may also closed the account of the customer after notifying the banks intention and giving him a reasonable time to make arrangement to have his cheques in circulation presented for payment before the notice period expires. Closing of customers account warrants a proper Notice determining the contractual relationship. Following are the reasons by which bank can close the account of customer.

TDR

One month

Two months

Three months

Six months

One year

5,000

5,000

5,000

5,000

5,000

1.00%

1.25%

1.5%

2.00%

2.50%

Maturity

Six monthly

Daily

Daily

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a) By frequently drawing cheques much in excess of the balance in his account which are return unpaid.

b) By introducing accounts of parties, which becomes undesirable in cause of time. c) By frequently contravening the Rules for operation on the account.

d) By making himself aggravate during his visit to the banks branches and picking quarrel with the staff unnecessarily.

LOCKERS:

ACBL also offers the facility of lockers of three type to it customer to offer security.

Types Size Annual rent (Rs) or Refundable deposit (Rs)

Small 6 inches x 2feet 1,000 15,000

Medium 12 inches x 2feet 1,500 20,000

Large 2 feet x 2feet 2,500 35,000

Key deposit is Rs 1,000 per locker.

In the case if customer lose the key of locker then breakage fee will be charged about Rs. 2,000 per locker plus actual charge of supplier of locker.

DOCUMENTS REQUIRED FOR LOCKER OPENING:

Locker opening form

Specimen signature card

Copy of NIC

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CLEARING

Clearing is a system by which bank exchange cheques and other negotiable instruments drawn one each other within specified area and securing the payment for their clients through the clearing house. A clearinghouse is an organization where these cheques are brought and the mutual claims of each bank on the other are offset ad settlement is made by the payment of difference. The responsibility of operation for the clearinghouse function lies with the state bank of Pakistan.

The function of clearing can be understood with the help of a simple example.

Every bank has its account with state bank of Pakistan. Suppose on of the account holder of ACBL brings a cheques of habit bank of (Rs 7000/-). Now in state bank of Pakistan the representatives of both banks will appear for clearing physical payment of cash is not made, but our banks (ACBL) account would be reduced by RS. 7000 and increased by Rs. 10,000 the reverse would be true for habit bank limited the clearing may be “for” or “against” if our bank’s A/C in sbp contains a net debit balance then it would be for and if credit balance then it would be “against” clearing.

COLLECTION OF CHEQUES

;

These cheques may be drawn on UBL HBL, or MBPor other banks of Pakistan. The clerk collects all the cheques of different banks and prepares schedule for them. Representatives of all banks will receive the cheques related to their branch either issued by its branch or other banks. If bank transfers funds in the same city, it is called IBC “INWARD BILL OF COLLECTION” and if bank transfers funds to another city when it is called OBC OUT WARD BILL OF COLLECTION. Bills are of 2 types

Clean and documentary clean bills include finance instruments and documentary includes documents attached with goods.

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ADVANTAGES OF CLEARING:

 Systematic arrangement for collection and clearance of cheques.  Speedy and economic collection and clearance of cheques.

 Clearance of cheques and other instruments of different branches of different banks in a systematic manner without any flaw and mistake.

 The collection and clearance of Govt. bills, instruments, and cheques.

 The collection of Govt. revenue through cheques, pay order and drafts payable through the State Bank of Pakistan and National Bank of Pakistan.

 It avoids the difficulties and cumbrances to be faced by the branches if they collect the instruments directly from branch to branch.

 Confidence among the clearing members is produced.

CLEARING OUTWARD

:

When the customer deposits cheques and other instruments of other banks for collection, we send the cheques in outward. Clearing.

PROCEDURE:

cheques are received duly entered on pay-in-slip. Counter foil is returned to customer after signatures. Crossing stamp is fixed on the cheque.

Clearing stamp is fixed on the cheque and pay-in-slip.

Clearing stamp with next date is fixed on the cheque and pay-in-slip. Endorsement stamp is fixed on the reverse of the instruments.

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In the clearinghouse the representatives of all the banks gather and exchange their instruments. They enter the total amount of cheques delivered and

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received in their summary sheets. The total of schedule received tally with the total of summary.

Clearing cheques received from other banks are sent to branches which will clear the cheques and instruments to respective amounts. Some cheques are returned un paid with the reasons mentioned in the cheques return memo.IBCA for net amount is sent to main branch.

In the 2nd house clearing cheques are return and exchanged by the representative of the banks. A summery is prepared for cheques received and delivered and net position is ascertained. Amounts are settled through SBP accounts.

After cheques are returned, the main branch sends IBCAs for net amount to the branches. Computer entries are made for (-) credits for returns and debits to main office A/C.

INWARD CLEARING:

In clearing house the cheques received from other banks are collected & sent to branches for their payment.

Crossing stamps, clearing stamps and endorsement are checked. Crossing stamp other than collecting bank is cancelled.

Cheques & instruments are posted to the debit of respective accounts.

Any instruments returned un-paid shall be returned in the second session of the clearinghouse i.e. 2nd clearing.

Cheques & instruments if un-paid are returned along with return memo. IBCA,s for net amount is sent to the main branch.

ENTRIES

FOR O/W CLEARING:

Dr. Suspense A/C clearing.

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FOR I/W CLEARING:

Dr. customers/Cs clearing(for return)

Cr. suspense A/C clearing (1/W clg)

TRANSFER DELIVERY:

This is the arrangement by which instruments of the branches of the same bank with in the city are collected and cleared.

OUTWARD TRANSFER DELIVERY:

The system is just like outward clearing.

In outward clearing branch wise schedule are prepared.

The clearing instruments are presented to the branches through main branch of the city. This is more effective & speedy process as compared to LBC because fate is received next date.

PROCEDURE OF O/W TRANSFER DELIVERY:

The customers deposits cheques & instruments of the branches of ACBL at Lahore along with pay-in-slip duly filled in.

Crossing stamp is fixed on the instruments. Transfer delivery stamp is fixed for next date.

Endorsement stamp is fixed on reverse of the instrument. Payee’s A/C is credited

Askari Commercial Bank Ltd Badami Bagh Lahore.

INWARD TRANSFER DELIVERY:

Cheques drawn on the branch are received with the schedule. The entries are made in the I/W. TD register and balanced with the summery of T.D.

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cheques are debited to respective account and cheques which are not passed returned with the objection memo.

The IBCA is sent for the net amounts for cheques passed.

INTERNAL CLEARING:

When the customer deposits the cheques in the branch drawn on the account in the same branch. The cheques are received along with the pay-in-slip. The amount is transfer from the account where the cheque is deposited and credited to the account where it is transfer.

SPECIAL DELIVERY:

SBP conducts special clearing when clearance of special Government revenues is required.

Government cheques. Pay order treasury cheques are cleared and paid.

Remittance department plays an important an important role in transfer of funds; it includes DD, TT, MT, TC and pay order.

It is an instrument payable on demand for which value has been received issued by the branch of the bank drawn i.e. the payable at some other place (Branch) of the same bank.

TRAVELLERS CHEQUES (TC):

TC (traveller’s cheques) is for all branches with no charges. We give the money in cash/cheque/direct debit instructions to the banker and he gives in return the slips of Rs.10,000, Rs. 25,000, Rs.50,000, Rs.100,000, Rs.500,000 which is required. Now government has made some restriction against TC because people have stared it to

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use in place of money. There are no charges of any type such as postage, taxes, commission charges.

TELEGRAPHIC/MAIL TRANSFER (TT/MT):

This is an instrument that is use to transfer the money from one branch to other branch of same bank through bank. The person known as payee, for whom TT is made, TT is only paid to him after seeing his ID card. TT has been made on following modes of payments.

1. On cash. 1. On cheques.

2. Through debiting account no.

After issuing TT it is get registered in issuing register. Which required TT/MT no. payee name and address, amount, account no.(if through account payment has been made), cheque no.. Along TT/MT an advice also be send to other branch from where money will be drawn, that advice is called telex message. On the basis of which the other branch will pay the money after tallying serial no. and test no. of TT.

TT is made if the client has account in the bank if he has no account then he has to fill the TTR (telegraphic transfer receipt) which is a voucher for the official record in bank. Its form is of blue colour. In DD the person has to take care of DD which is issued to him.

Demand Draft (DD):

The demand draft (DD) is issued to the person who want to draw money from another branch in any other city, then by showing that draft he can easily draw money if he has account there. Demand Draft is issued by one branch of bank payable to other branch of the other bank e.g. DD is issued by ACBL payable by MCB. The person who pays the value and on whose behalf draft is issued is called purchaser.

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The Branch/Office which issues a draft on another branch or office is called the drawing/issuing branch.

The Branch /Office on which draft is drawn is called the drawee branch. The person entitled to receive the payment is called the payee.

DD also has been made on three modes of payments. 1. On cash.

2. On cheques.

3. Through debiting account no.

ISSUANCE OF DD:

 Request shall be on the standard DD application form.

 Fill in all information such as name of beneficiary place where the DD is drawn, amount, mode of payment cash/cheque /debit authority signature with name and addresses.

 Check the application form.

 Charge commission as per schedule of charges.

 Get voucher from cash department. After the customer has made payment by cash /cheque.

 Prepare the demand draft (Security Stationery)

 The issuance of DD is computerised and the amount is automatically protected graphed during printing for avoidance of forgery.

 Entry is then made in DD issued register, in the DD issued register separate folio is allotted for each draw branch and a serial control number is applied.

After issuance of DD, an advice is send to the branch from where client wants the money to be drawn, which confirms the DD. In this aspect cantra is another concept, which is followed in the branch where money is transferred. Payment of DD takes place in two ways:

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1. If advice reach the other branch before the draft then that branch debit the H.O of bank and credit client.

2. If draft reach first then bank open the temporary account called suspense account or red account through which amount is debited for the satisfaction of client and credited the H.O of bank when that branch receives the advice than it debit the H.O of bank and credited the suspense account.

There are postage and commission charges.

CANCELLATION OF DD:

• Obtain application in writing along with original DD.

Verify the signature of applicant. This signature should tally with signature on DD application form.

• Mark cancellation in DD issued register.

• Payment from suspense account DD cancelled after recovery of cancellation cheques as per current schedule of charges.

• Inform the drawee branch regarding cancellation and ask for IBCA. • On receipt of IBCA adjust amount paid out of suspense account.

Lost/Stop Payment/Issuance Of Duplicate DD.

• Get application from purchaser and verify the signatures.

• Inform the drawee branch of the loss of DD and advise them to mark caution against payment if presented.

• After necessary checking, the drawee branch will inform us about the status of DD- whether it has been paid or is still outstanding.

• Write on the face of duplicate DD in red ink “Duplicate in lieu of original DD. no.____ dated ____ reported lost”.

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• The duplicate DD will have the same control number.

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• The printed number and serial control number of DD issued shall be mentioned on the application form.

Signatures of two attorney holders with their attorney number should obtained on the DD. The 2nd signing officer must check all the particulars before signing.

The postage rate is fixed Rs.25and commission rates are as following:

PAY ORDER:

Pay order is also called “banker’s cheque” drawn upon the issuing branch/Office itself. It required account no. and other information about client which mean cross payment is its restriction.

• Get the application form. Issues pay order after recovering charges.

Do necessary vouchering. Make entry in PO issue register.

• All pay orders shall be crossed “payee’s account only”.

• It may be noted that IBCA is not involved because PO are payable in same branch.

CANCELLATION OF PO:

Application for cancellation. Surrender of original pay order. Recover cancellation charges.

LOST AND DUPLICATE PAY ORDER.

Check the record to ensure that payment has not been effected. Get application for issuing of duplicate PO. Recover charges. Issue duplicate pay order.

Pay slip:

The banks for settlement of its own payment issue pay slips. There is no excise duty and no commission.

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C r e d i T D e p a r t m e n t ”

“The major source of bank’s income

Credit department is most important department of bank to earn her income by lending money to other at different rates as compare to that deposit interest rate. Normally, bank takes money from depositors at rate X and utilize those funds by advancing them at X+1 rate, so X- (X+1)=1 this 1 is the income of the bank. If we say that bank is body then credit is blood of that body. It generates revenue for the bank so credit decisions are to be carefully analyzed.

Different departments are working in SBP to monitor credit. * BCD... Banking control Department.

* BSD... Banking supervision Department.

* BPRD ... Banking policy and regulation department,

Commonly operations regulate credit size, sector and bank. Credit line is given to banks finance the purchase of crops after every six months .

NATIONAL CREDIT PLAN:

Every year economic survey is made and with the help of this survey government patronize certain sectors and also advise banks to give more loans in these sectors. According to this year the agriculture sector is the target for financing.

CREDIT REGULATION 1992:

In 1992, certain regulation are made by SBP for credit advancement: ⌡Bank cannot lend more than 10% of its reserves.

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⌡No bank can finance its own shareholders.

⌡If bank finance to other bank’s shareholder than it has to take permission from SBP. ⌡Bank has to handle its suspense liabilities within 30 days.

⌡Advances ratio should not exceed 65%.

Bank should check the current ratio of the customer.

PROCEDURE FOR TAKING LOANS:

For taking loan first credit line proposal (CLP) is made. In a CLP there are different types of documents:

Application form Credit information

Application form:

The customer requests the application form from the bank for the loan. Some documents are also attached with the application, which are of two types:

• Permanent Information Memo • Charge Document

Permanent Information Memo:

These are the documents in which there are permanent information of customer and his business.

Charge Document:

Charge document is made for the security purpose. These document are sign by borrower. Purpose for sign is that if the borrower does not pay the loan in a certain specific period of maturity then these documents can be shown in a court against him.

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For the satisfaction purpose bank also take credit information about the party. Credit information is taken from the Credit Information Bureau (CIB). This type of

information is taken when loan of huge amount is taken, above 5 million. Clearance report is checked.

All these documents are arranged in a file. This file is called credit line proposal. Every loan is sanctioned after the preparation of CLP.

DISCRETIONARY POWERS OF ADVANCES:

Up to certain limit each level can give orders of advancing loan but for the bigger amount branches have to take permission from upper level of authorities.

Credit sanction advice move through these levels.

A r e a o ffic e c r e d it

c o m m it t e e

H e a d o ffic e c r e d it

c o m m it t e e

E x e c u t iv e c r e d it

c o m m it t e e

B o a r d o f d ir e c t o r s

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TYPES OF SECURITIES

Normally loans are of two kinds. i. Clean loans.

ii. Documentary or secured loans.

In clean loan no tangible securities are taken from the customer. But in secured loans tangible securities are

Different kinds of secure securities are • Deposit with bank.

• Deposit with other banks. • Government securities.

• Account receivable /notes receivable. • Inventory.

• Moveable /immovable property

Fixed assets are hypothecating, Pledging or mortgaging. In these three cases tittles charge and control varies among bank and the borrower

Type Title Charge Control

Hypothecation Borrowers Bank Borrowers

Pledge Borrowers Bank Bank

Mortgage Joint Bank Bank

GOOD LENDING PRINCIPLES.

There are five good lending principles, which are kept in mind while considering a credit decision.

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1. SAFETY

Lending must be safe enough and given to one who already has the ability in the form of cash flows to show and for this purpose some liquidity security should be pledge.

2. SUITABILITY

Lending must fit into the plan and loans are given to a business a growing industry. 3. LIQUIDITY.

Business cycle should be complete in one year. The credit will be refunded in liquid form and for debt security bank consider most liquid security.

4. DISPERSAL

Loans should be given in diverse sector and should not be concentrated just to one sector to maintenance balance growth of economy.

5. REMUNERATION

Lending must be remunerative and ultimate goal is to maximize the profit.

RISK ANALYSIS

We know higher the risk higher the return but risk must be carefully evaluated. There are five Cs, which should be considered.

1. CHARACTER

Normal and social character of an individual or organization should be good. He should not be involved in any illegal and unethical business like smuggling or black- marketing. 2. CAPACITY

Borrower must have the capacity to take the loan and repay that loan. 3. CASH

There must be regular cash flows of business because liquidity is important for refund of loan.

4. COLLATERAL

Transaction must be secured by collateral. The applicant should have such amount of asset that can be used as security of credit he has taken from bank.

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5. CONDITIONS

Different conditions are important to minimize the risk of lending mostly these conditions are two kinds.

These conditions relate to industry and country environment.

Positive condition: Bank does not restrict the applicant to do something but it demand for some paper to be signed.

Negative condition: Bank restrict the applicant to invest this credit in pre-specified business.

TYPES OF LENDING:

There are two types of advances: A. Funded finance

B. Non-funded finance

A. FUNDED FINANCE

In a fund base loan cash are involved. In these loans cash transaction are made directly. Fund based loans are further divided into five types:

1.

Running finance

2.

Cash finance

3.

Term finance

4.

Staff finance

5.

Clean finance

6.

Mortgage finance

7.

Trade finance

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1.

RUNNING FINANCE

This is also known as current finance or hypothecation. Per day mark-up is a charge but customer is flexible to draw within the drawing power. Hypothecation of stock is the prime security. In running finance amount is mentioned clearly. Mark-up is charges

on the amount that is drawn not on full amount. Previously this is known as “overdraft”, in which customer can withdrawal his credit account in excess of credit in it.

2.

CASH FINANCE

This is just like in running finance the only distinction in this case security is stock pledged form and the security margin is also charged. Chequebook is not issued. Cash flow must be regular one.

Bank issues delivery order if the borrower wants to draw stock equal to money deposited by customer.

3.

TERM FINANCE

Its time period is fixed. Amount and mark-up rate is mentioned. Mark-up is charged on the full amount of loan because amount is withdrawal at once. Term finance is secured by security. Credit should be given according to the security. It is more profitable than running and cash finance because mark-up is charged on whole amount.

There are some cases when long term finance is also provided, these are: * Existing plant is in running and expansion in it is needed

* To running plant for replacement of machinery * To running plant for modernization

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4

. STAFF FINCNE (PERSONNEL)

This facility is given to the staff of ACBL. The amount of loan depends upon the rank of staff.

* OG iii to OG I the amount of loan is Rs,25,000 * Above OGI up to SVP Rs.50,000. * And above SVP Rs.100, 000

Repayment period is 2 years and instalments are deducted from salary. Mark-up rate is 5% no security is needed it is against GP fund. The eligibility is 2 years or more service. 5.

CLEAN FINANCE:

These are the special types of finance is given without the security. In the ACBL these type of finance are given to the Army officers mostly. The amount of this finance is Rs 25000. The bank should not be given more than Rs. 25000.

6.

MORTGAGE FINANCE

This I also transacted through Retail Banking Division. as a security simply the mortgage of property is demanded by the bank. this is for three purposes;

* Purchase of house * Construction of house * Renovation of house

This facility is for individuals. Repayment period is 15 years for construction and purchase of house and for renovation 7 years subject to remaining service. The mark-up is SBP discounting rate 4% plus with a floor rate 15%. Total service of the applicant should be 3 years and minimum 2 years with the existing employer. no complicated procedure only the recommendation of the employer is needed.

8.

TRADE FINANCE:

There are two kinds of the trade finance. 1. Import related finance

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2. Export related finace

1).

IMPORT RELATED FINANCE:

There are two types of import related finance: ⌡Finance against trust receipt (FATR)

⌡Finance against imported merchandise (FIM) ⌡Payment against documents (PAD)

FATR:

In this type of finance cash is involved between borrower and bank only. This type of loan is given on the basis of trust only. This type of finance is very risky, so the bank charges high interest rates. FATR finance is given to selective persons. The can put signee behind the bars without going to court after 180 days purchase good from exporter.

FIM:

Importer says that he has no money and wants to import goods. Bank then opens LC and pledge all the imported goods. After arrival of goods bank allows him to take away goods as he pays to the bank and charges mark-up to the remaining balance. It is like cash financing.

PAD:

If the importer does not pay with in 3 days of arrival of good then bank converts LC into funding facility and charges mark-up .

2).

EXPORT RELATED FINANCE:

There are two types of export finance.

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1.

FAFB (finance against foreign bills)

2.

FAPC (finance against packing credit ) 2a. Pre-shipment finance

2b. Post-shipment finance

1.

FAFB:

This is provided in case of usance LC. The exporter discounts usance LC with bank and bank after taking cushion (check) makes payment.

2.

FAPC:

This type of finance is given for the packing purpose. It can be before shipment for purchasing raw material and for packing of shipment and after shipment, for giving the salary of labours and payment of raw material.

B. NON FUND BASED

It is the commitment and does not involve hard cash. It is normally an obligation of the bank and in case of default of original borrower the bank stands responsible. In this type of facility bank asks the applicant for cash margin and for mortgage of property. Because even though no funds of bank involve but this facility is as risky as funded finance. But it is very lucrative for bank because no funds of bank are involved but bank charges and interest on the cash margin by head office generates revenues for bank.

TYPES OF NON_FUNDED FINANCE:

There are two types of non-funded finance. 1. Letter of credit (LC)

2. Letter of guarantee (LG)

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There are two types of LCs:

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Usance LC

Sight LC

Usance LC:

It is the LC in which the time period is involved. Time period is 60, 120, 160, days. Bank makes the payment of LC when they received the documents, like transport receipt and invoice.

Sight LC:

It is the LC, opposite to usance LC, in which payment to the exporter is made on the sight of documents.

LETTER OF GUARANTEE.

Banks issue guarantees when contract is made between two parties. It requires no prime security and only collateral security is taken. The amount of guarantee to be given is calculated after valuation of assets of applicant, which he/she wants to give as collateral. 70% of total property is taken as FORCED SALE value of the assets and after taking 25 %security margin on forced sale value the guarantee is given for remaining value. Normally 25%cash margin is also taken for guarantee. This margin may vary according to the credibility of the applicant. No mark-up is charged but commission is taken. The rates for commissions are:

* Up to 5million . 4% or minimum Rs 500.

* 5m-10m . 3%

* 10m-200m . 25%

* over200m .2%

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This commission is charged quarterly.

TYPES OF GUARANTEE

Most of the guarantees are given in case of contracts. Guarantees are allowed for the purchase of fertilizers and for travailing agencies to PIA.

Following are the major type of guarantees:

1.

BID BOND

Banks give commitment for a bid. Normally 5 % contract amount is kept as bid security to qualify bid. Now bank gives guarantee to beneficiary on behalf of applicant for this amount. If bid is accepted then contractor asks the bank for ADP.

2.

ADVANCE PAYMENT GUARANTEE (ADP)

Bank gives this guarantee to beneficiary to provide the contractor the advance payment because he now has to start work.

3.

PERFORMANCE BOND GUARANTEE

That the contractor will perform the task assigned with in the specified period of time. 4.

SHIPPING GUARANTEE

This type of guarantee is very rare and given it at 100 % margin.

“FOREIGN EXCHANGE”

Foreign exchange is one of the important departments of ACBL. It deals with foreign currency and foreign exchange. In a foreign exchange department ACBL deals with Account opening, Withdrawal, deposits and remittance.

Figure

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