AN INTERNSHIP REPORT ON HABIB BANK LIMITED CORPORATE CENTER FAISALABAD BY MUHAMMAD IRFAN B.COM (P.U) A REPORT SUBMITED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF MASTER IN BUSINESS ADMINISTRATION (MBA) DEPARTMENT OF BUSINESS MANAGEMENT SCIENCES UNIVERSITY OF AGRICULTURE FAISALABAD 2004 To The controller of examination, University of agriculture, Faisalabad. We, the supervisory committee, certify that the contents and forms of report submitted by MUHAMMAD IRFAN, regd. No. 2002- ag -1293,have been found satisfactory and recommend that it be processed for the award of degree. Supervisory committee 1. Chairman ……………………………………………….. (Mr. Hassan Rasool) 2. Member ……………………………………………….. (Mr. Shahid Tufail) 3. Member ……………………………………………….. (Mr. Faud Bashir) EXECUTIVE SUMMARY This report is required by my department. The purpose of report is to write down all the major actives that are done by me in that particular branch during my internship training. It Comprises of: Formal part Introduction of the organization The situational analysis Products and services Deposit department Remittance department Import and export department HRM department Credit and administrative department Work done by me Suggestions and recommendations CONTENTS Sr. No. Title 1. Executive summary 2. Contents 3. Letter of HBL 4. Acknowledgement 5. Introduction 6. Products of HBL 7. Span of management 8. Departmentalization 9. Suggestions Acknowledgment All praises belong to almighty Allah who the supreme authority knows the ultimate relation underlying all sorts of phenomenon going on in this universe & whose blessing & exaltation flourished my thought & thrived my ambitions to have the cherished fruit of my modest efforts my humblest thanks to the Holy Prophet Hazrat Muhammad (PBUH) who is forever a torch of guidance & knowledge for humanity as a whole. We deem it our utmost pleasure to avail this opportunity to express gratitude & deep sense of obligation to my revered teachers and bank persons for their valuable and dexterous guidance, untiring help, compassionate attitude, kind behavior, moral support and enlightened supervision during this whole project. Finally, I would like to extend hurtful thanks to my adoring parents and friends for their day and night prayers sacrifices and encouragement, moral and financial support throughout the course of our study. May all of them live long and enjoy a happy life! BANKS AND SCOPE OF BANKING WHAT IS BANK? A bank is an institution for the custody, loan or exchange of money for sanctioning credit, for transferring funds by domestic foreign bills of exchange. It is a pipeline through which currency moves into and out of circulation. As it is clear from the definition of banking, the main activity or function of banking is borrowing and lending of money with a margin of gain. However, as far as the present day banking is concerned, there are a number of different banks, set up under specific different objectives, performing various functions. INTRODUCTION OF HBL: HABIB BANK GROUP is a leader in Pakistan’s services industry. An extensive network of 1425 domestic branches the largest in Pakistan and 55 international branches to meet customer needs. Perhaps the HABIB BANK LIMITED establish in 1941 at Bombay. But its history starts in 1841 when a young boy name Ismail Habib reach Bombay for job. After some time he got the job with a dealer in utensils and non ferrous metals.Ismail Habib was very keen and intelligent and became partner of his boss. Later on he was elected as a president of the market. Many years later he expended his business. He engaged in private banking. So’ HBL has come a long way from its modest beginnings in Bombay in 25 august, 1941 when it commenced business with a fixed capital of 25000 rupees. Impressed by its initial performance, Quaid-e-Azam Muhammad Ali Jinah asked the bank to move its operation to Karachi after the creation of Pakistan, HBL establish itself in the Quaid’s city in 1943 and became a symbol of pride and progress for the people of Pakistan. During the early days of newly born state, government of Pakistan faces the great problem of fund shortage. This time HBL again help the governance of Pakistan and came to rescue to provide Pakistan with assistance of not less than 8 crore. Besides this, HABIB BANK has been a pioneer in providing innovative banking services such as first installation of mainframe computer in Pakistan followed by ATM and more internet banking facilities in all branches. The main strength of HBL brand is its great services to all customers especially to the corporate customers and its prominent head office building that has dominated Karachi’s skyline for 35 years. Mission statement To be recognized as the le ading 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 – shareholders, customers and employees. Values at HBL 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. PRODUCTS AND SERVICES OFFERED BY HBL PRODUCTS: o HBL Muhafiz Rupee Travellers Cheques o HBL Auto Finance o HBL Flexi Loans for salaried personnel o HBL LifeStyles Financing Scheme o HBL i-Card o HBL House Financing Loans o HBL Easy Access o HBL Fast Transfer o Haryali Agricultural Loans o HBL E-Bank SERVICES: o Retail Banking The Retail Banking network, with 1425 branches, is the core strength of Habib Bank. The network provides HBL with the largest diversified low cost deposit base of any bank in Pakistan, and forms the basis for many of our other business lines: corporate and investment banking and treasury activities. The network provides HBL with the largest diversified low cost deposit base of any bank in Pakistan, and forms the basis for many of our other business lines: corporate and investment banking and treasury activities. o Commercial Banking Enterprises operating in the middle market contribute significantly to the economy of a country. During FY-2000 HBL’s management decided to address this issue. On November 1, 2000 Commercial Banking came into being. The objective of setting-up Commercial Banking was two-fold: First to stop the erosion of market share in the middle market; Second, to regain the lost market share Commercial Banking is making headway with improvement not only in terms of the business figures but also in its ambiance. Renovation of is being carried out in order to give a professional look to all the Commercial Banking Centers. o Corporate Banking The Corporate Banking Group serves large institutional customers who require sophisticated products in an environment of intense competition. HBL Corporate & Investment Banking Group is now recognized as a market leader and regularly arranges and participates in most large structured finance deals. o International Operations HBL has one of the most extensive international networks amongst emerging market banks. HBL’s ability to operate successfully in diversified markets and cultures is a function of a long history in international banking – when first international branch was opened in 1951. The Bank’s branches in financial centers continue to provide efficient trade settlement and reimbursement services to the entire network and business with other banks. SWOT ANALYSIS STRENGTHS: Goodwill & historical background Professional and well trained staff Largest customer base HBL is Pakistan's largest commercial bank HBL has a domestic network of 1,425 branches with an international network of 48 branches in 26 countries 20% share of HBL in financial market Large Balance sheet size Decentralized authority WEAKNESSES: Unfavorable union activities and management conflicts Checking System is at intra-department level Weak marketing policies Nepotism & Favorism Infected portfolio still exists as bad debts Centralized management in particular areas OPPORTUNITIES: Opportunities for growth and expansion in cash management. Faster market growth represents opportunity to grow and diversify Restoration of investor’s confidence and pick up in private sector investment flows. Large deposit base and funds flow can help to avail related market opportunities THREATS: Adverse & unstable government policies Political instability Advance technology Competition from other banks PEST ANALYSIS AND ENVIRONMENTAL SCANING A broad view of market is important when management is interested in introducing better services for customers. Rapid technological change, global competition and the diversity of buyers preferences in many markets require the constant attention of the market vouchers to identify promises business opportunities, see the shifting requirements of the buyers, evaluate changes in competitors positioning and guide the choice of which buyers to target and classify them according to respective segments. Identification of external and macro factors that influence buyers and thus change the size and composition of market overtime involves initially building customer profiles. These influences include: Political and legal environment Economic trends Socio cultural environment Technological factors POLITICAL AND LEGAL ENVIRONMENT Banks are strongly affected by the political and legal considerations. This environment is composed of regulatory agencies and government law that influence and limit various organizations and individuals. Mostly these laws create new opportunities for business. Business legislation has following main purposes To protect banking companies from unfair competition. To protect consumers from unfair business practices adopted by banking companies To protect the interest of the society from unbridled business behavior. ECONOMIC TRENDS A banking market requires better consumer market in volume along with higher borrowing power. The available borrowing power depends on: Consumer income Saving rates Consumption patrons Rates of interest Budget deficit Exchange rates Cost of living Inflation SOCIO-CULTURAL ENVIRONMENT A society is shaped by beliefs, norms and values. People in a society consciously and unconsciously interact with: Themselves Others Organization Society Nature Following are the main factors. Which arise because of change in socio-cultural environment? Consciousness about services Concern for environment Improved customer relation TECHNOLOGICAL FACTORS Forces of technological advancement have played the most dramatic role in shaping the lives of people. The rate of change of technology has greatly affected the rate of growth of economy. New technology is creating deep rooted affects which could be observed in long run. The improvement techniques involved in on line banking. In brief PEST analysis affects the overall banking companies and provides us the information about the external macro condition. ORGANIZATIONAL STRUCTURE OF HABIB BANK LIMITED PRESIDENT AND CEO 7 MEMBERS OF BOARD OF DIRECTORS G.E, IOBG G.E, CPOD G.E, CPCS G.E, RBG G.E, CIBG G.E, ARM G.E, AGA HEAD OF IT HEAD OF HR HEAD OF FINANCE SENIOR VICE PRESIDENTS VICE PRESIDENTS ASSISTANT VICE PRESIDENTS GRADE I OFFICERS GRADE II OFFICERS GRADE III OFFICERS CLERICAL STAFF NON-CLERICAL STAFF G.E GROUP EXECUTIVE IOBG INTERNATIONAL AND OVERSEAS BANKING GROUP CPOD CORPORATE PLANNING AND ORGANIZATIONAL DEVELOPMENT CPCS CREDIT POLICY AND COMPANY SECRETARY RBG RETAIL BANKING GROUP CIBG CORPORATE AND INSTITUTIONAL BANKING GROUP ARM ASSETS REMEDIAL MANAGEMENT AGA AUDIT AND GENERAL INFORMATION ORGANO GRAM OF CORPORATE CENTER, FAIS ALABAD RGM & EVP AVP F INC ON Officer AGM Marketing Manager HR/Admn. AGM Operations VP Officer AVP AVP/RM’s Manager Tarde Officer RM’s Mgr.Cash & Rem Officer IT In ch arge Officer O / I T e as u r y- O f fi c e r DEPOSIT DEPARTMENT Bank deals in money and they are merely mobilizing funds within the economy. They borrow from one person and lend to another, the difference between the rate of borrowing lending forms their spread or gross profit. Therefore we can rightly state that deposits are the blood of the bank which causes the body of an institution to get to work. These deposits are liability of the bank so from point of view of bank we can refer to them as liabilities. TYPES OF ACCOUNT: 1) CURRENT ACCOUNT: In this type of accounts the client is allowed to deposit or withdraw money as and when he likes. He may, thus, deposits or withdraws money several times in a day if he likes. There is also no restriction of amount to be deposited or withdrawn. However, there is requirement of minimum balance maintenance of Rs.5000/-. Usually this type of account is opened by the businessmen. No profit is paid by the bank and no service charges are deducted by the bank on current deposits account. Eligibility: - i. All Pakistani’s Resident/Non-Resident, Individuals (Single-Jointly) Companies/Firms etc. can open and operate the Account but he should be a corporate customer. ii. Any Foreign National Individuals (Single-Jointly) having valid Resident Pakistan VISA/Work Permit can open and operate the Account Requirements for Opening of Account:- Duly filled prescribed A/C opening FORM. Attested photocopy of N.I.C./Passport of Account Holder(s), Proprietor, Partners, Directors and office Bearers as the case may be. Certified true copy of the certificate of incorporation or registration (in case of limited companies & registered bodies only). Certified true copy of the certificate of commencement of business (in case of public limited companies only). Certified true copy of the memorandum and articles of association (in case of limited companies). Certified true copy of rules and regulations or By-Laws (in case of association etc.). Certified true copy of the resolution of the Board of Directors/Managing Committee/Governing Body regarding conduct of the account. Features:- Account can be OPENED with Minimum Balance Rs.1000/- with no maximum limit. Checking balance at any time during banking hours. No profit is paid. Statement of Account dispatched on request letter. There is no restriction for withdrawals of amount and number of cheque. 2) Profit and loss sharing savings: This type of account is for those persons who want to make small savings'. This type of account is opened with a minimum deposit of Rs. 1000/- or the amount prescribed from time to time. The profit is paid on these accounts on the minimum balance during a month for the whole of that month. Zakat & other taxes are deducted as per rules of the government. The requirements for this account is duly filled prescribed A/C opening FORM, Photo Copy of National Identity Card (Resident Pakistani), two Passport size photographs with Signatures/Thumb Impression (Resident Pakistani), Photo copy of Passport with Page bearing Resident Visa of the Country where Pakistani Residing, two Passport size photographs and signatures on A/C Opening Form for Non-Resident Pakistani with Signatures/Thumb Impression etc. Features:- Account can be OPENED with Minimum Balance Rs.1000/- or prescribed limit that is announced time to time with no maximum limit. Profit is payable at monthly subject to adjustment on deceleration of actual profit rate declared every half year. Profit is calculated on monthly products Zakat will be deducted on valuation dates of account. Profit is Paid/Credited in Account on half yearly basis in case of six monthly PLS saving accounts. Statement of Account dispatched on half yearly basis after posting of profit. There is no restriction for withdrawals of amount and numbers of cheque. 3) PLS special notice deposit: Special notice deposit is paid on daily product bases. Under this deposit scheme, a deposit is received from the depositor under the condition that he will intimate the bank before a certain period in case of withdrawals. There are two types of special notice deposit, they are 7 days and 30 days notice deposits. The profit is paid on these deposits but it is nearly equivalent to saving account rate that is paid on special notes. 4) PLS term deposit: A type of term deposit,in which a receipt is issued for varying tenors ranging of deposit. It is in the form of receipts and profit on these receipts is paid biannually. These receipts are encashable after expiry of the period for which they were issued. Different profit rates are applied to different type of term deposit. It has no maximum limit but not less than 1 month. Account opening rate is 1000 and the zakat is deducted on the rules and regulation. Eligibility:- All Pakistani’s Resident/Non-Resident individuals, Firms/Companies, Govt/Semi Govt. Departments can purchase the TD. Any Foreign National having valid Resident Pakistan VISA can purchase TD. Requirements for Purchase of TD:- Duly filled prescribed FORM. Photo Copy of National Identity Card (Resident Pakistani). Two Passport size photographs with Signatures/Thumb Impression (Resident Pakistani). Photo copy of Passport with Page bearing Resident Visa of the Country where Pakistani Residing Two Passport size photographs and signatures on A/C Opening Form for Non- Resident Pakistani with Signatures/Thumb Impression. Photo Copy of Passport with Page bearing Resident Visa of Pakistan (Foreign Nationals). Features:- TD can be purchased with minimum of Rs.1000/- with no maximum limit. Profit is payable at yearly rate declared every half year. Profit is Paid/Credited in Account on half yearly basis. The holder of term deposit receipt must keep the receipt under lock any loss of receipt must inform the bank because without it the bank will not pay the amount. 4) PLS khas term deposit: Pls khas term deposits are acceptable for a period ranging from one and half year to five years in multiple of six months. In this regard the profit is declared from time to time but will be paid only once at the time of encashment of receipt of maturity. Zakat will be deducted only once at the time of maturity or before maturity. Account opening in special cases: Blind person account: A blind person can easily open an account in the bank like other persons but it is preferred that he should open a joint account with a normal person. If he wants to open the account individually, there should be an authorized person with him who checked the signature and the amount filled by blind person. The banker can not fill the amount and check the signature. The one thing that is provided extra by the blind person is two photographs duly attested by an authorized person. Non resident person account: Non resident persons are those who do not live in Pakistan permanently. According to the tax authority the non resident persons are those who live in Pakistan: In case of foreigner not more than 180 days. In case of Pakistani not more than 90 days etc. In proceeding 4 years not more than 365 days. All things will remain same, only one thing that is passport copy of the person will have to provide to the bank. The logic behind this is that the bank insures the entry and the exit date of the person in Pakistan. The person has to inform bank 15 days before entering in Pakistan and the bank also send this information to State Bank of Pakistan. After getting this information State Bank give instructions to bank about handling of not resident person’s account. Zakat treatment on all accounts: Zakat will be deducted on all accounts except the followings: Fiqah Gafreia account. Non Muslim’s account. Trust account. Government account. Provident fund. Defense account. Non Pakistani’s account. SWIFT Society for worldwide inter bank financial telecommunication.[SWIFT] Only for banks Telecommunication not transition Head office in Belgium Run by different country members Lease lining by head office Start in pak 1995-96 Awareness seminars start in 1997 Work through coding &decoding Swift provide to members an id &password for connect Charges from customers depend on message size Min changes is 120 Changes for one LC is 1400 Code not more than three degits (ID and Passward code) Authentic mode, people satisfied Less chances of fraud Work as E Mail Version 2 relate to bank to bank information Version 4 relate to bank to bank Document Version 7 relate to bank to bank LC In HBL use in domestic ---------- 70 branches In overseas branches ---------- 21 Centralized system( send message to different countries at once) REMITTANCES DEMAND DRAFT: Demand draft is a written order drawn by a branch of a bank upon the branch of same or any other bank to pay certain sum of money to or to the order of specified person. It can be issued to the customers as well as non customer against cash cheque and letter of instruction. Demand draft is negotiable instruments that can be negotiating at any time before its cancellation. Its Legal provisions are same as that of cheque. Following parties are involved in demand draft: Applicant issuing branch drawee branch Beneficiary A demand draft may be issued against the written request of the customer before issuing it must be seen that the demand draft is in order. The DD application must be scrutinized by the counter clerk in respect of following points. There should be branch where payment is to be made. Full name of payer should be mentioned. Amount in words and figures must be same Application should be signed by the applicant on two places. TELEGRAPHIC TRANSFER: Telegraphic transfer means the transfer of funds from one branch to another branch of the same bank or upon other bank under special arrangements just like a telegram. Telegraphic transfer is not negotiable and the funds are not payable to bearer. Minor cannot avail this facility. In telegraphic transfer the bankers use secret codes. One code is with issuing person and the second is with an other person. When they combine the codes it’s become an amount that is called check. The payment is made after the confirmation of the check. Following parties are involved in TT Applicant Drawing branch Drawee branch Beneficiary Following important things should be included in TT: Full name of the beneficiary or account number should be mentioned in the application form. Instruction regarding mode of payment should be obtained. A record in the remittance outward register should be maintained. All the remittance must be controlled through number or codes. PAY ORDER: Pay order is an instrument through which payment can be made from one bank to another bank. Pay order is meant for bank own payment but in practice they are also issued to customers. Following parties are involved in pay order: applicant issuing branch payee MAIL TRANSFER: Mail transfer is not negotiable and the procedure of it is same with the procedure of DD.When a customer request the bank to transfer his money from this bank to any other bank of the branch of same bank in the city, outside the city of outside the country the first thing he has to do is to fill an application form. In which he states that I want to transfer the money from this bank to that specific bank by mail. If the customer is the account holder of this bank, the bank will debit his account and the concerned officer will fill forms to make the mail transfer complete. If the customer is not the account holder of the bank, then firstly he has to deposit the money and then rest of the procedure will be adopted to transfer his money. Imports and exports department: Exports: Introduction and registration: Imports and exports act 1950 have empowered the federal Govt to control the import and export in Pakistan. Pakistan is developing country and like other developing countries its imports exceeds than exports. To control this situation the registration of import and export has been made obligatory under the registration order 1993. The authority of registration has been given to export promotion bureau. No importer and exporter who has no granted registration shall indent, import and export of any good into or out of Pakistan. The requirements for getting registration are as under: Application form. Photo copy of I.D card. Copy of memorandum and article of association (in case of limited company). Ownership deed of office. Fee payment. Certificate of incorporation. Applicant should regular tax payer. The major exports from Pakistan are surgical goods, sports goods hand noted goods, leather goods, textile goods, etc. Export procedure: All the exports work under the imports and exports act that is changed by the state in every year. When the importer send the L.C to bank in respect to import or when the L.C comes to the advising bank from the issuing bank then the concerned officer allot the number to the L.C and get registered. The concerned officer write down the name of issuing bank and the party name in a register and intimate the party about L.C. the exporter after receiving the L.C from bank will prepare the documents as per the L.C usually the following documents have to be prepared by the exporter: Bill of lading Covering letter E- Form Bill of exchange Packing list Commercial invoice Quota documents in case of quota country Certificate of origin Special custom invoice The export form (E-FORM): E-FORM means “export form” which is the first and foremost requirement for the exports from Pakistan. It is control instrument by Govt of Pakistan by which it monitors the receipts from exports and checks the goods that are transferred without foreign exchange. all banks which are engaged with the foreign exchange are required to print and maintained the E form that is checked by the state bank of Pakistan. For export an e form is issued by the bank on the request letter of a company. Two separate registers are maintained by the bank one for his use and the other one are for the requirement of the SBP. On issuance of E forms the banker lists it in the register and makes sign from the exporters. Banks record the name of party, amount, the goods description, port of destination, importer name port of loading etc. The functional utility of E-FORM: The export form has four copies. That is used by the exporters and banks. Without it the exporter can not make export. These copies are used as: Original copy is for SBP that is checked by the higher authority. Duplicate copy is for the bank use that is upraised by the custom authorities. Triplicate for the use to report of SBP at the time of payment received. Quartiplacte is for the company used. Usage of E – FORM: E- FORM is an important document for export. It has its own importance such as this form is used as a checker means it monitor that what things are going abroad and in return what things we are getting. So it creates a check and balance on the foreign exchange. It shows the total quantity and quality of the goods that is sending to another country. An E –Form shoe the party worth that is very helpful for the party and the bank. Bank can create a party limit for the credit on the behalf of it and a party can arrange a loan for its future requirements from the bank. It shows the terms of payment by the importer and the delivery terms by the both parties that is helpful in case of any discrepancy during the contact. Short shipment notice: A shipment may be cancelled by the importer or exporter due to many reasons. The cancellation of the export letter is called short shipment notice. In this situation the company has to inform the bank. Company has to give a written letter to the bank that he is not making the export so please cancelled their e form. On the other hand bank at the time of receiving the letter will stop the e form and cancelled the all documents. IMPORTS Imports regulation: Import is being regulated by the ministry of commerce and the government of Pakistan under the import and export act. Categories of imports: Imports are classified into the following categories: Commercial sector imports Industrial sector imports Public sector imports Registration of importers: A person who wants to approach the bank for importing goods from abroad, he should have to get himself registered with the export promotion bureau under registration of imports and exports act. He must fulfill the following conditions before getting himself registered: NIC NUMBER NATIONAL TAX NUMBER MEMBER OF REGISTERED ASSOSITATION Documentary letter of credit: A documentary letter of credit is an instrument or document issued by the bank on the behalf of a customer, authorizing a beneficiary to draw a draft and drafts or sometimes the requirement of a draft which will be honored on presentation by the bank if drawn accordance with the te3rm and condition specified in the letter of credit. It is the written undertaking by the bank (issuing bank) pay to the seller (beneficiary) at the request or as per the instruction given by the opener (applicant) pay at sight or at the future date, a stated sum of money against the required documents. The documents include the commercial invoice, certificate of origin, insurance policy or certificate and the documents of transport relating to the mode sending goods. L/C is therefore is an arrangement of security for the parties. The conditional guarantee is related to the documents only and not on the underlying goods or services. Establishment of letter of credit: Procedure: The person applying for the letter of credit must be registered with the EPB. The opening bank verifies this registration or otherwise exemption. This is mentioned in the “I” form. The importer also shows the valid certificate of an organization membership. A category pass book is issued by the EPB for registered importer specifying his category. This book is centralized by the centralized banks in the city. It is not necessary for the bank to hold the original copy of the pass book of all the importers. But some times the importer gets L.C from more than one bank so the bank have to hold the photo copy of this pass book. The applicant can get the application from any branch of the Habib Bank Limited. However only some branches are authorized to open L.C. That branches how are not authorized have to contact with the authorized branches to open an L.C. The authorized branches in such case require the certificate from the applicant branch that the required formalities are fulfilled and the approval was obtained with required margin. For establishment of letter of credit, the importer requests the opening bank with the following documents: 1) Application and agreement form IB-8: Credit application form is an agreement between the bank and the customer on the basis of which the letter of credit is opened. This form contains the undertaking that the importer will get the documents from the bank at the mark up price. It contains the following information: Name and address of importer. Name and address of exporter. Amount in foreign currency. Terms of credit. Description of goods. Origin of goods. Port of loading and discharge. Last date of shipment. Foreign bank charges. Terms of shipment. (Partial shipment or transshipment) Insurance cover note, policy no, and name of insurance company. Forward booking. Mode of transmission. Import registration no. Any other documents required. Detailed documents. 2) Performa invoice/ purchase order: A Performa invoice is quotation of seller containing the description and the specification of the goods, price, and terms of the sale. Some times the exporter has their agent in the country. The agent must be registered from the EPB. 3)Insurance cover note: All the goods imported under the documentary credit must always be insured. In accordance with our country import policy, insured must be issued by a Pakistani insurance company or the foreign company operating in Pakistan and such company must be approved by the bank. Insurance covered based on the following: It is issued in the name of issuing bank A/C importer. The rider should cover against war. The port of shipment and the port of destination. Amount of premium prepaid. Shipment period. The description of goods should be the same as per the form. 4) Appendix B: This Performa replaces the import license and is submitted along with L.C application form duly filled in triplicate. It is conditional undertaking that the imports goods are not banned, not smuggled. It is also an undertaking that if the bank is unable to arrange the said currency the importer have to purchase it from other banks or from any other place. It includes the details and description of goods, codes, class, type, source of import, country of import, Performa invoice no etc. 5) “I” FORM: This form is used at the time of retirement of documents against L.C established earlier for reporting to the transaction to SBP through the bill of entry deptt. It has four copies that is used as follows: Original is for the use of SBP. Duplicate for the authorized dealer to be used for processing exchange control. Triplicate for the authorized dealer record. Quartiplacte is for the submission in SBP in the case of import where the documents are not retired. Approval for establishment of letter of credit: After scrutiny of the documents, IB-8 along with attached documents is put before the corporate head for approval. If the amount of application exceeds the power of the corporate head the branch concerned prepared the memorandum for the corporate banking head for obtaining his approval. In case party enjoying regular limit, the L.C is established without adopting the procedure mentioned above. However the amount of L.C should not exceed the regular limit. Types of letter of credit: 1) Revocable credit: The letter of credit that can be cancel with the consent of importer, without giving any prior information to the exporter. 2) Irrevocable letter of credit: The letter of credit that can be cancelled by the mutual consent of the both parties. Only one party can not cancel it. 3) Irrevocable confirmed letter of credit: When an issuing bank authorizes and or request to an other bank to confirm his irrevocable credit and adds its confirmation. Such confirmation constitutes a definite undertaking of such bank in addition to that of the issuing bank. There are following other letter of credits: 1. Revolving Credit 2. Transferable Credit 3. Back to Back Credit 4. Green Clause Credit 5. Red Clause Credit 6. Clean Documentary Credit 7. Transit Credit 8. Stand by Credit 9. Sight Credit Parties to a credit: The applicant: The applicant of the letter of credit is called the importer or buyer. The buyer requests to the bank to open a documentary letter of credit in favor of the seller. Opening bank (issuing bank or importer bank): At the request of the importer an issuing bank issues a credit under the instructions in the favor of the seller. Advising bank: An advising bank is a bank in the seller’s country. The issuing bank forwards the advice of the credit by mail or by any mode to the correspondent bank in the exporter country as instructions of the opener. Beneficiary (exporter): The person or body receiving the letter of credit from the importer that is opened in favor of him. Confirming bank: The bank that on the requests of the issuing bank adds confirmation to a credit. It is definite undertaking of the confirming bank, in addition to the issuing bank. Negotiating bank: It May or may not be the advising bank. An authorized bank that gives the value to the draft for processing and payment. Reimbursing bank: Reimbursing bank is the bank, which on the behalf of the opening bank, honors the Reimbursing claim lodged by the negotiating bank. Modes of payment: Sight letter of credit: The seller submit all the documents with draft in the importer country Complying with the all terms and conditions. The payments are made on the presence of the documents. Usance letter of credit: Under these circumstances it is agreed that the payment will be made after a specified period. So the payment is made after or on the expiry of that date. Risks for importer and exporter: Importer’s risks: He does not know the seller. He does not know that goods will be delivered in time. He does not know how to check the goods. Exporter’s risks: He does not know the buyer. He does not know the credit worthiness of the buyer. He does not wait for payment. He does not wait for exchange control. Buyers and sellers obligations: The seller’s obligations: Provision of goods as per contract. License authorization and formalities. Contract of carriage and insurance. Delivery at time. Transfer of risk. Division of cost. Notice to buyer. Proof of delivery. Good checking marking and packing. Other obligations. Buyer’s obligations: Payment of price. License authorization and formalities. Contract of carriage and insurance. Taking Delivery at time. Transfer of risk. Division of cost. Notice to seller. Proof of delivery. Inspection of goods. Possible problems in international trade: Non payment. Delay in delivery. Financing, how and against what. Currency restrictions. Regulatory restrictions. Documentation and mode of settlement. ICC rules and INCO terms. HUMAN RESOURCE DEPARTMENT FUNCTIONAL RESPONSIBILITIES Right Now the responsibilities assigned to HR department at Corporate Center can be categorized under three heads: Staff matters / Basic HR Functions Expenses control Security matters Now I’ll discuss these one by one. Background: The banking council of Pakistan was responsible for the recruitment, selection and allocation of human resources. After the dissolution of the Pakistan Banking Council, the Banking & Financial Services Commission of Pakistan is responsible for these activities. Procedure: Staff requirements are met according to the changing needs of macro environment scenario and particularly the arising needs of the bank itself. A need analysis is conducted. After assessing the human resources requirements and screening of the applications, most probably, the suspects are invited for a written test. Short listed candidates are called for an interview for personality and social appraisal. Interviews are a mix of direct and indirect interviewing techniques andd information required. The selected candidates are sent for training of six months training from MDI’s. The training is through the lectures regarding banking procedural guidelines and other behavioral aspects. After the completion of training employees are allocated to different offices. The effective management of people in an oganization requires an understanding of motivation, job design, reward systems, and group influence. Recruiting Retention Succession planning Risk Management Diversity in our workforce Management information Progressive compensation and benefits design and implementation Employee communications and relations Training needs analysis, program design and implementation Performance evaluation Work-life initiatives CREDIT & ADMINISTRATION DEPARTMENT The responsibility of providing administrative support for the lending activities of the Bank, and day-to-day monitoring of credit-exposure, is vested in the Credit Administration Department (CAD). FUNCTIONAL RESPONSIBILITIES: The main responsibilities under this department are: Implementation of credit facility and their maintenance according to terms of credit approved. Ensure that standard loan documentation for each credit facility is maintained and the correctness & completeness of such documentation and also responsible for custody of all credit files. Maintain the safe custody of all collateral as per bank’s standard operating procedures; undertake periodic evaluation and inspection of hypothecated/ pledged inventories in accordance with the terms of credit. Ensure compliance with o Institutional credit policies & procedures o Local regulatory requirements. Prepare various portfolio composition reports and other documentation for submission to GRM’s & RM’s. CREDIT FACILITY IMPLEMENTATION PROCEDURE Upon approval of credit proposal, the credit proposal and approval are handed over to CAD. Now CAD determines the nature of documentation required and on receipt of same ensures that all legal documents are obtained and are legally enforceable. After all these activities it can release the facility for utilization. MARKETING DEPARTMENT The marketing department in HABIB BANK LIMITED is very strong. It is the main source of gaining and maintains the customers that can give a large profit to the bank. There are five relationship managers in Habib bank and every person is responsible for the credit of his party. CUSTOMER DEALING: HBL corporate center only deal with the following categories of business: The organization that have minimum 250 million sales in a year. The organization that have availed 80 million finance Agri based industry. HBL do not deal with the agriculture sector. PROCEDURE FOR CREDIT APPROVAL: It is the responsibility of the relationship manager to provide or fulfill the requirement of the customer by checking his financial and position. The procedure of credit approval starts with the credit proposal. First of all the customer request to the bank for credit and on the behalf of him the RM check the memorandum. The Memorandum includes: The company information. Purpose of credit. Assessment of management. Risks. Financial analysis. Third party or other bank information. Conclusion and recommendations. Then the RM sends it to the authorities who accept or reject the proposal. If they accept the proposal they announced a credit range for the party. At the end RM sends the proposal to CAD deptt custody and check. EXCESS FACILITY CREDIT BY RM: Relationship manager is authorized to provide the excess facility to the customer than the credit line. It may be up to 10 percent of excess amount OR 12.5 million Whichever is less? It is not more than 15 days if the customer wants to increase this facility he has to contact with the head office. TYPES OF CREDIT FACILITY: 1) fund based: It is first type of credit facility. In this facility the bank actually provides fund to customers. 2) non fund base: Second type of credit facility that does not provides fun but only give the guarantee. If the customer is unable to make the payment at maturity date then bank will be responsible to make the payment. Work done by me in HBL ACCONTS OPENING DEPARTMENT: In this account department I gain the particle knowledge about opening. This department deals with opening account and saving account for its customer and all matters regarding there off. The customer opening account/saving accounts can be categorized as following: 1) individual 2) firm 3) company 4) trust 5) staff 6) others OPENING AN ACOOUNT: In order to open an account first of all the customer has to fill a form prescribed by the bank. The person is required to bring some reference or introduction for opening the account. Introducer may be a person who has an account with HBL. Some important information regarding introducer e.g. the name and account number of the introducer is written on the space provided on the specimen signature cards. Then in order to find out whether he is a true introducer or not a letter is sent to him thanking him for this introduction, so that any thing wrong may come into notice. There are different requirement for different types of accounts and account holders. An important thing is that the customer should have a corporate customer. The corporate customer limit is 40 million and this branch always deals the corporate customer. General rules for opening an account: One person can open only one account in the same branch with the same category. In the event of death of an account holder the credit balance will be transfer to the heirs of the diseased individual account. Services charges will be deducted periodically as prescribed from time to time on the accounts that are under the limit of specific account. Services charges are not applicable on that accounts that are prescribed as exempted. A distinctive number will be allotted to the each account. The bank can close those accounts that are under the minimum limit of the bank. Any sum to be deposited in the account should be accompanied by paying in slip showing the party account number and the name. Account holder can only withdraw the sum of money by his own account by cheque. Cheque should be signed by the account holder by the specimen given by the bank. Post dated and defective cheque is not accepted. If statement of account spoiled a new will be issued on cost. Any change in the address should immediately communicate to the bank. The account holder wishing to close the account must surrender the cheque book. Account may be transfer from one branch to another same branch without any charges etc. DEPOSIT DEPARTMENT “Deposit are the blood of a Bank” I worked in this deptt for one week and learned that the acceptance of deposit is the real source of income of a bank. Deposit Department is the backbone of commercial banking. Deposit is often used to describe the money which customers of all kinds leave with the bank. Deposit account can be defined as an account, which is opened to earn interest. The term deposit is highly misleading. It is not something deposited for safe deposit box. Bank deposit is not like that; when one brings currency to the bank for deposit the bank does not put the currency in the vault. It may put small fraction of the currency in the vault as Reserve but it will lend most of deposits to someone else. The entire banking system is based upon borrowing. Like all banks, deposit department has acknowledged its worth as the most important. Almost all the operations generated from the deposit department and with due course of time reflect back to the deposit department. In order to attract funds bank has introduced various types of deposit schemes that may suit the need and tastes of a large number of depositors. TYPES OF DEPOSIT FACILITY: Deposits are broadly classified into the following three categories: i) Demand deposits ii) Saving deposits iii) Time deposits The procedure undertaken upon receiving deposits from the customer is as follows: 1) Examining the deposit slip to ensure that the name and the account numbers are clearly indicated. 2) Counting the cash/cheque and agree the total with the amount on the deposit slip. 3) After that the pay-in-slip is validated for cash transaction/ transfer/ clearing transfer as appropriate before the counterfoil a handed over the customer. 4) Cheque assigned by the director, partners, employees of a company, drawn in favor of themselves and credited in their account in the bank are to be scrutinized WITHDRAWALS: An amount can be withdrawn by the cheque. The withdrawals can be made only at branch where the account is maintained. All cash withdrawals will be made under account holder’s full signature. One or two bank officers have to verify the signature. In current account the bank does not offer any interest. We can deposit and withdraw any amount during the banking hours. ISSUANCE OF CHEQUE BOOK: The account holder requests for a new cheque book by presenting the requisition slip along with the authority letter to the concerned officer. His signature was verified before giving him the new cheque book. One or two bank officers have to verify the signature . REMITTANCES DEPARTMENT: I work in this department for one week; this department deals in transfer of money from one place to another or country by: 1) Demand draft 2) Mail transfer 3) Telegraphic transfer In this department internees are advised to observe the working of transfer of money from one place to another place or country by the above mode of transferring money. During my stay in this department I observed that how demands draft be issued. The procedure is as follows: First a bank receives a request from the customer to issue a bank draft. The written request is either in a banks standard from or separate paper signed by the applicant with cash or cheque covering the amount of the draft and other charges of the bank. While issuing a bank draft it is necessary that they should be free from alternations. All the details must be written clearly in ink. After issuing a demand draft it is handed over to the applicant and it advice containing the particulars of the draft is sent to drawer branch with it is necessary information and payment of the draft is made on its presentation or according to the terms and condition of the mode of transfer. SUGGESTIONS & RECOMMENDATIONS Some suggestions are found in order to maintain the steady growth and for the security of environment which are as follows:- Customer Service Improvement. Environment should be improved by creating tangibility as service kind of businesses need tangible environment. Short Term Finances. Marketing tools to be used for introduction and advertisement of their products. Awareness programmes for the customers for enhanced features provided by the bank to the customers e.g. EFT, Internet Banking and PC Banking and also ATM Operation. As recently Bank is become Private they must take advantage of their Legend Leadership. There is a need of Employees Training & Development. As Habib Bank is skipping to a new Automated System, Highly skilled work force and award employees are required to run that system whereas the present employees are not eligible to run the system as most of the employees of the bank are simply graduate or undergraduate. Working environment of branches is not pleasant.