|First of all I am thankful to Almighty Allah who gave me knowledge and power to make me able to complete my internship successfully.
I am also thankful to Department of Administrative Sciences Quaid-I-Azam University Islamabad who provide me this opportunity to have an experience in a reputed organization and groom myself for the future professional responsibilities.
I shall also like to wish to acknowledge and show my deep gratitude to our respective teacher, Ms. Mehnaz Khan, for her consistence, advice and support given during the writing up of this report.
I offer my heartiest tribute and cordial gratitude to present my thanks to Mr. Shoukat Hayat Babar Operation Manger of ACBL Multan Branch and Mr. Ateeq ur Rehman Credit Incharge of ACBL Multan for their kind support and cooperation in this project.
To Mr. Farooq Bosan, I owe more than what I can mention….her inspiring guidance, remarkable suggestions, constant encouragement, keen interest, constructive criticism, and friendly discussion enabled me to complete this report efficiently. Without her support and proper guidance, it would be almost impossible to accomplish this task successfully.
Table Of Contents
List of Tables 3
List of Acronyms 4
Executive Summary 5
INTRODUCTION TO ACBL 7
Awards & Achievements 9
The Mission 10
Core Values 11
Corporate Philosophy 11
Code of Business Principles 11
Credit Department 13
Deposit Department 27
Remittance Department 30
Foreign Exchange Department 39
Financial Analysis 47
SWOT Analysis 49
FINDINGS AND RECOMMENDATION 51
List of Person Interviewed 57
List of Tables
1. Organizational Hierarchy
2. Charges of Online Transaction
3. Charges of Letter of Credit
4. Financial Performance
5. Name of Major Withdrawal of Deposits
6. Name of Major Withdrawal of Advances
7. Name of Person Interviewed
LIST OF CHARTS
List of Acronyms
AWT Army Welfare Trust
PACRA Pakistan Credit Rating Agency
CLP Credit Line Proposal
EF Export Finance
FAPC Finance Against Packing Credit
FCEF Foreign Currency Export Finance
FIM Finance Against Imported Merchandize
FCIF Foreign Currency Import Finance
LC Letter of Credit
FS Financial Statements
RF Running Finance
CF Cash Finance
CD Call Deposits
TF Term Finance
DO Delivery Order
CSA Credit Sanction Advice
DP Drawing Power
SS Specimen Signature
AOF Account Opening Form
ASDA Askari Special Deposit Account
FISDA Financial Institution Special Deposits Account
DD Demand Draft
TT Telegraphic Transfer
PO Pay Order
OBC Outward Bills for Collections
IBCA Inter Branch Credit Advice
IBC Inward Bills for Collections
SBP State Bank of Pakistan
EPB Export Promotion Bureau
FBP Foreign Bills Purchased
FDBC Foreign Documents Bills for Collection
ATM Auto Teller Machine
The Department of Administrative Sciences was established in 1975 and offers Masters degree in Business and Public Administration. They are giving the best education and are offering for specialization, financial management, marketing management and computer application to business. An important programmed is six to eight weeks internship with any recognized institution.
I decided to take up Askari Commercial Bank Limited for my internship because its competing bank nowadays and gives a good training to the internees. So in order to learn more this was my choice.
This report is about my internship that I have undergone at Askari Commercial Bank Limited Multan Branch from 26th June 2003 to 10th August, 03. During my internship I am able to learn practical aspect of business, and get good working experience.
On the very first day of my internship I reported to Human Resource Manager / Operation Manager Mr. Shoukat Hussain Babar. He gave me small introduction of the bank and introduced me to the staff of the bank. Every internee is rotated among the bank’s departments and so was I. This rotation is done in order to have general concept regarding bank’s functions, operations and policies. In this rotation the stay in department is usually a week. I have learned more about the Bills and Foreign Trade department and have given below the caption of activities I was involved in during the period of six weeks.
During my internship I found that Askari Commercial Bank is a best bank in Multan because most of the Exports and Imports in Multan are done through this bank. Multan is one of the cotton growing cities of Pakistan. Most of the businesses in Multan are directly or indirectly linked to cotton that is also the case with Askari Commercial Bank’s clients. Because Multan is a Agricultural City, and its major export is Cotton and Mango. So its export is done on seasonal basis. In the season of cotton and Mango export Askari Commercial Bank get its target easily but difficult for it to get its target in the off season. Same with the case of imports, in Multan major imports is Oil Seeds which is also done on seasonal Basis.
Low profit rates are one of the major reasons for not meeting the deposit targets. The profit rates on Askari deposit schemes are quite low when compared with other banks especially with the National Saving Centers. In today every customers is the rational customer he knows the value of money and wants a best return on his money.
Earlier Askari Commercial were able to attract customer due to their ancillary services like ATM Cards, Credit Cards, Online Banking etc. but now all the banks are offering these services through their own network or through third party contracting, so our plus points are no more our advantages. So the only thing through which ACBL can increase their deposits are profit rates, because the customers only want maximum profit on their investment.
INTRODUCTION TO ASKARI COMMERCIAL BANK
INTRODUCTION TO BANK 1:
Askari Commercial Bank Limited (ACBL) works as a Unit of Army Welfare Trust was established for the Welfare of Army Officials. The office of Army Welfare Trust is situated at AWT Plaza, Rawalpindi. AWT offers the “AWT Saving Scheme” to the army officials only. AWT has its units as under:
1. Askari Associates.
2. Askari Leasing.
3. Askari General.
4. Private Business.
5. Textile Mills.
6. Cement Industry.
7. Askari Commercial Bank.
Incorporated in Pakistan on October 09, 1991. The bank obtained business commencement certificate on February 26, 1992 and started operations form April 1, 1992, as public limited company, and has since expanded into a nation-wide presence of 51 branches, supported by a network of online ATMs. The Bank is listed on the Karachi, Lahore and Islamabad Stock Exchanges and the initial public offering was over subscribed by 16 times. Askari Commercial Bank is scheduled Commercial Bank and is principally engaged in the business of banking as defined in the Banking Companies Ordinance 1962.
Askari Commercial Bank limited continues to scale new heights in all areas of its operations. The safety and security of depositor’s funds, high productivity and optimum use of technology are the hallmarks of its corporate strength.
While capturing the largest market share amongst the new banks, Askari has provided good value to its shareholders. Share price of ACBL has remained approximately 12% higher than the average share price of quoted banks during the last four years.
Askari Bank is principally engaged in the business of banking as defined in the Banking Companies Ordinance, 1962. as at December 31, 2002 the Bank had total assets of PKR 70.313 billion, with over 250000 banking customers.
Askari Bank is the only bank with its operational Head Office in the twin cities of Rawalpindi-Islamabad, which have relatively limited opportunities as compared to Karachi and Lahore. This created its own challenges and opportunities, and forced us to evolve an outward-looking strategy in terms of our market emphasis. As a result, we developed a geographically diversified assets base instead of a concentration and heavy reliance on business in the major commercial centers of Karachi and Lahore, where most other banks have their operational Head Offices.
Multan is a cotton city, so to get the export market of cotton ACBL open its branch in Multan in December, 1994. In a short span of time this branch increase their business remarkably. In 2001 this branch gets the trophy of highest profit for the year 2001. This branch has highest deposits and advances as compare to other banks working in Multan. Now recently this branch gets the trophy of highest imports for the month of July 2003 as compare to all the branches of Askari Commercial Bank working in Pakistan.
Awards & Achievements 2
Over the years, ACBL have received several awards for the quality of our banking service to individuals and corporate. ACBL have been declared “The Best Bank in Pakistan” by the Global Finance magazine for the years 2001 & 2002. Also, ACBL have been given the “Best Consumer Internet Bank” award for Pakistan by the same magazine for the year 2002. in 1994, 1996 and 1997, ACBL received Euro money and Asia money awards. Askari has A1+ rating for short-term obligations – the highest possible for the category, while the long-term rating stands at AA. Askari Bank won the prestigious “Best Presented Annual Accounts” awards for 2000 and 2001 from the Institute of Chartered Accountants of Pakistan and the Institute of Cost and Management Accountants of Pakistan, for the services sector. For the past four years, ACBL have received prizes from the South Asian Federation of Accountants for “The Best Presented Annual Accounts” for the financial sector, in the ASSRC region.
Over the years, Askari Bank has proved its strength as a leading banking sector entity, by achieving the following firsts in Pakistani banking.
I. First Pakistani Bank to offer on-line real time banking on a countrywide basis.
II. First Bank with a nation-wide ATM network
III. First Bank to offer Internet Banking services
IV. First Bank to offer E-Commerce solutions
The Vision 3:
“To be the Bank of First Choice in the Region”
The Mission 4
“To be the leading private sector bank in Pakistan with an international presence, delivering quality service through innovative technology and effective human resource management in a modern and progressive organizational culture of meritocracy, maintaining high ethical and professional standards, while providing enhanced value to all our stakeholders, and contributing to society”.
Core Values 5
The intrinsic values, which are corner stones of our corporate behavior, are:
Corporate philosophy 6
From knowing our customer requirements to understanding employee needs, from utilizing modern technology to making responsible social contributions, from enhancing stake-holders value to practicing corporate ethics… We are continuously and consistently striving to address newer challenges with a single motivation:
“the power to inspire and be inspired”
Code Of Business Principles 7
Our Code Of Business Principles is to:
Deliver solutions that meet customers’ financial needs;
Build and sustain a high performance culture;
Build trusted relationships with all stakeholders;
Build and manage the Bank’s portfolio of business to achieve strong and sustainable shareholders returns; and
Create and leverage strategic assets and capabilities for competitive advantage
To give credit is to finance directly or indirectly the expenditure of others against future payment.
Lending or financing is one of the basic functions of banks of all categories, through which they gain major part of their profits. A bank accepts deposits of money and repays cash to its depositors on demand. But this is not to say that; bank gives this service for nothing. Bank borrows money at a lesser rate of interest and lends to the borrower at higher rate of interest. And the difference between these two is the profit of the bank.
Credit department deals with all the activities related to giving credit to customers.
CREDIT MANAGEMENT CYCLE:
Credit Management is composed of six steps:
The first step in the Credit Management is receiving a credit request, which is a lending proposal for the bank each borrower has a purpose for borrowing. Some borrow to fulfill their working capital needs, others wants to finance any project. The customer presents his idea to the banker and wants the information on bank’s facilities. Then after collecting information if the customer deems it beneficial he makes a loan request.
This bank customer relationship should be mutually beneficial.
PROCESSING OF LOAN PROPOSAL:
Managing a safe, healthy and profitable credit portfolio depends on the quality of judgment exercised by the officer and the depth of their risk associated with the nature of the borrowers business. The banker is supposed to make a judicious judgment, which should be based on a critical study of advance proposals. It is very much necessary that the banker should have a complete confidence in the integrity and ability of the customer to use the money to his advantage and repay it within a reasonable period. Information must be collected and confirmed by investigation and negotiation during processing of the proposal.
In respect of fresh (ending proposal, the CLP is the end result of a series of internal and external investigation exercises following the identification of a potential customer, beginning with the first call on the customer.
To assess the risk and estimate the potential of a particular business, a series of investigative exercise is undertaken. This evaluation stage include knowing the purpose of borrowing, knowing business prospects of a customer, visiting the business place, analysis of financial statement, visiting the collateral securities etc.
PURPOSE OF BORROWING:
The borrower must disclose factual purpose for seeking financial accommodation from bank without such, the proposal should not be given due consideration.
1. The possible purpose may be as follows:
2. Export Financing / Packing Credit.
3. Import Trade Financing.
4. Working Capital need for Trade and industry.
5. Fixed Investment for Industry (Project Financing).
6. Purchase of Industrial or Commercial Vehicles.
7. Construction of Residential, Industrial and Agricultural
9. Finance for movement of Goods / Crops within the country.
10. Purchase of Agricultural Machinery.
11. Development of Agricultural Land.
Different Advance Facilities are offered according purpose of borrowing. Some facilities may be used for specific purposes because of their very nature and therefore, risk involved in extending them can be accurately identified; for example; an LC Facility can be used only for imports and depending on the items being imported, risk can be assessed reasonably and accurately. But other facilities however may be used for a variety of purposes and it may not be possible to assess the risk as accurately. It is, therefore, important that in all cases facilities is extended only after understanding precisely the use to which they will be put, and monitoring systems devised to ensure that their use is confined to disclose purposes only. Because without these safeguards, risk involved in extending them would not remain the same as envisaged at the time of extending he facility.
KNOWING THE BUSINESS PROSPECTS OF THE BORROWER:
Fortunes of business enterprises fluctuate with changing trends in their respective business and industrial sectors. All businesses grow in spite of individual weaknesses and shortcomings. But during recession in an industry some companies suffer more then other because of their particular circumstances such as flaws in sourcing of materials, structural weaknesses in manufacturing process or distribution arrangements, sales and receivable management, sales and receivable management and more often financial management.
Aside from fluctuating market conditions caused by temporary imbalances in demand and supply, which result in unusual growth or slump in sales, there is a gradual impact of the natural life cycle of industries and their products. Product life cycles are characterized by an initial period of rapid sales growth followed by the period of decline in growth rate signifying weakening of demand, either slowly or rapidly, forced by any one or all of the following:
1. Market saturation due to increased competition.
2. Innovation or the development of better / cost effective substitute.
3. Technological changes, which render older models obsolete.
4. Changes in import / export tariff which affect pricing structure.
Thus while preparing CLP, the concerned officer must look at these trends to identity both short term as well as long term prospects of the business of the borrower in the market place and the economy as a whole. He must also satisfy himself about capacity of the borrower to survive these shocks as and when they surface before recommending establishment of a lending relationship.