In Masters of Business Administration, Internship Program is an important part to give students an opportunity to have experience of practical field. Unless and until the students experience the novelty of practical work, their knowledge of what they study in theoretical courses remains incomplete. The most important point in an Internship Program is that the student should spend their time in a true manner and with the spirit to learn practical orientation of theoretical study framework.
This internship report is on my eight weeks practical training at United Bank Limited Hussain Agahi Branch, Multan. In this internship report I have tried to give details about the United Band Limited, working and the functions of different departments of the bank.
First of all, I thank my all respected teachers for providing me comprehensive knowledge about Business Administration Courses and also for providing me the opportunity to complete my internship program in UBL to enhance my practical knowledge about banking sector of Pakistan. I am also indebted to the followings because without their help, I would not be able to achieve this practical knowledge:
Hussain Agahi Branch Multan
Mr. Habib Ullah Khan (VP-Sales)
Mr. Haji Nusrat (AVP-Operations)
Mr. Mirza Qamar Baig (Advances Department)
Mr. Habib-ur-Rehman Sheikh (Staff Manager)
Chowk Fawara Branch Multan
Mr. Mian Azhar (Branch Manager
Mr. Zafarullah Khan (OG-II Officer)
Mr. Jamil (Cashier)
HISTORY OF BANKING
“Bank is a pipeline through which currency moves into and out of circulation.”
Bank accepts deposits and repays cash to its customers on their demand. The Bank borrows money at a lesser rate of interest and lends it to the borrowers at a higher rate. It is thus a profit-lending concern. Bank cannot lend all the money that has been deposited with it. It has to keep a certain portion of the total deposits in cash with them in order to meet the cash requirements of the individuals and business concern.
Word Bank is said to be derived from the words Banc us or Banque or Bank. The history of banking is traced to as early as 2000 BC. The priests in Greece used to keep money and valuables of the people in temples. These priests thus acted as financial agents. The origin of banking is also traced to early goldsmiths. They used to keep strong safes for storing the money and valuables of the people. The persons who had surplus money found it safe and convenient to deposit their valuables with them. The FIRST STAGE in the development of modern banking, thus, was the accepting of deposits of cash from those persons who had surplus money with them.
The goldsmiths used to issue receipts for the money deposited with them. These receipts began to pass from hand to hand in settlement of transactions because people had confidence in the integrity and solvency of goldsmiths. When it was found that these receipts were drawn in such a way that it entitles any holder to claim the specified amount of money from goldsmiths. A depositor who is to make the payments may now get the money in cash from goldsmiths or pay over the receipt to the creditor. These receipts were the earlier bank notes. The SECOND STAGE in development of banking thus was the issue of bank notes.
The goldsmiths soon discovered that all the people who had deposited money with them did not come to withdraw their funds in cash. They found that only a few persons presented the receipt for encashment during a given period of time. They also found that most of the money deposited with was lying idle. At the same time, they found that they were being constantly requested for loan on good security. They thought it profitable to lend at least some of the money deposited with them too the needy persons. This proved quite a profitable business for the goldsmiths. They instead of charging interest from the depositors began to give them interest on the money deposited with them. This was the THIRD STAGE, in the development of banking.
By experience the banks came to know that they could keep a small proportion of the total deposits for meeting the demands of customers for cash and the rest they could easily lend. They allowed the depositors to draw over and above the money actually standing to their credit. In Economics terminology we can say that they allowed the overdraft facilities to their depositors. This was the FOURTH STAGE, in development of banking.
When every bank issues receipts and most of them allowed the overdraft facilities, there was then too much confusion in the banking system. The banks in order to earn profits could not keep adequate reserves for meeting the demands of the customers for cash. The failures on the part of the bankers to return money caused widespread distress among the peoples.
In order to create confidence among the people, steps were taken to regulate the banking organization. A conference was held in Nuremberg in 1548. It was decided that a bank should be set up by the state, which should streamline the banking organization and technique. The first central bank was formed in Geneva in 1578. Bank of England was established in 1694. The responsibility of issuing of notes is now entrusted to a central bank of each country.
COMMERCIAL BANKING INPAKISTAN:
At the time of partition total number of Banks were 38 only. Out of these Banks the Pakistani Banks were only 2 , Indian Banks 29 & Exchange Banks were 7. The total of deposits of Pakistani Banks was Rs.880 Million. & advances were Rs: 198 Million.. According to banking companies ordinance Banks are the companies, which transacts the business of Banking in Pakistan.
Commercial Banks have constituted the most important [part of the intuitional credit in the economy of Pakistan. Being the largest source of credits, Banking Industry is a pivot of whole the economic activities in Pakistan. Section 37(2A) of State Bank of Pakistan Act 1965 lays down that the Banks must have paid-up capital & reserve of not less then Rs: 5 Lac & fulfilling certain other requirements for declaring as “Scheduled Bank”.
At the time of independence Bank services was badly affected. But with the passage of time these are improving. The government of Pakistan nationalized all Banks in early 1974. This act was done to minimize control of few hands over banking. But this step was proved e futile for the
Banking in Pakistan. So the Govt. had to revise its decision in1990. Two Banks (Allied Bank Of Pakistan Limited & Muslim commercial Bank Of Pakistan Limited have been denationalized. Since then Banks were working well. Now slogan of the Banks is to serve their customers in the best possible manner.
“Banks are the guardian & distributor of money “.
Similarly we can say that it is a pipeline thorough which currency moves into & outside the circle. Banks accept deposited of money and repay it on demand. Bank borrows money at lesser rate of interest & lends it at higher rate of interest. In this way Banks earn money. Bank do not lend all money they collect, they keep certain portion of it as reserve to meet the uncertain demand of the customer.
FUNCTIONS OF A COMMERCIAL BANK
In general terms the functions of a commercial bank can be classified under the following main heads.
1. ACCEPTING DEPOSITS
Some people have an excess money and they want to deposits it to some honest man or an institution which can give them some profit. So the first function of commercial bank is to receive deposit there are three types of deposits.
1.1 Demand Deposits or Current Deposits
Some people deposit their excess money in the current accounts and they can withdraw their money deposited in this account at any time during the banking hours, so bank is not ready to give interest on it.
1.2 Fixed Deposits
These deposits are fixed for a particular period. Commercial banks also pay an interest on these accounts. An important thing related to it is the varying interest rates for the different period deposits. Interest rate increases with the increase in the fixed deposit period.
1.3 Saving Deposits
To create the habit of savings, bank accepts the saving deposits and pays an interest on these deposits. And this rate of interest is greater than the demand deposits.
2. ADVANCING LOANS
Bank also advances the loans to the merchants and charges the interest. It is the major source of its income. It also issues the loan for short term, medium term and for long term. And bank receives the higher interest from the borrower for the long term loans offered.
3. DISCOUNTING OF BILL
Commercial banks also discount the bills and facilitate the business; for example one businessman purchases anything from another person and promises to pay after one month. The seller will write a bill to the buyer and there will be an order that after one month the buyer will pay the amount to the seller. Buyer will sign on the bill. In other words buyer will accept the responsibility of that amount. If seller is in need of money, he will take it to the bank and will receive the money by discounting the bills. The commercial bank also may rediscount it from the central bank.
4. CHEAP MEDIUM OF EXCHANGE
By issuing cheques and drafts bank provides cheap, medium of exchange.
5. TRANSFER OF MONEY
The commercial bank is very helpful in transferring the money from one place to another by issuing the drafts. This is very popular concept in the modern world and widely used in the business community.
6. CUSTODIAN OF PRECIOUS ARTICLES
Banks also provide lockers for the safety of precious articles. So now everyone can secure his precious metals like gold, silver, etc., and bank charges a very nominal charge for this facility.
7. AGENCY SERVICES
Commercial Banks also perform the duty of an agent. It collects and pays on the behalf of the customers.
On behalf of the customers all the banks also make an investment in different companies and industries. And banks receive nominal charge from the customers.
9. CREATION OF CREDIT
It also creates and extends the volume of credit.
10. FACILITATING TRADE ACTIVITIES
It also provides the finance to the foreign trade. Letter of credits are issued by the commercial banks for the foreign payments.
11. PURCHASE AND SALE OF SECURITIES
The commercial bank purchases and sells the securities, for itself and sometimes on the behalf of the costumes.
12. ACTING AS A TRUSTEE
If a client directs his bank to act as a trustee in the administration of a business, the bank performs this responsibility.
ROLL OF COMMERCIAL BANK IN THE ECONOMY DEVELOPMENT OF PAKISTAN:
Banks play an important role in the economic development of country. If our Banking system is not in accordance to the economic requirement then how it can play a vital role in our developments. The State Bank of Pakistan is at the apex and all the commercial Banks have to follow the rules of State Bank of Pakistan. Role of the banking sector can be judged by the following facts:
The commercial Banks namely United Bank Limited Pakistan, Habib Bank Ltd, Allied Bank Of Pakistan Ltd. & National Bank has opened Branches in urban areas & rural areas to mobilize savings of people.
FINACCING OF DEVELOPMENT PROJECTS:
Banks & other financial institutions like ADBP, IDBP, and PICIC etc. Advances short & medium terms loans for financing of the development projects both in the private & public sectors .So they helping to accelerate the rate of progress (Economic) in the country.
ENHANCING TRADE ACTIVITIES:
The credit institutions collect the savings of people & make them available for facilitating the trade activities both inside & outside the country.
CREATING CLIMATE FOR CAPITAL FORMATION:
A developed baking system stimulates the growth of economy by creating favorable climate for capital formation in the Country.
HELP OF STATE BANK OF PAKISTAN IN ACHIEVING MONETARY PUBLISHES:
Commercial Banks under the supervision & guidance of the S.B.P help in implementing & achieving the objective of monetary policy, which vary from time to time.
ASSISST IN PLANNED DEVELOPMENT:
Commercial Banks are profit-seeking enterprises. In order to maximize profit they have the incentive from S.B.P to maximize the limit of finance. An organized Banking system keeps balance between the liquidity * profitability, thus assists in the planed development of the Country.
PROFIT SHARING SCHEME:
Commercial Banks receive surplus balance of the households and business & pay interest on the deposit of client. The depositors instead of having a fixed return on the deposit will share in the profit & loss of the Bank. The profit & loss scheme arrangement is the alternative to interest, under an Islamic economic system, which is since on the experimental basis in Pakistan.
UNITED BANK LIMITED
United Bank Limited was established on 7 November 1959. The first president of the UBL was Mr. I. I. Chundrigar. Most of the branches of Union Bank Ltd. were merged into UBL to work as UBL’s subsidiary .The head office was at Dhaka.
UBL is one of the largest nationalized banks in the country. With almost forty years of good standing to its valued clients, it has stood the test of time, producing assets of over Rs. 101 billion. UBL’s deposits, being guaranteed by the Government of Pakistan, are 100% secure.
UBL has assets of over Rs. 140 billion, capital and reserves of over Rs. 3.2 billion and a solid track record of 43 years, in addition to the convenience of over 1400 branches serving throughout the country and also at several overseas locations. UBL, with an integrated network of 1400 branches domestically, with 19 overseas locations, gives direct access to a comprehensive range of better banking facilities to help it’s customers monitor their business internationally.
Some Key Information about the UBL
Date Established November 7, 1959
President Mr. Amar Zafar Khan
Branches (as on Jun 2002) 1419: 1400 domestic, 19 overseas branches
Employees (as on Jun 2002) 14000 Employees
REORGANIZATION OF DOMESTIC OPERATION
In 1986, the organizational structure of domestic operations of the bank was reformed and decentralized on the basis of provinces. As a result provincial headquarters were established at Karachi, Lahore, Peshawar and Quetta in order to meet the needs of sanctioning loans and other facilities to the trade, industry and agriculture of each province. Azad Kashmir was serrated from NWFP and made separate region.
The quantum of work immensely increased due to the growth of economic activities and phase of industrialization and other change in Punjab and Sind. It was also considered necessary to improve the quality of advances and to expedite the recovery process of the loans and advances. Beside above the economic condition of the country also changed due to privatization policy, establishment of a number of new private banks as well as expansion for operations by the foreign trade and banks in major cities.
For above changes, high power committees constituted by the Govt., which recommended structural, and other reforms, the details of which are received from Pakistan banking council are follows:
FORMATION OF REGIONAL HEADQUARTERS
The provincial chiefs of Punjab, Sind, NWFP, and Baluchistan are ceased to function and in their place nine regional chief executives started functioning in the nine major cities. The new segmentation of UBL’s branches on the basis of regions can be looked from the following:
PROVINCE WISE REGION ALLOCATION
Province/Area Region Name
Azad Kashmir MuzafarAbad
Domestic Network of Multan Region
Multan Region 225Branches
Head Office 1
Dera Ghazi Khan 36
Rahim Yar Khan 32
UBL is committed to the welfare of Pakistan. It lends to farmers for the purchase of tractors, superior quality seed and fertilizers. UBL further fosters the individual welfare and well being of the common man by lending house building finance and loans to set up small businesses. UBL has played a leading role in the dissemination of Computer Technology in Pakistan and is dedicated to the promotion of sports.
Small Business Scheme
UBL Computer Training Institute
Staff Colleges of UBL
UBL Sports Complex
UBL’s agricultural loans on easy terms and conditions to small-scale land owning farmers boost the country’s economy and yield greener harvests. UBL enables farmers to buy good quality seeds, fertilizers, pesticides and agricultural implements.
SMALL BUSINESS SCHEME
Under the Small Business Scheme, UBL is providing loans on easy terms to those who wish to set up their own small-scale business. This scheme is aimed at spreading prosperity in the country by reducing unemployment. As more and more people start their own industrial units, the country will move steadily towards economic self-reliance.
UBL COMPUTER TRAINING INSTITUTE
UBL is a pioneer in the computerization of banking in Pakistan, and now plays a leading role in the dissemination of Computer Technology in Pakistan and is proud to be a part of the Government’s Computer Literacy Program aimed at preparing the younger generation to meet the challenges of tomorrow.
UBL, the leading user of Computer Technology in the Banking Sector has set up most modern facilities at Muzaffarabad, Azad Kashmir, and Sheikhupura for imparting training to the educated youth under the Government’s Computer Literacy Program. These centers are equipped with state of the art hardware and audio-visual aids and are manned by experienced professionals.
STAFF COLLEGES OF UBL
The UBL has three staff colleges, which are generating banking trained personnel. These colleges are at Karachi, Lahore and Rawalpindi, established in 1964, 1978 and 1977 respectively. These staff colleges are providing facilities of training to the employees of the bank so as to meeting the growing need of the banking field and coping with the changing environment of the country.
UBL SPORTS COMPLEX
In addition to providing professional banking services, the bank continued to play an important role in the promotion of sports in the country. Towards this end, the bank has already constructed a big sports complex in Karachi, where all types of facilities for sports like cricket, hockey and flood light courts for tennis and basketball have been provided.
UTILITY BILL COLLECTION
• UBL has over 1300 branches collecting electricity, gas, telephone and WASA, and other utility bills like demand notice for telephone connection during business hours.
• Almost all the branches have special utility bills collection counters with sun-shelters and drinking water.
• Separate booths for utility bill collection are available at all major cities for the convenience of the public.
• Branches in all major cities have electronic bill collection machines. And now-a-days UBL management is trying to launch on-line banking system in all over the Pakistan. For this purpose some of the branches have been equipped with this on-line facility.
• For the customers’ convenience, UBL accepts cheques for payment of utility bills.
DISH, TV LICENSE FEE COLLECTION
UBL is one of the main collecting agents of PTV collection fee for issuance of licenses/renewal of licenses at its authorized branches all over the country.
PLS – SAVING ACCOUNT
UBL offers PLS Savings Account that can be opened with an initial deposit of Rs. 10,000. The share of profit is credited half-yearly to the PLS Saving accounts and is calculated on monthly balance. Depositors can withdraw their savings by presenting cheques at the particular branch of UBL during banking hours. But under the new private management each saving account holder can withdraw his amount in a week.
PLS UNI-SAVER ACCOUNTS
PLS UNI – SAVER accounts are Special PLS – saving account with several built-in special features and benefits for the depositors. Profit is calculated on a daily product basis:
PLS – TERM DEPOSITS
UBL offers the following most attractive and highly profitable deposit schemes to suit the customers’ requirements. Deposits are fully secure and you earn high profits. Deposit period along with Indicative profit rates are shown below:
Declaration of Rates of Profits on PLS Term
Rates in 2003 after Privatization
Period Profit Rate
3 months 2.90%
5 Years 3.90%
PRODUCTS AND SERVICES
The bank provides its customer various products & services, to cater their need of investments and other social or business requirements. These Product & Services offered by the bank are as follows:
Following type of UNIZER accounts are available:
Term deposit accounts
Deposits can be maintained in US$, and other currencies like Yen.
Your UNIZAR account is:
Free from all exchange control regulations.
Worldwide access with the flexibility to operate internationally with real convenience.
Take advantage of the appreciation of foreign currency.
Withdrawal of funds without any restrictions.
Free from all exchange control restrictions.
The declared rates of profit on UNIZAR deposits for disbursement for the
half year 30-06-2000 is as follows:
SMALL BUSINESS SCHEME
Under the Small Business Scheme, UBL is providing loans on easy terms to those who wish to set up their own small-scale business. This scheme is aimed at spreading prosperity in the country by reducing unemployment. As more and more people start their own industrial units, the country will move steadily towards economic self-reliance.
The tax descriptions on the UNIZAR account:
Tax Type %
Income fax Nil
Wealth tax Nil
With-holding tax Nil
Zakat deduction Nil
The customers can open a UNIZAR account with foreign currency notes or a foreign remittance in the form of:
D.B.Cs., subject to rules.
UNICARD is valid throughout Pakistan and is accepted by:
Large super markets
With UNICARD there is no hassle of paying bills and counting cash. Just sign the bills and take your leave.
UBL is the pioneer in introducing Credit Card Culture in Pakistan.
The UNICARD is like passport to carefree enjoyment.
UNICARD saves money of the holder: the holder of the UNICARD have a record of all the expenditures.
UBL offers you a self-service banking facility called UNICASH. You can obtain UNICASH cards and use the Automated Teller Machines, which are installed, at convenient locations called Cash points.
You can avail the following self-service banking facilities
Confidential Personal Identification Number (PIN) ensures that only the holder can use your ATM Card.
The PIN protects against misuse in case of card is lost. Customers can change their PENT anytime they want.
Customers can specify flexible weekly withdrawal limits.
Customer can withdraw your weekly limit in one go, or in multiple installments. Customers can use UNICASH Cards at UBL Cash-points located in the following cities:
City Cash Points
RUPEE TRAVELLER CHEQUE
UBL offers the facility of the Rupees Traveler Cheque. UBL Rupee Travelers Cheques are the ideal and safest way of carrying cash when traveling anywhere in Pakistan.
Used for conducting day- to-day business.
No commission is charged from the purchaser.
No excise duty on purchase.
Easy to obtain and encash from all designated 350 branches of UBL.
Acceptable all over Pakistan.
Good until used and have unlimited life.
Easily transferable like an order cheque.
CHAPTER NO. 2
DEPOSIT DEPARTMENT DEPOSITS DEPARTMENT
Deposits act as a backbone of bank. It is the lifeblood of every bank. These deposits are source of generating incomes for the bank and for the general public to meet the financial needs. The supply of money in circulation is also affected by the amount of loans and advances issued by the bank. The primary economic function of the commercial bank is to receive the surplus saving money from the general public, individuals, firm, institutions, public houses and companies and to pay the cheques drawn upon the bank.
The bank accepts the deposits at a low rate of interest and lends it at higher rate of interest, the difference between the lending and accepting rate is the Source of income for the bank. Keeping in view the above factors UBL offers the following types of accounts:
The classification of the deposits in to current, saving and fixed accounts is mainly on the basis of duration and purpose for which the account is maintained at a bank
Current account is running account because, customer can withdraw deposited amount at any time, whenever he feels need. The customer can withdraw without any prior notice to the bank. The bank has to pay the cheque provided within the limits of the account balance. The main thing is that bank does not pay any kind of interest on current account.
The bank cannot invest the deposited amount under current account heading, because of the fear of withdrawal. Bank has to keep with it a higher reserve ratio to meet the needs of the current account holders.
Saving Account is an important source of funds for the bank. The purpose of this account is to attract the small saving of the general public. Normally workers, schoolboys and employees of the organizations use the saving account facility. UBL also provides this facility to the general public against a certain rate of interest. The new name of this account is now a day is PLS-Saving Account. If a customer wants to withdraw a large sum of money (above 15000), he will have to give a notice of 7 to 14 days in writing to the bank. Saving account deposits provide a chance to the bank to invest safely, because customer can withdraw small amount of balance.
FIXED OR TERM DEPOSITS
Fixed or Time deposits accounts are the major source of the capital for investment for the bank and cannot be withdrawn as in case of the current account. The amount deposited can be received back after a certain specified period of time. The rate of interest paid on fixed Deposits is normally higher than saving Deposits. The rate of interest also varies due to time period. After the expiry of the period the customer presents the receipt to bank and received the amount in cash or bank added in the customer accounts as agreed between bank and customer.
OPENING OF THE NEW ACCOUNT
A customer can open the following three types of accounts:
1) Opening of saving Account
Saving account is also divided into two types further,
Individual saving account
Joint Saving Account
I. Opening of Individual Saving Account
An individual person can open this type of account. UBL has defined the following procedures for the opening of individual saving account:
Signature specimen card, the bank to get authorized signature of the customer as specimen for avoiding any future discrepancy gives Customer.
Account opening form, when a customer comes to open the new account in the branch he is given a printed form, to be filled by him. Account opening form consists of full name, address, and date of birth, occupation, telephone number, and N.I.D. card number.
Guaranteed by the existing account holder, when the new account holder fulfills all the requirements then he is asked to give some existing account holder guarantee, so that in future the new account holder may not fraud with the bank.
II. Opening of Joint Saving Account:
Opening procedure for the joint saving is same as in case of individual saving account. Just the difference is in the account opening form.
Signature specimen card is also used for the same purpose as for the individual saving account, to avoid future discrepancy.
Account opening form, joint saving opening from has same information more than one time because more than one person fills this form to open the account. Briefly is that no one/single person can open this account, as a result it is called joint saving account.
Rules and Conditions for Saving Account:
The account opening person knows the rules and conditions.
This account can be opened only with initially Rs. 100 not less than this amount.
PLS- Saving account may be opened by/in the name of individual or jointly, or by charitable institutions or provident funds or other funds, associations, societies and firms or clubs.
For opening of this account application has to submit on the prescribed form by the bank.
Customers can deposit money in his account by using pay-in-slip.
Customer must check the signature of two officer of the bank on the deposit slip.
Withdrawal, depositor can’t withdraw more than his balance or one quarter. At least 7 days notice must be given to bank for withdrawal purposes.
Bank can’t responsible for a cheque, which has been paid prior to receipt of written instructions from the drawer countermanding payment.
The bank will take care to see that credit and debit entries are correctly adjusted, but if any mistake is by the depositor/withdrawer than bank will not responsible for the loss.
If the account is closed the unused cheques must be returned to the bank for the cancellation and the balance amount, if any must be withdrawn.
The profit or loss on the balance due at the time of death will be paid when bank will declare its profit/loss for the half year.
Death of account holder, in absence of any instructions the credit balance outstanding in any joint account in the name of two or more persons will be payable to the survivors.
The bank to the account holders will supply statement of account every quarter.
Amendments of rules, the bank have a right to amend, alter or add to any of these rules with or without notice to the account holders.
2). Opening Of Current account
A person, businessman and organization can open the following types of current account.
Joint Current Account
Individual Current Accounts
Sole proprietorship Current Account
Partnership Current Account
Joint Current Account
More than one person can open joint current account. Minimum balance of this account is Rs.l0, 000 approx. If a joint holder dies then bank holds the account and refers case to the court.
Account opening form, this application form is divided into two sides and both sides have same information which are details of signatory (A, B), name, occupation, nationality, place and date of birth, national identity card number, business address, employer no. Etc.
Individual Current Account
Only one person can open individual current account. Minimum balance in this case is 2500, if the balance in the account is less than this limit than bank sends a statement to account holder to maintain the minimum balance. For withdrawal, checkbook is issued and used no other instrument is used or accepted by the bank. Procedure for opening this account is also same as in PLS-Saving account just the difference is in opening form information, required by the bank.
Sole Proprietorship Current Account
In sole proprietorship organization a person invests his capital and devotes full time to his business. Sole proprietor opens this account. Minimum balance that required in this account is Rs. 1000. All the profit paid on balance will go to the sole proprietor only.
The account opening form of this account is different than others because this form is filled in the name of the organization. The name of proprietor. Place and Date of birth, Nationality, Passport number and National Identity Card number, have to mention on this form.
Following documents certified copies are required with the application:
Most recent set of Account
Current Municipal Licensee
Commercial Registration Certificate.
Partnership Current Account
Partnership current account can be opened with the name of Partnership Company. Before opening of partnership account shareholders has to decide that how many partners have right to sign on cheque. The procedure is same for opening such account; the difference is in the account opening form. Account opening form shows the name in full, nature of business, principal place of business, address, location, and telephone number, telex number. After that this form is divided into four sides with the name of A.B.C.D. and showing the same information mentioned earlier.
Rules and Conditions
Bank can close /down any account at any time upon 48 hours write notice, after the opening of the account.
The account number should be mentioned on all correspondence with the bank when deposits or withdrawals are made.
The account holder must maintain the minimum balance requirement that is Rs: 1000.
After six-month bank refuse the payment of the cheques (post dated cheques).
Bank will not make payment if cheque is made unauthorized.
Account holder who is unable to sign, he will affix his left-hand thumb.
The cheque amount should not exceed to balance of account.
Any person opening a current account is deemed to have read, understood and bound by the bank rules and conditions of current account.
CHAPTER NO. 3
It is said that accounts department is the backbone of the bank. It plays a vital role in performing different banking functions. The accounts department at UBL Hussain Agahi branch is performing its function manually. Different books of accounts relating with other departments are maintained here. With the help of these books of accounts, accountant prepares monthly, quarterly, semi-annually and yearly financial statements.
The working in accounts department mainly depends upon voucher system. For each and every transaction-taking place in the bank vouchers are prepared and through these voucher contra entries are passed under different heads.
FUNCTIONS OF ACCOUNTS DEPARTMENT
The accounts department performs the following functions:
To prepare and maintain the vouchers.
To maintain and update the ledgers for term deposits.
To update general ledger.
To prepare different periods statements.
Each and every transaction in the bank is made through vouchers; the final place is accounts department for recording these vouchers. Officer in the accounts departments arranges these vouchers according to heads of accounts. These vouchers are of two types:
1. Debit Vouchers
2. Credit Vouchers
These two vouchers are again classified into three following types of vouchers:
All the daily transaction in cash, transfer and clearing is done through these vouchers. A sheet is prepared on which all the vouchers, passed during any one working day are consolidated and summarized. This sheet is called supplementary sheet. It provides help in preparing Cash Book.
There are two types of supplementary sheets:
Debit Supplementary Sheet:
In which all debit Cash Voucher, Clearing Voucher, Transfer Voucher are included.
Credit Supplementary Sheet:
In which all credit Cash Voucher, Clearing Voucher, Transfer Voucher are included.
It is maintained to keep the record of daily receipts and daily paid vouchers. Cashbook is consisted on the opening balance and the closing balance of the day. For correct balance of the cash book there is a need to arrange all the vouchers.
Ledger For Term Deposits
One of the functions of accounts department is to maintain and update the term deposit ledgers and books manually. Term deposit receipt or TDR ledger is updated after every month for estimation of profit on customer accounts. Accountant has to prepare different ledger for all schemes of term deposit. With the help of TDR the accountant prepares provisional ledger/Summary ledger and also statement of provisional expenses. The profit after every six-month will be the expense of the branch.
Updating General Ledger
When vouchers are recorded in cashbook then the balance of each head of account is posted to its ledger account. There are two main heads of the general ledgers, Income account & Expenditure account. All the accounts fall under one of these two main heads. Separate ledger register is maintained for every head of account. In UBL all the daily transactions in deposits, cash, clearing, transfer remittance, foreign exchange; advances are performed through these daily ledgers. Accounts department Maintains and prepares the following ledgers and books of accounts:
Daily General Ledger Expenses
Daily General Ledger Incomes/Receipts
Monthly General Ledger Assets
Monthly General Ledger Liability
Daily General Ledger Zonal Expenses
Daily General Ledger Inspection expenses.
Daily General Ledger Regional Expenses
Daily General Ledger Audit Expenses
The format of the entire above ledger is approximately same. General ledger tells about A/C No., description, previous Balance, Dr. amount, Cr. amount and running balance.
Preparation of Different Statements
Accounts department prepares these statements,
Statement of Affairs
Statement of provisional Income
Statement of provisional Expenses
Statement of Head office A/C
Balance confirmation Book/Report
Statement of affairs is prepared yearly, consisting on the details about assets and liabilities of the branch. This statement provides assistance in budgeting about branch. Statement of provisional Income and expense is prepared monthly. Statement of account and balance confirmation is sent to accounts holders.
UBL is also providing lockers facilities to its customers. The account department also maintains the record about lockers. The basic purpose of locker is to provide safe custody to client’s valuable ornaments, jewelry or documents. Almost in all branches, Lockers are available in different sizes at different rates. For availing this opportunity, customer has to open his account in the same branch/bank.
Locker Operating Procedure:
Bank provides an application form to the applicant who needs to operate a locker in the branch. This application form contains all rules and regulation regarding to obtain a locker. Specimen signature card is also filled in signed by the applicant. Bank assigns a password to their customer for secrecy. Each locker has duplicate keys. One (master) key is kept by the bank, and the other by the customer. In case of opening any locker, first of all master key is applied and then the customer key. If the locker has been obtained jointly then at the time of the opening, the person signed the application form, should be presented there otherwise, the bank will not allow to operate the locker. Bank officer has to maintain the following register for record keeping purposes of locker.
Key Deposit Register
Safe deposit locker fee is recovered in advance or at the start of the year, half-year or quarterly.
Types of Locker
There are basically three types of locker at UBL that are as under:
TYPES OF LOCKERS RATES OF LOCKERS
Small Rs. 1200
Medium Rs. 1800
Large Rs. 3000
The key deposit fee is Rs. 600. Per locker and it is refundable at the time of closing an account the breaking charges are Rs. 500 per locker and it is also refundable at the time of closing of account, provided there is no breaking.
CHAPTER NO. 4
This department basically deals in bills, which come in bank for collection. The bills are cheques, call deposit, drafts and pay order. These bills are from outstation branches of UBL or of other banks. This department provides services to customers at low charges to get their amounts from the nearest branch.
HEADS OF BILLS
There are two main heads of the bills i.e.
Outward Bills For Collection (OBC)
Inward Bill For Collection (IBC)
Outward Bills for Collection
Bills department receives cheques or other kinds of bills from its clients. The condition under Outward Bills for Collection is that the customer must have his account in the branch. This branch forwards the cheque with schedule or covering letter to that branch on which bill is drawn. The checking officer of bills department will cross the cheque with special bank stamp before forwarding the cheque to the other branch.
Outward bills for collection register
Outward bills for collection register is maintained in order to deep the records of all bills for outward collections. This register is updated two times, first at time of receiving the OBCs and secondly at the time when confirmation advice is received from the other branch, either the cheque will be paid or not by the other bank branch. After confirmation of the amount, confirmation advice is transferred to the sender branch. After confirmation of the amount and bills, the account of the customer is credited against reasonable charges, which is income for the bank.
Inwards Bill for Collection
These bills come to branch for payments so branch has to verify these cheques, pay orders, drafts and call deposits etc. The party account must be opened in that branch which sends it to paying branch .The responsibility under IBCs of the branch is to verify all the bills within three days, and should send the bank advice to the originating branch.
Inward bills for collection register
Inward bills for collection register are maintained for future record purposes. Care is made while posting the amount of bills in the register. Each bill is assigned a number according to the register series. Every year the number starts from one and continues for the whole year and next year again from one and so on.
CHAPTER NO. 5
This department welcomes the cheques and other negotiable instruments drawn upon local branches of other banks. State Bank of Pakistan has a clearinghouse, in which the bank representative brings cheques and other Institutions and mutual claims of each bank on other are off set and a settlement is made by the payments. Clearing system is helpful for both the customers and bank in saving of time, labor and currency involvement.
PROCEDURE FOR CLEARING CHEQUES AND INSTRUMENTS
UBL is a member of SBP and has an account with SBP. The clearinghouse of SBP, through which branches forward and receive clearing cheques, with a schedule, conducts clearing. The clerk of forwarding branch prepares the schedule and vouchers of all the clearing cheque, which he received on that day and sends these cheques to the checking officer. Checking officer passes these cheques and vouchers by his initials, endorsement stamp and branch special crossing stamp. Clerk posts the contra entries of these vouchers in the clearing register. At every day at about 9:05 a.m. Representative of all local banks are in clearing house of SBP, to receive and forward the cheques.
PROCELURE FOR ADVISING H/O ACCOUNT
All the inter-bank adjustments will be effected through HO account, it will be essential for the branches to advise head office account about every transaction. The SBP will send a consolidated debit/credit advice to the branches in respect of clearing cheques delivered or received from the branches. The amount of the advice will agree with total amount appearing in the schedule of cheques delivered/received. Copies of all advice will be sent to head office. The other branches will not send any advice to head office.
Branch receives the cheques and other negotiable instruments drawn on other branches of the same bank. Main branch of the UBL handles the transfer deliveries of cheques. The same clearing cheque procedure will be adopted in the transfer delivery case except both availing the facility of SBP, In case of cheque drawn on one branch and collected by another branch for the credit of its constituents the branch delivering the cheques will send a consolidated debit advice to the drawee branch. Clerk maintains the ledger for transfer deliveries, copies of all the advice will endorse to head office as usual.
CHAPTER N0. 6
REMITTANCES DEPARTMENT REMITTANCE DEPARTMENT
Transfer of money or equivalent to money from one branch to another branch of the same bank is called remittance. Now it has become an easier and safer method both for the client and banker to transfer their money from one branch to another within the city or Outside City.
In case of remittances normally two banks are involved, are as under:
Originating Bank Branch
It is the branch, which issued the instrument for remittance.
Responding Bank Branch
The branch that receives the instruments for remittances, also known as drawee’s branch:
TYPES OF REMITTANCE
Remittances are classified into the following two types:
It is a transfer of money from one branch to another branch of the same bank within the same country. In this case both the parties will be of the same country and same bank.
MODE OF REMITTANCES
United bank limited, uses following types for transfers of money:
Demand Draft (DD)
Pay Order (PO)
Mail Transfer (MT)
Telegraphic Transfer (TT)
Demand Draft (DD)
A bank draft is an order instrument issued for payment of a certain sum of money to a certain person. There are three parties involved:
Drawer: Issuing Bank.
Drawee: The bank on which the draft is drawn.
Payee: The name of person to whom the payment is to be made.
There are two types of demand draft, which are as follows
a) DD Issued
UBL has a standard application form that must be filled in by the customer for issuance of Demand Draft.
The DD Application Form contains:
Signature of Applicant
In Favor of (Payee’s Name)
Drawn on (Name of Drawee Branch)
Amount in words and figures.
The Second Officer, Cash Officer and another authorized officer must duly sign this form. The cheque of the showing the amount of the DD is attached with the application form. The clerk prepares the demand draft when all the requirements are fulfilled. As a precaution, the draft should be protecting graphed. In the case protect graph is not available, a sum of the amount payable must be written in red ink preceded by the words “UNDER” or “NOT OVER”. It is known as “Protective Crossing” or security notation. Demand draft is then recorded in the DD issued register and credit advice is sent to the drawer branch.
The bank recovers different types of charges from the applicant on issuance of DD, including:
Central Excise Duty
b) DD Payable
When the bank branch receives a credit advice issued by another branch and the title of the advice is demand draft then this is called the Demand Draft Payable or the DD Payable. Practical procedure regarding to the payment of demand draft, in the United Bank Limited may be summarized as follows:
1. All drafts drawn on a branch should be routed through the General Ledger Accounts “Draft Payable” of the Bills Payable Account. This account is credited by the drawer branch on receipt of the cover in the form of IBCA.
2. Signatures should be verified on all drafts drawn on a branch.
3. Normally, payment of a draft should be made after receipt of a corresponding credit advice. In case the advice has not been received, payment should be executed through the approval of the Manager at the drawee’s branch who should satisfy himself with regard to the authenticity of the draft in terms of signatures and otherwise.
4. On receipt of advice from the drawee’s branch, signatures should be verified if the amount of a draft exceeds Rs.5000/-
5. The draft when paid should be marked in the DD payable register.
Essential Precautions at the Time of Payment
I. The instrument should be scrutinized properly with regard to name, Drawee branch, amount in words and figures protect graphic and signatures of officers.
II. The payment should not be effected unless the payee has been identified to the satisfaction of concerned officials at drawee branch.
III. Extra care should be exercised if the payee falls in the category of non-customers. It would be better if an account holder verifies the identity of the payee, in such cases.
Payment Order (PO)
A banker’s Payment Order is an instrument drawn by a banker on himself Implicit in a payment order is an undertaking on the part of the banker to pay, a certain sum of money, on the presentation of the instrument. The payment orders are generally issued for anyone of the following practical purposes:
To facilitate all locally payable expenses on account of a bank for the reason that such payments are not executed through cheques.
2. For the sake of inland and foreign remittances in case where the beneficiaries do not maintain account with the bank.
3. For all local payments under instructions of the customers for sundry purposes like payment of insurance premium, payments to third parties, club bills, rent and taxes etc.
The following contains stepwise procedural prescriptions pertaining to the issuance and payment of payment order:
For the issuance of payment orders, an application will be tendered on bank’s standard form (F-34) by the purchaser giving his name and address thereof In case of request from the bank’ s customer for the issuance of the payment orders, a letter in this respect, will be obtained giving full particulars of the payee authorizing the bank to debit the account.
The cost of the payment order along with an amount of Rs.5/- as commission plus excise duty will be paid on the counter.
In case of letter of authority, the total amount i.e. payment order amount, commission, excise duty and postage, if any, will be debited to the customer’s account as per bank instructions and contra credit will be passed to Bills Payable — Payment Orders Account, commission, excise duty and postage account.
The application for the issuance of payment order the Manager/Second Officer as the case shall sign (F-34) may be if it is to be issued on bank account.
The particulars of the payment order shall be inserted on the blank payment order leaf either through a typing machine or shall be neatly hand written using indelible ink. The account shall also be rounded off through a protect graph machine or by hand on top of the instrument.
Subsequently, the particulars of each payment order shall be recorded in payment orders issued register. The payment order shall be signed by two authorized officers of the bank simultaneously authenticating entry in payment order issued register and after verifying the following:
Name, code & address of the issuing branch.
Name of the payee.
Amount in words and figures.
Date of issue.
The amount is rounded off on top of the instrument either through protect graph machine or neatly by hand-writing.
VII. A stamp containing the following stipulation shall be affixed on the back of each payment order at the time of issue:
Received payment from United Bank Limited as over leaf on.
VIII. The payment order, then, shall be delivered to the purchaser or to the department concerned against acknowledgment on the reverse side of F-34 as well as on the counter foil of the payment order.
The payee shall be duly identified by a bank customer or by Manager / Second Officer in case the payment order is presented for cash payment on the counter and it will be ensured that the payment order is properly receipted on its reverse on appropriate value or revenue stamps.
The payment order will then be entered in payment orders issued register after marking the date of payment against the date of issue in the contra columns under authentication.
The payment order will then be passed for payment as per bank instructions.
The procedure as given above will be adopted in case of all payment orders received for payment, except that usual precautions shall be observed to ensure that the bank stands discharged from the payment in due course.
3) Mail Transfer (MT)
Some times a constituent of a bank wants to transfer funds from one account to another or a non-constituent wishes to remit funds in a particular account maintained at some place with a branch of the bank or when the accounts are transferred from one branch to another branch, such amounts/balances are remitted by means of mail transfer. The procedure for issuance of a mail transfer is the same as discussed for drafts except that the applicant is provided with a memorandum for money received from him for the issuance of a mail transfer on a particular branch of the bank. The payee must be an account holder (customer) of the drawee branch.
PAYMENT OF MT
The procedure for payment is as follows.
On receipt of advice from drawer branch, the test should be verified if amount exceeds Rs. 5,000.
The particulars of MT should duly be entered in MT payable register.
Following vouchers should be passed after the test has been verified
Dr. Head Office Account Drawer Branch.
Cr. Bills Payable Account MT payable.
When the customer’s account is to be credited, the following entries are passed:
Dr. Bills Payable Account- MT Payable
Cr. Customer’s Account.
If the payment is to be effected in cash, the entries are:
Dr. Bills payable Account- MT payable
Before making the payment of MT, the drawee branch must ascertain the following:
It is drawn on the same branch.
Payee has signed the revenue stamps of adequate amount.
Payee is properly identified.
Telegraphic Transfer (TT)
Generally a mail transfer advice reaches the drawee branch the next day, when courier arrangements exist. However, when it is sent through post offices, it usually takes 2 to 3 days to reach its destination. But sometimes an individual whether customer or not, demands that his funds should be transferred from one place to another through the quickest means. In such cases, transfer of funds message is passed on through a telegram, ordinary or express, to the drawee branch of the bank. A tested message is sent to the drawee branch followed by the confirmation copy. In case the payment is immediately required by the payee, the tested message is given on the telephone.
Besides normal charges as those recovered on issuance of demand draft, the bank charges one additional expense i.e. Telephone Charges of amount Rs.100 from the customer.
Payment of TT
A TT facilitates urgent transfer of funds either by a telegram or through telephone. A step-wise procedure relating to the payment of TT at the drawee branch is as under:
1. The drawee branch receives message either on telephone, or through telegram. In case of a telegraphic conversation, the concerned official at drawee branch should ask for the proper identification of the official at the drawer branch. Whereas the message should be decoded in case of telegram.
The particular of the TT should duly be entered in the TT payable register.
In case where the customers account is to be credited, following entries be passed:
Dr. TT Account Drawer Branch
Cr. Bills Payable A/C _ TT Payable
Dr. Bills Payable A/C _ TT payable
Cr. Customer’ s Account.
4. In case where the payment is to be effected in cash, the following vouchers shall be passed:
Dr. Bills Payable A/C TT Payable
5. TT should be paid after proper identification.
With-in the country or from abroad, UBL offers the most efficient and price competitive services. With its large network of branches, it is poised to offer service almost at doorstep of the customers. UBL is a member of SWIFT
(Society for Worldwide Interbank Financial Telecommunications). It is now the privatized commercial bank to link up with three international points, Dubai, London and New York. This enables the Bank to provide secure transmission of foreign exchange payments for trade, home remittances and other transfers in a fully automated manner.
UBL’s new remittance service, TezRaftaar offers all overseas Pakistani people the fastest and the most convenient delivery of their money to their beneficiaries in Pakistan. Best of all, TezRaftaar is completely cost free and is available at all UBL branches along the Bank’s Network in the Middle East, UK and US.
TezRaftaar has following features:
Guaranteed delivery within 24 hours to your given address in Pakistan.
Doorstep delivery by authorized courier or credited to the recipient’s account.
Free of charge transfer service.
Open to all including those who are not UBL account holders?
Complete reliability of transaction.
Time is Money, so don’t keep your family waiting
Money gram service is a person-to-person international money transfer service that allows consumers to send/receive money around the world in minutes, with no bank account required.
FEATURES OF MONEY GRAM
With money gram your money can be transferred from almost any country in the world because it is a reliable and trusted way to send/receive money worldwide.
The money gram service is used around the world because it is a reliable and trusted way to send/receive money worldwide.
More than 50,000 MoneyGram agent locations in more than 150 countries; computer networked to ensure that your money is transferred within minutes.
Easy: (How to Receive your transfer)
1- Sender abroad goes to nearest MoneyGram representative, fills out a form, hands in the amount he wishes to send and the send (service) fee**, and shows an I.D.
2- Upon completing the transaction, sender will be given a transaction reference number.
3- Sender calls the receiver and informs him of the transaction reference number and the amount of money sent.
4- Receiver can go to any MoneyGram representative, show an I.D, fills out a simple form mentioning sender’s name and amount expected.
5- Receiving agent hands over the money to receiver.
NOTE: “Currency exchange rate set by MoneyGram or its representatives will be applied”.
CHAPTER NO. 6
This is sensitive department of the branch. No other person is allowed to enter in the premises of cash department. As obvious from name that this department deals in cash deposits and payments. Cash department is performing its functions/duties manually. For payments and receipts, it has to maintain certain sheets, books of accounts and various ledgers, which are as under:
Cash received voucher sheet
Cash paid voucher sheet
Cheque book record
Cash balance book
PROCEDURE FOR CASH PAYMENTS
The instrument against which payment is made that is the cheque. Normally the cheques come for payment in the branch are, cheques received at counter for payment and other cheques are Clearing or Transfer Cheque. No payment is made against any other monetary instruments.
When cheque is received for payment special care is taken about the signature of the account holder, date, no cross or cutting in figures, signature at the back of the cheque presented for payment. If any thing is found wrong then cheque is dishonored and is given to customer for rectification. If the cheque is found valid in all respect then Token Clerk assigns token to the cheque at the back. The same Token is given to the customer as a proof. The next step is forwarding cheque to the accountant for the verification of the signature with specimen card signature. If signature are not according to specimen card then the cheque is returned to customer and token is taken back. In token register a note is written that cheque returned unpaid. If signature are similar with the specimen card than cheque amount is posted in Ledger Card/Transaction Ledger. Special care is given to the balance of the account either favorable or unfavorable.
If the balance in the account is less than the cheque drawn, then bank may extend O/D facility to its customer but now-a-days this facility is not provided.
If the cheque is up to or less than 10,000 then officer can sanction and in case of greater, than he has to get approved from his superiors. Finally, after all verifications of the cheque it is given to the cashier, then payment is made to holder of the cheque. At the same time cashier maintains the Cash Receive Voucher Sheet. The cashier performs all these duties manually.
PROCEDURE FOR CASH RECEIVED
For depositing any amount in the account Pay-In-slip is used that is filled by the customer. The pay-in-slip is consisted on date, A/C no., and particular about the amount to be deposited in the account. The depositor signs the part of the paying slips, which are retained by the bank to show acceptance about the entries, made in pay-in-slip. The pay-in-slip serves as a voucher to Card/Transaction Ledger is only updated with pay in slip. The cashier checks necessary details provided in the pay-in-slip and count the cash to be deposited and tally with the figures written in pay in slip and in his hand/counter. If any mistake is found then first that mistake/error is removed. If there is no one, than cashier fill in Cash Voucher Received Record Sheet and assigns a voucher no. To both the transactions made in the sheet and to pay-in-slip. This voucher sheet starts with one and continues for the whole day and next day again started from one. If all is done well, than accountant authenticates the two by signing on the two documents posting stamps on the slip. One part of the slip is given to depositor, and other part is given to clerk for further posting in Ledgers.
The Cashier, at the end of the day has to maintain and balance the cashbook. The cashbook contains the opening balance, details of payments and receipts. The Manager of the bank signs the consolidated figures and written in cashbook as closing balance, which will the opening next day.
Closing Balance = Opening Balance + Receipt – Payments
Chapter No. 7
Human Resources Department
Human Resources Department
Transfers & Postings
Scrutinizing bills (Hospital Bill)
Staff Deceased cases & its Correspondence
Retired employees Cases & its correspondence
All staff legal cases & Court at Multan & Lahore.
Complaints and its correspondence
Fraud & Forgery cases
Mandatory Leaves and its observance.
Staff leaves and other related staff matters
Goals of all Staff
Monthly Statement of Staff
Disciplinary Action Cases
CHAPTER NO. 8
ADVANCES DEPARTMENT ADVANCES DEPARTMENT
Credit is defined as the sale of goods, services and money claims in the present in return for a promise to pay in the future. While in banking sector advance is the promise that carries the repayment of the original amount plus an interest on the principal amount, extended as advance. The credit/advance is given on the base of the confidence/trust and on the belief that the customer will be able and willing to pay on the demand or at some future time.
The term credit may not be confused with term Debt. Credit and debt are merely the same things looked at from two different points of view. When a lender extends credit, the borrower acquires it. The lender or the creditor has the right to get back payment and the borrower has the obligation to pay back. Credit can be defined in these words: “credit is the right to receive payment or the obligation to make payment on demand or at some future time on account of immediate transfer of goods”. The first phrase right to receive payment is used from the point of view of the creditor, as he is to exchange present goods for the right to receive payment in future. The second phrase, an obligation to make payment on demand, which is from the debtor point of view. The debtor has an obligation to pay in the future for the goods required. Credit and debt are two sides of the same shield.
PROCEDURE FOR ADVANCES
The credit officer will have to see the following information from the company:
Name of the Company
Names of Principal Shareholders/Directors.
Line of Business.
Financial Standing & Respectability.
Your Credit experience including the use of credit facilities.
For this purpose the credit officer takes following steps before advancing credit:
Step 1: Applicant is required to serve some documents to the credit officer whenever required by him. These documents may include certified Financial Statements, legal documents regarding property occupied by the borrower. And some other certificates required by law and prudential regulations of State Bank of Pakistan like property deed, mortgage of property etc.
Step 2: Now the credit officer will have to analyze the provided financial statements critically. He will have to see the summary of financial health of the company, or partnership or the sole trader ship. Then he will have to fill the form containing information about:
Balance Sheet Line # 01-43
Income Statement Line # 44 – 64
Balance Sheet Reconciliation Line # 65-83
Analytical and Comparative Ratios Line # 84 – 136
In ratio anlaysis, credit officer has to see the Liquidity, Marketability, Profitability, and Activity ratios. After this he has to see the comparative Operating/Non-operating Cash generation statement.
Step 3: While doing this job the credit officer will have to see that the financial statements are reflecting the true picture according to the GAAP or not, and must fulfill the requirement of Checklist—-Prudential Regulations. This form consists of three pages regarding the subject matter. For this purpose he has to see the competitors, suppliers, customers and bankers with whom he is dealing.
Step 4: If the credit officer is satisfied with the financial performance of the company and other documents, he will write a credit approval containing the relevant information about the business. He attaches these documents with the proposals he made and forwards to the Zonal Office. The Zonal Office advance department ensures that the requisite documents are in order. Further they applied various financial tests, client business reliability and competitiveness. If the Zonal Chief has the power to sanction the loan, then he will prepare the sanction advice and sent it back to the relevant branch. If beyond his limits/powers then send it to regional office.
ELEMENTS OF CREDIT SELECTION
Five C’s are the main elements used for credit selection:
The loan officer checks the character of the applicant, his family background, mode of living, & business.
The loan officer checks the paying ability of the applicant by his previous experience.
Loan officer checks the business capital and liquid assets worth.
The loan officer checks collateral like stocks, bonds, B/Es,
The loan officer also checks the economic condition inside the country and outside the country. If economic condition is favorable than loan is sanctioned otherwise not.
SECTORS FOR ADVANCES
There are three main sectors for which UBL is advancing loans. These sectors are:
These loans are given specially to traders, businessmen, small industrial units, including cottage and small-scale industries, agriculturists. Thus UBL is ensuring an equitable distribution of credit among various sectors of the country’s economy. Different industry codes are used for different kind of industries.
These loans are given to industrial units including cottage and small-scale industries up to or less than Rs. 20 million. Loans amount shall not exceed amount specified by marginal restriction on the type of securities offered. Industrial loans are granted by analyzing the requirements of the industries.
Loan period, loans are allowed for a maximum period of 5 years including a maximum grace period of one year. In special cases up to 10 years loan period can be extended, depending on the merit of the case.
Total principal amount of loans to a single borrower shall not exceed to Rs.0.3 million, including loans to dependent members of the family. Maximum maturity period is 3 years, also depending upon the nature and types of the loans, extended.
Mark-up, will be charged as per existing rate, which is subject to change from time to time. Presently it is 0.51 paisas per day on per thousand/1000. Mode of paying back, the borrowed amount can repay back in the form of quarterly, equal monthly or semi-annually with interest, or as the case decided.
Securities against Commercial Loans
Loan can be made against any or more of the following securities:
Mortgage of immovable property (land and Building).
Pledge of stocks, raw materials and finished goods.
Hypothecation of stocks, raw materials and finished goods.
State Bank of Pakistan Guarantee.
The loan is advanced to those farmers who have cultivated land. It is classified into following types:
This finance is advanced to the agriculturists for inputs requirement of lands i.e. fertilizers, pesticides, seeds etc. It is also called short-term loan. The amount of advance with interest is repayable within one year in lump sum form. Loans can be advanced to the client on his credit worthiness, or average balance.
These loans are advance to the farmers for the purpose of development of the land or other development purpose belongs to the agriculture sector for example for tractors, thrashers, tube-wells. It can be long term, medium term or short-term loans. The repayments of the loans are schedules in periodic installments, which may be quarterly, half yearly or yearly. Mortgage of land is used as security for the development finance. Mark up is charged on daily basis, which is changeable. The present rate of mark up is 0.50 paisas per day on per thousand.
FACILITIES BY UBL
UBL provides two types of facilities in case of advances, which are following
Funds are given to customer according to their requirement against securities.
1) Funded Facility
If loan is on funded basis, the bank invests the big amount. Funded advance can be of following types:
Demand Finance (D.F)
Cash Finance (C.F)
(a) Demand Finance
It is a main kind of advance. Bank requires 100% security against demand finance and charges interest on it. Security can be of different forms like cash, collateral and property. For example one person have dollars but he do not want to spent these, he will give an application to the branch manager, branch manager will take the dollars and will give the Pak. rupees against the dollars. After maturity, when customer will make the payment of advance plus interest then UBL will pay same dollars to the customer. UBL charges interest on advance from 14% to 18.25%. If the securities can be easily convertible into cash, and then the rate of interest will be low, other wise the rate of interest will high.
(b) Cash Finance
UBL gives cash finance only to specific/special persons or customers upon which bank has fully confidence. Cash finance is given against 50% security or greater than 50% security. This security can be SDR (special drawing right) or property. Bank charges interest on advance amount. The interest rate differs in different types of securities, and can be from 14% to 18.25%. If the security is nearest to cash then bank charges nominal rate otherwise the chargeable rate will high.
Cash Finance, is given to the following companies by UBL.
Not operated by the Branch
2) Non-Funded Facility
Not operated by the Branch
DEPARTMENT INTERNAL CONTROL UINIT (ICU)
1-What is ICU:
Internal control unit is an independent appraisal function established to examine and evaluate the adequacy and effectiveness of the Business’s system of internal controls and quality of performance in carrying out assigned responsibilities. It is basically established for performing and monitoring vital independent as well as departmental control functions that are critical to the ongoing health of the branch.
Since the unit works interpedently, its reporting or work should be directly supervised by the Country ICU Head and under no circumstances Branch Management should influence their day to day work.
2. ICU Objectives
Main objectives of ICU are to:-
1.Ensure the reliability and integrity of financial and operating information and the means used to identify, measure, classify and report such information.
2. Review the systems established to ensure compliance with all policies and procedures, and to ensure that all the financials are passed accordingly.
3. Review the means of safeguarding assets and an sap[appropriate, verify the existence of such assets.
4. Review the operations or programs to ascertain whether results are consistent with the established objectives and goals.
5. Maintain high quality of work standards in branches.
6. Identify problems that may result in potential losses or damages to customer services.
Country Operational Head
Country ICU Head
Branch ICU Staff
5. ICU STAFF
A. ICU staff will maintain their independence by not involving in operations (e.g. processing, supervision and custody functions etc.). They will not have any financial or maintenance access on the system except for inquiries.
B. ICU staff selection criteria, while selecting ICU staff due weight is given to high responsibility level, imaginative and having independent judgment, Rich banking experience and knowledge on laid down policies and procedures.
CONTROL FUNCTION MECHANISM
Followings are the main parts of Internal Control Functions:
Control Verification / Review Charts.
Proof / Balancing Charts.
Departmental Control Function Checklists.
Corrective Action Monitoring.
A. Control Verification / Review Charts (Departmental & Independent
These documents are the most important records as they list the actual control verifications to be performed by the ICU and operating departments along with important checkpoints. They are split between Daily, Weekly, Monthly, Quarterly, and Semi annually and annually.
B. Proof/Balancing Charts.
In order to check any unusual/unauthorized transaction and to monitor the long outstanding items, monthly balancing proofs will be prepared by the respective departments for all such accounts in which transactions are passed manually. The ICU Head has a listing of all approved General Ledger/Subsidiary Ledger heads against which proofs are to be prepared at required frequencies. Quarterly the chart will be compared to the General Ledger to ensure that it is complete and include all accounts.
D. Corrective Action Monitoring.
A memorandum of exceptions if noted during the verification / reviews, will be forwarded to Branch Manager. Corrective action will be notified to ICU in writing by respective departments. ICU will monitor the pending file and work closely with the various timely manners.
E. Work Plan
At the beginning of each month ICU Head/staff will prepare his work plan for the month, proper planning is done, and copy is sent to ICU Head. Planning should be kept confidential from Branch Manager.
F. Vital Control Functions to be carried out by ICU.
A. Monitoring of Departmental balancing / proofs of General / Subsidiary Ledger heads.
B. Periodical Independent Verifications and Product Reviews.
C. Treasury function Controls.
D. Statement Rendition (mailing statements/balance confirmations to customers).
E. Customers ‘complaints.
F. Management Support Functions:-
¨ Corrective Action Tracking.
¨ Policy / Procedures Deviation Control (where required).
¨ Designations—at the time of changes for keys and other security stationery custody.
FOREIGN EXCHANGE EPARTMENT
At the last stage I have been posted in Foreign Exchange Department of the Branch, where I have experienced for two weeks. During this time what I have learned is as follows:
HERARCHY OF THE DEPARTMENT
FUNCTIONING OF CURRENT DEPARTMENT
The customer must have his account with our branch, because without it we cannot enter into the foreign exchange transactions. So a depositor opens an Account with the Bank in any form like:
Foreign. Exchange Department of the Bank accepts under noted Foreign Currency from account holders. State Bank of Pakistan provides exchange rates on daily basis. And daily transactions are recorded at their current exchange rates.
British Pound Sterling
Saudi Rial, etc.
Opening of Foreign Currency Account.
Like normal account opening form, an account opening form is provided to prospective customer. At the same time introduction of that customer is important condition so that provided information by customer may be got authenticated. An existing account holder may introduce the incoming customer. The Manager takes new Account holder’s specimen signatures on specimen Card in order to avoid future problems. At the occasion of withdrawal of funds Accountant compares the signatures on cheques to the provided Specimen of Signatures so that genuineness of the cheques may be verified.
At the time of depositing funds the amount of funds is debited to “Foreign Currency On Hand Account.” & Credited the Party’s /Account Holder’s A/C.
At the time of withdrawal of funds the amount is credited to” Foreign Currency On Hand Account. & Debited to Party’s /Account Holder’s A/C.
Foreign Exchange department remits Foreign Currency through under noted Paid Up Documents:
Foreign Demand Draft
FOREIGN DEMAND DRAFT:
The demand draft is a written order is being given by the issuing Bank on it’s own behalf to it’s other Branch of the same Bank to pay the certain amount to the concerned person.
PROCEDURE TO PREPARE (F.D.D)
First of all draft application is filled in by the client. This application contains the under noted information.
o Name of the party/Person in who favor the FDD is being issued.
o Amount to be sent
o Account No if DD is crossed
o Amount of Exchange to be charged by the Bank.
o Name of Branch. Where the FDD is drawn.
1. Then cashier sends the cash receipt to the account department. The accountant records the amount (paid in cash or drawn from the account of the Account Holder) in scroll register.
Accountant gives the FDD leaf along with voucher (which was called FDD application form before the deposit of cash) to Bank’s Assistant who records the particulars of FDD in FDD register. Thereafter the FDD is issued and handed over to the Party/ Client. Now Bank sends advice of the FDD to the concerned Branch where the FDD is to be paid to the Customer OR his Agent OR in favour of whom he insert endorsement of the back of the FDD.
MAIL TARNSFER (MT):
It is the transferring of money from on place Branch to another place of the same Bank Cash transaction is not involved. Advice of the MT is sent along with it. The amount of MT is directly credited to the account of beneficiary’s account. That is why MT can be used to transfer the amount from one account to the account of other Branch of the same Bank.
It is proper and pertinent to mention here that procedure of issuance e of MT is same as in the case of FDD.
TELEGRAPHIC TRANSFER (TT)
This is most rapid method to transfer funds. Coding Message is sent through Telegraphic message OR on Phone.
If any of our account holders whether single person/organization wants to import any Commodity / Goods from a Foreign Country it approaches to this department. Submits application and full-fills all the formalities conditions levied by State Bank Of Pakistan under F.E regulation Act 1947 and purchases foreign exchange for payment the cost of Goods/ Commodities to be imported. Then the Department opens L.C (Letter Of Credit is infact guarantee to the Foreign Bank for payment of the cost of Goods).
Bank charges like Commission and Exchange for providing this facility are received.
If any Person/Organization wants to Export any Commodity / Goods to any Country it approaches to this department. Submits application and full-fills all the formalities conditions levied by State Bank Of Pakistan under F.E Regulation Act. For the export of goods the foreigner party sends an L.C through foreigner Bank in order to receive cost of Goods. Then Bank makes payments of L.C (Letter Of Credit which is infact guarantee to the foreign Bank for payment of the cost of Goods) to the Foreign Bank.
Bank charges Commission and Exchange for providing this facility are recovered.
Bill Of Exchange
Bill Of Lading
All these four functions are being performed by the staff manually as well as at Computer in a very systematic way in order to keep the record up to date to avoid any divergence.
UBL has got a well reputed on –line system in most of its branches. Remittance department is working very efficiently in transferring the funds to peoples due to this system
The bank also has started ATM facility in most of the branches 24 hours banking is now the trend in Pakistan.
Bank is providing quick credit services to all the customers at all branches. Because the credit manager cooperates with the borrowers while making a loan request to the bank.
The human resource department is not performing well in the organization. Selection process is not done on the merit due to which many competent persons can’t get job in UBL.
Bank is not introducing new products these days, so bank should boost the product development and increase the range of facilities offered for customers. And the rates of interest on its various products have been reduced.
Privatization has adversely affected the morale of the employees because they will not be able to get the expected fringe benefits, so it may lead to job stress.
Government is taking very bold steps to promote IT in Pakistan UBL has an opportunity to improve in IT stock exchange is very volatile and takes immediate effect so in times of crises conservative investors turns to saving deposits.
UBL is surrounded by many competitors it has an opportunity to aggressive marketing to increase its business.
UBL has many competitors who are continuously increasing their products and marketing aggressively it may cause its customer to shift to its competitors.
Analysis, Suggestions & Recommendations
During my internship at the UBL I find out week areas that require improvements for long-term benefit of the organization. These suggestions and recommendation are as follows:
IT has changed the old method of making business. So, compuretization in UBL is become the basic need. Though UBL has the computer system yet the system has not totally shifted on computer. Manual procedure is still there, Hence computer facility is not fully availed and many branches are working without computer and computer system, it should be fully availed and system should be fully computerized. Compuretization will save to much timewhich is wasted due to manual procedures.
This world is now called a globle world becaused it is connected through computer network. In today’s networked world e-commerce is getting importance day by day. All the leading banks of the world are adopting the concept of online banking and they are providing better services to their customers through the Internet. United Bank Limited should also adopt the e-commerce so that it will be able to compete with the national and international banks. Its is only possible when all the branches are computerized.
Performance Appraisal & Compensation
Employee appraisal is an major part good and effective HRM. It consist of systematic evaluation of an individual with respect to his personal traits and characteristics, his on job performance and his potential for development. In Unite Bank Limited there is no appraisal system exists. No relationship has so far been established between appraisal and staff motivation. No weight is assigned to appraisal in making decisions on promotions, postings, etc.
Compensation is a necessary thing for employees satifaction. And UBL has not any proper conpensation plan when ever management decide to give bonus or extra salary to employees it is followed. So there should be proper conpensation plan.
This is age of competition and every organization is facing hard competition from not only domestic organization but also from the international organizations due to globalization. Due to this competition the marketing department plays a vital role in the success of the organization.
UBL should have a strong marketing department like many other private banks have, for the publicity of their products and make well inform the customers all the services provided by the bank and to conduct detailed market researches to find out new opportunities, needs of the customers and make comprehensive plans to capitalize those opportunities.
Physical appearance of the location and inside the building also matters. It helps a lot to attract the customer. Some branches of UBL are very attractive but all the branches should be well dressed
6. Refresher Training Courses
There should be proper staff training refresher courses programs to train the employees latest tool and techniques of the banking. They should be given be given computer training. Most of the employees of the UBL know nothing about the computer and its application in the banking.