Professional Documents
Culture Documents
ON
CENTER FAISALABAD
BY
ASMA YASIN
My department requires this report. The purpose of report is to write down all the major
activities that I performed in that particular branch during my internship training. It
Comprises of:
Formal part
Introduction of the organization
SWOT Analysis
PEST Analysis and Environmental Scanning
Products and services
Deposit department
Remittance department
Export Refinance Scheme (Part 1, Part 11)
Import and export department
HRM department
Credit and administrative department
Financial Analysis of the client
Work done by me
Suggestions and recommendations
CONTENTS
1. Executive summary
2. Contents
3. Acknowledgement
4. Introduction
5. Products of HBL
7. Span of management
8. Departmentalization
10. Suggestions
Acknowledgment
All praises belong to almighty Allah who the supreme authority knows the ultimate relation
underlying all sorts of phenomenon going on in this universe & whose blessing & exaltation
flourished my thought & thrived my ambitions to have the cherished fruit of my modest
efforts my humblest thanks to the Holy Prophet Hazrat Muhammad (PBUH) who is forever a
torch of guidance & knowledge for humanity as a whole.
We deem it our utmost pleasure to avail this opportunity to express gratitude &
deep sense of obligation to my revered teachers and HBL’s relationship manager Mr.
Zaiuddin and Mr.Waseem Bhati for their valuable and dexterous guidance, untiring help,
compassionate attitude, kind behavior, moral support and enlightened supervision during this
whole project.
Finally, I would like to extend hurtful thanks to my adoring parents and friends for their day
and night prayers sacrifices and encouragement, moral and financial support throughout the
course of our study.
WHAT IS BANK?
A bank is an institution for the custody, loan or exchange of money for sanctioning
credit, for transferring funds by domestic foreign bills of exchange. It is a pipeline through
which currency moves into and out of circulation.
As it is clear from the definition of banking, the main activity or function of
banking is borrowing and lending of money with a margin of gain. However, as far as the
present day banking is concerned, there are a number of different banks, set up under specific
different objectives, performing various functions.
INTRODUCTION OF HBL:
Besides this, HABIB BANK has been a pioneer in providing innovative banking
services such as first installation of mainframe computer in Pakistan followed by ATM and
more Internet banking facilities in all branches. The main strength of HBL brand is its great
services to all customers especially to the corporate customers and its prominent head office
building that has dominated Karachi’s skyline for 35 years.
Mission statement
Humility:
We encourage a culture of mutual respect and treat both our team members and
customers with humility and care.
Integrity:
For us, integrity means a synergic approach towards abiding our core values. United
with the force of shared values and integrity, we form a network of a well-integrated
team.
Meritocracy:
At every level, from selection to advancement, we have designed a consistent system
of human resource practices, based on objective criteria throughout all the layers of
the organization. We are, therefore, able to achieve a specific level of performance at
every layer of the organization.
organization.
Team Work:
Our team strives to become a cohesive and unified force, to offer you, the customer, a
level of service beyond your expectations. This force is derived from participative
and collective endeavors, a common set of goals and a spirit to share the glory and the
strength to face failures together.
Culture of Innovation:
we aim to be proactively responsive to new ideas, and to respect and reward the
agents, leaders and creators of change.
change.
PRODUCTS AND SERVICES OFFERED BY HBL
PRODUCTS:
SERVICES:
o Retail Banking
The Retail Banking network, with 1425 branches, is the core strength of
Habib Bank. The network provides HBL with the largest diversified low cost deposit base of
any bank in Pakistan, and forms the basis for many of our other business lines: corporate and
investment banking and treasury activities. The network provides HBL with the largest
diversified low cost deposit base of any bank in Pakistan, and forms the basis for many of our
other business lines: corporate and investment banking and treasury activities.
o Commercial Banking:
Commercial Banking is making headway with improvement not only in terms of the business
figures but also in its ambiance. Renovation of is being carried out in order to give a
professional look to all the Commercial Banking Centers.
o Corporate Banking:
o International Operations:
STRENGTHS:
WEAKNESSES:
THREATS:
Banks are strongly affected by the political and legal considerations. This environment is
composed of regulatory agencies and government law that influence and limit various
organizations and individuals. Mostly these laws create new opportunities for business.
A banking market requires better consumer market in volume along with higher
borrowing power. The available borrowing power depends on:
Consumer income
Saving rates
Consumption patrons
Rates of interest
Budget deficit
Exchange rates
Cost of living
Inflation
SOCIO-CULTURAL ENVIRONMENT
A society is shaped by beliefs, norms and values. People in a society consciously and
unconsciously interact with:
Themselves
Others
Organization
Society
Nature
Following are the main factors. Which arise because of change in socio-cultural
environment?
TECHNOLOGICAL FACTORS
G.E, IOBG G.E, CPOD G.E, CPCS G.E, RBG G.E, CIBG G.E, ARM G.E, AGA HEAD
OF IT
HEAD OF HR HEAD OF FINANCE
VICE PRESIDENTS
GRADE I OFFICERS
GRADE II OFFICERS
CLERICAL STAFF
NON-CLERICAL STAFF
Members of Board of Directors:
AVP FINCON
Officer
VP Officer AVP
Officer
RM’s
Officer
IT Incharge
Officer
O/I Teasury-Officer
DEPOSIT DEPARTMENT
Bank deals in money and they are merely mobilizing funds within the economy. They
borrow from one person and lend to another, the difference between the rate of borrowing
lending forms their spread or gross profit. Therefore we can rightly state that deposits are the
blood of the bank which causes the body of an institution to get to work. These deposits are
liability of the bank so from point of view of bank we can refer to them as liabilities.
TYPES OF ACCOUNT:
1) CURRENT ACCOUNT:
In this type of accounts the client is allowed to deposit or withdraw money as and
when he likes. He may, thus, deposits or withdraws money several times in a day if he likes.
There is also no restriction of amount to be deposited or withdrawn. However, there is
requirement of minimum balance maintenance of Rs.5000/-. Usually this type of account is
opened by the businessmen. No profit is paid by the bank and no service charges are
deducted by the bank on current deposits account.
Eligibility:
i. All Pakistani’s Resident/Non-Resident, Individuals (Single-Jointly) Companies/Firms
etc. can open and operate the Account but he should be a corporate customer.
ii. Any Foreign National Individuals (Single-Jointly) having valid Resident Pakistan
VISA/Work Permit can open and operate the Account.
Features:
Account can be OPENED with Minimum Balance Rs.1000/- with no maximum limit.
Checking balance at any time during banking hours.
No profit is paid.
Statement of Account dispatched on request letter.
There is no restriction for withdrawals of amount and number of cheque.
2) Profit and loss sharing savings:
This type of account is for those persons who want to make small savings'. This type
of account is opened with a minimum deposit of Rs. 1000/- or the amount prescribed from
time to time. The profit is paid on these accounts on the minimum balance during a month for
the whole of that month. Zakat & other taxes are deducted as per rules of the government.
The requirements for this account is duly filled prescribed A/C opening FORM, Photo Copy
of National Identity Card (Resident Pakistani), two Passport size photographs with
Signatures/Thumb Impression (Resident Pakistani), Photo copy of Passport with Page
bearing Resident Visa of the Country where Pakistani Residing, two Passport size
photographs and signatures on A/C Opening Form for Non-Resident Pakistani with
Signatures/Thumb Impression etc.
Features:
Account can be OPENED with Minimum Balance Rs.1000/- or prescribed limit that
is announced time to time with no maximum limit.
Profit is payable at monthly subject to adjustment on deceleration of actual profit rate
declared every half year.
Profit is calculated on monthly products
Zakat will be deducted on valuation dates of account.
Profit is Paid/Credited in Account on half yearly basis in case of six monthly PLS
saving accounts.
Statement of Account dispatched on half yearly basis after posting of profit.
There is no restriction for withdrawals of amount and numbers of cheque.
3) PLS special notice deposit:
Special notice deposit is paid on daily product bases. Under this deposit scheme, a
deposit is received from the depositor under the condition that he will intimate the bank
before a certain period in case of withdrawals. There are two types of special notice deposit,
they are 7 days and 30 days notice deposits. The profit is paid on these deposits but it is
nearly equivalent to saving account rate that is paid on special notes.
Eligibility:
Features:
Pls khas term deposits are acceptable for a period ranging from one and half
year to five years in multiple of six months. In this regard the profit is declared from time to
time but will be paid only once at the time of encashment of receipt of maturity. Zakat will
be deducted only once at the time of maturity or before maturity.
All things will remain same, only one thing that is passport copy of the person will have to
provide to the bank. The logic behind this is that the bank insures the entry and the exit date
of the person in Pakistan. The person has to inform bank 15 days before entering in Pakistan
and the bank also send this information to State Bank of Pakistan. After getting this
information State Bank give instructions to bank about handling of not resident person’s
account.
SWIFT
REMITTANCES
DEMAND DRAFT:
Demand draft is a written order drawn by a branch of a bank upon the branch of same
or any other bank to pay certain sum of money to or to the order of specified person. It can be
issued to the customers as well as non customer against cash cheque and letter of instruction.
Demand draft is negotiable instruments that can be negotiating at any time before its
cancellation. Its Legal provisions are same as that of cheque.
Applicant
issuing branch
drawee branch
Beneficiary
A demand draft may be issued against the written request of the customer before issuing it
must be seen that the demand draft is in order.
The DD application must be scrutinized by the counter clerk in respect of following points.
TELEGRAPHIC TRANSFER:
Telegraphic transfer means the transfer of funds from one branch to another
branch of the same bank or upon other bank under special arrangements just like a
telegram. Telegraphic transfer is not negotiable and the funds are not payable to bearer.
Minor cannot avail this facility. In telegraphic transfer the bankers use secret codes. One
code is with issuing person and the second is with an other person. When they combine
the codes it’s become an amount that is called check. The payment is made after the
confirmation of the check.
Applicant
Drawing branch
Drawee branch
Beneficiary
PAY ORDER:
Pay order is an instrument through which payment can be made from one bank to
another bank. Pay order is meant for bank own payment but in practice they are also issued to
customers.
Following parties are involved in pay order:
Applicant
issuing branch
Payee
MAIL TRANSFER:
Mail transfer is not negotiable and the procedure of it is same with the procedure of
DD.When a customer request the bank to transfer his money from this bank to any other
bank of the branch of same bank in the city, outside the city of outside the country the first
thing he has to do is to fill an application form. In which he states that I want to transfer the
money from this bank to that specific bank by mail. If the customer is the account holder of
this bank, the bank will debit his account and the concerned officer will fill forms to make
the mail transfer complete.
If the customer is not the account holder of the bank, then firstly he has to deposit the
money and then rest of the procedure will be adopted to transfer his money.
SBP ERF Scheme
SBP had introduced this scheme to promote country ‘s export and to earn foreign
exchange. This scheme is operated through authorized dealers under SBP control.
This scheme had been amended by time to time.
Features:
Risk:
• If the exporter has been / will be defaulted the laps of funds of authorized dealers.
• Cheating or misuse of funds, SBP may cause to impose not any penalty but also
termination of bank employee or change of management or authorized dealer’s
reputation may destroy.
How to operate this scheme?
Part I Part II
Post shipment EE EF
Preshipment Party request statement statement
Party request letter L/C sales contract total realization it include
L/C sales contract Under taking & negotiation total
Undertaking DP note SBP financed realization
DP note Form D Form E & not but on which
Form D Commercial invoice availed SBP finance Form E SBP
Proof of purchase Bill of Lading finance
of raw material Form E availed not
include.
Part I:
This means after making a shipment the exporter prepare all relevant shipping
documents and evidence of shipment. The exporter contact his bank w.r.t to lodge the
documents and send a one set of shipping documents to export finances department to allow
him post shipment part I under SBP scheme.
Required documents at the time of finance allow to party
• D/Pnote
• Under taking on non judicial stamp paper
• L/C
• Party request letter
• Form D
• Commercial invoice
Penalties:
• Provide proof of shipment against relevant sales contract or L/C on which finance
obtain
• Substituted the old L/C or contract with new one after assurance that against new
L/C.
Restrictions/prohibitions
• Evidence of shipment submit to SBP within 180 days or within time period fixed by
SBP
• In case of substitution against new L/C or sales contract make sure that the exporter
has not availed pre or post shipment finance through any other bank.
• Non shipment
180 days *1000000* 0.37/1000=66600
• Short shipment
Finance amount 1000000
Shipment 800000
Short shipment amount =200000
Part II:
The authorized dealers provide this finance facility to exporters against their EE
statement. From the export earning during of one fiscal year the SBP sanction a limit of 50%
for the availment of the ERF part II. In the EE statement all foreign bills realized and
negotiated during a period of 01-07-04 to 30-06-05 are included in this statement.
Documents required at the time of sanction of finance
• D/P note
• Under taking on non judicial paper
• Party request letter
Days*amount of finance*rate(0.37)/day/1000
SBP calculate case to case basis daily product and match this with his EF performance, if
he avail excess Refinance from SBP and Business performance is short the SBP imposed a
short fall penalty.
Total short product*number of days*0.37/180
Demand finance :
Running Finance:
This form of financing was known as Overdraft when a bank customer requires
temporary accommodation, his banker allows withdrawals from his account and running
finance thus occurs. The accommodations generally allowed against collateral security. The
customer is in advantageous position in a running finance because he has to pay mark up
only on balance outstanding against him on daily products basis.
Pledge:
It is entitled to the exclusive possession of the property until the debt is charged.
Hypothecation:
When the property in the goods is charged as security of loan from the bank but the
ownership & possess
It is a post shipment finance facility which is provided by the banks to its clients
after providing the evidence of shipment, he contacts his bank to request him to lodge the
documents. He then provide the request letter with sale contract to grant him finance & this
department grant him finance (90% value of commercial invoice).
Imports and exports department:
Exports:
Imports and exports act 1950 have empowered the federal Govt to control the import
and export in Pakistan. Pakistan is developing country and like other developing countries its
imports exceeds than exports. To control this situation the registration of import and export
has been made obligatory under the registration order 1993. The authority of registration has
been given to export promotion bureau. No importer and exporter who has no granted
registration shall indent, import and export of any good into or out of Pakistan. The
requirements for getting registration are as under:
Application form.
Photocopy of I.D card.
Copy of memorandum and article of association (in case of limited company).
Ownership deed of office.
Fee payment.
Certificate of incorporation.
Applicant should regular taxpayer.
The major exports from Pakistan are surgical goods, sports goods hand noted goods, leather
goods, textile goods, etc.
Export procedure:
All the exports work under the imports and exports act that is changed by the state in
every year. When the importer send the L.C to bank in respect to import or when the L.C
comes to the advising bank from the issuing bank then the concerned officer allot the number
to the L.C and get registered. The concerned officer write down the name of issuing bank and
the party name in a register and intimate the party about L.C. the exporter after receiving the
L.C from bank will prepare the documents as per the L.C usually the following documents
have to be prepared by the exporter:
Bill of lading
Covering letter
E- Form
Bill of exchange
Packing list
Commercial invoice
Quota documents in case of quota country
Certificate of origin
Special custom invoice
The export form has four copies. The exporters and banks use it. Without it the
exporter can not make export. These copies are used as:
Usage of E- FORM:
E- FORM is an important document for export. It has its own importance such as this
form is used as a checker means it monitor that what things are going abroad and in return
what things we are getting. So it creates a check and balance on the foreign exchange. It
shows the total quantity and quality of the goods that is sending to another country. An E –
Form shoe the party worth that is very helpful for the party and the bank. Bank can create a
party limit for the credit on the behalf of it and a party can arrange a loan for its future
requirements from the bank. It shows the terms of payment by the importer and the delivery
terms by the both parties that is helpful in case of any discrepancy during the contact.
IMPORTS
Imports regulation:
Registration of importers:
A person who wants to approach the bank for importing goods from abroad, he
should have to get himself registered with the export promotion bureau under registration
of imports and exports act. He must fulfill the following conditions before getting himself
registered:
NIC NUMBER
NATIONAL TAX NUMBER
MEMBER OF REGISTERED ASSOSITATION
The person applying for the letter of credit must be registered with the EPB. The opening
bank verifies this registration or otherwise exemption. This is mentioned in the “I” form. The
importer also shows the valid certificate of an organization membership. A category pass
book is issued by the EPB for registered importer specifying his category. This book is
centralized by the centralized banks in the city. It is not necessary for the bank to hold the
original copy of the pass book of all the importers. But some times the importer gets L.C
from more than one bank so the bank have to hold the photo copy of this pass book. The
applicant can get the application from any branch of the Habib Bank Limited. However only
some branches are authorized to open L.C. That branches how are not authorized have to
contact with the authorized branches to open an L.C. The authorized branches in such case
require the certificate from the applicant branch that the required formalities are fulfilled and
the approval was obtained with required margin.
For establishment of letter of credit, the importer requests the opening bank with the
following documents:
Credit application form is an agreement between the bank and the customer on the
basis of which the letter of credit is opened. This form contains the undertaking of the
importer that get the documents from the bank at the mark up price. It contains the
following information:
All the goods imported under the documentary credit must always be insured. In
accordance with our country import policy, insured must be issued by a Pakistani
insurance company or the foreign company operating in Pakistan and such company must
be approved by the bank. Insurance covered based on the following:
4) Appendix B:
This Performa replaces the import license and is submitted along with L.C
application form duly filled in triplicate. It is conditional undertaking that the imports goods
are not banned, not smuggled. It is also an undertaking that if the bank is unable to arrange
the said currency the importer have to purchase it from other banks or from any other place.
It includes the details and description of goods, codes, class, type, source of import, country
of import, Performa invoice no etc.
5) “I” FORM:
This form is used at the time of retirement of documents against L.C established
earlier for reporting to the transaction to SBP through the bill of entry deptt. It has four
copies that is used as follows:
After scrutiny of the documents, IB-8 along with attached documents is put
before the corporate head for approval. If the amount of application exceeds the power of
the corporate head the branch concerned prepared the memorandum for the corporate
banking head for obtaining his approval.
In case party enjoying regular limit, the L.C is established without adopting the procedure
mentioned above. However the amount of L.C should not exceed the regular limit.
1) Revocable credit:
The letter of credit that can be cancel with the consent of importer, without
giving any prior information to the exporter.
1. Revolving Credit
2. Transferable Credit
3. Back to Back Credit
4. Green Clause Credit
5. Red Clause Credit
6. Clean Documentary Credit
7. Transit Credit
8. Stand by Credit
9. Sight Credit
Parties to a credit:
The applicant:
The applicant of the letter of credit is called the importer or buyer. The buyer requests
to the bank to open a documentary letter of credit in favor of the seller.
Beneficiary (exporter):
The person or body receiving the letter of credit from the importer that is opened in
favor of him.
Confirming bank:
The bank that on the requests of the issuing bank adds confirmation to a credit. It is
definite undertaking of the confirming bank, in addition to the issuing bank.
Negotiating bank:
It May or may not be the advising bank. An authorized bank that gives the value to
the draft for processing and payment.
Reimbursing bank:
Reimbursing bank is the bank, which on the behalf of the opening bank, honors the
Reimbursing claim lodged by the negotiating bank.
Modes of payment:
Importer’s risks:
Exporter’s risks:
Buyer’s obligations:
Payment of price.
License authorization and formalities.
Contract of carriage and insurance.
Taking Delivery at time.
Transfer of risk.
Division of cost.
Notice to seller.
Proof of delivery.
Inspection of goods.
Non-payment.
Delay in delivery.
Financing, how and against what.
Currency restrictions.
Regulatory restrictions.
Documentation and mode of settlement.
ICC rules and INCO terms.
FUNCTIONAL RESPONSIBILITIES:
Background:
The banking council of Pakistan was responsible for the recruitment, selection and
allocation of human resources. After the dissolution of the Pakistan Banking Council, the
Banking & Financial Services Commission of Pakistan is responsible for these activities.
Procedure:
Staff requirements are met according to the changing needs of macro environment
scenario and particularly the arising needs of the bank itself. A need analysis is conducted.
After assessing the human resources requirements and screening of the applications, most
probably, the suspects are invited for a written test.
Short listed candidates are called for an interview for personality and social appraisal.
Interviews are a mix of direct and indirect interviewing techniques and information required.
The selected candidates are sent for training of six months training from MDI’s.
The training is through the lectures regarding banking procedural guidelines and other
behavioral aspects. After the completion of training employees are allocated to different
offices. The effective management of people in an organization requires an understanding of
motivation, job design, reward systems, and group influence.
• Recruiting
• Retention
• Succession planning
• Risk Management
• Diversity in our workforce
• Management information
• Progressive compensation and benefits design and implementation
• Employee communications and relations
• Training needs analysis, program design and implementation
• Performance evaluation
• Work-life initiatives
FUNCTIONAL RESPONSIBILITIES:
Upon approval of credit proposal, the credit proposal and approval are handed over to
CAD. Now CAD determines the nature of documentation required and on receipt of same
ensures that all legal documents are obtained and are legally enforceable. After all these
activities it can release the facility for utilization.
MARKETING DEPARTMENT
The marketing department in HABIB BANK LIMITED is very strong. It is the main
source of gaining and maintains the customers that can give a large profit to the bank. There
are five relationship managers in Habib bank and every person is responsible for the credit of
his party.
CUSTOMER DEALING:
HBL corporate center only deal with the following categories of business:
Then the RM sends it to the authorities who accept or reject the proposal. If they accept the
proposal they announced a credit range for the party. At the end RM sends the proposal to
CAD deptt custody and check.
OR
12.5 million Whichever is less?
It is not more than 15 days if the customer wants to increase this facility he has to contact
with the head office.
1) fund based:
It is first type of credit facility. In this facility the bank actually provides fund to
customers.
2) non fund base:
Second type of credit facility that does not provides fun but only give the guarantee.
If the customer is unable to make the payment at maturity date then bank will be
responsible to make the payment.
In this account department I gain the particle knowledge about opening. This
department deals with opening account and saving account for its customer and all matters
regarding there off. The customer opening account/saving accounts can be categorized as
following:
1) individual
2) firm
3) company
4) trust
5) staff
6) others
OPENING AN ACOOUNT:
In order to open an account first of all the customer has to fill a form prescribed by
the bank. The person is required to bring some reference or introduction for opening the
account. Introducer may be a person who has an account with HBL.
Some important information regarding introducer e.g. the name and account number
of the introducer is written on the space provided on the specimen signature cards. Then in
order to find out whether he is a true introducer or not a letter is sent to him thanking him for
this introduction, so that any thing wrong may come into notice.
There are different requirement for different types of accounts and account holders.
An important thing is that the customer should have a corporate customer. The corporate
customer limit is 40 million and this branch always deals the corporate customer.
One person can open only one account in the same branch with the same category.
In the event of death of an account holder the credit balance will be transfer to the
heirs of the diseased individual account.
Services charges will be deducted periodically as prescribed from time to time on the
accounts that are under the limit of specific account.
Services charges are not applicable on that accounts that are prescribed as exempted.
A distinctive number will be allotted to the each account.
The bank can close those accounts that are under the minimum limit of the bank.
Any sum to be deposited in the account should be accompanied by paying in slip
showing the party account number and the name.
Account holder can only withdraw the sum of money by his own account by cheque.
Cheque should be signed by the account holder by the specimen given by the bank.
Post dated and defective cheque is not accepted.
If statement of account spoiled a new will be issued on cost.
Any change in the address should immediately communicate to the bank.
The account holder wishing to close the account must surrender the cheque book.
Account may be transfer from one branch to another same branch without any
charges etc.
DEPOSIT DEPARTMENT
“Deposit are the blood of a Bank”
I worked in this deptt for one week and learned that the acceptance of deposit is the
real source of income of a bank. Deposit Department is the backbone of commercial banking.
Deposit is often used to describe the money which customers of all kinds leave with the
bank. Deposit account can be defined as an account, which is opened to earn interest.
The term deposit is highly misleading. It is not something deposited for safe deposit box.
Bank deposit is not like that; when one brings currency to the bank for deposit the bank does
not put the currency in the vault. It may put small fraction of the currency in the vault as
Reserve but it will lend most of deposits to someone else.
The entire banking system is based upon borrowing. Like all banks, deposit department has
acknowledged its worth as the most important. Almost all the operations generated from the
deposit department and with due course of time reflect back to the deposit department. In
order to attract funds bank has introduced various types of deposit schemes that may suit the
need and tastes of a large number of depositors.
The procedure undertaken upon receiving deposits from the customer is as follows:
1) Examining the deposit slip to ensure that the name and the account numbers are clearly
indicated.
2) Counting the cash/cheque and agree the total with the amount on the deposit slip.
3) After that the pay-in-slip is validated for cash transaction/ transfer/ clearing transfer as
appropriate before the counterfoil a handed over the customer.
4) Cheque assigned by the director, partners, employees of a company, drawn in favor of
themselves and credited in their account in the bank are to be scrutinized
WITHDRAWALS:
An amount can be withdrawn by the cheque. The withdrawals can be made only at
branch where the account is maintained. All cash withdrawals will be made under account
holder’s full signature. One or two bank officers have to verify the signature.
In current account the bank does not offer any interest. We can deposit and withdraw
any amount during the banking hours.
The account holder requests for a new cheque book by presenting the requisition slip
along with the authority letter to the concerned officer. His signature was verified before
giving him the new cheque book. One or two bank officers have to verify the signature
REMITTANCES DEPARTMENT:
I work in this department for one week; this department deals in transfer of money
from one place to another or country by:
1) Demand draft
2) Mail transfer
3) Telegraphic transfer
In this department internees are advised to observe the working of transfer of money from
one place to another place or country by the above mode of transferring money. During my
stay in this department I observed that how demands draft be issued.
The group started textile waste business 20 years ago and established cotton fiber
recovery plant in Faisalabad. It is the parent company of the group. Annual production
capacity of the plant is approx. 150,000 tons. The raw material is procured mainly from open
market and a very negligible quantity is obtained from their two sister concerns
Qutub Textile Mills (Pvt) Limited is situated in Sheikhupura. The unit was
established five years ago with 1600 rotors. Rafiq Spinning Mills( Pvt) Ltd is utilizing the
production facilities of “ QTM” under lease arrangements.
.
3. RAFIQ SPINNING MILLS (PVT) LIMITED:
After successful operation of the above two projects, the group established
another unit on 11.11.1997 in the name of Rafiq Spinning Mills (Pvt) Limited, consisting of
3,000 open ended rotors. It started its commercial production in April 1998 and is showing
profits continuously. The Company has undertaken expansion of the unit by installing 16,980
spindles. The company through their own sources has imported the machinery. Having a
successful experience, now the company is once again going into expansion by setting up
15,480 spindles.
MEMORANDUM
RAFIQ SPINNING MILLS PRIVATE LIMITED
1. PURPOSE
This memorandum is being submitted for renewal of existing working capital facilities,
which are as under:
The company has been availing regular facility of PKR. 150M for cotton Pledge,
purpose being to purchase stock of cotton for full year requirements. Presently 16,980
spindles of the company’s Ring Spinning Unit are operative. Considering the current year’s
cotton prices the existing facility stands sufficient for the company; company has requested
for renewal of the same.
To cater Liquidity needs during temporary slump period, the facility for the
pledge of yarn bags to the extent of 10% of over all limit will also be available, however, the
facility will be subject to a margin of 25% for pledge of yarn.
The pledged stocks will be stored in Go-downs/open compound at mill premises
duly insured and under custody of our Macadam. The pledge shall be allowed at KCA rates
maintaining Margin of 10% and shall be released against cash payment.
Markup:
Mark up will be charged at Base Rate plus 1.5%, Base rate is defined as the 6
months “KIBOR” where KIBOR is defined as the Average rate, Ask side, for the relevant
tenor, as published on Reuters page KIBOR or as published by the Financial Markets
Association of Pakistan in case the Reuters page is unavailable.
LC Commission:
PRIMARY SOURCE:
Through sales proceed i.e. internal cash flows of the company. During FY 05,
company generated gross operating funds of PKR.28.962M.
SECONDARY SOURCE:
JPP first charge on all current assets of worth PKR.178M, our share stands at 70.00M,
which is to be enforced in case needed. Market value of current assets is 352.741M.
JPP first charge on all fixed assets of worth PKR 188 M, our share stands at 120M,
which is to be enforced in case needed.
The group is in cotton waste/spinning sector for last twenty years. Yarn produced by
company is utilized as raw material in towel industry. Buyers of company are located in all
major cities; however, most of the buyers are residing in Karachi. Company is pursuing the
policy of large number of buyers. Days receivables have been nominal over the years since
selling terms of the company are on cash basis, this truly indicates quality and penetration of
company’s products in the market. Major buyers of company are as under:
MAJOR BUYERS:
INDUSTRY ANALYSIS:
5. MANAGEMENT :
Mr. Muhammad Anwar is the Chief Executive and Chairman of the Company, having more
than 20 years of experience in the line of business beginning with the waste recovery unit. He
is responsible for the procurement of raw material for all the group companies.
Mr. Muhammad Siddiq is younger brother of Mr. Anwar is looking after Sales and
marketing of the Company. It is pertinent to mention that directors of the company have no
impressive educational back ground, yet they have rich experience of their line of business in
their credit.
6. FINANCIAL ANALYSIS:
Sales:
Sales of the company have been improving over the years and increased to PKR 985M
IN FY-04 from 568M in year 03 owing to increased & focused marketing efforts,
establishment of new local markets backed by enhanced production. While For the nine
months audited financials of year 05 sales stand at 737.774 M. Yarn.16 single, 20 single, 24
single, 40 single are the different qualities of yarn being produced by the company with
prices ranging from 3200 per bag to 5600 per bag.
Gross profit margin increased from 7% to 9.1% in year 2005 due to decrease in cost of
goods sold while cost of goods sold decreased mainly due to substantial drop in prices of
cotton in year 2005 in addition to this, Lower power & fuel consumption cost is one of the
reasons supporting cost efficiency and effectiveness, consequently leading to higher gross
profit margin in year 2005.
Operating profit:
Operating profit increased from 15.214M (1.5%) in year 04 to 24.786M (3.4%) in year
05 mainly due to carry forward impact of lower COGS happened due to lower cotton prices
during the year under review.
Net margin:
The profitability shown in the financials is tax tailored, actually their net margins fall
between 5 to 6 %. There is no significant improvement in net margin, in terms of percentage
because of high financials cost during the year, as the same has improved to 0.5% from
previous 0.4%.
Debt service coverage ratio stands at 1.5x & 1.2x in year 04 and 05, the main reason
for relatively lower Debt to service coverage is lower profitability shown in books which are
more often tax-tailored.
BALANCE SHEET:
Days payable 5 3 3
LIQUIDITY:
The current assets increased from 198.582M In 04 to 383.891M in 05, this increase
in current assets is mainly associated with substantial rise in cash & marketable securities and
inventory. Cash and marketable securities were built to accommodate banks for their June
closing figures. In addition to this the amount of cash also includes PKR 74M lying in
escrow account of Bank Alfalah as sponsor’s equity because the company is under process of
expansion for which they have also gone for consortium finance from BAL & ABL.
Sufficient stock at lower prices is inevitable for profitability in textile industry; prices of
cotton went down in early 2005 which prompted the buyers to stock cotton in order to
maximize gains.
Receivables have been nominal over the years, which highlight company’s policy of sales on
cash basis. Receivables stand at 7.566M in year 05 as compared to 16.361M.
The current liabilities increased from 244.565M in 04 to 342..120M in 05, this increase is
mainly due to increase in short term debt (Exposure of Working capital lines from banks) and
this factor is very much obvious due to increase in company’s operations. More precisely, the
short term borrowings were raised by PKR 100M, during the year under review, and the
same has been invested in inventory which increased by PKR 100m fully complying the
matching principle requirement.
LEVERAGE:
The company has been low leveraged over the years with leverage standing at 1.8 x
& 2..7x in year 04 & 05 respectively, Total Net Worth increased during the period 03-05
from 172M TO 180M due to increase in retained earnings over the period. Paid-up-capital
stays same at 150M during the period 03-05.
CASH FLOW:
During the year 2005, gross operating funds generated were PKR 28.962M. The
company generated net operating cash deficit of PKR 73.917M during the year. The
operating needs increased by 93.683M owing to growth in sales, on the other side operating
sources were reduced by 9.196 M because of company’s policy of replacing costly market
credit thus rendering increase in working capital requirements by 102..879 M. the inventory
requirements increased by 99.771M which were financed thru increase in short t term
borrowings by PKR. 99.548M and remaining through gross operating funds generated.
CAPEX of PKR 12 .383 was made during the year, which was financed thru gross operating
funds generated of PKR 28.962M.
Projections
The company has projected its total sales to be around 1034M by 30 thJune
2006.These projections are supported by the fact that their sales by the end of 31stDec
2005(from July01, 2005 to Dec31, 2005) were 503.479M. This year company has also routed
export business of 12M to Korea. Net fixed assets are projected to grow around 614M since
company is intending to undertake the expansion project (New Ring Spinning) in the year
under projection. On the source side the long term liabilities are projected to be around
434M, the company wants to finance the proposed project thru Directors loan (222M),in
addition to this the company has also gone for the syndication( Long term senior Debt of
PKR 210M) with BAL & ABL.
Gross operating funds generated are projected to be around 33.747 M. Total Non-Operating
needs in year 06 will be 366 M due to increase in proposed CAPEX, on the other hand the
Non-operating source side will increase by 289M to finance Non-operating need.
Mitigating Factors
1. New spinning unit will enable the company to enjoy economies of large scale
production, reduce costs, improve quality of their products and enhance their
productive efficiency.
2. GOP policies are comparatively stable and a separate ministry for textile has
been established with a leading Textile figure being in chair.
3. The company has always emphasized on sheer commitment for quality
improvement to capture the market.
4. Regarding risks associated with size / quality of cotton crop, they have
sufficient liquidity (due to availability of required credit lines) which allows
procuring cotton at the right time and competitive prices.
5. Experienced technical and operational staff to ensure smooth operation of the
Unit.
6. The company enjoys the edge of comparatively cheap raw material and labor
force while maintaining strict quality measures at par with international
standards. New spinning unit will enable the company to enjoy economies of
large-scale production.
8. THIRD PARTY INFORMATION:
The sponsors enjoy excellent relationship with banks and are highly regarded for
their reputation of meeting their financial obligations on ti
Rafiq is one of our valued clients with clean history of relationship spanning well
over four years. Keeping in view sufficient equity injection, comfortable level of leverage,
momentum of growth in sales and a team of professionals to look after the technical,
operational & marketing aspects of the business we should enhance our relationship with the
customer while opting the “Growth strategy”.
RAFIQ has become a creditable name in the textile industry of Faisalabad. In a bid
to prepare itself for the challenges / opportunities of the barrier free trade Textile Vision
2005, their planned spinning unit will help them reap the benefits with competitive edge of
cost effective, quality products. The company has already started exporting quality yarn to
various buyers in the region. We may improve net return on funded facilities from the
relationship by rationalizing the credit portfolio in accordance with their financial
requirements as proposed. In view of the above, we recommend the proposal for approval.