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Faysal Bank Ltd.

BANKING SECTOR IN PAKISTAN


WHAT IS BANK?
In Simple words we can say that bank is a pipeline through which money moves
into and out of circulation. Bank accepts deposits and repays cash to its customers
on demand. The bank borrows money at a lesser rate of interest and lends it to the
borrower at a higher rate.

HISTORY OF BANKING IN PAKISTAN


At the time of independence, there were 487 offices of scheduled banks in
the territories now constituting Pakistan. Following the announcement of
independence plan in June 1947, the Hindus residing in the territories now
comprising Pakistan started transferring their registered offices in Pakistan,
transferred them to India in order to bring a collapse of the new state. By 30 th June
1948, the number of offices of scheduled banks in Pakistan declined from 487 to
only 195.

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Faysal Bank Ltd.

BANKING IN PAKISTAN
Pakistan has indeed unique banking history commencing as were from scratch at
the time of Pakistan of this subcontinent. However it soon comes over its extra
ordinary banking problems and by grace of Allah we have a stable banking sector.

INTRODUCTION
Faysal Bank Limited (Bank) was incorporated in Pakistan on October 03, 1994
as a public quoted company listed on Karachi & Lahore stock Exchanges. The six
Pakistan branches of Faysal Islamic Bank of Bahrain E.C. amalgamated with the
Bank when it commenced business operations effective January 01,1995.
The year 2002 is the 15th year for Faysal Bank serving the Pakistani economy and
market. Similarly, Al Faysal Investment Limited was incorporated in Pakistan in
1991 as the investment arm of the group and make valuable contributions in the
public and private sectors based on Shariah approved modes of funding.
As of January1,2002, the two entitles of the group in Pakistan, Faysal Bank
Limited and Al Faysal Investment Bank Limited, merged into one and today only
Faysal Bank Limited remains as a larger, stronger and much more versatile
institution among private banks in the country. In fact it is amongst three largest in
terms of quality, which after the merger stands at over Rs.4.0 billion. The total
balance sheet size of Faysal Bank after the merger is in excess of Rs. 40 billion

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Faysal Bank Ltd.

SHAREHOLDERS
The Bank has been incorporated with an authorized share capital of Rs. 1.5 billion
of Which Rs.1.1 billion is issued and paid-up. As 31st December,1995 the Bank
share capital was held by:
Faysal Islamic Bank of Bahrain E.C.(FIBB) including its nominee directors
NIT, general public and employee
FIBB is a Bahrain based bank; established in 1982 and is a subsidiary of Dar AlMal Al Islamic (DMI), Geneva with H.R.H.Prince Mohammad Al Faisal Al Saud
as its chairman

BRANCH NETWORK
The Bank has seventeen branches, five at Karachi, one at Quetta, three at Lahore,
one at Faisalabad, one in Multan, one in Sialkot, two in Islamabad, one in
Rawalpindi, one in Peshawar, one at Mirpur Azad Kashmir

LOCATION MULTAN BRANCH


Faysal Bank Ltd. Multan is located at 66-B Abdali road The Bank is very close to
PIA office

STAFF OF THE BRANCH


There are sixteen employees in Multan branch.
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Faysal Bank Ltd.

MISSION STATEMENT
OVERALL VISION
Faysal Bank derives its mission statement from its principals Shamil Bank
Bahrain E.C and its holding company DMI Trust. The overall mission being:
The introduction of a just and equitable financial system by being a world class
multi-purpose financial institution, providing a range of specialized services,
working on Shariah principles.

VALUES
Training the spirit of Shariaa into modern financial products and services
Maintaining a high reputation for prudence in the financial community
Developing operational

infrastructure, system architecture and business

strategies focused to customer needs, with whom the bank endeavors to


share its success
Practicing the culture that each staff member is not a mere personal number,
but part of one family, treating each other with respect. The management
insist on quality training and management development programmes
Reflecting high standards of integrity, propriety, goodwill and teamwork in
its conduct, within the family and its marketplace.

HISTORY AND BACKGROUND


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Faysal Bank Limited as incorporated as a public limited company under the


Companies Ordinance,1994 on October 3,1994 in Lahore vide Certificate of
incorporation No,LO7391 of 1994-95 with an authorized capital of Rs.1,500
million ordinary shares of RRRs.10/-each.The Ban has been established by Faysal
Islamic

Bank

of

Bahrain

E.C.,pursuant

to

the

federal

Government

permission/sanction letter no.F 8(23) Bkg.IV/92-5443 dated April 7,1993 ,as


amended, for establishment of a commercial bank
The state Bank of Pakistan-SBP, vide its letter no . BRD (NBFI)676/625-E-93
dated September 16, 1993 has also agreed in principle to the setting up of the Bank
in term of the governments aforementioned permission letter. SBPs said letter
also contains interalia, its agreement in principle for they merger (amalgamation)
with the Bank of the existing branches of Faysal Islamic Bank of Bahrain E.C.
(hereinafter referred to as FIBB- Pakistan Branch) subject to meeting with the
requirements of the law, in particular section 48 of the Banking companies
Ordinance, 1962 & on the condition that the transfer of assets &liabilities shall be
on the basis of the break-up value or net- worth of the FIBB-Pakistan Branch as
per the books. The FIBB- Pakistan branch will merge with the Bank on a going
concern basis.

The entire under taking of FIBB in Pakistan scheme of amalgamation are as


follows:

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Faysal Bank Ltd.

The entire undertaking of FIBB in Pakistan, including all it s assets &


liabilities & all the rights & obligations, etc as at the effective data (data of
approval of the scheme by the state Bank), shall with out any future act, action
or deed, stand transferred to, & vest in the Bank . As a consequence, the FIBB
Pakistan branch shall stand merged with the Bank.
A consideration for the transfer, the Bank shall pay to FIBB, a sum equal to the
non-worth of its branches in Pakistan, as per the books, as on the
amalgamation date, the net-worth will be certified by the auditors of FIBBPakistan Branch.
Notwithstanding the effective date, the cut-off date i-e the date as of which the
amalgamation of FIBB- Pakistan Branch with the Bank shall be deemed to
have taken place as envisaged to be the close of business on December 31,
1994.
After approval by the shareholders of FIBB &the Bank the scheme would be
presented to the SBP for approval in terms of section 48 of the banking
companies ordinance, 1962.
Bank was incorporated as a public limited company. Its shares are quested in
Pakistan. 60% of the capital is held by Faysal Islamic bank of Bahrain E.C &
40% by the general public. The Faysal Islamic Bank of Bahrain E.C merged
into the Bank when it commenced business operations on January 02, 1995.

CONFORMITY TO ISLAMIC SHARIAA

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Faysal Bank Ltd.

The Holy Quran outlines for Muslims a complete code of life for dealing
individually or collectively. This is future amplified by saying and practice of Holy
Profit(May be upon him) From these guidelines , an Islamic economic system can
be elaborated upon, aimed at creating a socially, economically and politically
viable and just environment supporting the universal well being of humanity
In this context all functions of the bank are performed in strict adherence to the
principles of Islamic Shariaa. In order to ensure such conformity of Shariaa, the
Bank operations are checked and monitored by its Religion Supervisory Board
to whom the management reports periodically. In case of new operations and
activities prior approval of Religious Supervisory Board is invariably obtained by
the bank management.
The Religious Supervisory Board of the bank itself comprises eminent scholars of
Islamic Shariaa from Bahrain, Egypt, Saudi Arabia, Turkey, and Pakistan
possessing in-death knowledge of the conditions in which the Bank operates. The
Groups Religion Board, composed also of many internationally renowned Islamic
Scholars, provides advice from time on issue that pertain to Group level
implementation

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Faysal Bank Ltd.

GROUP OBJECTIVES
1. To put before all Muslims, contemporary Islamic financial services, helping
to executive their financial dealing in strict respect of the ethical individual
and social values of Islamic Shariaa, without contravening the heavenly
imposed prohibition of dealing in riba (interest or usury).
2. To serve all Muslims communities in mobilizing and utilizing the financial
resources needed for their true economic development and prosperity with
the principles of Islamic justice assuring the rights and obligations of both
the individual and community .
3.

To serve the Ummat Al Islam and other nations by strengthening the


fraternal bonds of common belief in Allah through mutually beneficial
relationship for economic development and enhanced environment for
peace.

The above objectives are to be fulfilled in economically viable conditions of


profitability, Insha Allah, for clients and shareholders. To implement these
objectives, the Group has embarked on a long term plan to establish a worldwide
plan-Islamic network of Islamic financial institutions comprising banking
(massacre), investment, takefol (insurance), services and business development
companies.

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Faysal Bank Ltd.

ACTIVITIES OF THE BANK


Its activities include act as a manager, on a trustee basis of a series of Modaraba
investments funds and private portfolio investments accounts in accordance with
Islamic laws and principles particularly with regard to the prohibition of receiving
or paying interest.

SOUND MANAGEMENT
Its sources are largely due to the management style and polices of senior manager.
It sees Modaraba syndications as a major growth area and there are possibilities
that the bank will arrange such syndications for corporations and companies in
these countries especially in the high growth economics of South East Asia in
particular Malaysia and Indonesia.
There have been suggestions that this type of specialist facility could be intended
to other regions such as the Middle East, North Africa and the Muslims Central
Asia Republics where commodity export and import finance is in big demand.

SYSTEMS DEVELOPMENT
Faysal bank ltd. (FBL) provides a unique mix of services to its customers. That is
why off the shelf software packages and third party vendours are not successful in
providing a complete range of software packages to fully meet the operational
needs of its wholesale and retail banking operations, customers services support

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Faysal Bank Ltd.

and sophisticated MIS. The Bank has succeeded in completing in house


development of software for meeting all of its requirements. This results in
interlining all the operational units of the Bank to allow fast exchanges of data and
information.

PURPOSE OF OPERATIONS IN PAKISTAN


The following are the main objectives of the establishments of FBL in Pakistan.
1. To extend Islamic financial services to the people of Pakistan.
2. To enhance trading relations between Islamic countries.
3. To support market opening in Pakistan by diversion and mobilization of
surplus funds available from within and from other Islamic nations.

SERVICES OFFERED
FBL offers a wide range of banking services to public and private sector
corporations, partnerships, individuals, professional, and expatriate Pakistan
working abroad . These services include:

Deposits
-

Current Accounts

Profit and loss sharing deposit

Saving account

Call/notice/term deposit accounts

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Foreign Currency
-

Current and saving accounts

Call/notice/term deposit accounts.

Documentary Credits/Guarantees
-

Import letter of credit

Negotiation and collection of export documents

Issuance of letters of guarantee

Performance bonds, etc.

Financing

Short Term
-

Modarba (Financing resale of goods)

Working capital

Short/medium term
-

Syndicated financing

Medium/long term
-

Modaraba

Moshakara

Ijara

Other Services

Remittances
Demand drafts, pay orders, telegraphic and mail transfers.

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Foreign exchange bearer certificate


NIT units.
Foreign exchange and travelers cheques.

SOURCES OF FUNDS
The banks main sources of funds are:
a.

Demand deposits (current accounts balances)

b.

Investment deposits (funds under management)


Within theses two basic categories, the bank is able to offer
differently structured accounts to

provide a range of deposit series

such as current, saving, call term, modaraba etc.

STRATEGIC INITIATIVES
Significant risk management initiatives have been taken to ensure ongoing health
of the banks financing portfolio. These initiatives include risk rating of the entire
portfolio on a predetermined risk scale, monitoring of industry concentration,
classification of credits against State Bank of Pakistan as well banks own in house
developed guidelines. A Risk Assets Review Unit (RAR) has also been
established. PARs primary responsibility is to perform independent audit of the
Banks financing and investment portfolio on an ongoing basis.

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CORPORATE AND INVESTMENT BANKING


Corporate banking business of the bank has been streamlined along target
marketing approach. As a starter, cluster of industries strategically important to the
economy and the country have been identified for doing business with. This target
market identification effort is supported by full length studies of theses industries.
Target Market criterion and minimum Risk Acceptance Terms have been
established. Total portfolio has been scanned against these standards. As a result
the Bank customers base is composed mainly of top tier namess and the exposure
well diversified in all the strategic industries.
On the investment banking side, Faysal has already been involved in a few
significant roles it was one of the 9 sub underwriters of the PTC voucher sale last
year, it is one of the main underwriters of the trend setting Rs.500 million TFC
issues for Sui Southern which is due to be floated in the couple of months, and just
recently it has been declared, in conjunction with Natwest Market and Shoaib
Capital, as the lower bidder for the financial advisor ship position to the
privatization of KESC.
Using its big global network if contacts, including a strong position in the Middle
East, Faysal intend to further develop this side of its business.

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CONSUMER BANKING
Faysal Bank continues to strengthen its position in consumer Banking. While
extending quality service to retail customers, the Bank Offers attractive local and
foreign currency deposit schemes. FBL
Launched its first branded liability product Rozana Munafa Business Account in
July 1995, targeted towards large corporate and personal business. The Bank has
also redesigned and refurbished most of its branches, having a consistent identify
in terms of design, dector and colour. FBL realizes the importance of customer
focused services, having commenced Evening Banking at all nine branches.
Personal Services Centers have also been established at most of the retail
Branches Where Personal Service Officers are available to provide personalized
service to individual customers and business. The Bank Plans to launch ATMs and
telephone banking as a self service banking Concept available 24 hours on a
countrywide basis in the near future. Priority banking for up scale customers will
also be introduced during 1996.

HUMAN RESOURCE
Hiring and retention of talented and qualified personnel will
Continue to receive priority attention. The recent trend in the financial sector calls
for specialized training in the fields of credit, operations transactions banking,

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treasury and corporate finance. The bank is committed to providing the best
needed training to its staff and to upgrade their skills.

SHARIAS IMPLEMENTATION
Bank continues to meet the liquidity requirements by making investments in
Shariaa compatible instruments. Steps have been taken to bring operations of the
bank in greater conformity with Shariaa operations are under review to evaluate
their compatibility with the shariaa and to refine them in consolation with
Maulana Mohammad Taqi Usmani, Deputy Chairman, Islamic Fiqah Academy
(OIC).

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BOARD OF DIRECTORS
H.R.H Prince Mohamed Al Faisal Al Saud

Chairman

Mr. Farook Bengali

President & CEO

Mr. Khalid Abdulla Janahi

Director

Dr.Said Saad Al-Martan

Director

Mr. Mahmood A. Faruqui

Director

Mr. Nasir Ali shah Bukhari

Director

Mr. Ziad H.Rawashdeh

Director

Mr. Tariq Iqbal Khan

Director

EXECUTIVE COMMITTEE
Mr. Khalid Abdullah Janahi

Chairman

M. Farook Bangali

Member

Mr. Ziad H. Rawashdeh

Member

MANAGEMENT
Mr. Farook Bangali
Mr. Khalid Tirmizey

President&CEO
Country General Manager,
Commercial Banking

Mr. M. K. Hoti

Country General Manager,


Investment Banking
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Mr. Bashir A. Sheikh

General Manager Commercial


Banking Central

Mr. Mohammad Saleem

Head of Country Operations


& Information Technology

Mr. Ahmed Kamran

Regional Manager, Corporate


Banking

Mr.Mansoor Hamdani

Head of Internal Audit

Mr. Arif Hasan Khan

Head of Human Resources&


General Services

Mr. Ejaz Rahim

Deputy General Manager,


Investment Banking

Mr. Zubair Gilani

Area Manager, Investment


Banking North

Mr. Hasan Imam

Country Risk Manager

Mr. Mohammad Iqbal

Head of Finance

Mr. Mohammad Siddique Memon

Company Secretary & legal


Advisor

Mr. Sohail Nawaz

Area Manager, North

Mr. Richard Rath

Area Manager, Southern Branches

Mr. Saleem Shafi

Head Corporate Communications

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COMPANY SECRETARY & LEGAL ADVISOR


Mr. Mohammad Siddique Memon Vice President

AUDITORS
A. F. Ferguson & Co.

Charted Accountants

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ORGANIZATIONAL BEHAVIOUR
ANALYSIS OF ORGANIZATIONAL BEHAVIOUR
Some of the characteristics of the bureaucracy are present in the organizational
structure of FBL. These include
1.

Positions arranged in hierarchy.

2.

?In all the departments, excluding the Credit Marketing and Accounts,
comparatively higher degree of the set procedures and rules exist.

VERTICAL ANALYSIS
1. Centralization Versus Decentralization
Geographical
FBL has its branches in main cities and countries of the world show that it is
geographically decentralized.
Functional
All the seventeen branches of FBL have their own personal Departments. But, at
the same there is a personnel Departments of all other branches in Pakistan
Within Multan branch, there is centralization to a greater extent. Up to the level of
Assistant Vice President and Grade 2 officers (only in the Credit Marketing
Department), there is decentralization and there is too within the rules, polices, and
procedures of the State Bank of Pakistan and Head Officers of the Bank in
Bahrain.
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2 Flat Versus Tall Structure


The structure of the organization is tall with a few members at each level. As a
result there is a narrow span of control and supervisors have close control over
their subordinates

HORIZONTAL ANALYSIS
1. Departments
FBL has a functionally departmentalized structure. As the organization chart
shows, various functional departments are further departmentalized on the basis of
their services.
2. Line and Staff Concept of Organization
Persons at the management level (Senior vice President, Assistant Vice President,
and Regional Vice Presidents) are in line while others persons are in staff.

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INTER SE RELATIONSHIPS
RELATIONSHIP AMONG THE EMPLOYEES OF ONE
DEPARTMENT
Relationships among the employees are congenial and friendly. They take personal
interest in each others joys as well as problems. They like to share the work of
each other. Whenever an individual comes in the morning he, before going to his
seat, visits other departments to keep himself in touch with other persons in the
bank.

RELATIONSHIP AMONG THE EMPLOYEES OF


DIFFERENT DEPARTMENTS
All the departments of bank are interrelated. They depend upon one another for the
proper functioning of the among. All the departments keep full information
of their department required it. This resulted in connecting all the
departments of the bank like a chain, whose strength depend upon the
strength of individual circle of the bond upon them.

RELATIONSHIP BETWEEN EMPLOYEES AND THEIR


SUPERVISORS
Supervisors of FBL are the supporters, consultant, and above all the teachers of
their subordinates. Whenever any worker faces any problem due to any reason, his
supervisor is always ready to help him out, Additionally, the Open Door Policy
relations between the managers and their subordinates.
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GROUPS
Employees working in one department or related departments e.g. Credit
Marketing, Credit Administration, are more close to none another because
according to George Homans theory, the more numerous will be their interactions,
and stronger will be their sentiments.

COMMITTEE ORGANIZATION
In FBL the committees are present at the top levels of the management pyramid.
Theses committees include:
1. Branch Credit committee (BCC);
This committee exists at the branch level. Every branch of the Bank has its own
committee. The functions of these committees are to approve the credit up to a
certain limit which has been allocated are to them by the Head Office in Bahrain.
2. Regional Credit Committee (RCC)
This committee exists at the regional level.

JOB DESIGN
Job design is an important work area for work motivation and the study of
organizational behaviour. It includes the specification of the tasks and activities
associated with a particular job.

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JOB ROTATION
Management of FBL always try to adopt the modern management practices to
improve further the efficiency its human resource. It continues to design new
methods to make the job more interesting and acceptable to the workers.

JOB ENRICHMENT
This concept states that the job must be designed to provide opportunities for
achievement, responsibility, advancement, and growth. The concept of job
enrichment is very much applied in FBL. Because of the introduction of computer
technology, the prospects of job enrichments has further increased.

GOAL SETTING
Goal setting is an effective tool for the practice of human resource management
and an overall performance system approach in the form of management by
objective (MBO).

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MANAGERIAL POLICIES
PRODUCTION FOR THE FORMULATION OF POLICIES
FBL. Policies are formulated at the three levels discussed below;

1. AT HEAD OFFICE LEVEL


At the head office (in Bahrain level policies are formulated to the BOD. A meeting
is called upon between the members of BOD and the CGM from regional Head
offices. Together they formulate the policies in the light of the main objectives of
the Bank. Moreover, they also consider the economic, political, geographic, and
social circumstances of each country analyzing with the Rules and Regulation of
FEDERAL banks of these countries.

2. AT THE REGIONAL HEAD OFFICE LEVEL


At the Regional head office (for example in Karachi, the CGM calls upon the
meeting of all the SVPs of theses meetings, the CGM put before SVPs all the
polices agreed upon by the BOD and religious Board and, then, they together
formulates the polices to be implemented within Pakistan.

3. AT THE BRA NCH LEVEL


At the branch level SVPs of each branch call upon the meetings of all the
managers in the branch and communicate to them the polices agreed upon by the
BOD and at the Regional Head Office. Along with the implementation of the
polices decided in Regional Head Office, SVPs and the managers formulate
polices at the branch level.
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IMPLEMENTATION OF POLICIES
Managers, officers, and workers, at each level, try to follow the polices set up at
various levels. Any failure in following up the polices are immediately brought to
the notice of the corresponding management along with the reason, either proposes
solutions for the implementation of polices or makes amendments in the polices, if
reasons for non-compliance are genuine.

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TYPES OF MANAGEMENT POLICIES


The following main types of managerial polices have been discussed here:

1. Personnel Policies
Personnel polices cover the major problems of providing and maintaining an
efficient work force.

2. Marketing Policies
Marketing polices deal with the problems of planning for sales activities.

3. Financial Policies
Financial polices are concerned with the problems of providing and handling
capital That is required for the business.

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PERSONNEL POLICIES
Banking is a business of trust. It is only on the basis of trust that people deposit
their money and other valuables in the bank. Moreover people also believe that
their money will be best taken care of.
The image and efficiency of the banking is conditioned largely by the quality and
expertise of banking personnel. Fresh university graduates are selected and
imparted theoretical and practical training. On completion of practical training,
bank managers absorbs the trainees in their organization

THE TOOLS OF PERSONNEL MANAGEMENT


Selection of Employees
Educational background of the persons wishing to get job in FBL are primarily
taken in to consideration. Integrity of the person is also important. For this
purpose, references are required so that the person giving the references can be
contacted in case of any lose to the institution by that person. Bank policy is to
take such references in writing.
At the lower level, Bank has mostly hired young staff and fresh graduates.
However, some employees have also been transferred from other institutionsboth banking and non banking. At the management level, mostly experienced staff
is working and has been hired from other banking institutions.

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Individuals, once selected by the Selection Committee, are kept under observation
in the beginning. During that period their capabilities, IQ, ability to do various
jobs, behaviour and

many other things are checked. When selection committee

gets satisfied with their performance their appointed as training officers. This is
one step before the selection of the individual as an officers.

Selection Criteria
Bank management is very particular while recruiting and including in their work
force. The suitability of the individual is always checked by the method shown
above in order to avoid any complications in the future. Before recruiting any
individual management makes sure that the person has capabilities to work for
achieving targets of the organization. It is because of this policy and practice
employed while recruiting the employees that till now, no man has been asked to
quit the job. However, Bank does not stop the employees from leaving the jobs
themselves if new job is more suitable to them.

PROMOTION FROM WITHIN THE ORGANIZATION


Bank, as discussed previously, is very choosy for hiring employees. Fresh
graduates hired at the lower level are trained to move up various levels in the
organization. They are developed for higher jobs and higher responsibilities. Till
1989, all the officers working at the upper levels have been promoted from within
the organization.

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Training
Training has become a pre-requisite for advancement in the profession. In FBL,
employees are provided training according to the requirements of the individuals.
Training programmes attended by the Bank employees are mostly sponsored by
Pakistan Institute of Management and Institute of Bankers in Pakistan.
Management accesses the development and training needs of each individuals and
enrolls the employees accordingly. Along with these formal training programmes,
employees are given informal training regularly by their immediate superiors
according to individual needs and deficiencies. In short, training is a continuing in
FBL.
If the people are hired from outside for higher jobs and the already working
employees remain working in their grades, it becomes difficult to maintain the
desired levels of performance. Moreover, such a practice also results in creating
unrest among the employees, and as a result the cannot wok up to their maximum
capabilities.

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COMPENSATION FOR OVERTIME


In banking business employees have to clear their wok daily. Whenever there is
extra work in a day, it has to be cleared up the same day so that work can be
started for fresh next day. For this purpose, employees some times at the end of
month or at the end of year have to do extra work. It is job of Selection
Committee to see what is the level of extra work done by employees and from
time to time they compensate them according to the contribution of the employees.

PROCEDURE FOR GETTING SALARY


All the employees of the bank have maintained an account with the Bank. In the
beginning of each month, the accounts department credits the salary in the
accounts of the individuals.

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ARRANGEMENT FOR WORK


1. HOURS OF WORK
Timing of the Job
9.00 a.m to 5.00 p.m

With one hour break for lunch


and Zuhar prayer

Days:

5 days a week

2. VACATIONS
Causal leaves:

15 per anum

Privilege leaves:

30 per anum

Privilege leaves are given to the employees for relaxation and recreational
purposes after continuous work. Such leaves help the employees in mental and
physical relaxation. During one month of privilege leaves, employees are also
given the pay for that month so as to compensate for the recreational charges he
has to bear during that period.
Employees are encouraged to take the leaves allowed to them by the Bank so that
they can get some time out of their busy routines. This practice has shown that the
employees feel more fresh, enthusiastic, and energetic when return to their jobs
after vacation.
Medical leaves are also provided to the employees if an employees is not feeling
fit and needs for getting well properly. Bank also reimburses the medical expenses
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and their dependents i.e. Bank pays 100% medical free payables on the behalf of
its employees.

3. WORKING CONDITIONS
Working conditions both physical and environment are very crucial for employees
working in any organization since it is the organization where they spend most of
their day. Working conditions can both motivate and de-motivate the employees
depending upon whether proper or improper working conditions have been
provided. From the environment maintained in, even a person FBL who enters the
Bank for the first time can realize that the management of Bank is well aware of
the important impact of working conditions on the efficiency and morale of
employees.

4. SAFETY
Safety is the main concern for manager, officers and employees. The money and
other valuables in vaults and lockers in banking business are more then any other
business. Therefore, management of FBL has taken special measures to safeguard
the life and property of both their employees and the customers. Many of these
measures were decided and taken at the time of the construction of the building
while others short term decision were taken after the bank started proper
functioning. Some of the salient features of such safety measures are discussed
here:

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a)

The walls of the lockers area and the cash vault are made up of concrete
which makes them non-drillable. Moreover the lockers and the vault are
made up fire-proof steel. These measures help preserve the loss and cash
either by some human being or by an accident such as fire.

b)

Two gunmen have been appointed at the entrance who make sure that no
suspicious person enters the Bank. These are responsible for safeguarding
the life and property of Bank s employees and customers. One guard is
also present at each floor. Shifts of guards change with time. After banking
hours, one guard remains in the Bank over night.

c)

Doors are made up of heavy wood so that it becomes difficult for a running
person both to enter or leave the Bank. This makes sure that in case of
robbery, the person to open the door quickly.

d)

In order to safeguard against fire, special alarm system has been installed in
the Bank. Smoke detecting instruments, present on the roof, start ringing
the alarm bell whenever they detect smoke. In case of fire, this system will
help saving the life of the persons in the Bank who can leave the Bank
immediately through special exit door.

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5. PHYSICAL CONDITIONS
The following physical facilities have been provided by the Bank:

a) Light
There is a proper arrangement of light in the Bank. The whole bank is illuminated
with lights, which makes the working conditions pleasant. Moreover, there is also
suitable arrangement for daylight in the entire building.

b) Temperature
Central heating/cooling system ensures the moderate temperature necessary for
proper working of the employees.
Some other facilities provided to the customers include: calm and quit working
environment, modernly designed washrooms , fully carpeted.

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MARKETING POLICIES
SERVICES POLICIES
Introducing a Service in the Market:
FBL considers multitude of factors while introducing a new service in the market.

a)

The primary aim and objective and the basic reason of establishment of
the Bank is the promotion of Islamic Banking System. This, therefore,
service as the main guiding force for all of the activities of the Bank. This
factor is taken in to consideration every time Bank introduces a new
service. Religious Supervisory Board makes sure that every instrument,
which the Bank is planning to use, meets the requrement of Islamic
Shariaa.

b)

FBL has introduced rupee deposits product, Rozana Munafa, whose main
features (no account charges, a high yield as well as transaction
convenience etc.) and even its name, was developed in close collaboration
with a focus group of actual and potential customer of the bank.

c)

Bank is largely under the expansion and is planning to open many new
branches in Pakistan, Recently there are nine branches operating in
Pakistan and two other branches in Sialkot and Gujranwala are going to
start their operation.

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PROMOTIONAL POLICIES
ADVERTISING
FBL spends relatively less on advertising than mutual savings banks and savings
and loan associations, its main competitors FOR deposits. However, the Bank is
spending more of its attention on Rozana Munafa Scheme through newspapers.

DIRECT CUSTOMER SOLICITATION


Management FBL believes in promotion through direct customer solicitation.
They believe that direct personal contacts produce more spectacular result.

FINANCIAL POLICIES
SOURCES OF CAPITAL
Deposits are the major source of capital for FBL. Deposits are mostly obtained
from customers. However, Head Office also invest a certain amount of money as
deposit from time to time to earn money on his investment.

MONEY AT CALL
In case the Bank needs capital and deposits with it are not sufficient to its
requirements, the Bank goes to the inter Bank market for finances. From this local
market Bank can obtain both long and short term finances. Such money is called
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the Inter Bank Call Money and is obtained at Inter Bank Call rates decided by the
SBP.

Investment
Another source of obtaining capital for the Bank is the profits which it earns on
the amount invested in various projects.

Investment Portfolio
1.

FBL is very particular while investing its money . It never invested its
money in Treasury Bills with SBP through such n investment promises
highest returns. But since, such investment is based on interest, it is not
used by the Bank.

2.

FBL has very conservative portfolio policy. It mostly gives loan to very
established customers. Moreover, its investment in shares is very small.

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REPAYMENT OF LOANS
Delay on the part of customers for the repayment of loan is a big problem for
other banks. In Islamic system, Morabaha transactions provide a sort of
protection against such risks because the maturity period of Modaraba
transactions very short. Only 60,120,180 days are required for the liquidation
of the transaction. Within such a short period , the management evaluates the
customers on the basis of whether he is paying the due amount or not.
Bank has never given any loan whereby customers has to pay the installment
after three years and has never allowed the customers to continue taking the
profits while doing adjustment once a year.

RESERVE WITH SBP


Every bank has to maintain 25%of its capital with SBP. This amount can either
be kept in PLS or in Treasury bills on. On T-bills, the rate of return is 11%
which is more than on PLS. But since treasury bills are non-Islamic, therefore,
FBL does not keep the deposit in Treasury bills.

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OTHER POLICIES
1

There are no restrictions on advising letters of credit received from any


bank favoring customers or other beneficiary (lies) who does not have
dealings with FBL.

If the beneficiary of the letter of credit is an FBL customer, he is advised


immediately over telephone about the receipt of credit. When the
customer or his authorized representative visits the3 Bank, the officer
hands over the letter of credit along with a covering letter. The officer
retains a photocopy of the credit in the file.

If the beneficiary of the letter of credit is not the Bank customers, over
telephone followed by a mail advice. Before delivering the letter of credit
to the beneficiary or his representative, the officer obtains an authority
letter. The signature on this letter is verified by the beneficiaries banker,
which, in turn is verified by Bank designated employee/officer. The
letter of credit is then delivered to the beneficiary or his authorized
representative after retaining a photocopy in the file.

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DEPRECIATION
Depreciation is provided on the straight line method at rates intended to write off
the cost of various assets over their estimated useful of three to ten years, freehold
buildings over their estimated useful life of fifty years and leasehold buildings
over the life of the lease. Land and capital work in progress are not depreciated.

SIGNIFICANT ACCOUNTING POLICIES


PREPARATION OF FINANCIAL STATEMENTS
Foreign Currency Translation
Foreign currency transactions are translated into US dollars at the approximate
rates of exchange prevailing at the transaction date.
Fee and other Income
Fees arising from the management of Modaraba investment funds and private
portfolio investment accounts are accrued as income on the basis of Banks
entitlement to achieve such revenue as defined in the Banks contract with the
investor. Commissions earned on letter of credit and letter of guarantee issued are
taken to income in full when earned.

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Amount Allowable as Increase in Expenses


During one year while making the budget, overall expenditures can be increased
only up to 10% of the expenses of the base year. Some expenditures can show an
increase of 20%, some 5% etc. But overall increase should be less than or equal to
10%.

Short Term Investments and Islamic Securities


Parallel sales and purchase of currency transactions with major financial
institutions are carried at cost, and income is accrued on the straight line method
over the period of related transactions.
The statutory with the State Bank of Pakistanis stated at cost and income is
recognized on the basis of profit declared
Investments in Modarabas, trade pools, commodities pools and Islamic marketable
securities are stated at cost and changes in unit valuation are dealt within the
statement of income.

Islamic Financing
Islamic financing consists of mainly trade financing agreements (Modaraba) or
investments in joint ventures (Musharaka) which are stated at cost. Where the
ultimate income is both contractually determined and quantifiable at the
commencement of transaction then such income is accrued at straight line basis
over the period of transaction. Where the income from a contract is not

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contractually determined or quantifiable, it is recognized when reasonably certain


on realization.

Provision for losses on Islamic Financing


Bank maintains two types of provisions: Specific and General. Specific provisions
are made for losses arising on Islamic financing advances where the directors
consider that loss is probable.

Deferred Taxation
Deferred taxation is provided using the liability method.

Approval Requirements for L/C


If the documents contain discrepancy (ies), if the L/C opening bank name is not
included in the Global list of 500 Rated banks compiled and published by the
Banker, if the beneficiary of the letter of credit is not FBLcustomer and the
documents have been represented through another bank, and if the signature on the
letter of credit could not be verified or if the letter of credit was received by telex
that could not be authenticated then negotiation of export documents is done with
the approval of Branch Manager.

Processing Under Reserves


Negotiations/purchases of export documents containing discrepancy(ies) is
handled under reserve after obtaining approval on a case by case basis from the
Branch Manager.

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Documents Presented Under L/C of Non-Rated Banks


The documents/drafts under letter of credit of banks outside the list of 500 rated
banks compiled and published by the banker are negotiated/paid against customer
indemnity with the approval of the branch manager. The indemnity requirement
can be waived the branch manager.

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SERVICE FACILITIES
Faysal Bank continues to strengthen its position in consumer banking. For
extending quality service to retail customers, the bank offers attraction local and
foreign currency deposit schemes. FBL launched its first branded liability product
Rozana Munafa Business Account in July 1995, targeted toward large corporate
and personal business. The bank has also redesigned and refurbished most of its
branches, having a constant identity in terms of design, dcor and colour.
FBL realizes the importance of customer found services. That is why it has
commenced evening banking at all seventeen branches. FBL is divided in to
following departments, which provide different facilities to different customers:
Customer Service Department
Documentary Credit Department
Credit Administration Department
Credit Operations Department
Corporate Banking Group Department
Accounts & general Services Department
Customer Service department is further divided in to two sections which include
Account Opening section and Cash dealing section To provide better and accurate
service the Bank has computerized the bank accounts which results in saving the
time along with greater speed, accuracy and neatness in accounts.

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MANAGEMENT INFORMATION SYSTEM


MANAGEMENT INFORMATION SYSTEM
Information system is the life blood of any firm especially the financial institution.
In FBL, managers make use of it to formulate polices, make decisions, and resolve
problems. Management and other employees of FBL together with the use of
sophisticated computers and carefully planned and designed procedures are able to
achieve the maximum pay-offs for the Bank within the special goals.
Information is the major ingredient of the success of the bank especially in the
credit department where the credit officers get all the pertinent data, organize it in
a form suitable for the managers and to obtain necessary information and to base
their decisions upon some logical and sound footings.
In FBL management Information System is the responsibility of the Account
Department. All the information generated in various departments is routed to the
Accounts Department where it is presented in a form usable for the managers at
different levels and other users of information.

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INFORMATION
SOURCES OF INFORMATION
Patterns of communication exist to ensure that the manager get right information
at right time. Some sources of getting information include; telephone, personal
communication with employees, public, etc. other banks, and clients. Upper
management is also one important means of providing information to the credit
officers who organize these into useful form.

CLASSIFICATION OF INFORMATION
The information needed by the bank can be classified in the following two broad
categories.

1 INTERNAL INFORMATION
Internal information is always available within an organization in one form or
another. It may be in the mind of an employee or manager, in accounting records,
in filling cabinets, or on computer. Internal information tells the management
about actual performances as against delegation of authority, responsibility
budgetary controls and future targets and enables it to take appropriate decisions to
plan, organize, and control the operations.

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2. EXTERNAL INFORMATION
External is collected from outside the organization. It relates to the environment in
which an organization operates. Such as fiscal policies and political, social and the
economic trends on the one hand and the information regarding the competitors as
to their past performance, present activity and future plans, on the other.

EXTERNAL USERS OF INTERNAL INFORMATION


Government
Regulatory agencies
Financing Institution Bank, etc.
Customers & employees.

EXTERNAL INFORMATION
Government and fiscal policies:
Social trends:
Economic trends:
Competitive Information:
Customer information:

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PRESENTATION OF INFORMATION
In the Bank, the information is presented in the form of reports.

It is also

presented orally and in writing. The selection of form and means depends on the
nature of information, purpose, and the level of user. The purpose of information is
an important factor in determining the form and means of presentation.
SVP is mainly concerned with overall information and not detailed analysis.
Therefore, information is presented to him in a concise form for the purpose of
saving his time and instant understanding. The middle management needs detailed
information for the purpose of monitoring and controlling. The traditional form of
presentation in columnar statements or narratives is used at middle management is
normally action oriented and can best be conveyed in plain language for the
purpose of clear understanding and getting the required action.

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BANK AS A SYSTEM
A bank is a system established for a particular reason. It has inputs and outputs.
The input of one system is frequently derived from the outputs of others and its
own output then becomes the input of yet another system in the chain. A bank
system is one, which provides a financial service and earns profits.

COMPUTERS- A TOOL FOR MIS


As opposed to some other banks whereby information is obtained manually from
the books and records, reproduced on prescribed formats and supplied to central
data processing centers for processing, storing, and retrieving in the form of
computer printout, FBL uses a systems whereby entire records and transactions go
into the main database file from where it can be extracted in any format needed by
the management.

COMPUTERIZATION OF BANK
ACCOUNTS
FBL is making an efficient use of information. One factor that is contributing
towards this efficiency is the presence of fully computerized processes and

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procedures. Computers are being used optimally in all the departments for data
processing.
The following are some of the important advantages, resulting from the
computerization of Bank accounts:
Saving in staff, space and stationery:
Saving in time:
Greater speed, accuracy, and neatness in accounts:
Accurate information:
Better training and more liquidity of the staff:
Analysis of large volumes of data:

MARKETING MIX
FBL is a marketing- oriented Bank. It offers the marketing mix to attract
customers from business and corporate sector. Marketing mix offered by the Bank
is in accordance with its target customers and its policies and objectives. It is due
to practical marketing mix provided by the Bank that it has built its good name
within a short span.

MARKETING MIX

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There are number of different description of mix elements. Probably the most
popular is McCarthys the four Ps: service (for service industry) place, price, and
promotion.

SERVICES
Services offered by FBL are meant to attract customers from corporate sector.
Marketing mix includes services such as financings, account handling, facilities of
import and export. Services mix provided by indicates that the objective of FBL
management of FNL is to encourage big clients and to discourage small ones.

Marketing Services
FBL is one of the organizations in the service sector that goes far beyond offering
the physical product into offering aboard array of need satisfaction. Everyone in
the bank is producing and selling some element of service, which may or may not
require the use of tangible goods. Financing provided by the credit department,
cheque books, travelers cheques etc. issued by customer service department are the
services which require the use of tangible goods like papers, documents, money,
etc. while some services like consultancy provided to the clients do not require the
use of tangible goods.

Management Services Offered


Every individual in the bank starting from the SVP to the office boy are dedicated
to provide the best services to the customers of the bank. They provide the
direction and much of the motivation behind its development and success. People

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Dimension in the bank have also gained added power from the lack of a tangible
product offering (Basic Marketing).
Those operating at the point of sale have an especially important role to play,
possibly the most important of all. The main contact with customers is over the
bank counter, by telephone, and in the manager room. Management realizes this
and, therefore, Bank recruitment, promotion, and training policies are all geared
to this situation.

Specialization
It is the requirement of SBP that commercial banks cannot restrict themselves to
the provision of few services only. All those primary functions, which are laid
down by SBP bye-laws, have to be performed and operated on the prescribed lines
by the Bank. Therefore, Faysal Bank, being a commercial bank, cannot adopt the
policy of providing and specializing in only a few services. It has to perform all
the functions.
FBL has been operating on the policy of providing the best of all the operations.
The management believes that especially in the banking industry, it is not possible
for an organization to specialize in one field only and to provide average services
in others. When a customer enters the bank and starts dealing with the bank, he
expects to enjoy the base facilities. Once he opens the account, he would start
using other facilities like import, export, financing on Islamic lines etc. provided
by the Bank. Unless the entire functions are on strong footings, he will get
objected and discouraged. Therefore, the Bank management tries to improve upon
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and specialize in all the subsequent functions right from opening the accounts to
provision of functions.

Quality of Services
The most thing about FBL is that it provides very prompt services to its customers.
Promptness is important because any customer who enters the bank wants his job
to be done first. Quick services provided by, therefore, is an important factor FBL
offers for customers satisfaction. However, it is not only the quickness that
attracts and has kept the customers loyal to the Bank. It is, in fact, quickness with
accuracy that has helped the bank in earning a good repute in a short span of time.

Style and Design of Services


All the services provided by FBL have been designed according to principles of
Islamic Shariaa. The designing of services on Islamic lines is the major objective
of the Bank and a driving force behind all policies of the bank. Another major part
of the design of the services offered by is Staff Management. Managers of the
bank FBL therefore, are very careful for the selection, recruitment, training and
management.

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PLACE
Location
Keeping in view the customer group, target market, and resources of the Bank, it
has the possible location(so far as Multan branch is concerned). FBL is neither a
saving bank nor it has a very huge target market consisting of all types of
customers from small to large, therefore, the present location i.e. at Abdali road a
very clean and open area of Multan is more than suitable for the Bank. Beautifully
designed and decorated building with neat and clean surroundings, and pleasant
colour combination in the interior just matches the tastes and appeals of its
customers. Area surrounding the bank is also inhabited by those people who fall
under the target market of the Bank.

Distribution
Most of the offerings other Bank are of an intangible nature. As a result of the lack
of a physical product, there is no need for the distribution and the middlemen. The
bank has its ten branches in Pakistan where services are created and offered to the
customers without the intervention of any middlemen.

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PRICE
SBP has an important role to play in formulating policies regarding the
commission rates, charges to be taken, tax to be deducted, etc. from the customers.
All the commercial banks have to operate within in those prescribed limits and
FBL is no exception. It follows and charges the rates as issued by SBP from time
to time.
There are, however, certain services for the provision of which SBP has given
maximum and minimum limits to be charged from the customers. In such
situation, FBL does offer concessional rates to certain customers for competing in
the market. The above discussion makes it clear that there are not very significant
changes in the prices of services offered by FBL and other bank.
FBL does not charge anything to the customers for their statements. Customers
can come to Bank many times in a month and can get their statements within
minutes. This is the additional edge that the Bank has over many other Banks.

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PROMOTION
Customers satisfaction is the major policy of the Bank along with many other
policies. It is because of this policy that Bank provides best services, best6
environment, and courteous behaviour to its customers. As a result, customers not
only themselves remain loyal to the Bank but also speak good to others about the
bank. Since a satisfied customer is more powerful means of promotion than both
advertising and personal satisfaction, therefore, FBL pays more attention for the
satisfaction of the customers. The Bank. thus, do not need to spend huge amount
on promotional medias.

Sales Appeals
Sales appeals used by the bank primarily consist of promptness and accuracy of
services. Other things that help the bank in establishing itself in the market are
quality of services, personality and ability of officers, and sincere attitude for the
well being and financial help of the customers.

Sales Promotions
FBL uses newspapers, journals and magazines for advertising purpose with the
objective of telling public about the services provided by the Bank. The share of
advertisements in total expenditures is, however, very less. The reason is that the
bank management believes in promoting the good name through personal
solicitation. Moreover, for existing set up, a satisfied customer and a happy
employee are sufficient for necessary promotion.

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Effect of Incorporation
The Bank has gone in to public from January 1995, so managers have, therefore,
planned to increase the expenditures for advertisements. Advertisements will
become important because general public want to know and hear about the
company in which they invest or plan to invest money.

CRITIQUE
Of all the elements in the marketing mix, FBL needs to pay more attention to the
promotion part. Though it is true that personal solicitation and satisfied customers
are a good means of promotion, yet Bank should try to create its name recognition
among the public.
Management of FBL always tries its best to carry out the business according to the
pride lines provided by Shariaa. people do not have this view of FBL. They think
it to be like other banks operating on interest free banking. Management should try
to promote this positive point of the bank through media. A gradual promotional
policy educating will result in increasing the deposits of the bank that is why they
have launched a new scheme (Rozana Munafa), which is going very popular.

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ACCOUNTING PROCEDURES
The accounting system followed by Faysal Islamic Bank is completely tailored to
its own individual needs and to the needs of modern banking. Accounting system
has been designed not only to record post facto information but also to cope with
the needs of forward- looking decision making. A good information system should
be capable of generating all information for planning, organizing and controlling
the activities of an organization from a common database.

COSTING
Quite clearly no meaningful plan can be established without the fullest possible
information. An efficient costing system is needed so that the cost of different
services and of running different parts of the system can be established as
precisely as possible. Accuracy of accounts is desirable and essential for the
success of the Bank. Bank neither buys nor sells goods and commodities. It
renders certain services to his constituents, the cost of which it finds out in order to
see whether or not a certain customer account is a paying one.

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MOST ESSENTIAL REQUIREMENT OF


SOUND BANK BUSINESS
Bank keeps accounts not only for the purpose of finding the cost of an article, or
certain services, but also for finding the exact amounts owing to and by industrial
and commercial concerns. In this regard, FBL is very careful because failure to
keep proper accounts not only affects its credit, but it may also land it in
difficulties. Sometimes even businessmen depend upon their bank records in the
matter of their financial dealings. Bank cannot afford to be careless in the, matter
of accounting, and therefore, this department has been placed under a competent
senior officer of the Bank.

OBJECTS OF KEEPING PROPER ACCOUNTS BY


BANKS
The chief objects with which bank accounts are kept, are the following:
To have a chronological account of all transactions done by the Bank, as it must be
able to produce sufficient proof of what it does from day to day. These running
accounts are very important.
To know the exact amounts owing to and by the Bank. Unless the Bank knows
what are exact amounts due from various customers, it cannot possibly make
demands upon them. Similarly, unless a Bank knows what are the amounts owing

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by him to his customers, it cannot honour their cheque and make other payments
required by them.
To know its exact position at all times and, thus, to find whether or not the
business is making progress.

OBJECTS OF KEEPING PROPER ACCOUNTS-IN


SYSTEM TERMS
Main functions of record keeping, in system term are the provision of information
and implementation of control.

BAD DEBTS
Multan branch does not have any bad debts. Accounts Department has, however,
created a general provision for bad debts.

CURRENT ACCOUNTS
Under the Islamic financial system as governed by the glorious Sharias, clients
wishing to deposit funds with an Islamic financial institution and seeking their
guaranteed return do not receive any income or benefit. Such funds are indicated
as current accounts and Bank treat these as loans from the customer to the
Islamic financial institution repayable on first demand. Bank chooses to make use
of such funds for investment purpose on its own risk. Current account funds are

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treated as the Banks liability and are reported above the line in the Banks balance
sheet.

DEPOSITS ACCOUNT
An investor can deposit his amount in the Deposit Account in FBL if he wants to
receive benefits, if accruing, from the investment of his funds. The depositor
assumes all the risks inherent in the investment of such funds. Faysal Islamic Bank
guarantees the return of the principal only not profit. Only in the case of gross
negligence on the part of the Bank, which is proved as such, the Bank is liable for
making good losses incurred owing to such proved gross negligence.

BASIS OF ACCOUNTING FOR CASH


FIFO basis is used for the cash in the main safe.

ACCOUNTING CONVENTIONS
Bank record of savings accounts shows all deposits, withdrawals, and dilly
balance in account. Rank record of current accounts shows all deposits and
withdrawals.

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EXPENDITURES
CAPITAL EXPENDITURES
Separate budget is made for capital expenditures on which only depreciation can
be charged. Estimated cost for the purchase of capital asset is included in the
budget and depreciation is also charged to the asset to show the exact value of the
assets after certain period.

REVENUE EXPENDITURES
Proper budgeting of each and every revenue expenditure is done. For example, an
important item in the overhead charges is the employee cost. To prepare the
budgeted figure of this expenditure, the bonus that is expected to be given to
employees, any increment that is expected to be given to the employees, and the
pay of the employees for that year are added together to find the employee cost.
Moreover, any chances of increases or decreases in the employee cost, depending
upon the plan, to hire new employees or to terminate an employee are also taken
into consideration while making budgets, likewise, each item of expenditure and
income is taken into consideration to find out the budgeted figure of it. Theses
amounts are then presented in the form of profit and loss account to calculate the
net income for the years.

POLICY
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Any expenditure-capital or revenue is treated as revenue expenditure if it is up to


Rs. 5,000. Above this level, capital expenditures are treated in capital account.

REVALUATION
Heavy expenses are amortized over the period for which these will remain in use.

ENTERING RATES INTO SYSTEM ON DAILY BASIS


New rates are fed into the computer on daily basis. These rates are then used for
finding the daily position of balances. Whenever a new rate is fed, an evaluation
entry is generated that automatically debits or credits the accounts (according to
the increase in FCY rates) to keep the total balance according to new rates.

ACCRUAL REVERSE
Bills of electricity, gas, etc. consumed during a month come next month.
Therefore, provision for taxes are kept for the month. At the time of receipt of
actual bill, entries made are reversed and entry for actual expense is entered.

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TRANSACTION JOURNAL (LONG OR SUPPLEMENT


BOOKS)
This journal gives the overall picture of all the transactions made in a day. This
effect is then shown in the General Ledger. In other words, it can be said that the
transaction journal is the difference between the General Ledger of two
consecutive days.

INTER BANK DEPOSITS


Bank store funds in other commercial banks. Those inter bank deposit disappear
from the total reserves of the entire banking system when the reserves of all banks
are aggregated according to conventional accounting practices. The Bank to which
an inter bank deposit is due has an asset exactly equal to the deposit liability of the
bank from which the deposit is due. The inter bank deposit liabilities exactly
cancel the inter bank deposit assets for the banking system as a whole.

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RATIO ANALYSIS
For 2001
Current Ratio
Current Ration

Current Assets
Current Liabilities

6625432
22492887

.30 times

For 2002
Current Ratio
Current Ration =
=

7142337
21787882
.33 times

Current ratio has been decreased in year 2001.

For 2001
Networking Capital

Current assets current liabilities

6625432 22492887

- 15867455

Current assets Current liabilities

7142337 2178711

- 14645545

For 2002
NWC

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For 2001
Debt Ratio

Total Liabilities
x 100
Total Assets

23,588,466
x 100
2440736

996%

For 2002
Debt Ratio

22483907
x100
2399647

937%

DEBT EQUITY RATIO


For 2001
Debt Ratio
Debt Equity Ratio

Long Term Liabilitie s


Stock Holder Equity

23,588,466
2441000

9.6 times

For 2002
Debt Equity Ratio

22483907
2400,000

9.37 times

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For 2001
Ratio on Equity

Net Pr oft After Taxes


StockHolder Equity

NPAT
x100
SHE

275,718
x100
2441,000

.11%

For 2002
Ratio on Equity

207,298
x100
2400,000

9%

For 2001
Ratio on Assets

Net Pr oft After Taxes


x 100
Total Assets

275,718
x100
26029000

1%

For 2002
Ratio on Assets

Net Pr oft After Taxes


x 100
Total Assets

207,298
x100
24,725,000

.8%

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CUSTOMER SERVICES DEPARTMENT


Mr. Kamran Ashraf is the head of this department.
Customer Services Department of Faysal Bank Ltd. Can further be divided into
following sections:
Customer Services Section
Cash Dealing Section
It started its function on the very first day of operation of the bank in Multan. Mr.
Kamran Ashraf is operating this department.

CUSTOMER SERVICES SECTION


Mr. Kamran Ashraf is dealing with this department.
In customer services section, the customers are provided the following services:
Opening the Accounts
Special Deposits
Remittances
Collections
Issuance of Travelers Cheques (T/CS).
Issuance of Foreign currency (USD, Pound, DM)
Receipts of T/CS.
Receipts of Foreign currency.

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Some of these are described below:

ACCOUNT OPENING
It is the most important department of bank
Mr. Kamran Ashraf deals in this department. Following procedure is adapted for
this purpose.

PROCEDURE OF ACCOUNT OPENING


It is very simple and quick procedure. A person who wants to open FBL provides
the facility of opening the accounts according to open an account must has the
introduction of banks staff or any existing account holder of the bank. The
customer is required to fill an opening form. AOF is very standard and up to the
mark which contains almost all information about the customers. Customer is
guided to fill to fill all columns of AOF.All formalities and requirements are
completed and verified, and all supportive documents are taken and checked
according to the nature of account. If any formality is incomplete, cheque book is
not issued until it is fulfilled.
Account number is allotted to the customer and all particular such as nature of
account, opening date, initial deposit, title of accounts are written in register
Account is opened in the system by putting all the particulars of the customer in
the system. The letter of thanks is sent to the customer for confirmation of address.

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After complete procedures finally the manager of the Bank signs the AOF and
these forms are filed in proper sequence.

TYPES OF ACCOUNTS
There are following types of accounts:

Individual Account
Any individual or proprietor of a business can open an individual account at FBL
Following requirement has to be fulfilled for this account.
Signature of the customer
Name of the customer
N.I.C photocopy attached
Name and account no of the introducer
Verified sign of the introducer

Joint Account
When more than one person opens a single account it is called it is called joint
account. The names of persons are written on title of A/C
Joint A/C cannot be opened by single person. Both persons have to sign on
cheques.
Following requirements has to be fulfilled for this account
Sign of both customers on the back of AOF
Sign on joint A/C # mandate
NIC copies of both members
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Mode of operation
Name and account number of introducer

Third Party Mandate


In this type of account A/C holder can authorize any person to draw his account.
He is authorized to run that title of account. Title of account will be in the name of
account holder.
Following are the requirements for this type of account:
Copy of NIC
Power of attorney

Company Account
In order to open an account of accompany there are following requirements:
An up-to-date copy of the companys memorandum & articles of association
The companys certificate of incorporation
The Companys certificate to Commerce Business (Public company only)
Also following documents are required:
Copy of certificate of Incorporation
Memorandum & articles association
List of directors
Copy of board resolution
Certificate to Commerce of business (if required)
Signature cards
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Copy of NIC

CLUB, SOCIETY, ASSOCIATION OR TRUST


The opening of this account require:
Copy of NIC of all society or Trustee members
Stamp of society or club
Certified copy of resolution
Copy of rules
List of office Bearers

Partnership Account
Account title will be the name of the partnership firm.
Following are the requirements for opening this account:
Sign of customers on back of AOF
NIC copies of all partners
Partnership deed (certified copy)
Partnership mandate (prescribed format)
Companies rubber stamp

Foreign Currency Account


For opening of this type of account
Copy of NIC
Copy of Passport

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Closing Of Account
When a customer wants to close an account he has to give a hand written
application to the head of the operations department to close his account plus
remaining leaves of check book.
The manager first verifies the sign of A/C holder then closing is done from the
register on the computer where the account was opened. In the File of the A/C
holder his account opening form is crossed.

Cheque Book Issuance


When the account is opened, then the customer is given a customer is given a
cheque book sign upon and encash money. It proceeded as included:

PROCEDURE
The account opening formalities must be completed before issuance of check
book. Particulars of the check book requisition should be completed containing
title of account, account number, type of currency and signature of the customer
Signature of the customer are verified on the requisition.
The check book is taken from safe/locker. It is assured that series of check.
Particulars are entered in the cheque book issuance register. Account number is
stamped on every leave of the check book and those leaves are counted. Name of
the account holder is written on the cover of the cheque book. And requisition on

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the check book for further issuance is properly filled, stamped and signed by office
of the bank.
Cheque book is delivered to the customer and his signature are taken on cheque
book issuance register. Check book serial number entered in the system. Stock of
cheque book are balanced at the end of each day and kept under safe custody.
FBL issues the following cheque books
Saving account25 leaves
Current account - 50 leaves

TYPES OF ACCOUNTS
FBL deals with the following types of accounts:
Faysal Sahulat Account (Current)
Rozana Munafa Account
Rozana Munafa Plus
Faysal Premium Account
FCY Saving
FCY Current
Faysal Sahulat Account
Under the Islamic financial system as governed by the glorious Sharias, clients
wishing to deposit funds with an Islamic financial institution and seeking their
guaranteed return do not receive any income or benefit. Such funds are indicated
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as current accounts and Bank treat these as loans from the customer to the
Islamic financial institution repayable on first demand. Bank chooses to make use
of such funds for investment purpose on its own risk. Current account funds are
treated as the Banks liability and are reported above the line in the Banks balance
sheet.

Rozana Munafa Account


An investor can deposit his amount in the Rozana Munafa Account in FBL if he
wants to receive benefits, if accruing, from the investment of his funds. The
depositor assumes all the risks inherent in the investment of such funds. Faysal
Bank guarantees the return of principal only not profit. Only in the case of gross
negligence on the part of Bank, which as such, the Bank is liable for making good
losses incurred owing to such proved negligence. The relationship is governed by
the dictates of Sharias, which is contractual between

the client and the Bank in

order that the parties are fully aware of all risks, rewards and their respective rights
and obligation.

TYPES OF CUSTOMERS
FBL open accounts for the following types of accounts depending on the type of
the customers:
Individual Personal Account
Joint Account

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Sole Proprietorship Account


Partnership Account
Public Limited
Private Limited
Association, Clubs, Charitable Institutions, etc. Account.
Attorney Accounts
Autonomous Accounts

DORMANT ACCOUNT
Current and Saving Accounts, which remain inactive for the following periods are
classified as Dormant Accounts:
Current Accounts L.CY. 06 months
Current Accounts F.CY. 12 months
Savings Accounts F.CY. 06 months
Savings Accounts F.CY. 12 months

PROCEDURE
The EDP unit provides daily a list of those accounts, which did not have any
customer, oriented transaction for the last six months and have now been

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transferred to Dormant section. The ledgers of such accounts in marked as


CAUTION-DORMANT ACCOUNT.
The specimen signature cards of Dormant accounts are taken away from Tellers
area and are kept in the custody of the officer who has been designated to approve
operations in the Dormant accounts.
When an account has been placed on Dormant status, a letter is sent to the
account has been inactive for sometime and it is appreciated if he continues to use
it.
Upon reclassification of the Dormant account, the accounts are transferred to
active are with the prior approval of the incharge of the Customer Services
Department.

TREATMENT OF MORE THAN 10 YEARS OLD


DORMANT ACCOUNT
If no transaction has taken place in Dormant Account and no statement of Account
has been requested or acknowledged by the account holder during a period of 10
years reckoned from the day an account

holder initiated transaction was

last

taken place, the account holder gives three months notice in writing by registered
post acknowledgement due on the last known address. If no acknowledgement or
reply is received the balance amount is paid to the State Bank of Pakistan and the
Bank is discharged from the liabilities of such as account.
The specimen signature cards and other documentation of such account continue
to be preserved till such time as intimation from the State Bank of Pakistan is
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received in writing advising that such documentation need not be preserved any
longer.

CASH SECTION
Mr. Manjoka deals with this department.
Cash section of FBL works under the operation department. This department is
given the complete responsibility of cash, as result of transaction in touch local
and foreign currencies. It is also responsible for safe custody of cash.
This department performs the two main functions:
Cash Receipts
Cash Payments

CASH RECEIPTS
Mr. Manjoka deals cash receipts in this department depositor uses deposit slip for
depositing the amount in to their accounts. The officer cheeks if the deposit slip is
properly filled up containing title of account, A/C number, date and amount in
words and figures and figures. Detail on both counter files and cash receipt
voucher should be the same. Cash is receipt by cash receipt officer, twice counted
and matched with the deposit slip. The cash details are written on the back of the
deposit slip and also entered in the cash receiving register. Cash received stamp is
affixed on the face of the deposit slip along with the signatures of the cash

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receiving officer. Deposit slip and cash receiving register is given to the officer in
the cash.

PAYMENT OF CHEQUE
Mr Manjoka deals with the payment of the cheques .First the cheque is presented
by the customer or holder to the cash payment officer. He confirms that it is drawn
on the same branch and particulars of the cheque are properly filled in. One
signature of the holder is taken on the back of the cheque. Cheque is handed over
to the officer of the cash department. For scrutiny where the officer checks the
amount in the words, figure, date, payees name crossing if any account number
cheque serial no and signature of the customer. It is posted in the System
And posting stamp and number is affixed on it.Cheque is handed over the cash
payment officer for the payment and the cash paid stamp is written on the back of
the cheque. Enteries passed in the cash payment register

SPECIAL DEPOSITS
SPECIAL DEPOSIT INCLUDE
a) CDR (Call Deposit Receipt)
These Deposits operated on no profit no loss basis. Money deposited with the bank
this head is exempt from Zakat. Customers who deposit their money under this
head can get money when they need it. CDR can be made Open as well i.e. the
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person who deposits the money does not need to do signature for getting the
deposited money back.

USES
CDRs are used by the customers for making the payments of bills.
2) DRs are used for keeping the money temporarily in the Bank without involving
the procedure of writing cheques because cheque is a legal document of the money
deposited by the customer, which he has to show to the tax authorities

NDR (NOTICE DEPOSIT RECEIPT


The following are the period for which these terms deposits are issued:
07 days
30 days
Profits are given on theses deposits and Zakat is also deducted from these deposits.

TDR (TERM DEPOSIT RECEIPT)


The following are the period for which these terms deposits are issued:
1 month
2 month
3 month
6 month
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1 year
2 year
3 year

FUNDS TRANSFER APPLICATIONS


For the transfer of funds the following applications are required here:
Telegraphic Transfer (local/foreign)
Pay Order
Demand Draft (local/foreign)
SBP check

PAY ORDER
Pay order is issued for local station. Application form is given to the customer to
fill. Two signatures are taken on the form .One for request and otter for receiving
the instrument. All the particulars of the application form are checked and bank
commission charges and with holding tax is written on the top of the application.
If the customer is maintaining his account with the branch he can give cheque for
the total amount of instrument plus bank charges. Cheque and application form is
then given to the officer cash department for payment ,post the cheque and signs
the application .If the customer wants to pay cash, cash is deposited on cash
counter Cash receiving officer receives cash on the application form along with
the bank charges and withholding tax. Application form is given to the remittances

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incharge for issuance of instrument. He enters all the particular of the application
form in the system and computer gives the auto control number to the instrument.

DEMAND DRAFT
Demand draft is issued for some outside station. It is the instrument that is used to
transfer amount from one city to another city. It can be made on cash as well as on
the cheque. If it is made through cheque, then it is necessary that the person must
be account holder. While in the case of cash, it consist of the three copies.
Original copy which is given to the account holder
DD advice is sent to the central branch
Copies for reconciliation. Its photocopy is kept with bank while original is sent to
the head office for reconciliation.

PROCEDURE
The client who wants to transfer his funds from one city to the other fills a form
requesting the bank to prepare a DD.DD application form contains columns
requiring information for the preparation of DD. e.g.
Beneficiary name
Applicants name
Address
Amount to be sent etc

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Bank deduct charges against DD.

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TELEGRAPHIC TRANSFER
It is another mode of transfer of the funds. It is the quickest mode of the transfer of
funds from one city to the other city. For TT, client has to submit the application
on prescribed form of the Bank. Client can deposit money in the bank or can
request the bank to deduct the amount. Against the TT along withy the charges
against the issuance of TT from his account. The charges against the issuance of
TT charged by Faysal Bnak.

PROCEDURE FOR TELEGRAPHIC TRANSFER


ISSUANCE
Application form is given to customer to fill. Two signatures are taken on the form
one for the request and otter for receiving of the instrument. All the particulars of
the application form are checked and bank commission charges along with holding
tax written on the top of the application form. If customer is maintaining the
account wit the bank, he can give cheque for total amount of instrument. for total
amount of the instrument plus bank charges .Cheque and application form is given
to the officer cash department for the payment of the cheque .After proper scrutiny
officer cash department post cheque and signs the application form to assure that
the payment is received. If the customer wants to pay cash it is deposited by the
customer on the cash counter. Cash receiving officer receives cash on the
application form is then given to the remittance incharge for issuance of
instrument .He enters all the particulars of the application form in the system and
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computer gives the auto control number to the TT message of receiving branch.
This message is then sent through Telex to the receiving branch followed by the
TT advice. The customer is confirmed that TT has been sent

PROCEDURE FOR T.T. PAYABLE


When TT message is received, tested number on TT is checked and verified.
Tested number is then written in the register and signed by the holder of the test
keys for office record.
All the particulars of the tt payables then entered in the system. Payment
instruction on the TT message are followed it if is pay and advice it will be paid
through TTR on the cash counter or through clearing and if it is credit an
advice ,it will be transferred in the account mention ed in the TT message. Printout
of voucher (TT are taken. if TT is presented

for payment ,signature of the

authorized officer are verified on TTR and after proper scrutiny ,it is posted .

PROCEDURE FOR FOREIGN DEMAND DRAFT


ISSUANCE
Application form is given to the customer to fill the same. Two signatures are
taken on the form, one for request and otter for receiving the instrument. All the
particulars of the application form are checked and bank commission which is
US$5/- for each amount of FDD. Cheque is received from the customer for total

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amount of FDD plus the ban commission. Cheque and application form then
given to the officer cash department for payment cheque
After proper scrutiny, officer cash department posts the cheque and sign the
application form, to assure that payment is received.
Then cheque and application form is given to incharge. Remittances, ho will enter
the particulars of the application in the FDD issuance register. if the customer
wants to pay the cash. it is deposited by the customer on cash counter. Cash
receiving officer receives cash on the application form along with the bank
charges. Application form is then given to the remittance in charge for the issuance
of the instrument. A control number is allotted to the instrument for FDD register.
Instrument is completed by putting all the particulars in it and signed by two
attorney holders. Instrument is then handed over to the customer. FDD advice is
sent to the responding foreign bank. Where they are maintaining the Dollar
account through registered mail. Exchange transaction credit advice is sent to the
Head office for reimbursement .Copies of the FDD and ETCA are kept in the
record of bank

PROCEDURE FOR FOREIGN TELEGRAPHIC TRANSFER


ISSUANCE
Application form is given to customer for filling the same. Two signatures are
taken on the from one for request and other for receiving the instrument. All the

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particulars of application form are checked and bank commission are charged,
which is US $15/- that rate for each amount of FTT.
If the cheque is received from the customer, it is taken for total amount of FTP
plus bank charges. Cheque and application form is then given to the officer cash
department for payment of cheque After proper scrutiny, officer cash department
posts the cheque and signs the application to assure that payment is received. If the
customer wants to pay cash, it is deposited by the customer on the cash counter,
cash receiving officer receives cash on the application form along with the bank
charges. Application form is then given to the remittance incharge for the issuance
of the instrument. He enters all the particulars for the application form in the FTT
register and control number is allotted to FTP.TT message is written in the telex
containing name of the transferring branch, name of the receiving branch ,date,
amount, currency, page name and account number. A test number is given to FTP
message for receiving branch. This message is then sent through telex to receiving
branch. Customer reconfirmed that FTT has made . Exchange transaction credit
advice is sent to the head office .Copies of the advice and FTR are kept in record
for bank

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CALL DEPOSIT
When the party wants to give payment itself to another party then it makes call
deposit. The bank keeps it with itself unless it does not receive instruction from
other bank. Normally it is made on cash and goes on party account.

PAY SLIP
It is used when Bank itself pay for any type of transaction e.g. purchase of
stationary.

COLLECTIONS
All the

cheques under collection

are called cheques under collection in

FBL.There are two types of bills for collection:


Outward Bills for Collection
Inward Bills for Collection
Outward Bills for Collection
All the cheques are received on one counter along with the paying slips duly filled
in properly containing particulars of cheques and account holder. Counter folio of
paying slip is handed over to the customer by putting stamp for cheque received
for collection of FBL on it duly signed by officer. Theses cheques are scrutinized
and cheques for local clearing are separated from OBCs. Cheques for local
clearing are entered in clearing register, whereas cheques for collection are entered
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in OBCs register and handed over to the bills department for Collection. OBC
number is allotted to the cheque from OBC register. Special crossing and Bank
endorsement stamps are affixed to the main branch of that city for collection.

FBL A CUSTODIAN OF VALUABLES


Bank is responsible for a large sum of money and other valuable things kept with
it with the view that it will prove to be a safer place for these things than the
homes of the people. Bank has special rooms for the safe custody of these
valuables etc. These vaults are kept in special room known as Vault Rooms
Or Storing Rooms.

TELLERS
Tellers play a major role in establishing the good will of the Bank. Tellers perform
the task in which customers are more sensitive i.e. depositing and withdrawing
money. For the convenience of customers, the tellers are not provided irrelevant
functions. This is a great factor in minimizing the customers waiting time and
inconvenience

RESERVE CASH
Cash left with the Bank at the end of the day

is known as the Reserve Cash.

Reserve cash is divided in to two parts:

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CASH IN HAND
It is the cash which is not kept in vaults but is kept in special boxes. There are two
tellers in the Bank and each of them has a separate box for putting cash in hand.
As per policy, Cash in hand should not be greater than Rs. 1500000 . Any amount
greater than this amount is transferred to the vault at the end of each day.

CASH IN VAULT
Any amount (in whole numbers not in paisas) greater than the Cash in hand and
which cannot be kept in tellers boxes is placed in vaults.

CREDIT DEPARTMENT
The credit department comprises of following three departments in FBL.
Credit operations
Credit Administration
Corporate Banking Group

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CREDIT OPERATIONS DEPARTMENT


Mr. Kazmi deals with this department.
It also started its function from the very first day of the bank. Following facilities
are accommodated by this department.

1) FUNDED FACILITIES
LPO (Local Purchase Order)
Ore-shipment
Post shipment
T/R (Trust Receipt
PAD (Payment against Documents)

2) NON- FUNDED FACILITIES


a) Sight LC
b) Guarantees

DOCUMENTS AND FORMALITIES FOR APPROVAL OF


FACILITY
Following are the documents and formalities, which are to be submitted by the
customer in favour of FBL
Request Letter

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Board resolution
Signature of customer/partner /director
Visiting card
NID card (NIC)
Certificate of incorporation
Certificate of commencement of business
Import/Export Registration Number
Financial of last three years + Audit reports
Commitment if required
In case a new customer comes to FBL and asks for approval of facility (Project
Financing), the concerned bank officer asks him, to submit following documents
to him.
Request Letter
Feasibility Report
Background Information sheet
And all other documents which he thinks must be submitted. In Feasibility report,
the concerned bank

officer observes the following points before he makes the

decision of FAF.

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INTRODUCTION
Sponsors
Project cost details
Debt Equity ratio
Implementation or construction schedule
If the (officer) is satisfied he will make the proposal of facility.

A) LOCAL PURCHASE ORDER


Definition
It is a short term provided by the bank through its own sources to the customers
for the following purposes:
To purchase the stock of raw material
To meet expenses of production
To meet the expenses other than production

Rate
Profit is charged on it after 90 days or quarterly
Rate of profit is different for different customers

Period
PAF of LPO is available for only one year

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After one year if the customer wants to renew this facility, bank will see if the
(customer) had fully utilize the credit facility in the previous year. If he has fully
utilize the credit facility and paid the profit satisfactory, he will be given this
facility again. But if he has made satisfactory repayment of profit but has not fully
utilized his credit facility, he must give solid reasons acceptable to the Bank if he
wants to renew his credit facility for the new year
Bank will either hypothecate or pledge the stock of the customer
Bank is more secure in case of pledge because items pledged are placed in covered
godowns, watchman is appointed by the Bank, Banks Board on godown, and
register record is maintained for amount of items containing in or going out of
godown.
In case of hypothecation, goods may be placed in uncovered godowns, So Bank is
not very much secure.
b) Equitable Mortgage property
(i.e. customer cannot sell property or rent it, if the Bank does not agree).
c) Personal Guarantee of Directors

B) PRE-SHIPMENT (OWN SOURCE)


A customer comes to bank and asks it to provide him credit facility so that he can
produce items which he can ship (export).
Securities (For PAF)

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1. Personal guarantee of directors


2. Charge on Export bill sent in collection
3.

Lien on property. (Sometimes)

4.

Hypothecation

Rate
Different rate of profit is charged on this credit facility, from different customers.
Usually 16-20%

Period
Maximum period for which this loan can be provided is 180 days but PAF is
prepared for 1 year and can be renewed each year.

DOCUMENTS: Required from Customer


LC or Contact
Request letter
Demand promissory note

C) POST SHIPMENT (OWN SOURCE)


This is the credit facility required by the customer after he has made shipment and
needs funds for carrying on his production of goods.
Documents Required from Customer (By C.O Dept)
LC or Contact
E
Bills of Lading
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Bill Exchange
Invoice
Other documents

SECURITIES
Required for Proposal raising or PAF
Personal guarantee of Directors
Lien on Export Bills sent in collection
Property under lien

Rate
This credit facility is provided at different rates to different customers. Usually 1014%

Period
It can be provided for maximum of 180 days but PAF is prepared for 1 year (it can
be renewed each year).

D) CREDIT FACILITY AGAINST SIGHT L/C


1. Trust Receipt (very near to LPO)
When a customer has imported goods but cannot make payment against the Draft
Bill of Exchange then Bank his signature on T.R documents and pays for imported
goods on customer behalf. Then Customer must pay the amount for which goods
were imported on the date as agreed as well as Profit to the Bank on T.R facility.

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2. Securities
All those securities as per LPO.
If Credit operations Department prepares PAF under sight LC
Bank retains a certain amount of CASH MARGIN on imported goods amount
(Not less than 30% under new policy).
Lien on imported goods.

E) CREDIT FACILITY AGAINST USANCE LC


Acceptance
Customer signs an acceptance in favour of Bank that he will make payment of
imported goods up to a certain date, so bank pays the amount of imported goods.

Securities required
Lien on imported goods.

NON-FUNDED FACILITIES
F) BANK GUARANTEES
Customer obtains bank guarantees to give to different institutions e.g Sui Gas
Corporation.

Securities
Cash margin of guarantees

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Personal guarantee of the director


Equitable mortgage of required value of property

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G) FINANCIAL GUARANTEES
When the Bank(e.g FBL)is not in

a position to give credit facilities to the

customer it will issue a financial guarantee to customer.

LONG TERM CREDIT FACILITIES


It means FBL provides long term finance to the project. Project financing facility
is normally given in case when new project has to be set up. All its details are
given below:

Securities
All the stocks, properties and assets are in the charge of the bank, i.e Bank
advances finance on the security of whole project.

Period
This PAF is prepared or renewed every year.

Profit Rate
Profit rate is different for different customers.

Types of Project Financing


Foreign Currency Credit facility (for import of machinery)
LMM (Credit for Local Machinery Manufactured)
FAPC (Finance Against Packing Credit)
Most of the Banks (Foreign) avoid giving credit facilities to the customer
and also FBL does not prefer to offer these credit facilities.
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Period
5 to 10 years but PAF renewed every year.

LEASING
FBL makes two agreements with the customer.
Lease Agreement
Sale and Lease Back Agreement

Procedure
Customer opens LC for the import of machinery but the Bank pays for it. Then
Bank acts as the lesser and the Customer as a lessee, and machinery is given to
Customer under lease agreement.
Bank calculates and notes the following:
Principal amount of item to be leased. Say 50,00 Million.
Residual value (say 10%)(at the start of lease period) 5.00 Million.
Documentation fee Suppose Rs. 300.
Front-end fee (1% of principal amount) Rs.500, 000.
Then concerned Bank officer prepares Authorization Schedule.
Name of the customer is (single party or customer or company is mentioned on the
top of the page.
Background

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Date of registration
Authorization Capital + experience
Chief executive name +experience
Line of business
Nature

PAST PERFORMANCE
Availability of Facilities: Facilities sanctioned and if under utilized then
solid reasons for utilization.
Nature of facilities
Adjustment of facilities: How much of facilities has been adjusted or
satisfied
Operation of current account: What is the average balance, minimum
balance (maintained or not)
Profitability: Banks earning on customers current account during previous
year
Expansion of business
Charges in corporate set up

PURPOSE OF FACILITY

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PROFITABILITY
Profitability of the facility advanced e.g on LPO @20%P.A

BANK CHECKING
I.e. bank while preparing PAF obtains confidential opinions about the customers
from other Banks and Companies.

MANAGEMENT
Number of Directors
Manpower-Skilled and Unskilled

MARKETING OUTLOOK
Companys business position in the market.

RELATIONSHIP
Relationship of the customer (Company), its directors with the Bank preparing
PAF.

Approval
When approval of facility is prepared it is sent for approval.

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CREDIT ADMINISTRATION
Mr. Ihtishan deals with this department.
The main function of this department is to critically examine the securities given
by the client against credit facilities.
For through checking they may need a check list of following documents.

CHECK LIST OF DOCUMENTS


1. Facility Acceptance Letter
This is the letter on which Credit Administration officer mentions the credit
facility provided to the client and their amount. The client must accept this letter.
2. Corporate Resolution
Corporate Resolution showing that company is to obtain financing facilities from
the Bank.
3. Application for Morabaha Facility
Application for Morabaha facility submitted by the customer to the Bank
4. Authorization to Debit the Account
Customer authorizes the Bank that it can debit his account if he defaults or for
payment of some charges.
5. Demand Promissory Note
It is a legal document; Bank can sell the customers security if he does not pay the
credit (loan) by pressing its documents in the court.
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6. Agency Agreement
This document is prepared by the Banks lawyers on behalf of the Bank and it is
accepted by the Customer.
7. Morabaha Financing Agreement
This document shows that the parties (FBL and Customer) have agreed on some
Purchase and Resale financing agreement.
8. Personal Guarantee
Personal guarantee given by some person (Director in cases of limited company)
to the Bank (FBL that customer will pay the loan he has received according to the
terms and conditions he has agreed on).
9. Letter of hypothecation of Movables
In favour of FBL
10. Letter of hypothecation of Receivables
In favour of FBL
11. Letter of Lien and Authority to Set off
In this document customer agrees that all the sums of money deposited in his bank
account will be the security for the payment of financial activity availed by him
and all other costs or charges in terms of financing agreement between the
customer and Bank.
The customer also agrees not to withdraw the already agreed amount of money
from the deposit

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12. Memorandum of Agreement Bearer Securities


Customer deposits Bearer securities with the Bank and the Bank agrees to grant
financial facility to customer at his request.
13. Memorandum of Deposit of Title Deed
This document confirms that the customer has deposited original documents of
the property with the Bank and thereby creating an equitable Mortgage in favour
of the Bank.
14. Affidavit
It is submitted by the customer and he declares on that he is the sole owner of the
property (title documents of which are submitted to FBL as security against the
credit facility). Customers also authorizes that the can proceed against him in the
court if he fails to repay the amount due.
15. Letter of Lien on Marketable Securities
Customer agrees that all the shares, stocks and securities are under lien (charge) of
the Bank.
16. Agreement of Pledge
A customer agrees to pledge some movables, a security for the payment of amount
due.
17. Letter of Pledge
18. Deed of Mortgage
Agreement of mortgage of property
19. Letter of arrangements for Bills purchase
All theses above mentioned documents are prepared by the lawyer of the Bank.
The customer has to read them and accept them in favour of the Bank.

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DOCUMENTARY CREDIT DEPARTMENT


Mr. Zaidi deals with this department.

TYPES OF FACILITIES
There are two types of facilities:
Non-funded Facilities
Funded Facilities

NON FUNDED FACILITIES


FBL gives guarantees on the behalf of its customers to pay the principal in case of
any mis- happening on:
Customer Guarantees
Sui Gas Guarantees
Wapda
Excise
Financial Institution
When one client goes to a financial institution for loan, that institution does not
believe on customer and demand for Bank guarantee. Then financial institution
gives his guarantee to another financial institution.

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There are non funded facilities in which Banks own finances are not utilized.
Other non-funded facilities include:
Letter of Credit
L/c at Sight
L/s Usance

FUNDED FACILITIES
Funded Facilities are those which are related with the flow of Finances. In funded
facilities Banks own finances are involved. Theses are of many types:
Export Facilities
Pre Shipment
Post-Shipment
Long Term Financing
Import Financing
Financing Against Imported Merchandise (FIM)
Trust Receipt
Foreign Bills Purchased
Provision of non funded facilities is the responsibility of Documentary Credit
Department, while the provision of Funded facilities is the task of Credit
Operation Department.

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DETAILS REQUIRED ON GUARANTEE


FBL generally asks for the following details on guarantee:
Name and address of the applicant
Name and address of the beneficiary
Currency and amount of guarantee
Terms of guarantee
Expiry date of guarantee

ENTRY IN GUARANTEE REGISTER


A separate register known as guarantee register is maintained for recording
guarantees issued by the Bank. Date, letter of guarantee number, name of the
applicant, name of the beneficiary, commission, amount of LG and date of expiry
are recorded in it and a running serial number is allotted to the guarantee there
from.

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EXPORT SECTION
All exports from Pakistan, which are subjected to exchange control regulations,
are required to be declared on form E to one of the authorized dealer for
certification only after it has been completed and signed by the exporter himself or
bank.
While certifying form E bank ensures that exports give only one address. After
the form E has been certified by the bank, it is submitted to customer/personal
authorities at the time of shipment .The customer authorities detach original copy
and after filling in portion related to them and affixing there seal and signature
thereon forward it to the State Bank.

FORM-E
Government has provided facility to exporter in taking E-form from any bank and
he can present it to any bank for negotiation. Export proceed realization certificate
SBP gives rebate to exporter against export after realization. It is paid according to
commodity wise and bill wise.

SCRUTINY OF DOCUMENTS
On receipt of the bills of lading along with the for E and the export documents,
officer compares the and/or documents with the relative export form and satisfies

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himself that theses confirm in all respects to the declaration made on the relative
export forms.

RECEIPT OF L/C
Bank receives L/C from the Opening Bank in the following ways
By mail
By telex/Cable
In both cases, the officer checks the authenticity of L/C. If it has been received by
the telex, he confirms its test and if it has been received by mail, he matches its
signature with the signature already present on signature cards.
After the confirmation of the authenticity of the L/C, the exporter is handed over
the original L/C. If the authenticity of the L/C cannot be proved, Original is kept
with the Bank and a photocopy is handed over to the exporter.

VERIFICATION OF L/C
The signature on a letter of credit is verified from the available record of specimen
signature of the concerned bank. If the specimen signature record is not available,
the obtains a tested telex confirmation from the letter of credit opening bank.

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EXPORT L/C ADVISING REGISTER


After verification of test or signature the following information are recorded in
export L/C advertising Register:
Date
Reference number of FBL
L/C No.
Exporters name
Opening Bank
Amount
Expiry date of L/C
Description of Goods
Remarks

SCRUTINY OF DOCUMENTS
Officer, departmental Supervisor and then Branch Manager at the time of
approving negotiations/ Purchases of Export Bills for his satisfaction, scrutinize
the export documents.

ADVISING DISCREPANCIES TO THE ADVERTISING


BANK

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In case of discrepancies that violate the condition of letter of credit FBL advises
the opening bank. A covering schedule containing a list of discrepancies is sent of
opening along with documents. Asks the opening branch to send authority for the
FBL acceptance discrepancies if the seller agrees. If the opening sends authority
for acceptance. If opening fails to reply within 10 days, Bank send.

TRANSFERENCE OF L/C
Sometimes the word transferable is written on the L/C. This word shows that if the
exporter, who has original made contract with the importer, is not in a position to
send the goods, he is allowed to give this L/C to other exporter provided the new
exporter will send the same goods as mentioned in the L/C.

METHOD AND PERIOD OF PAYMENT


Full export value of the goods exported from Pakistan and declared to the
Customer authorizes should in an approved manner within a period of four months
from the date of shipment/position. Sometimes State Bank also mentions some
period during which the payment has to be received. The payment is received
through an Authorized Dealer either in convertible foreign currency in which the
Authorized Dealer maintains accounts or in U.S dollar or in Pakistani rupees from
a non resident bank account.

RECEIPT OF PAYMENT
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Upon the receipt of payment from the importer, the Bank commission to the agents
of foreign importer up to allowable limit.

MAINTENANCE OF RECORDS
Pricing And Distribution of Export Forms:
FBL maintains a complete record of all export forms printed by the Bank and of
their distribution to their branches and customers. For this purpose, it maintains a
Stock Register which shows branch-wise distribution of the export forms.

MAINTENANCE OF PARTY WISE RECORD OF


CERTIFIED EXPORTS FORMS
Bank maintains another for recording therein the particulars of export firms issued
and certified by it in respect of each exporter. In this register it records against
each form, the date of submission the export documents when shipments have
been made.

IMPORT SECTION
Import section deals in letter of credit. But before opening of letter of credit it is
necessary the importer is license holder.

INTRODUCTION OF LETTER CREDIT

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The fundamental function of commercial letter of credit is to facilitate the making


of merchandise.

TYPE OF LETTER OF CREDITS OFFERED BY THE BANK


FBL offer the following types of letter of credits to its customers:
Irrevocable Documentary Letter of Credit (Where beneficiary does not require
another banks confirmation) which may be any one or combination of the
following:
Sight Credit
Acceptance Usance Credit
Negotiation Credit
Deferred Payment Credit
Customers are required to deposit the appropriate deposit margin before opening
L/C. the amount to be deposited are either laid down in Customer Facility Form.

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PROCEDURE FOR OPENING L/C


Customer seeking to open L/C fills an application form. This application form is
Banks s own form and customer has to adequately and thoroughly fill it. Bank
ensures that the outstanding liabilities against the letter of credit limit plus the
amount of new letter of credit are with in the established limit. Officer, then
prepare offering sheet showing details of all outstanding. The Department head
reviews and approves it if within established limits.

CONDITIONS FOR OPENING L/C


FBL does not open letter of credit unless it is covered with an import license. The
following details in the import license are checked before opening a letter of
credit.
1. It is issued in the name of importer.
2. It is registered with the State Bank of Pakistan and registration number and
date are mentioned. Also it should be signed by an official of the State Bank
of Pakistan.
3. Any cutting should be authenticated under the signature and seal of the
issuing officer. No erasing is allowed.
4. It is duly embossed with the seal of the office of the controller of Imports
and Export.

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5. It is valid for import from all permissible countries. If it is restricted to one


country, the good should be imported from the country only.
6. Date of issue and date of expire are mentioned in the import license.
7. Place of issue of import license is given but the issuing office.
8. Signature of the official of the registration Branch of SBP is verified.
9. Letters of credits are established only against Exchange Control copy of the
import license.

DETAILS REQUIRED IN L/C APPLICATION


The letter of credit application agreement should contain the following details.
Name and address of the advising Bank
Name and address of the application
Name and address of the beneficiary
Currency and amount of letter of credit
Country of origin
Details of document required
Import license and registration number
Requirements about packing list
Requirements about bills of lading
Port of shipment
Port of destination
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Partial shipment allowed or not


Details off any other documents required

VERIFICATION OF SIGNATURES
A designated officer verifies the signature of the customer on Application
Agreement for genuineness as well as to ensure that the owner of the signature has
the authority to issue the instructions.

PROCESSING TIME FOR L/C APPLICATIONS


On receipts of completed application for opening a letter of credit, the credit
department ensures that the letter of credit is opened and dispatched without undue
delay. The letter of credit can be opened within maximum period of two working
days.

PROCESSING THE L/C


Bank issues identification number for control purpose to each issued credit. At the
end of working day, completed applications are held overnight in a fireproof
cabinet in a special room.

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MARKETING DEPARTMENT
Mr. Amjad and Mr. Mubashir deals with this department.
Nowadays marketing of products is prime importance for any organization. This
dynamic organization has its own marketing department, which is responsible for
creating the demand for goods and services.
Faysal Bank Limited has its own marketing department at the head office,
Karachi. This department operates different deposit schemes for its customer time
to time in order to increase the business of the Bank. At FBL the marketing people
make customer calls and personally visit the potential customers and convince
them to invest in FBL. They make phone to customers and inform them about their
schemes, profit rates etc.

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ACCOUNTS DEPARTMENT
Mr. Nadeem deals with this department.
Accounting department is the running blood of the Faysal Bank. It handles almost
all the problems occurring in the bank.
The important activities preformed by accounts department are as follows:

TREASURY
A special officer in FBL performs a portion of this operation.

CLEARING
Mr. Liaqat Ali deals with clearing.
Before discussing it is necessary to what is clearing?
The process by which cheques exchanged between the collecting and paying
bank and the ensuring financial settlement is called clearing
This is facility is provided by the state bank of Pakistan for offsetting of cross
obligations between the different banks. Clearing is of two types.

Inward Clearing
When cheques drafts, etc, of our branch presented to us for clearing by the SBP.
Cheques to be honored be bank.

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Outward Clearing
The cheques of other banks which the account holder deposits in their accounts are
send for collection.
Clearing process (inward/outward).
Here the local cheques are received that are drawn on FBL. All the cheques are
received on one counter along with the paying slips duly filled in properly
containing particulars of cheques and account holder. Counter folio of paying slip
is handed over to the customer by putting stamp for cheque received for collection
for Faysal bank limited on it duly signed by officer. These cheques are scrutinized
and cheques for local clearing are separated from OBCs. These are then entered in
clearing register and cheques for collecting are entered in OBC register and
handed over the Bills Department of Collection. Clearing officer checks and
verifies titles of all the cheques deposited by the customer to confirm the good title
of the cheques. Cheques are scrutinized proper and paying slips are separated from
cheques. Special crossing, endorsement and clearing stamps are affixed on the
cheques. Cheques of each bank are sorted and arranged branch wise. All the
cheques are then entered into the clearing system of bank. Print out of the clearing
is taken and details are attached.
With the cheques of each bank. Details of these banks are then entered into the
clearing schedule containing number of cheques presented and their total amount
against the name of each bank. Then total number of cheques presented to all

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banks and their total amount is written on the foot of the schedule, which is
tallied with the clearing register.
Next morning these cheques are delivered to the respective banks in clearing
house of the SBP between 9:00 to 9:30 AM. In the same manner, other banks
present their clearing drawn on Faysal Bank. Total number of cheques and their
amount delivered to other banks are received from them are written on the clearing
House schedule and handed over to the Officer Clearing House SBP. Cheques/DD
received in clearing are given to the Officer Cash Department of the branch for
their payment. After proper scrutiny of cheques, verification of signatures and
confirmation of balance in the account Officer Cash Department pays these cheque
by canceling and posting them in the system.

ADVANTAGES TO FBL
Foreign currency is purchased at a certain rate. During the period if rate increases
to a higher rate, the difference between the two rates is the source of income for
Bank.
In case of any mis-happening, Banks risk is minimum because foreign deposits
are backed up by SBP.
Receipt of Foreign Currency
By law, the branch of any bank cannot keep foreign currency. It has to sell this
currency at spot rates to its Head Office. Therefore, whenever the Bank receives

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Foreign Currency through cheques, it sells this amount on the same day to Karachi
branch.

BUDGETING
Accounts department in the bank is responsible for making all the plans for the
bank. These plans range from yearly to daily plans.

Five Yearly Budget


Bank first of all makes a plan for five years. This plan include the budgetary figure
for five years, new avenues to search, new customers to find, etc. Such a plan
gives only the broad guide to mark the direction in which the bank wants to move
in the near future.

Yearly Budget
Next step is that the account head makes a very accurate yearly budget
incorporating all factors like increase in tariff rates, rules and regulations of SBP,
dollar fee, charges in profit rates, etc. The annual budget is made for the year on
quarterly basis. The budget, this shows the targets for the bank, e.g. target deposits
to be achieved, targets expenditures, target profit, etc. After the approval of the
budget by the top management, it is communicated to all levels.

Comparison
Bank employees, management, etc. try their best to achieve the targets. After each
quarter to access the performance of the bank in terms of established objective, the

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actual figure for income, expenditure and profits are compared with budgeted
figures. The quarter-wise analysis is done for control purpose. It helps in finding
out whether the expense have increased beyond the targets and whether the
objectives set by the management have been achieved. The answer to these
questions help in finding out the areas wherever the performance was not up to the
desired level.

Revised Budget
Revised budget is sometimes necessary in order to incorporate the new policies
introduced by SBP or to show the effect of new changes in rates, etc. Budgets
made by the accounts department are flexible budget to readily incorporate the
rates of uncontrollable factors.

Monthly Review
Officers in accounts department makes profit and loss accounts both at the end of
the each quarter and at the end of each month. The advantages of monthly review
is that the management comes to know about any deficiencies which are hindering
the way of achieving the targets and then can try to overcome these in the
subsequent months. For example, if the income earned from the investments made
by the bank falls below the budgeted figure, the bank management can start
looking for new avenues so that the gap between the budgeted and actual figures
can be minimized during the subsequent months.
The advantages of these budgets is that at the end of the year, management has the
annual, quarter-wise as well as monthly figures for review purpose.
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Variances
Any variances resent in the actual amount and budgeted amount is probed into all
the factors; internal, cultural, social economical and political are taken into
consideration. If for example, the expenditure increases as compared to budgeted
figure as it happened last year when the printing expenditures had increased
because of increase in the cost of paper, the true causes of the increases are found
out. If the causes are out of control as in the above mentioned case and are
expected to prolong, appropriate adjustments are made in the budgets. If ,
however, the causes are in the control, then the appropriate policies are made to
encourage the employees and the concerned persons to curtail the expenditures.

OTHER SERVICES PROVIDED BY ACCOUNTING


DEPARTMENT
Another important task of the accounting department is the provision of various
types of information needed by the management for decision making. In this area,
it acts as a centre of MIS whereby all the information needed by management is
processed and given proper format.

Advantages
With the use of computers in MIS, the complete record of each account holder can
be obtained for full one year in the form of report. This shows the total
transactions does with each customer along with the amount of income the bank
has earned on his account, the number of LCs he has opened during the month, the
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amount of commission his account has earned, the total amount present in the
savings account, current and deposits accounts, etc.
It is one of the management to judge the overall performance of the customer
during one year. Information thus obtained can also be used for control purposes.
Wherever a customer comes to the bank to take any facility, management use the
information maintained his account to decide whether to provide him the facility
or not. In cases the management sees that the customer has not maintained good
record with the bank. The tip management negotiates with him to find out the
causes and the provide assistance if needed.

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SPECIAL FEATURES OF FBL


Faysal Bank Limited is an established bank. It has some special features with the
help of those it is growing rapidly.

GOOD WORKING ENVIRONMENT


As the working environment plays a great role in this competition age, So the FBL
has good working environment. All the people work with great cooperation
managers are so kind that each problem can be discussed with them.

EFFICIENCY
Employees at FBL are quite efficient. As Multan branch is new one. Its employees
have to bring their bank among the list of good banks. Therefore, they work more
than their working hours and it is all according to their will. It also shows their
loyalty to organization.

CUSTOMER SERVICE
All the customers are entertained individually. Same kind of behavior and
attention is given to all customers.

PRODUCTS
Prioritizing its product! Portfolio in the line with its corporate and consumer needs
and wants, the bank is committed to develop products that give more value to its
customers in both sectors.
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SWOT ANALYSIS
STRENGTHS
Faysal Bank limited has strong belief on customer services
Manager and EVP Mr. Safdar Qureshi has good coordination with staff members
The environment of Faysal Bank Limited is very friendly
FBL is Fully computerized, each department has its own PC
The products of FBL are very excellent
Customers are allowed to give suggestion for the improvement of

Bank and

these suggestions are listened carefully

WEAKNESSES
Faysal Bank Limited has no ATM facility
Faysal Bank Limited has no Credit card facility
The building of FBL is small

OPPORTUNITIES
Information technology
Credit card facility
ATM card facility
Establishing foreign branches

THREATS
There is great competition in the market

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RECOMMENDATIONS AND
SUGGESTIONS
Faysal Bank Limited is the first bank which has come under listing in Pakistan.
Faysal Bank Limited has been active in Pakistan since the last seven years and has
been in the forefront in Islamic mode of financing. Faysal Bank Limited has a
clear advantage over other new banks as the bank did not have to start from
scratch, it has access to already established international network and has
mobilized sizable deposits.
Faysal Bank Limited is successful in employee retention, customer satisfaction
and high profit generation because of good services. Happy employees help create
happy customers, which, in the next cycle, reinforce the happy employees, and so
on.
Faysal Bank Limited is more than satisfied with its customers. The track record of
the customers is excellent and the repayment procedure is satisfactory. The bank is
fully aware of the financial strength as well as the market repute of all of its
customers.
Much of the good reputation of Faysal Bank Limited, is because of the good
behavior and response of the employees of the bank. Good and friendly attitude on
part of workers is the result of excellent management of the bank who believe that
people are the central case of any organization, especially those engaged in
providing services to their customers. As a result of customer oriented policy of
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the management, employees have been trained to behave in a very friendly manner
with customers.
Environment of the bank also plays an important role in customers satisfaction.
Employees always talk very politely on the telephone because telephone, if
not used properly, can be a cause of spoiling the good name of the
organization.
The entire environment of the bank gives the impression that customers are
very important to the bank. They are offered seats even when they come for
very small task.
However, there are some suggestions for improvement.
Establishment of more branches in Pakistan
More advertisement on electronic media.
Introduction of more credit schemes like Rozana Munafa.

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OBSERVATION & CONCLUSION


I observed Faysal Bank Limited a financially sound bank. Its profits are increasing
year by year. Its staff is very good and sincere with bank.
Faysal Bank views specialization and service excellence as the cornerstone of its
strategy. The people at Bank realize that innovation, creativity, reliability,
customized services and their execution are the key ingredients for their future
growth
They are aware that they have stepped into 21st century and they must meet its
challenges by acquiring the highest level of technology. They will thus be
accelerating their technological advance to enable them to distribute their products
and services through most efficient and high technology means. Online banking
services and introduction of ATMs at strategic locations have been firmed and will
be fully operational during the year 2003.

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