You are on page 1of 92


History & Introduction of the Organization 1 Organizational Structure & Policies 5 Working of Different Departments 9 Training Programme 50 Marketing Mix of Bank Alfalah Ltd. 52 Financial Analysis 59 SWOT Analysis & Suggestions 87


One of the requirements to complete M.COM degree programme at Hailey College Of Commerce, is to complete 6-8 weeks of Internship programme at a reputable organization. Major objectives of Internship Report are to acquaint the student with the real management process, to introduce the student with various career opportunities available in the market. A student can prove his/her value and worth by his/her hard work and friendly manners. This brief introduction can certainly be a door opener for possible employment opportunities. This report covers almost all the modern banking operations. Firstly, it gives the History and Introduction to the organization. Then, organizations structure, hierarchy and working of various departments is discussed. It also includes the organizational Marketing Mix, SWOT analysis and comprehensive financial analysis. I hope this report contains all the relevant material required by the Institute and gives the readers a concise view of the basis of modern banking system.

BCCI was founded by Pakistani banker Agha Hasan Abedi (1922 ), who remained its chairman until 1989. From March 1990, it was under the control of Sheik Sultan Zayed bin al-Nahayan, the ruler of Abu Dhabi. (BCCI) Bank of Credit & Commerce international bank, founded 1972. By 1990, BCCI had offices in 69 countries, $15 billion in deposits, and $20 billion in assets. In July 1991 evidence of widespread systematic fraud at BCCI led regulators in seven countries to seize the bank's assets, and its operations in the remaining 62 countries were gradually also shut down. A subsequent investigation resulted in a New York criminal indictment of the institution and four of its units, and the arrest of some 20 BCCI officials in Abu Dhabi for alleged fraud. In July 1990 five former officials of BCCI were convicted in Tampa, Florida, for laundering $32 million in cocaine profits for Colombia's Medelln drug cartel. Despite these convictions and later evidence of BCCI's fraudulent conduct, regulatory control was hampered by the fact that the bank had no central office under the jurisdiction of an individual government. Its two central offices were located in Luxembourg and the Cayman Islands, both tax havens with secretive banking rules. In October 1994 a US federal court sentenced Swaleh Naqvi, former chief executive of BCCI, to an eight-year prison term for his role in defrauding investors, adding to a 14year sentence he had already been awarded in Abu Dhabi. In addition, Naqvi was ordered to pay more than $250 million to US investors. The government of Abu Dhabi, which held a 77% share in the collapsed bank, reached an agreement with the bank's liquidators March 1994, when it agreed to reduce its claims

against BCCI and contribute $1.8 billion to creditors, a move approved by the High Court in London December 1994. In Pakistan it was not liquidated. Govt. of Pakistan negotiated and purchased the bank. Government of Pakistan acquired BCCI and in March 1992, associated its three branches in Lahore, Karachi and Rawalpindi, with Habib Bank Ltd. In October 1992, the State Bank of Pakistan, Ministry of finance and the Liquidators decided to make it a subsidiary of Habib Bank Ltd. Now it was called Habib Credit & Exchange Bank Ltd. Following the privatization in July 1997, HCEB assumed a new identity of Bank Alfalah Ltd. on February 25, 1998. Charged with the strength of Abu-Dhabi based consortium, and under the leadership of His Highness Sheikh Nahayan Mubarak Al-Nahayan, Minister of Education, Government of Abu-Dhabi, and a prominent member of the royal family- the Bank is energized with the vision, envisaging the development of Consumer sector in Pakistan.


Abu Dhabi Consortium: 70% of shares Habib Bank Limited (for & on behalf of Govt. of Pakistan): 30% of shares Presently Bank Alfalah has 23 branches compared to 3 at the time of privatization and work is under way on new branches nationally & internationally. Prioritizing its product portfolio in line with consumer needs and wants, the bank is committed to develop products that give more value to its customers, be it a simple bank account or complex financing of a major project. With its deposits already soaring by more than 30% after privatization, Bank Alfalah has embarked upon an expansion program to ensure physical presence in all major urban centers of Pakistan. And with a team of talented, service dedicated professional bankers, Bank Alfalah commits all its energies, resources and time to cater to all banking and financial needs.


Bank Alfalah Limited (formerly Habib Credit & Exchange Bank Limited) was incorporated on June 21, 1992 as a public limited company under the Companies Ordinance, 1984 and it commenced banking operations from November 1, 1992. It is engaged in commercial banking and related services as defined in the Banking Companies Ordinance, 1962.

H. H. Sheikh Nahayan Mabarak Al-Nahayan, Chairman

Mr. Omar Z. Al-Askari Mr. Abdulla Khalil Al-Mutawa Mr. Abdulla Nasser Hawaileel Al-Mansoori Mr. Mohammad Saleem Akhtar, CEO Mr. Ikramul Majeed Sehgal Mr.Nadeem Iqbal Sheikh BOARD ADVISORY COMMITTEE: Mr. Omar Z. Al-Askari Mr. Abdulla Khalil Al-Mutawa Mr. Ganpat Singhvi Mr. Bashir A. Tahir AUDITORS OF THE BANK:
A. F. Ferguson & Co. Chartered Accountants.

LEGAL ADVISORS OF THE BANK: Zafar Law Associates Sajad Law Associates Samee & Bilal Associates Ansari Law Associates. MISSION STATEMENT:
The Bank is committed to dedicate all its energies, resources and time to bring higher value and satisfaction to our customers, employees and shareholders.


Chairman / Director

Board of Directors

Chief Executive Officer (C.E.O.)

Executives In charge

Area Office (North)

Area Office (South)



Manager Operations

Manager International Banking

Manager Credit

Manager Customer Banking Customer Services & Coordination

Accounts Department

Imports Department

Credit Department

Computer Department

Exports Department

S.A.M. Department

General Banking

Foreign Exchange Department

Personnel Department Internal Audit Department Marketing Department

Tele Communicatio ns


The account-opening department is sub divided into two deptts. FCA & Pak rupee account opening.

Pak rupee accounts:

This department is maintaining about 15,000 accounts at the moment. Primary banking products offered by bank Alfalah are Current accounts Saving accounts/PLS deposits Term deposits Royal profit Royal group (joint investment plan) Royal patriot (special term deposit)

Current accounts:
This is a non-profit account. It can be opened with a minimum balance of Rs.1000. A balance of 5000 is to be maintained or there is a penalty of Rs.200 per month. This current account can be used to obtain an overdraft facility.

Saving accounts/ PLS deposits:

These are profit-bearing accounts. Profit is given at a rate of 9% per annum. The disbursement of profit is made semiannually. 10% with holding tax is deducted at the time of disbursement. This profit is credited to customers account.

Term deposits:
This is an account where an amount of money is deposited for a fixed period of time. There is certain %age of profit that increases with the amount deposited or the duration of deposit, whichever the case may be. 10% with holding tax is deducted at the time of

payment of profit. The money can be withdrawn before completion of the term and there is no penalty for it. a) Notice deposits: NOTICE DEPOSIT 7 - 29 days 30 days & above b) Term deposit TERM DEPOSITS 1 Month 3 Months 6 Months 1 Years 3 Years 5 Year 8% 10% 10.5% 11% 12% 13% 6.1% 7.5%

Royal profit:
This is a bank account that gives a higher rate of return that increases with savings. This is a savings account with characteristics of a current account. The money can be withdrawn with out prior notice. It can be opened with a minimum balance of Rs.50, 000. Profit is paid monthly. ROYAL PROFIT From 50,000 to 999,999 From 1,000,000 to 9,999,999 From 10,000,000 & above 9% 9.5% 10.5%

Royal patriot:
This is a special term deposit where profit rates improve with tenure and amount. No prior notice is required before withdrawal and no penalty in case of premature encashment. Low minimum balance required to open this account is Rs.25, 000. Profit on 1 & 2 years deposits is paid half yearly. ROYAL PATRIOT 1 Month Rate 25,000 - 999,999 1,000,000 - 4,999,999 5,000,000 & above 3 Months Rate 25,000 - 999,999 1,000,000 - 4,999,999 5,000,000 & above 6 Months Rate 25,000 - 999,999 1,000,000 - 4,999,999 5,000,000 & above 12 Months Rate 25,000 - 999,999 1,000,000 - 4,999,999 5,000,000 & above 2 Years Rate 25,000 - 999,999 1,000,000 - 4,999,999 5,000,000 & above 11.00% 11.25% 11.50% 11.00% 11.10% 11.20% 10.50% 10.60% 10.70% 10% 10.10% 10.25% 8% 8.10% 8.20%


Whenever a customer comes in to open an account, he is presented with an account opening form. Bank Alfalah has devised a most comprehensive and easy to be filled form for the convenience of its customers. It requires information like customers name, address, occupation, telephone no., NIC no., introduction etc. The customer is required to submit certain documents while opening an account.

Individuals/ Sole proprietor ship:

NIC/Passport photocopy.

Partnership deed, certified copy. NIC photocopies of all partners. Partnership mandate.

Club/ Society / Association:

Copy of rules. Certified copy of resolution.

Limited Companies:
Copy of certificate of incorporation Memorandum and articles of association. List of Directors. Copy of Board Resolution. Certificate of commencement of business. Copies of NIC of Directors. Latest copy of Form- 29

Issuance of Cheque Books:

The customer is given a chequebook requisition slip along with the a/c opening form. When he gives this to the a/c opening officer, a cheque book is prepared, an entry made in the cheque book register and in the banks software i.e., bank excel.

Specimen Signature Card:

Account holders signatures are taken for verification. Whenever he wants to with draw any amount, signature on cheque is verified with the help of SSC.

Treatment of Zakat and Tax:

Zakat is deducted on Rupee Accounts only. It is deducted once a year on the first Ramadan @ 2.5%. Exemption from Zakat is subject to completion of Zakat exemption formalities. 10% with holding tax is deducted on saving accounts annually.


This department deals with account opening, issuance of chequebooks, remittances, cancellation of cheques and foreign exchange securities. Foreign currency accounts are offered in four currencies in Pakistan. US Dollar

After freezing of foreign currency accounts on May 28th 1998. US dollar accounts are maintained with the help of two accounts. Head office account: Deals with old $ accounts, before 28th May. Fresh balance in these accounts is called incremental deposit. Money in these accounts can only be withdrawn in Pak rupee. Due from treasury account: This is new Dollar account. Money can be withdrawn in dollars and it can be transferred to other accounts as well.

Pound Sterling Deutsche Mark Japanese Yen

Current accounts Saving accounts Term deposits

Current accounts:
Non-profit bearing accounts. Money can be with drawn any time with out prior notice.

Saving accounts:
Profit is given @ 2.25% per annum. Disbursement is made twice a year. 10% with holding tax is deducted by the bank. Companies maintaining foreign currency accounts have to notify govt. that the remittances are not pertained to export proceeds and services rendered from Pakistan.

Term deposits:
The bank offers facility of term deposits in four major currencies. The interest rates on these deposits are given on the basis of rates prevalent in international money markets. This account is subject to deduction of 10% with holding tax.

Account opening procedure:

Account opening procedure is almost the same as the Pak rupee account opening procedure.

Zakat and tax treatment:

Zakat is not deducted on foreign currency accounts.

Tax is paid @ 10% annually. Only resident account holders are subject to deduction of tax. Whenever a transaction occurs and identing commission is submitted to any account, tax is deducted.

Cancellation of cheques:
Cheques presented for encashment are verified for signatures and then cancelled here. While cancellation, the rupee equivalent of the foreign currency is written on the cheque for bank record. Mid rates are used for $ to $ transactions. Mid rates are conversion rates based on the exchange rates of previous month and are fixed for a particular month.

Foreign remittances:
Swift/ telegraphic transfers International mail transfers Foreign Demand Drafts Traveler cheques

Swift--Society for world wide inter bank financial telecommunication:

The payments are classified into messages, keyed in over computer terminals of remitting bank and printed out as payment order almost immediately.

Telex transfers:
The banks that are not the members of swift commonly use this means of communication. International money transfer is routed through overseas branches/ correspondent banks. e.g., head office deals in $ with these correspondent banks. Citi bank N.Y. Abn Amro bank N.Y. Standard Chartered N.Y. Bankers Trust N.Y.

Assuming one of our customers wishes to transfer US$ 1000 to his family in USA.

Our Nostro account with ABC bank in USA

Pakistan Bank Alfalah

USA Beneficiarys Bank

The family in USA Our Customer receives US$1000. deposits US$1000 It takes only 72 hours to transfer funds through TT. It is the fastest means of money transfer.

Demand Draft:
It is an instrument for money transfer. A customer may opt for using a demand draft for transfer of funds. It is comparatively cheap but a slow method. It takes about 15 days.

Traveler cheques:
The persons traveling to other countries use traveler cheques for spot payments there. It is a safe and convenient way as no loss is likely to be borne by the person in case they are lost or stolen. The government issues traveler cheques quotas i.e., Travel quota: a person can obtain traveler cheques valuing $50 per day or $2100 during a calendar year.

Business quota: The maximum quota for business class is $300 per day or $9000 in a calendar year.

Government Securities:
The FCA is also dealing in the sale and purchase of government securities. Foreign exchange bearer certificates

FEBCs were issued before freezing of FCAs in May 98. These certificates can be exchanged in rupees and not in foreign currency. Interest is still given in dollars.

Special US$ bonds.

The main activities carried out in the accounts department of Bank Alfalah Ltd. are as follows: Budgeting Test Application Daily reports Maintenance of Fixed assets Record & Depreciation Activity Checking Head office extract/ H.O. Reconciliation Reconciliation Statement of SBP Foreign exchange -- Old Accounts Contracts

The main task performed by the accounting department is the preparation of budget. This is one important task on the basis of which funds are allocated to various branches in the country and revenue targets are determined. Every branch prepares its own budget for the fiscal year and then budgets of all the branches across the country are consolidated at head office in Karachi. In this way, the consolidated budget for Bank Alfalah Ltd. is prepared. The fiscal year of BAL is from Jan. to Dec. The accounting department at LDA Plaza starts preparing the budget in October and finishes it by the end of December. Budgeting includes Forecasting on the basis of previous records, plus whatever the bank aspires to achieve. First of all the banks Sources and Uses of funds are analyzed. Banks sources of funds are Deposits Capital Borrowing from other Banks

Banks Uses of funds are Advances Investment in securities Placement in Inter bank market

Various things are taken into account while formulating the budget like Income from advances Interest cost of deposits Trade finance business Other income (lockers rent, service charges, penalties etc.) Administrative expense

Marketing expense Utility Bills

The revenue target is fixed keeping in view the past performance. The cost of generating these revenues is also estimated. After each month the actual performance is compared with the estimates and variance is calculated. Variance can be negative as well as positive. If there is a negative variance, this shows managements inefficiency in controlling its expenses or incompetence in achieving the desired revenue target, besides various external factors. Proper adjustments are made in the next months target according to the previous months performance.

Application of Test:
Test is a coding system used to authenticate money transactions between banks. Whenever money is transferred through TT, the concerned officer requests the accounting department to apply Test to the message. The test is applied to the message; three copies of this message are prepared. One goes to the test key deptt., one to the telex / Fax operator and the third one goes to the department record. When the TT is received at the other end, this test is verified. The transaction will be carried out if and only if the test matches with their own test. Banks have arrangement with other banks with which they have quite a large volume of business and it is beneficial to have a direct arrangement with these banks. This test arrangement can be with banks within country and outside the country. For example, BAL has test arrangements with Abn Amro N.Y., American Express N.Y., Citi Bank N.Y. etc. When this arrangement is carried out a test key is provided to the concerned bank, which contains codes. This test key is different for every bank. This test key is also different for Inward and Outward telegraphic transfers. A common method to apply test follows this order

Prefix number Month & Day of the week Date code Amount code Currency code Variable No./ Serial No.

Sometimes a double test is applied to take care of any loophole. In double test, a second person applies the test again to the messages test.

There are a number of reports prepared in the accounting department to facilitate the working of management and to exercise internal control. Most of the reports are consolidated reports of the North region. Some of these reports are Daily funds management report Position of deposits and advances Income & Expenditure report Statement of affairs report (B/S) Weekly statement of positions

Reports generated from MAIN FRAME:

There are a number of reports generated from the mainframe computer daily. On the basis of these reports, comprehensive and concise reports are prepared.

Currency wise deposits report Local TDR daily position Account balances Transaction journal (book keeping) Position of subsidiaries Income & expenditure report Royal profit account balances New FCA & Term deposit a/c balances

Maintenance of fixed assets record & Depreciation:

Accounting department maintains the record of fixed assets. Depreciation is the allocation of cost over the useful life of a depreciable asset. The accounts department calculates the depreciation on the assets. It is accrued on monthly basis and charged at year-end. The assets are shown in balance sheet at historical cost less depreciation. Depreciation is charged at the following rates. Building Furniture Carpets & Curtains Equipment Vehicles 2.5% 10% 25% 20% 25%

Activity Checking:

Manual checking of all debit credit entries is done here. Sorting is made according to the mainframe-generated report. All the vouchers are checked that they are properly posted or is there any transaction left to be posted. This checking makes the working of bank more efficient and avoids any loophole.

Head Office Extract & H.O. Reconciliation:

Head office extract contains details of account maintained with head office. Transactions are taking place between head office and branch office. Accounting department reconciles the outstanding entries in the records of branch & head office. Thus, the balance at the end of the day is same at both the ends.

SBP Reconciliation Statement:

After preparing the head office extract the next step is to prepare the State bank of Pakistan reconciliation. The daily statement from SBP is matched with the statement of balance with SBP account in the branch office. It is actually carried out to settle any outstanding entries. These outstanding entries have to be settled immediately unless there is any specific reason.

Foreign exchange Old Accounts Contracts:

As Pakistan is a foreign exchange control country, all the foreign exchange had to be submitted to the state bank of Pakistan. The new FCY accounts are treated differently. There is an arrangement with the head office treasury. Revaluation of assets & liabilities takes care of the balances. For Old FCY accounts, whenever the foreign exchange is deposited into the account, the $ amount is debited to the SBP and equivalent Pak. Rupee are credited to the banks a/c. This is done to take care of the exchange risk. This is a sort of forward contract with the

SBP in which the Forex is sold to SBP on a particular date at the particular rate of conversion. Usually the contract is for 3 months. After 3 months the bank purchases the forex back at that days particular rate of conversion. The difference between the sold and purchased amount of Pak. rupees is then credited to the exchange difference account and SBPs a/c will be debited. The contract may be rolled over i.e., the forex may be rebooked or resold to the SBP for another 3 months or 1 year.


Management Information System generates information for monitoring performance, coordination and providing background information about the organizations operations. MIS helps management in running the overall operations. Provides required information in minimum time, helps in taking decision on time.

Information needs differ at various levels of management. There are three levels of management. Front line managers Middle management Level Management

Organizations adopt Information system to become more efficient, save money and reduce the work force. Improvements in decision making, serving ever higher customer and client expectations, coordinating dispersed groups in an organization and exercising tighter control over personnel and expenditures become the principal rationales for systems. With Information systems: Computer technology requires specialized organizational subunits, information specialist and a host of other supportive groups.

There are two major types of Information processing: batch & online processing. Which kind of processing is used depends upon the information needs of the organization.

Batch Processing:
In batch processing transactions are processed in batches on a regular basis, such as daily, weekly or monthly. Information in the system will therefore not always be up to date at any given moment. Transactions are accumulated in a transaction file, which is used to update the master file on periodic basis. This master file contains relatively permanent information on entities.

Online Processing:
In Online processing, transactions are processed immediately. Information in the system is always up to date and current. Transactions are keyed into the system immediately and the system responds immediately.

Online processing is used in departments like Cash dealing deptt. In the evening, different Batches are merged and the branch accounts are closed. Every day the Main Frame generates different types of reports to cater the needs of every level of management. Examples of these reports are Daily Account Activity Report Transaction Journal Income/ expenditure Affairs

Daily Statement of SBP/ H.O. Files Update Report Due from Treasury Transactions in FC Accounts Files Update Report Daily Exchange Position List of Cheque Books Issued Local TDR Daily Report On-line Activity Report Import Business New FCA Deposits

Automation & Technology:

Technological developments are opening up new vistas of solutions for distributing traditional financial products. Concurrently, rapid change in customer preferences has resulted in a major shift from manual to automated services. Bank Alfalah inherited the Information system named FalconIBM. It devised another Information system Bank Excel to cope with its expanding operations. This system has worked well for the Bank up till now but with advancement in Technology it is unable to keep pace with the new innovative Technology. One major drawback of Bank Alfalah that is keeping it from outnumbering its competitors is the outdated management information system. Also many routine tasks like vouching etc. are still done manually in most of the departments. This affects the speed and efficiency of the employees. One task that could be performed in minutes through a computer takes about hours. The competitor banks have very advanced computer systems that give them an edge.

To deal with this shortcoming, a new high Tech computer system is going to be launched in branches all over the country by the start of next year. This new MIS is known as Bank Smart. During the year 2000, Bank Alfalah made heavy investments, towards enhancing its capabilities in the area of automation and information technology. After the implementation of the new MIS, bank will be well positioned to meet client needs, with improved competitive advantage.

Credit department is considered the backbone of the bank. This is the deptt. which is the breadwinner for the other deptt. As advances are banks assets and deposits are banks liabilities, banking sector is the most vulnerable sector where the assets are in the hands of borrowers. BAL LDA plaza branch has deposits worth Rs.5 billion at the moment, its advances amount to approximately Rs.3 billion. There is still a gap of 2 billion surpluses. This surplus is placed with the head office which invests it in the interbank market and gives interest @ 11.5%. BAL needs to enhance its credit portfolio. Extension of credit should add value to banks assets. Credit marketers need to find quality customers with whom banks interest is not at stake. BAL inherited a huge portfolio of Non Performing Loans from HCEB at the time of privatization. The management is making serious efforts for recovery of these loans, and has been successful in some cases. An encouraging thing is that all the NPLs are duly provided for. So the risk of potential loss is considered low. BAL provides only short term financing facility to its clients because of paid up capital restrictions.

BALs unimpaired capital is Rs.885 million. According to Prudential Regulations, 20% fund based facility i.e., Rs.175 million can be granted to an individual or a single entity. There are various types of facilities availed by the clients:

Fund Based Facilities:

Current Finance/ Running Finance/ Over Draft. FAFB: finance against foreign bills (own source) FAFB: finance against foreign bills (refinance) FAPC-1: Finance against packing credit (refinance) FAPC-II: refinance (based on previous performance LBP: Local bills purchased (with L/C or without L/C)

FIM: Finance against Imported merchandize FATR: Finance against trust receipt FBP: Foreign bills purchased

TF loan: term finance

Non-Fund Based:
SLC: Sight L/C ULC: Usance L/C Guarantee

General criteria for credit facility:

Extension of credit should add value to banks assets. It should be need-based. Financial health of the borrower should be considered. CLP should highlight strength & weaknesses of the borrower. Name Lending should not be undertaken.

SBP direction must be followed while decisions are made regarding advancing of a facility. Credit facility should be backed up by adequate securities i.e., cash margins, mortgage, pledge/hypothecation of stocks, personal guarantee etc. Bank should have a well-diversified portfolio i.e., it should have exposure in various sectors of the economy.


The purpose of establishing credit approval authority level is to ensure that quality credits are booked after thorough appraisal of customers at the relevant authority levels.

Board of directors:
The power to sanction or reject any credit proposal lies with the Board of Governors. Every CLP is sent to the head office khi. for approval. Head office can sanction loans up to a certain amount; any CLP of bigger amount is then forwarded to the Board of Directors in Dubai.

Executive Credit Authority:

Board of Directors may delegate its discretionary powers to an Executive Committee. Executive Committee is nominated by BoD. Comprises of members of Banks Management. CEO is the chairman. Credit proposal is approved through majoritys approval.

Operations Credit Authority:

The Executive Credit Authority may delegate specific credit sanctioning powers to officers of the bank in order to facilitate the day-to-day operations. These powers cannot be sub-delegated. There are three divisions of credit deptt.

Credit Marketing Credit Monitoring Credit Administration

Credit Marketing:
These people look out for quality customers. They try to convince them that we are the best bank for you & provide supreme services. Good clients have repute in the market, they have many options, as any bank is ready to provide loan to them. There is a rat race amongst the banks to win these customers. Credit Marketers prepare Credit Line Proposal and send it to Head Office for approval.

Credit Line Proposal:

Basic contents of a credit line proposal are: Size & purpose of the proposed lines. Repayment schedule/ time frame Sources of repayment Pricing described as interest rate and commission etc. Previous relationship (if any) with the borrower. Evaluation of last 3 yrs. B/S, I/S, cash flow and future projections in case of term loans. Both trend & key financial ratios are compared with industry standards. Credit report from CIB. Credit report from other banks. Latest stock inspection report.

Credit Monitoring:
Once a relationship is in place with the client, a credit review is required on an annual basis for renewal of credit facilities.

However, assessment of credit risk is a dynamic process and should not be limited to the annual review exercise. Banks credit officer should maintain contact with the borrower through personal visits on a regular basis. The credit officer should seek and use information available from all sources, whether internal or market/third party. Conduct of the account, unusual requests, impact of changes in the environment/dynamics of the industry, all provide invaluable sources of information. Such information must be responded to proactively, in order to ensure that timely steps are taken to capitalize on opportunities and to protect the Banks interests.

LG is a non-fund based facility. This is an undertaking by bank to pay or discharge the liability to third person in case; the person availing this facility defaults. The letter of guarantee should comprise of the following: Specific amount Specific maturity date Date of Issuance

Bid Bond:
When companies issue tenders, they require bidders to submit a Bid guarantee along with the tender bids. This is to discourage the irresponsible bidders and to avoid the costs the tendering authority would incur in re-tendering for the same project if the successful bidder refuses to commence work. This BB amounts to 2-5% of the total project cost. Bank charges commission and this commission depends upon the amount of BB.

Performance Bonds:
The successful bidder submits the performance guarantee to the tendering authority, undertaking to perform according to the terms & conditions of the contract. This is the most risky type of guarantee because it is valid for the full period of the contract. Any event during the long validity period could prevent the contractor to perform the contract.

Advance payment guarantee:

The contractor has to submit an Advance payment letter of guarantee to the project sponsor, to get the cash advance payment for the start up operations of the project. In case the contractor fails to fulfill the contract, the APG is refunded back to sponsor.

Payment guarantee:
This is a simple guarantee given by bank that whenever it is called by client, bank will be liable to pay.


Trade finance is one of the most important departments of the bank. It earns revenue for the bank in the form of commission charges, L/c advising charges, foreign exchange differences on negotiation & purchase of bills for collection. Bank Alfalah is focused on Trade Financing; it attaches great significance to the development and maintenance of healthy correspondent relationships with banks and financial institutions, globally. Towards this pursuit, it has developed excellent business relations with renowned banks, whose support in terms of lines of credit extended to the bank, has also enabled to handle ever growing trade volumes. During year 2000, the bank handled foreign trade business in excess of Pak rupees 30.6 billion, representing an increase of 92 percent over the previous year.

International Trade is a consequence of an agreement between a buyer & a seller, separated by geographical distances or boundaries. To ensure safe transfer of goods to the right buyer and payment to the right seller, the services of financial institutions are hired, which have contacts and roots in both countries. On a smaller scale, trade involves buying & selling of goods within a country or may be a city. But the basic philosophy remains the same.


One of the most important functions of the commercial banks is to finance the import and export trade. Documentary letter of credit is a banks written undertaking given to the exporter for payment of a certain sum of money on behalf of the importer, provided the exporter tenders to the bank or its overseas agents, the specified documents within a specified period in accordance with the terms of the undertaking.

Advantages of Letter of Credit:

Since the letter of Credit is opened for the importer with established understanding that the exporter is sure to receive the payment for his consignment immediately in his own currency and country, provided the supporting documents are in order. Thus the exporter is insured against exchange risk and also the risk of dealing with unknown buyers. The importer has the guarantee that he will receive valid documents of title to goods and that these documents will evidence the shipment of the correct quality, quantity and value of the goods for which he placed the order. However, if he is not prepared to suffer for diverse fluctuations of exchange rates, he should book a suitable forward contract with his bank at the time of opening of L/C.

Parties to a Letter of Credit:

There are four parties involved in a letter of credit. Importer ---Buyer Issuing Bank --- Buyers bank Exporter --- seller Beneficiarys bank --- Sellers bank

Types of Letter of Credit:

Revocable L/C:

A revocable credit is the one which can be amended or cancelled at any time without prior notice to seller but before the authorized draft is presented for acceptance or payment.

Irrevocable L/C: An irrevocable letter of credit can be amended or cancelled only with the agreement of all the parties to it. It obligates the issuing bank to accept and pay the bills drawn upon it so long as the terms and conditions of the credit are complied with. All L/Cs should clearly indicate whether they are revocable or irrevocable. In case, there is no indication the L/C is treated as revocable. Confirmed L/C: A confirmed credit is the one which ahs been confirmed by the advising bank. By confirming the bank agrees to take on the liability of making payment to the seller if the issuing bank defaults for any reason. Transferable L/C: A transferable credit is the one, which can be transferred by the original first beneficiary to one or more second beneficiaries. These are used where the supplier of goods is other than the beneficiary of the L/C. Sight L/C: If the exporter of goods is to obtain payment immediately on presentation of stipulated documents, provided all the terms of L/C have been complied with, it is sight letter of credit. Acceptance L/C (Usance L/C):

When L/C stipulates payment to the beneficiary upon the maturity of a bill of exchange drawn under the terms of the credit, it is an acceptance credit. The exporter draws a draft for a particular usance (e.g., 30, 60, or 90 days or even longer). Upon presentation of documents to correspondent bank, the exporter does not receive payment but acceptance, which he either holds until maturity or discounts at a fine rate.

Establishment of L/C:
LC is established when it is recorded in the system of the bank. Internationally, when it is advised by the correspondent bank to exporters bank, it is considered established. When L/C is established a customer liability account is created with a debit balance. A bank liability account is created with a credit balance. When the documents are negotiated & returned this transfer entry is reversed.

Charges of L/C:
Cash L/C where total volume of import business of client during the period of or calendar year is L/C up to Rs 20 million L/C volume from Rs.20m to Rs.100 m L/C volume from Rs 100m to Rs300m L/C volume from Rs300m & above 0.40% 0.35% 0.25% 0.15% First quarter Each subsequent quarter 0.20% 0.15% 0.10% 0.05%

The trade finance department consists of two divisions: Import & Export.

IMPORT DEPARTMENT Issuance of Import Registration Certificate:

The importer applies to the Export Promotion Bureau through the Bank, to get Import registration Certificate. Following documents are needed along with the application. Application form for Import registration Original and attested copy of N.I.D. card.

Request letter from Importer. Original Bank letter. Original and attested copy of Income Tax Certificate. Original and attested copy of Chambers & Commerce Certificate. Original and attested copy of Sales Tax Registration Certificate. Attested copies of Lease deed. Attested copy of Registry of Property.

Performa Invoice:
It is the first document initiated between the importer & exporter. Every L/C is established on the basis of a Performa Invoice. It is issued by the exporter and contains the consent of exporter to sell goods. All the conditions of the contract of sale & purchase are settled in this Performa Invoice. Quantity: The quantity of the commodity and its specifications are given in the Performa invoice. Conditions of L/C: FOB: Free on Board Under this arrangement, the importer has to bear the expenses of freight & Insurance etc. C&F: Cost and Freight Under this arrangement the exporter has to bear the expenses of the shipment and the freight charges. CIF: Cost, Insurance & Freight Under the CIF arrangement, the exporter bears the cost, Insurance and freight charges of the goods. This condition is not permitted in Pakistan. Packaging Description Part shipment or Trans shipment: Part shipment refers to shipment in installments. When two or more different modes or/and ports of shipment are used, it is called Trans shipment. Currency:

The currency in which payment is to be received is mentioned.

Validity: Performa Invoice is valid up to a specified date. An L/C established on an invalid Performa Invoice is invalid. Validity of L/C may be renewed.

Procedure for opening an L/C:

When the importer receives the Performa Invoice, he comes to the bank to open an L/C. L/C is sent to the exporters bank for negotiation. This message is sent through Telex. It includes All the term & conditions of the importer. Doc. Required from the exporter. Instructions for the negotiating bank.

The negotiating bank will inform the Bank by Telex, 3 working days before negotiation the amount of documents, name of carrying vessel and the date of shipment.

Cash Margin:
Also referred to as L/C margin, is a security against the Letter of Credit. Some percentage of the L/C amount is kept with the bank as security in a non-interest bearing account. At times it is a compulsion by the SBP, as it discourages imports & the outflow of foreign exchange from the country. When documents are retired, the importer pays L/C amount less cash margin.

I-Form is submitted to SBP at the end of each month and prepared on the date of transaction with the importers bank. This is intimation to the SBP that the specified amount of foreign exchange has gone out of the country, on control rates. SBP checks for the authenticity of the outward remittances because the inter branch exchange rate is less

than the open market rate. A copy of invoice is attached; sometimes a copy of Bill of lading is attached for proof of the transaction.

Letter of undertaking:
The bank takes a letter of undertaking from the importer that when documents are received by bank, importer shall purchase the documents within seven days of such notice, at the marked up price prescribed by SBP.

Payment against documents (PAD):

In the case of sight L/C, the day our Nostro account is debited & payment is made to the exporter, by the correspondent bank, PAD facility is created. Markup per day accumulates until the documents reach the importers bank & are being retrieved by the importer. Importer might not want to retire the documents unless the shipment arrives, in that case he has to pay markup for the days, the documents lie with the bank.

Finance against imported merchandise (FIM):

This is the extension of SLC; in case the importer is not able to pay against L/C, he goes for financing against the sight LC. He can take loan against pledge of his imported merchandise.

Finance against trust receipt (FATR):

Trust receipt is a mutually agreed contract between buyer and seller. In this bank advances loan against trust receipt signed by an importer. Bank takes some collateral against this loan to secure its risk.

EXPORT DEPARTMENT Registration of Exporters:

Under the Registrations (Importers & Exporters) Order 1952, no person can export any gods from Pakistan unless he is duly registered as an Exporter with the Chief Controller of imports & Exports. Bank should ensure before certifying any export Form E, that the person is so registered. Documents required from Exporters Title of Business Nature of Business Names & Residential addresses of proprietors/ partners/ directors. Names & Residential addresses of Authorized Signatories Description of commodities to be exported. Certified copy of letter of authority if Form E is signed by bank/person other than proprietor/director/partner on behalf of Firm/Company. I.D. Card copies of proprietor/director/partner and authorized persons. Export registration certificate Lahore Chamber of Commerce & Industry membership certificate National Tax Number certificate Documentary proof of previous business (if any).

Issuance of Form E:
Form E is issued by Bank to bonafide exporters. It is not issued to any exporter unless he undertakes that full export value of the goods or will be disposed of in a manner and within time specified by the State Bank of Pakistan.

E Form Certification:
The bank undertakes that in event of non- realization of export proceeds against shipment on consignment sale within the stipulated period of 4 months, we shall obtain from the exporter(s) and furnish to the SBP a full explanation as to the circumstances resulting in non-realization. The Bank also undertakes that in the event of short realization, it shall obtain from the exporter(s) and furnish to SBP a fully documented account sales certified by the consignees/ chamber of commerce of the country of import.

Certificate of CIF/C&F: In case of CIF& C&F, this certificate is issued. The purpose of this certificate is to remove the confusion of charges. No objection certificate: This certificate is issued in case of L/C & advance payment. When importer has specified some shipping company then bank issues this certificate for the preparation of bill of lading. By Sea shipment certificate: This certificate is addressed to the shipping company, by the bank giving it a written authorization.

Functional Utility of the Copies of Form E:

All exports from Pakistan, which are subject to Exchange Control Regulations, are required to be declared on Form E which is in set of four copies each. The exporter should submit the full set of Form E to the bank for certification only after it has been completed and signed by the exporter himself or his authorized agent. After the Bank certifies the Form, it should be submitted to the Customs/ Postal Authorities at the time of shipment along with the shipping bill. The Customs Authorities will detach the original copy and after filling in the portion relating to them and affixing their seal and signature thereon forward it to the State Bank. The Customs Authorities will return the Duplicate, Triplicate & Quadruplicate copies to the exporter or his authorized agent who will retain the quadruplicate copy for his own record and submit the Duplicate & Triplicate copies to the Bank, along with the shipping documents within 14 days from the date of shipment. The Bank will forward the Triplicate copies of the export forms to SBP, along with the monthly return in which realization of export proceeds is reported, retaining the duplicate for its record.

Documents prepared by the exporter:

The following documents are prepared by the exporter and are sent to the importers bank. These documents should be prepared carefully to avoid any inconvenience.

Commercial invoices Transport Documents e.g., Bill of lading, Airway bill, Truck receipt or Railway receipt Draft or bill of exchange The certificate of origin The insurance certificate Packing list

Export bill for collection: When the documents are not clean then bank will send these documents for collection.

Export collection:
Foreign bills for collection are a mode for the settlement of business transactions that take place between buyer and seller. After receiving the L/C from the bank exporter ships the goods according to the requirements of the importer and brings the documents to its bank, to lodge for collection. For payment that are received after the maturity date, the exchange rate will be implied of the current day or maturity day; which ever is less & remaining is the earning of SBP. Exporter has maximum three days to delay the receiving of its payment from bank because the exchange rate tends to change. For collection of $10,000, bank will imply the given exchange rate of sheet provided by treasury. Above this limit, they directly contact the treasury for rate because these rate changes after every minute. Bank issues two documents at the time of payment to the exporter. EPRC (Export proceed realization certificate) Credit advice


Negotiation means discounting of foreign bills of exchange. Bank provides this facility in the form of negotiation. Bank purchases these bills through negotiation and provides the funds to party against bills. The exporter receives the L/C from importer through advising bank. He makes the shipment according to the requirement of the L/C. Now exporter is out of the funds and he goes for negotiation of the documents. The bank negotiates the documents after scrutiny of documents. The negotiation is also called foreign bills purchased. Only the L/Cs can be negotiated because only in L/C exporter bank is secured to get the payment from importer bank. Bank may negotiate the documents on the basis of indemnity bond taken by the bank. When bank is not satisfied with the documents but it negotiates with the condition that in case documents are rejected, the exporter will pay the amount.

Export refinance scheme provides financing facility to the exporters, by the scheduled banks on making the application. The banks are granted annual refinance limit by SBP for providing finance to exporters. The purpose of refinance is to boost the exports of the country. Exports play very important role in earning foreign exchange.

Mark- up:
Commercial banks provide this facility to the exporters @13% for a period of 180 days and commercial banks receive the funds from SBP @11 1/2 %. They provides this facility after including their margin. Mark up is charged on quarterly basis. Refinance facility is divided into two parts.

Part 1:
This part is further divided into two stages. i. FAPC Finance against packing credit (pre shipment finance)


FAFB Finance against foreign bills

(post shipment finance)

Finance against packing credit (FAPC):

Bank provides this facility against L/C or sale contract (in favor of exporter). Bank takes 100% security against this type of financing. The purpose of this facility is to provide funds to the exporter to produce goods and export them. This facility is also called preshipment finance. Afterwards bank receives the payment of exports and adjusts the exporters account. Here original copy of L/C is marked under lien and is submitted to SBP so the exporter cant negotiate the documents.

Finance against foreign bills FAFB:

This facility is also known as post shipment finance. This facility is availed by the exporter after he has shipped the goods and sent his documents for collection. He takes loan against these documents and pays fixed mark up rate on this facility.

Part 2:
This facility is given on performance basis. Their performance is checked by the EE statement, which is issued annually. This statement is prepared by the exporter and submitted to SBP by its bank for verification. Exporter can have finance up to half of the amount of previous years export. The mark up is charged for the period he has used the facility and not for the whole limit. SBP also monitors the use of this facility through the use of EF statement. It is submitted by exporter to its bank, bank will verify whether exporter has made any export or not. Then it will be submitted to SBP, which will check its records. In case exporter is not able to show the required performance then he has to pay fine.


Bank Alfalah has a very efficient and effective cash department at LDA plaza branch. The main operations carried out here are as follows: Receipts & Payments Clearing; outward & Inward Govt. Securities Remittance (pay order, pay slip, demand draft, telegraphic transfer)


At the cash counters, deposits are received and payments are made through cheques. The depositor fills in a credit slip for depositing certain amount. This slip contains a credit voucher. This voucher is sent for posting after being entered into the cash receiving register. Thus, the amount is credited to the customers account. Payments are made through cheques.

Cheque is a negotiable instrument. It is an order by one person to another person to make payment of specified amount to bearer or to the direction of bearer. Some characteristics of a cheque are as follows. It is Specifically drawn on bank. Acceptance is necessary. Payable on demand On a specified prescribed Performa of specified branch of specified bank.

There are three parties to a cheque: Drawee, Drawer & Payee. A cheque is valid up till 6 months.

Types of cheques:
Bearer cheque: It is an open cheque. The cheque can be encashed by whoever is holding the cheque. Order Cheque: This cheque is not to be encashed to anyone other than to whom the cheque is drawn on. For that purpose the bearer of the cheque might have to prove his identity. Cross cheque: It is an endorsed cheque. The amount specified on the cheque cannot be encashed on the counter. It can only be transferred from one account to another. The cheque may be returned unpaid because of a variety of reasons. There is a shortage of funds in the account. Payment stopped by drawer. Exceed arrangements Difference in drawers signatures. Post dated / outdated cheques. Mutilated cheques. Amounts in words and figures differ. Crossed cheques must be presented through a bank. Alterations in date/ figures/words etc.

GOVERNMENT SECURITIES: Cash department also deals in the sale & purchase of govt. securities. These are Rupee denominated certificates and bonds. These are floated in order to promote a saving culture in the economy. As more the savings more the investment. The certificates can be bought by one person or jointly by more than one person. There are three types of securities:

Special Saving Certificates:

These certificates have these features. These certificates have duration of 3 years An interest rate of 12.20% per annum. The profit is given after 6 months. The interest is compounded if the certificate holder does not receive the profit after 6 months. Person does not have to be an account holder to buy a SSC. The minimum denomination is Rs.500 & maximum Rs.1, 000,000. The certificate is not encashable for 1 month, after being bought. The bank earns commission @ 0.5% on these certificates. There is no Withholding Tax up till the amount of Rs.300, 000. There is W.H.Tax of 10% above Rs.300, 000.

Defence Saving Certificates:

These certificates have the following important features. Duration is 10 years. Profit is due after 1 year. Profit is paid on encashment of the certificate. The interest is compounded if the certificate is not encashed after one year. Person does not have to be an account holder to buy a DSC. The minimum denomination is Rs.500 & maximum Rs.1, 000,000. The bank earns commission @ 0.5% on these certificates. With holding tax @ 10% is deducted at source if the amount exceeds Rs.300, 000.

Wapda Energy Bonds:

Bond is a debt instrument. Whenever a company needs financing, one alternative is to go for issuing the bonds. Wapda issued these bonds few years back to generate funds. Bank acts as an agent and charges its commission. There are two types of Wapda bonds; Bearer bonds & Registered bonds. Wapda issued bonds for a duration of 10 years. Interest is paid @ 19% p.a. Interest is due after 6 months. Denominations range; Rs.5, 000 -- Rs.500, 000. Withholding tax @ 10% of the profit is deducted at source.

A service rendered by the banks in which bank transfers the money from one place to another. It could be between one branch to another, one bank to another bank or from one account to another account. Types of remittances: Inward remittances Outward remittances The above remittances take place through

Demand draft
DD is mode of transfer between two branches of the same bank located in different cities. There are four parties to a demand draft: Remitter, Remittee/ Payee/ Beneficiary, Issuing branch/Originating branch, Paying branch/ Drawee Branch. DD is a security stationary and kept in due control. It is valid up to three months. DD can be issued against: Cash, Cheque, Letter of instrument It can never be issued in the name of the same branch. There has to be a payee for a DD. There are certain commission, telex & postal charges for the issuance of DD.

If the DD is cancelled, physical presence of DD is necessary. There is a penalty on cancellation.

Pay order:
Pay order is also called the bankers cheque. It is a money transfer instrument. It is the most reliable instrument & it is usually not dishonored. Pay order is used for usually money transfers within city. PO is also liable to excise duty & commission. Stop payment cannot be made for PO, as it becomes property of the beneficiary. In order to cancel, endorsement by beneficiary is needed. PO is for within the branch. PO can be issued against: Cash, Cheque, and Letter of instrument PO can be issued to a/c holder & non-a/c holder.

Pay slip:
For payment of its dues, bank issues pay slips instead of giving away cash. Pay slip is issued only for a particular branch. There is a govt. of Pakistan revenue stamp pasted on the PS. Pay slip is not issued for post dated & out dated cheques.

Telegraphic transfer: TT is an electronic means to transfer money from one place to another. Inland TT is used for money transfer between the branches of the same bank. Bank charges commission for a TT. CLEARING:
OBC: Outward bill for collection IBC: Inward bill for collection

Outward bill for collection:

These include cheques drawn on other banks received in BAL. The bank collects these cheques on behalf of its customers. The bank charges Rs.50 or 0.15%of the cheques amount whichever is greater for every OBC. It also charges Rs.100 as postal charges.

Inward bill for collection:

These include cheques drawn on BAL but presented to some other bank. These cheques are received from clearing house for collection.

Same Day Clearing:

It takes almost 2 to 3 days to get a cheque cleared. If a client needs funds urgently, there is a provision of same day clearing. The amount should be at least Rs.500, 000. This facility is provided only at the main branch. The charges for servicing such cheques are Rs.150 per cheque.

The cheques drawn on some other banks are received here. The bank collects these cheques from the respective banks through clearing house i.e., the state bank. NIFT (National Institutional Facilitation Technologies (pvt) Ltd.) works within cities. It receives cheques from the banks and delivers at the State Bank. Representatives from all the banks collect their respective branchs cheques from there. NIFT take service charges @ Rs.2.50 per cheque. There are certain things considered before a cheque is sent for clearing: The cheque should not be post dated. Cheque should be valid. (A cheque is valid up till 6 months) Bank puts crossing & clearing stamps on OBCs. An endorsement stamp is put on the back in another citys branch of BAL where the cheque is sent for clearing. Then this cheque is sent to the respective banks branch. The same procedure is reversed in case of an IBC, the crossing, clearing & endorsement stamps are checked. The amount in words & figures and the date of cheque are duly checked.


When a client has bank account in some other city but he wants to encash the cheque or deposit money or wants money to be transferred from account in one citys branch to another citys branch he can avail the online facility. The client has to apply for this special arrangement between branches and that will make him able to transfer his funds very quickly. Ideally this transfer should take only 5 to 10 minutes but practically it takes about half an hour or so. Charges for Withdrawal or Deposit of less than Rs.100, 000 are Rs.300. There are no charges for amounts in excess of Rs.100, 000.

I completed 6 weeks of my internship programme at BAL, LDA plaza branch. Our internship programme was very systematic and organized. On the very first day, we were handed over with our schedule for the next 6 weeks. There are about ten departments in the said branch. I worked in 7 of these departments during this short span and tried my level best to learn as much as I could. My internship schedule was as under: FCA & Pak Rupee Account opening Accounts Department Credits Department Consumer Finance Trade Finance Cash Dealing/ Area Office 3rd July 7th July 9th July 14th July 16th July 21st July 23rd July 28th July 30th July 4th August 6th August 11th August

I worked under the supervision and guidance of experienced officials who were always very cooperative and helpful. I was taught about almost all the banking operations being carried out and which have already been discussed in detail as under Working of different departments.

This internship has proved to be a very learning opportunity for me. Whatever have I learnt during the past two years, I saw the practical demonstration of all of it. It is very informative to see the theory being put to practice. All the concepts of Accounting, management, marketing, banking, business communications, organizational behavior and finance were revised. I worked for some time in the Area office. There I observed the procedure of correspondence between branches all over the North region. That surely was interesting and informative. Also I felt more confident about my computer skills after working for the Area Manager and the Senior Operations Manager. I managed to spare some time from our tight schedule and met officials of departments where we were not scheduled to work. I gained some insight into the working of Special Assets Management Division, Credit administration, Personnel department by arranging these sessions. Also I had these sittings with the corporate head who gave clear concepts regarding the subject of Finance. Occasional chitchats with the staff gave interesting insights into the culture and environment of the bank. Hence, it was a great experience working in such a prestigious organization. I am sure the knowledge and skills gained, shall help me during the course of my career.

Marketers use numerous tools to elicit desired responses from their target markets. These tools constitute a marketing mix. These tools are classified into four broad groups that are called the four Ps of marketing: product, price, place and promotion. From a buyers point of view, each marketing tool is designed to deliver a customer benefit. The sellers four Ps correspond to the customers four Cs.

Four Ps Product Price Place

Four Cs Customer Solution Customer Cost Convenience



It is the combination of goods and services that can be offered to a market to satisfy want or need. Product is the first and the most important element of marketing mix. Product strategy calls for making coordinated decisions on product mix, product line, brands, packaging, and laboring.

Cut out to meet the high and varied demands of todays customer, Bank Alfalah has an array of products in the pipeline. Credit Cards, Foreign Currency Savings and Deposit Accounts, Telebanking, Local Currency Saving and Current Accounts, Safe Deposit Lockers, Priority Banking, ATMs,

Travellers Cheques, House Financing, Car Financing, Business Financing, Structured Finance and many more.

Primary banking products:

Primary banking products offered by bank Alfalah are Current accounts Saving accounts/PLS deposits Term deposits Royal profit Royal group (joint investment plan) Royal patriot (special term deposit)


The most denominations: Bank Alfalah presents 1,000, 5,000, 10,000, 20,000, 50,000, 100,000, 200,000, and 500,000 travellers cheques.

The highest denominations: Bank Alfalah offers the largest RTC denominations in the market i.e. Rs.500, 000 and Rs.200, 000. Commission on encashment: Whenever TCs are encashed after 7 days at any branch of BAL; a commission of 0.15% is given. Maximum security features: Lithographic security features, invisible UV printing, high definition micro-lines, anti scanner effect, mould based paper, Alfalah water mark and printing in the UK, are just some of the security features of the TCs which prevent counterfeiting. Fully refundable:

TCs can be refunded without any penalty or loss. These can be transferred and endorsed to anyone. Unlimited Validity: Bank Alfalah TCs will always remain encashable.

BAL provides locker facility to its customers and charges monthly rental. The operating hours are flexible and the vast branch network makes it more convenient for the clients.


This is a facility for salaried individuals to finance their domestic requirements such as purchase of house hold equipments, computers, funding of education, marriage, planning a holiday, payment of credit card bills, other liabilities or any other personal requirement.

Alfalah Car is an extremely successful scheme which, has enabled hundreds of individuals to own their desired brand new cars at Easily affordable & Flexible Installments Minimum Down Payment Minimum Insurance

The Bank provides automobile finances under the Morahaba mode of financing in accordance with the Islamic Injunctions.


Bank Alfalah has introduced for the first time, a home loan for Non Resident Pakistanis to buy, build or renovate a house in Pakistan

The BALs ATM Service is most convenient and quick way of accessing account using the QuickLINK Card with all the security and confidentiality. The ATM facility offers multifarious functions like: Withdraw cash round the clock Get mini statements Make instant balance inquiries Obtain details of transactions about accounts as at the end of the last business day. Transfer funds between linked accounts. Requisition chequebooks and account statements.


To provide innovative Investment Banking Services, Bank Alfalah has established Structured Financial Unit SFU for the benefit of its valued customers. SFU has the capability to assist public and private sector entities, major financial institutions, multinational corporations and domestic & international institutional investors in innovative financing, including underwriting, private placement and securitization. Bank also undertakes advisory assignments such as privatization, mergers & acquisitions, domestic listings, initial public offerings, recapitalizations and restructuring. Having access to the domestic and international financial markets, SFU can source and syndicate debt, equity and venture funds for public and private sector organizations to meet their financing and capitalization needs.

New products are essential to growth:

Bank Alfalah has a big product portfolio but it should keep on introducing new products & services to the customers, to keep abreast with the change and innovation. Replacement products must be created To build sales To keep up with the competition As the product ages, its profit generally declines

The amount of money which the buyer has to pay, The most common and obvious rationale given for the importance of price is that price is the only element in the marketing mix that generates revenue; all other elements are associated with cost. Bank Alfalah offers very reasonable and competitive rates on all the services it provides to its customers. Its rates for some consumer products like car finance are the lowest in the peer group. This fact surly gives an edge to the bank. Charges for all the international & domestic banking services are given in a Schedule of bank charges.

This includes the various activities the company undertakes to make the product accessible and available to the target market.

The producer does not sell his products directly to final users. Between producers and final users stand one or more marketing channels. Through different channels they capture the market. For this purpose, they select locations for head office and its branches, which are convenient to capture target market. To continuously offer courteous, professional and advanced banking solutions & to become accessible to more & more people, Bank Alfalah has embarked upon a rapid expansion programme, aiming to provide a networking that makes services available to any of the customers in all the major urban centers of Pakistan, with a view to go international. Bank Alfalah has 23 branches as compared to 3 branches at the time of privatization and work is underway on new branches. Bank Alfalah has plans to open branches in U.A.E., Bahrain, Sri Lanka and Bangladesh.

Promotion includes activities, communicating the merits of product and induce the potential buyer to buy it. Sales promotion includes tools for a) Consumer promotion (samples, coupons, cash, refund offers, price off, premium prizes, patronage rewards, warranties, tie-in-promotion, cross promotions, point of purchase displays and demonstrations). b) Trade promotion (price off, advertising and display allowances and free goods) c) Business and sales force promotion (trade shows and conventions, contents for sales representatives and specialty advertising). Bank Alfalah has a diverse portfolio of products & services. It can capture a huge market share by marketing its products & services properly. Bank should allocate more funds in its budget for the advertisement & publicity. In fact, Advertisement & publicity expense has decreased by 5 million in the FY00 as compared to the FY99. It relies mostly on personal selling like marketers bring deposits on the basis of their public relationing & contacts.

Bank Alfalah has been indulging in many promotional activities. It has sponsored the Mini Golf course at the Center point, Lahore to provide people with recreational opportunity and at the same time benefit from the recognition & publicity.

It is true that heritage monuments are an integral part of an urban structure and the very element that gives the city its character, but these monuments should not be empty structures that are too sacred to touch or inhabit. One of the primary examples is the case of Shaahdin Manzil on Shah Faisal Chowk, Shahra e Quaid-e-Azam. Bank Alfalah has taken an initiative to conserve it into a state-of-the-art, technologically perfect, intelligent office premises that incorporate all the modern office planning concepts, with minimal compromises to the cause of conservation. Shaahdin Manzil will serve as an identity for Bank Alfalah and be a valuable addition to the city of Lahore. Location of a major financial institution on this site shall also hopefully reverse the trend of flight of businesses and capital from Shahra e Quaid-e-Azam towards the residential areas of Gulberg & Cantonment.

Bank pursued a vigorous marketing campaign when it launched its Rupee Traveler Cheques, recently. It used different media like T.V., newspapers, magazines etc. The advertisements were put up on all the conspicuous places in the city. Attractive, eyecatching posters & handouts were distributed among the customers.

The liberty square, Lahore has been named Bank Alfalah Square. Bank sponsored the construction of a monument, Chini Khana at the spot. The square has been beautified and is well maintained.

Thus, the preceding examples show that Bank is quite business oriented and believes in the power of marketing & promotion. But still, considering the huge portfolio of products & services, it is advisable that bank should direct extensive efforts towards this arena.


BALANCE SHEET 1998 - 2000

2000 ASSETS Cash Balances with other Banks Money at call & short notice Investments Advances -- net of provision Operating fixed Assets Other Assets Total Assets Liabilities Deposits & other liabilities Borrowings from other banks Bills Payable Other Liabilities Deferred Liability Total Liability Net Assets Share Capital Reserve funds & other reserves Unappropriated profit Shareholders Equity Surplus/(deficit) on revaluation of Investments Surplus on revaluation of Fixed Assets 830,950 1,211 900,680 (13,528) 106,353 625,312 6,694 25,859,057 1,718,102 600,000 299,469 20,481,568 4,639,130

1999 (Rupees in thousand)


2,044,725 1,798,086 890,000 4,967,542 15,242,317 1,231,161 1,403,328 27,577,159

1,687,256 1,161,434 100,000 4,993,035 10,327,324 1,153,607 1,596,952 21,019,608 15,820,473 2,972,240 120,868 372,855 6,892 19,293,328 1,726,280 600,000 286,399 8,931 895,330 -830,950

721,285 386,211 248,000 3,406,514 7,757,708 263,760 1,537,629 14,321,107 11,878,221 1,348,313 51,737 176,630 7,400 13,462,301 858,806 600,000 255,094 3,712 858,806 ---


1998 - 2000 2000 1999 1998

Markup/Interest discount/return earned Cost/return borrowings on

& deposits,

(Rupees in thousand) 2,258,527 1,905,808 1,625,352 1,724,041 103,838 19,617 8,951 138,963 1,474,343 58,043 13,792 -114,250 1,313,564 39,438 3,345 -121,754

Fee, Commission & brokerage Profit from Securities Dividend Income Other Operating Income Operating Expenses Administrative Expenses Provision against Non performing advances-Net Bad debts written off directly Provision for other Losses Other Income Profit before Taxation Profit After Taxation Unappropriated profit brought forward Profit available for appropriation

503,256 (103,950) -7,619 1,420 400,350 215,350 8,931 224,281

402,559 (136,076) 175 -3,523 354,415 156,524 3,712 160,236

337,447 94,756

--23,614 67,736 145,365 2,420 147,785

BALANCE SHEET 2000 ASSETS Cash Balances with other Banks Money at call & short notice Investments Advances -- net of provision Operating fixed Assets Other Assets Total Assets Liabilities Deposits & other liabilities Borrowings from other banks Bills Payable Other Liabilities Deferred Liability Total Liability Net Assets Share Capital Reserve funds & other reserves Unappropriated profit Shareholders Equity Surplus/(deficit) on revaluation of Investments Surplus on revaluation of Fixed Assets -8309.5 -(86.4) 0.59 135.28 140.6 4.25 -53.38 20.38 -(12) 67.7 (2.87) 34.03 0.47 133.6 111.09 (6.86) 43.31 101.01 -12.2 (19.8) 5.72 (24.5) 37.18 20.38 -129.8 29.4 56.1 33.18 120.44 31.7 143.8 % 21.2 54.8 790 (0.5) 47.6 6.72 (12.1) 31.2 1999 % 133.92 200.7 (59.6) 46.5 33.12 337.4 3.85 46.77 1998 % 52.9 536.9 (38) 1.73 59.96 50.37 25.96 36.05


HORIZONTAL ANALYSIS BALANCE SHEET COMMENTS: Horizontal analysis is applied when a firm wants to evaluate performance over time. Developing trends can be seen by using multiyear comparisons, and knowledge of these trends assists the organization in planning future operations. Any significant year-to-year changes can be evaluated to assess whether they are symptomatic of a major problem.

The level of cash has been increasing over the years. In 1998, despite economic turbulence and resultant downturn, bank made considerable improvement in comparison to the corresponding period for the year 1997. 1999 was a successful year for the bank in all respects, a huge and steady increase in deposits kept the level of cash very high. Also cash in hand in local currency increased in 99. Bank enjoyed a very sound capital adequacy ratio of 13% whereas the industry requirement was 8%. The level of cash has increased in 2000 but at a decreasing rate, this can be attributed to the efforts to mobilize the deposits, the bank is advancing the deposited money and keeping a comparatively low level of cash. Bank invests money preferably in government securities like treasury bills, federal bonds etc. that are risk free. Investment is decreasing over the years that is a good sign as the deposit money is used for lending purposes. In 1999 investment increased by a huge %age reason being the book value of unquoted investments increased by 1.59 billion. Investment in fed. Bonds and the book value of unquoted TFCs decreased in 2000 bringing the level of investment down to very low. An analysis of the investments and advances shows that bank has consistently been using the major chunk of deposit money for advances. The advances of the bank are increasing over the years. This is a very good sign as it shows growth in the business of bank. A considerable portion of the advances portfolio that was inherited by Bank Alfalah at the time of privatization was sub standard as per prudent banking standards. Through extensive efforts of the Special Asset Management Department and strict credit policies,

a number of accounts have been revived and the provision for bad debts has decreased over the years. The advances of Bank Afalah are considered good as they are fully secured. Operating fixed assets are increasing over the years. In 1999, office premises were revalued by independent valuers and are shown at revalued amount less accumulated depreciation. That led to an enormous increase of 337.4% in FY99. Surplus on revaluation of fixed assets also amounted to a great increase in the equity base. Total Assets have increased very consistently at more than 30%, over this short span that is considered the infancy stage in the banking industry, this shows a very encouraging and favorable balance sheet footing.

Customer Deposits went up by more than 30% on a year-to-year basis. This reflects very positively on the business and growth of the bank. This deposit base is also a result of the expanded branch network, which has ensured diverse presence in different areas of the country. This increase in deposit money reduces the cost of deposits and is a cheaper source of financing. The confidence of customers reposed in the bank is reflected in the results of the bank as despite the economic downturn, the bank made considerable improvement by the prevailing industry standards. The Borrowings from other banks have been on the rise. This shows that the bank is a regular buyer from the interbank money market. This adversely affects the cost of funds and also the liquidity position of the bank. But this increase is not considered very alarming as it shows only the frozen picture of the last day of financial year. Here the encouraging sign is that the borrowings follow a declining trend. Other Liabilities of the Bank are on a constant rise from FY99 onwards. This increase has been amounted to by the increase in the markup paid on the increasing number of deposits. Also the interest paid on bank borrowings has been increasing. The amount of proposed dividend has increased by 90 million.

Total Liabilities are on the rise in the last three years, but the increase in liabilities is matched with the increase in Assets so it is not an alarming sign. The equity base has been decreasing because of a decrease in reserves. Bank is declaring dividend for the last two years so unappropriated profit is also decreasing. Deficit on revaluation of investments in FY00 has affected the equity base further. .

PROFIT & LOSS STATEMENT 2000 Total Revenue Markup/Interest discount/return earned Cost/return borrowings Fee, Commission & brokerage Profit from Securities Dividend Income 78.8 42.2 89.51 47.18 312.3 -(19.8) 100 -on deposits, 16.9 12.2 40.6 & % 20.94 18.5 1999 % 16.9 17.25 1998 % 45.1 53.8

Other Operating Income Operating Expenses Administrative Expenses Provision against Non performing advances-Net Bad debts written off directly Provision for other Losses Other Income Profit before Taxation Profit After Taxation Unappropriated profit brought forward Profit available for appropriation

21.6 25.01 (23.6) (100) 76.19 (59.6) 12.9 37.58 140.6 39.96

(6.16) 19.3 (243.6) 1.75 -(85.1) 423.2 7.7 53.38 8.43

(4.8) 44.7 27.3

--57.5 907.6 142414.7 3.46 5954.3

The figure of total revenue includes the mark up earned, Fee, commission & brokerage, profit from dealing & investment securities, dividend income and other operating income. The total revenue of the bank has been increasing over the years, which reflects very favorably on the bank. Total revenue has increased tremendously in FY98 as compared to same period in FY97 because of effective policies by management to strengthen the financial position after privatization. A steady increase in Advances ahs led to an increase in markup earned. Also Fee & Commission has increased along with the trade business volume. Bank has enhanced its domestic & international banking services. Also the cost of deposits is lower than the return on advances. The Cost of funds/ Markup paid is also increasing over the years but the increase in not more than the increase in total revenue. There is a spread of almost 4 5% in the lending & borrowing rates of the bank. Also banks cost of funds has been decreasing over the years because of increase in deposits. Advances are increasing at a fast pace. Deposits are being effectively mobilized and the bank borrowing is also decreasing. Reduced bank

borrowing also lowers the cost in the form of reduced interest payable. Lower cost of deposits enables the bank to lend at lower rates in comparison to the competitor banks and attract the AAA clients. The administration expenses of the bank are on a higher side. This increase can be attributed to the expansion programme of the bank. In 98, the Admn. Expense is the highest because of early set up and establishment problems. The increase in Admn. expense is not worrying as it is not under the control of the bank. Also the increase in deposits is at a higher rate than the increase in Admn. expenses. The Administration expense to Deposits ratio is quite satisfactory according to industry standards.

BALANCE SHEET 2000 ASSETS Cash Balances with other Banks Money at call & short notice Investments Advances -- net of provision Operating fixed Assets Other Assets Total Assets Liabilities Deposits & other liabilities Borrowings from other banks Bills Payable Other Liabilities Deferred Liability Total Liability 0.41 2.42 0.02 100 0.07 1.93 0.04 100 0.384 1.31 0.05 100 79.2 17.9 81.9 15.4 88.2 10.02 % 7.4 6.52 3.2 18.01 55.27 4.46 5.09 100 1999 % 8.02 5.52 0.47 23.7 49.13 5.48 7.59 100 1998 % 5.04 2.69 1.73 23.78 54.17 1.84 10.74 100


Cash, investments and Advances are the major constituents of total assets. This is typical for a bank, as banks do not go for creating fixed assets. The advances have increased considerably whereas the investments are decreasing. As bank is able to reduce its cost of funds, it might have been able to get AAA clients and lucrative business, so it prefers to use deposit money for advances. Balances with other banks have also increased over the years; this is quite normal as it is a very safe mode of financing. Deposits and bank borrowings are the major heads on the liability side. Bank Alfalahs deposits have been increasing with a steady rate of 30% over the years. Deposits are a cheaper source of funds and it reflects very positively on banks efficiency and profitability. An increase in borrowings from other banks is also observed which is not a very favorable sign. Borrowings adverse affect the cost of funds but then these figures do not depict the true picture of whole year. Bank should concentrate on decreasing these borrowings and mobilizing the deposits.

PROFIT & LOSS STATEMENT 2000 Total Revenue Markup/Interest discount/return earned Cost/return borrowings Fee, Commission & brokerage Profit from Securities Dividend Income Other Operating Income Operating Expenses Administrative Expenses Provision against Non performing advances-Net Bad debts written off directly Provision for other Losses Total Operating expenses Other Income Profit before Taxation -0.27 16.05 0.03 15.81 0.01 -12.72 0.14 16.93 19.88 (4.07) 19.22 (6.50) 18.83 5.25 4.07 0.75 0.32 5.45 2.77 0.66 -5.45 2.18 0.16 -6.76 on deposits, 68.16 70.49 73.39 & % 100 89.27 1999 % 100 91.10 1998 % 100 90.83

--24.15 1.28 3.74

The Vertical analysis of BAL shows a very satisfactory picture. Major portion of total revenue consists of Markup earned. This is a good sign and shows healthy growth in advances. The main source of banks income should be the mark up earned. It shows expansion in the business. The Fee and Commission is steadily increasing. The cost of deposits is gradually decreasing that shows efficiency of management. An increase in administration expenses and provision for losses has increased the operating expenses which has reduced the profit before tax. But still as compared to the FY98, the later years figures show considerable improvement in profitability.


Pre-Tax Income /Assets:

1. Return on Equity = Net Income

Capital Funds 1998 67,736 858,806 1999 354,415 1,726,280 2000 400,350 x 100 1,718,102 = x 100 = x 100 =

x 100




2. Return on Assets = Net Income

Total Assets 1998 67,736 14,321,107 1999 354,415 21,019,608 2000 400,350 27,577,159 x 100 x 100 x 100

x 100





Net Income Risk Assets (Advances: Net)

x 100


67,736 7,757,708

x 100



354,415 10,327,324

x 100



400,350 15,242,317

x 100



Operating Expenses Net Revenue

x 100


432,203 476,325

x 100



266,658 617,550

x 100



406,925 805,855

x 100


Banks profitability ratios show quite a healthy trend. 1. The Return on equity measures the return earned on the owners investment in the firm. Generally the higher these returns, the better off are the owners. Bank is earning a very satisfactory return on equity. In FY98, the pre-tax profit was very low which is attributed to the initial stages of the bank. Also the banking industry survived the nuclear blast and its aftermath. 1999 proved to be a very profitable year, the pre-tax profit of the bank increased 5 times as compared to the previous year. Also the reserves are increasing at a decreasing rate in 99 & 2000, the bank is declaring dividend. Thus the increase in profit in the later years is at a higher rate than the increase in capital funds. Banks operations are proving to be profitable earning high Return on Equity. 2. The Return on Total assets, which is also called the Return on Investment, measures the overall effectiveness of management in generating profits with its available assets. The higher this return on assets, the better. The return on assets is increasing which is an encouraging sign. A very low pre tax profit and an infected inherited portfolio kept this return to a very low level. The asset base increased by 46% over the previous year, in 99 which is matched with an increase in profit by 5 timesa very heartening sign. In 2000, the assets increased by 31% over the last year and surpassed the increase in pre-tax profit. But still the ratio is satisfactory and reflects positively on the profitability of the bank. 3. Risk Asset refer to the Advances of the bank net of provisioning. The Advances are increasing at a high pace throughout the last 3 years, which has resulted in increased markup earned and eventually high revenue. Bank Alfalah inherited a huge portfolio of non-performing loans at the time of privatization and also the profit earned was very low

because of initial stage and nuclear blast situation. Thus the ratio is very depressing. It improved to a considerable extent with an increase in the profit in 99. The management has made serious efforts for recovery from the delinquent clients and has been successful in many cases. Because of strong provision coverage, whatever loan is written back, it amounts to the genuine profit of the bank. Banks non-performing portfolio has reduced from 23% at the time of privatization to 9% as on Dec. 2000. The increase in pre-tax profit can also be attributed to decrease in operating expenses. In FY00, the increase in revenue is not as much as the increase in advances, due to which a decline in the ratio is observed. Well, the increase in advances is always a positive indicator as it shows growth in business and income. Also reflects positively on the efficiency of management in mobilizing its deposits. 4. Operating Expenses/ Net Revenue gives a highlight of the operational performance of the bank. There should be a proportional increase in the Net Revenue and the operating Expenses, where net revenue constitutes Total Revenue less markup paid on deposits. During FY98, the ratio comes out to be 90%, this huge proportion of operating expenses to the income is quite understandable as after privatization in 1998, Bank had to incur significant initial setup costs. 1999 was a successful year for the bank by all means, the operating expenses are much reduced because of decrease in provisioning, the expanding operations of bank increased the revenue earned, thus a decline in the ratio, which is a positive sign. The ratio has surged again in FY00; this can be amounted to a sharp increase in the operating expenses of the bank. Operating expenses are increasing because of the expansion programme of the bank. Huge investments are being made in this regard. But this is not infact alarming, as it will eventually lead to the profitability of the bank; also the operating expenses are not in the control of the management, these have to be borne.



Quick assets Total Deposits

x 100


4,614,510 11,878,221

x 100 =



7,741,115 15,820,473

x 100



9,570,138 20,481,568

x 100



Advances Deposits + Borrowed Funds

x 100


7,757,708 13,226,534

x 100



10,327,324 x 100 18,792,713



15,242,317 25,120,698

x 100



Total Financing Total Deposits

x 100


16,721,673 x 100 11,878,221



17,418,600 x 100 15,820,473



33,558,826 x 100 20,481,568



Demand Deposits x 100 Total Deposits


703,303 11,878,221

x 100



10,233,922 15,820,473

x 100



13,438,259 x 100 20,481,568



Due to Banks Total Deposits

x 100


1,348,313 11,878,221

x 100



2,972,240 15,820,473

x 100



4,639,130 20,481,568

x 100



Borrowed Funds Total Financing

x 100


1,348,313 16,721,673

x 100



2,972,240 17,418,600

x 100



4,639,130 33,558,826

x 100



Due from Banks Total Assets

x 100


386,211 14,321,107

x 100



1,161,434 21,019,608

x 100



1,798,086 27,577,159

x 100



Due from Banks Due to Banks

x 100


386,211 1,348,313

x 100



1,161,434 2,972,240

x 100



1,798,086 4,639,130

x 100


5. Quick Assets refer to the most liquid assets which readily be converted into cash. Quick assets to deposits ratio show how much liquid money is in hand to meet

obligations without going to the creditors or the money market. The minimum Cash Reserve Requirement by SBP for commercial banks is 5% & 15% in the form of Govt. securities. The quick assets should be or more than the deposits by 20%. In our case, the ratio is much above the benchmarked level and ranges between 38 48%. It reflects very positively on the liquidity of the Bank. Bank is well equipped to pay back in case all the deposits are called without going to the debtors. 6. A steady increase in the advances has been observed over the years. It is a very good sign as deposit money is not sitting idle and is used in a viable manner. The gap in deposits and advances figures is because of investment in securities, bank preferably invests in govt. securities, which are risk free. The Bank seems to be a regular borrower from the inter bank market; the bank borrowing are increasing over the years but this increase can be neglected because the balance sheet shows the bank borrowing figure of the last day of income year, this might have been returned the very next day, so it is not as such alarming. In 99, the increase in advances matches the increase in deposits i.e., 33% that is a very positive indication, but the huge increase in bank borrowings of 120% hampers the ratio. In FY00, the ratio has improved to considerable extent as bank borrowing has increased at decreasing rate; also advances have increased at a very high pace. 7. Total Financing includes both the fund based and the non-fund based financing. The advances and the fund-based facilities should not be less than the deposits. Underutilized deposits add to the cost of funds. The ratio between total financing and the total deposits should be more than 100%. Bank Alfalah has a very high ratio much above the bench marked level. Banks foreign trade business increased by 92% in FY00 increasing the non-fund based facilities to a great extent thus the increase in the ratio.

8. Demand deposits are the deposits, which are withdrawn through the issuance of an instrument e.g., cheque. These include the current & saving accounts where chequebooks

are issued. There is a very favorable increasing trend in the demand deposits. Increase in demand deposits reduces the cost of funds. The financing against the demand deposits is short term on which the cost of funds is lower. If we compare this ratio with the cost of funds, we can clearly see that cost of funds is continuously decreasing. It reflects very positively on the liquidity of bank and efficiency of management. Financing against demand deposits should be short term as it is a cheaper source of finance and BAL is emphasizing mainly on short term financing. 9. This ratio shows a relationship between the financial mix of the bank i.e., amount borrowed from banks and the funds received from the general public. There should be a proportional increase in both the sources of financing. The increase in the ratio is not a good sign for liquidity position. We may conclude that the bank is borrowing from banks to return the deposit money but then the increase in amount due to banks is not alarming; it is the position of the balance sheet date and does not depict the picture of the whole year. However, BAL should concentrate on decreasing the bank borrowings. 10. This ratio depicts the amount of borrowed funds used by the bank to make advances. A higher ratio is a very unfavorable sign; deposit money should be used for advances. As the bank has been in existence for a period of time, which is considered infancy period in the banking industry, it relies considerably on borrowings from banks. In FY99, borrowings have increased because of expansion programme but 2000 shows improvement in the situation. Decrease in this ratio is an encouraging sign. 11. This ratio shows what portion of total assets comprises of the balances with other banks. This is a safe mode of financing, especially when the economy is unstable and banks do not get desirable return on their investments Where some banks are giving lucrative rates, the banks find it feasible to place their funds in the inter bank market. But this ratio should not be too high as one of the basic functions of commercial bank is to lend to general public. A normal increase is observed in this ratio, which is satisfactory keeping in view the economic scenario.

12. The relation ship between what is receivable and what is due from banks is emphasized by this ratio. There should not be a disproportionate increase in both the amounts. The benchmarked level is 1:1. Our ratio comes out to be much below this level; this can be attributed to the initial period of banks existence. Also a big amount of borrowed funds weights down the liquidity position. The receivables seem to be less than the payables to inter bank market. Here, well again have to recall the fact that this figure of amount due to banks does not present the true picture of banks liabilities. So,this ratio is not in fact alarming.



Capital Funds Total Assets

x 100


858,806 14,321,107

x 100



1,726,280 21,019,608

x 100



1,718,102 27,577,159

x 100



Capital Funds Risk Assets

x 100


858,806 7,757,708

x 100



1,726,280 10,327,324

x 100



1,718,102 15,242,317

x 100



Capital Funds Total Financing

x 100


858,806 16,721,673

x 100



1,726,280 17,418,600

x 100



1,718,102 33,558,826

x 100



Capital Funds Total Deposits

x 100


858,806 11,878,221

x 100



1,726,280 15,820,473

x 100



1,718,102 20,481,568

x 100


Capital funds include the paid up capital, reserves, unappropriated profit, surplus on revaluation of fixed assets & surplus/ deficit on revaluation of investments.

13. This ratio shows the relationship between capital funds & total assets. It should be more than 5%, which is the cash reserve requirement by the SBP. In FY99, increase in equity because of revaluation of fixed assets led to an increase in this ratio. In October 2000, the Cash Reserve Requirement (CRR) of commercial banks was raised from 5% to 7%. This should have increased the ratio but the decrease in 2000 is a result of deficit on revaluation of investments in FY00. Bank is emphasizing on increasing the deposit base and fresh equity is not being injected. 14. When the equity is greater than the advances (net), it is a favorable sign for the bank. In case, bank face bad debts or it has to write off loans, the equity should be enough to bear the losses. BALs equity to risk asset ratio is satisfactory. The reduction in equity, because of decrease in reserves and deficit on revaluation of investments, is observed. Also advances have increased at a very high rate. These led to a decline in the ratio. 15. Capital funds to total deposits ratio signifies, how much internal sources are available to satisfy creditors. If all the deposits are called back, the ability of bank to pay back without going to the borrowers for advanced money is determined by this ratio. But the equity should not constitute a major portion of banks financing mix; most of the resources should be viably placed. The ratio comes out to be quite normal as having this much equity is a normal practice of bank.


Capital Formation Rate = Markup Paid + operating Expenses x 100 Deposits + Borrowings


1,745,767 11,878,221 + 1,348,313

x 100



1,741,001 15,820,473 + 2,972,240

x 100



2,130,966 20,481,568 + 4,639,130

x 100


17. Capital formation ratio or Cost of funds ratio is very important for a bank. It provides base for the lending operations. The cost of funds is decreasing over the years. Bank emphasizes on short term financing which further lowers the cost of funds. Demand deposits of bank are increasing which is inversely correlated with cost of funds. There is a spread of almost 4 5% in the lending & borrowing rates of the bank. Also banks cost of funds has been decreasing over the years because of increase in deposits. Reduced bank borrowing also lowers the cost in the form of reduced interest payable. Lower cost of deposits enables the bank to lend at lower rates in comparison to the competitor banks and attract the AAA clients.


In less than four years, Bank Alfalah has emerged as one of the leading commercial banks in the financial sector of Pakistan. It has shown great performance and now it is at par with many of its competitors.

The Bank has a very strong backing by the Abu Dhabi Consortium. The consortium owns 70% shares of the Bank. It has already made significant contributions in building and strengthening BAL. These principal shareholders are committed and willing to inject additional capital, if and when required. This is one reason for investors confidence in the bank.

Banks diverse product portfolio gives an edge over competitors. It presents a range of quality products with revolutionary perks and convenience. Assessment of the needs and wants of customers is an ongoing process at Bank Alfalah, which helps to continually develop new products and services.

Bank Alfalah has a vast branch network. It has embarked upon an expansion program to ensure physical presence in all major urban centers of Pakistan. Presently Bank Alfalah has 23 branches compared to 3 at the time of privatization and work is under way on new branches nationally & internationally.

The deposits of BAL have been growing at a steady rate of 30% after privatization. Its deposits are far more than competitors like Bank Alhabib, Soneri Bank, Prime Bank. The fact that the deposits target for year 2001 has already been achieved in the first seven months of the year, is apparent of the fact that bank Alfalah is a growing bank.

The Pakistan Credit Rating Agency (Pacra) has assigned a long term rating of AA- (double A minus) and short term rating of A1+ to Bank Alfalah Limited (BAL). These ratings represent a very high credit quality and a very low expectation of credit risk.

BAL follows a very strict credit evaluation and approval system, which has helped the bank to minimize the incidents of default during the last three years.

Low job satisfaction

During my short stay in the bank, I have observed that the level of job satisfaction is very low. Employees are so put off that they want to flee away from the dull boring routine work. Most of the employees plan to go & work abroad. This may be the result of the general downturn & depression in the economy of the country. But the management should do something to increase employee motivation level. Also some senior level employees are not very happy with the management either because of the pay packages or because they are of the view that the environment & standard of the bank has deteriorated from the time of BCCI. Accommodation problem

There is an accommodation problem being faced at the banks premises. The deposits of the bank are growing at a steady rate of 30%. It is introducing innovative products everyday. Likewise the operations are expanding like anything. Also there is new hiring of management trainees. The present building is not sufficient to accommodate all these. Some departments are so congested and especially in peak hours there is no proper space for clients even. Computerized system

One major drawback of Bank Alfalah that is keeping it from outnumbering its competitors is the outdated management information system. Also many routine tasks like vouching etc. are still done manually in most of the departments. This affects the speed and efficiency of the employees. One task that could be performed in minutes through a computer takes about hours. The competitor banks have very advanced computer systems that give them an edge. Lack of opportunities for socializing:

There is no opportunity provided to employees to socialize on an informal level. There is no club or society for arranging any recreational activity or programmes. The bank gives one or two annual lunches and thats it. Need is felt that some functions should be organized where employees can participate with their families and they can feel like a part of the Alfalah family. That will create feelings of belongingness & affiliation. When employees associate themselves with their organization that surely helps increase their motivation & job satisfaction. Non aggressive marketing:

Bank alfalah has a variety of innovative products and this innovation process is always in progress. Considering such a vast product portfolio, one expects that the bank would be spending quite an amount for publicity & advertising. But in fact the Ad. & Publicity expenditure has decreased by approximately Rs.5 million from FY99 to FY00. Also there is no proper marketing campaign for consumer products like ATM cards and car financing etc.

Huge portfolio of non performing loans:

Bank Alafalah inherited a sizeable portfolio of non-performing loans (NPLs). Although the new management is making serious efforts for recovery from the delinquent clients and has been successful in some cases, considering the size of NPLs portfolio, it will take the bank quite some time before the exposure can be fully settled. The bank maintains provision coverage of about 70% of NPLs. But still this portion of advances continues to be non-earning and weighs down the profitability. Low Capital adequacy ratio:

State Bank of Pakistan raised the minimum paid up capital requirement for scheduled banks from Pak Rupees 500m to Pak Rupees 1 billion, effective January 01, 2003. the bank is currently short of the minimum capital required and its capital adequacy ratio at

8.35% is the lowest in the peer group. In case the bank has to follow the ambitious growth path, the capital base of the bank would have to be enhanced. Service quality

Bank Alfalah claims to provide supreme services to its clients, as evident from its motto everything we do is for u. The level of services provided is not up to the mark. Especially in LDA plaza branch, the staff does not give the client that attention and quality of service he deserves. Mostly the clients have to wait for long time for getting their cheque books, for getting their cheques cleared and the online facility is only so called online, actually it takesat least 2 hrs. to complete the task which should be completed within minutes. It has been observed that clients are not satisfied. The competitors provide a quality of service far above the level of Alfalahs. Standard Chartered prides itself in the fact that they cater the needs of their customers most speedily and each customer is done with in 5 10 minutes. Even Pakistani private commercial banks like Prime bank & Askari commercial bank are very efficient in this regard.

Economic conditions

The economic condition of Pakistan is deteriorating day by day. The financial position of the masses in general is also adversely affected. This has hampered our already low level of savings. Thus less savings leads to lesser deposits or investment. This is an alarming situation for the whole banking industry.

In this day, keeping the cost of deposits is an up heal task faced by all the banks. The biggest threat are the nationalized banks which offer very attractive high rates of return to the clients because their cost of funds is low. Because of shortage of capital, no new investments are made. No new projects or industry is being set up. That effects the lending operations. Competitors

Bank Alfalah has competitors like Union Bank, Prime Bank & Askari bank, which are expanding their operations. They are marketing their products and services aggressively and increasing their branch network. Right now Askari bank is having more business & deposits than Alfalah. Union bank & PICIC are targeting very effectively every segment of the society. These emerging banks may become competitors to Alfalah. The service quality of foreign banks is way above the level of local banks. All these factors present a challenging situation to the bank.

Bank Alfalah has significant growth opportunities and the management is confident in their ability to grasp them. They are committed to enhancing the shareholders value and look forward with greater optimism to a prosperous future for Bank Alfalah. Diverse product portfolio to be marketed properly.

Bank Alfalah has an edge over other private commercial banks as it has a vast range of products & services to offer to its customers. Not many banks have such a huge portfolio of services to offer at such competitive rates. Bank should advertise & publicize its

products on various media channels to promote its business. Bank can sponsor various cultural events or some social cause. Bank Smart: computerization

Bank Smart is the new computerized system, which has started working in some of the branches. It is going to be launched all over the country probably in Jan 2002. This will surely help to complete the operations effectively & efficiently. Shaahdin Manzil:

Location of an organization is very important factor. It represents the basic strategy for accessing markets and may have significant impacts on revenue, costs and service levels to customers and clients. Bank Alfalah specifically wanted an office that could serve as their identity and be a valuable addition to the city of Lahore. Shaahdin Manzil has been carefully documented and its history researched so that it can be restored to its original glory removing the scars and scratches of the past developments. It is the perfect solution for the problem of accommodation. It will also bring goodwill to the bank as the citizens really appreciate this effort to conserve this historical structure into the urban structure, where they contribute much more to the city than just their empty appearance.

Employee motivational programmes

Many employee motivation programmes can be started to deal with the problem of low job satisfaction. Employees should be given incentives for their commendable performance. There should be something like refresher courses for the bankers. Seminars & workshop should be conducted. Online banking Internet has become the need of the day. Every pragmatic organization is taking advantage of this channel. Bank Alfalah has an official website but the services provided are restricted to some specific branches. Also some parts of the website are under

construction. Higher management should take steps to explore this opportunity. Customers should be able to make ready transactions, check balances of accounts etc. Service quality & speed

Bank Alfalah should strive for a higher quality of services. In this age of cutthroat competition, only those players survive who offer the best of everything. Only with a dedication to provide supreme quality services, the bank can prosper. Operations overseas

Ban Alfalah has expanded its branch network from 3 to 23 branches in less than 4 years. Work is underway on new branches in Pakistan & overseas. Bank Alfalah has plans for opening its branches in U.A.E., Bahrain, Sri Lanka and Bangladesh. New products: credit cards

Bank Alfalah can seek out growth opportunities through increased quality assets and by offering a wider range of products and services to esteemed customers. Alfalah credit card is on its way to open up a world of opportunities with added value. With its acceptability in millions of establishments around the globe, Alfalah credit cards will not only ensure the ability to pay for what the client wants, but will also give added benefits.


Effective measures should be taken to boost up the morale of employees. Here are some suggestions to motivate the employees and enhance job satisfaction. Individual differences should be recognized. Match people to jobs. Individualize rewards Check the system for equity Use goals & ensure goals are achieved.

The work environment has a very positive impact on employees productivity. The work environment should be beautified. It should give a very welcoming and lively impression to the customers.

Some club or society should be formed which arranges activities and functions where employees can participate with their families and they can be a part of the Alfalah family. That will create feelings of belongingness & affiliation. When employees associate themselves with their organization that surely helps increase their motivation & job satisfaction.

There should be one casual day in the week, like it is in foreign banks where all the employees dress up in casual outfits. That will help them interact on a more informal basis.

Proper steps should be taken to improve the service quality. This can be undertaken by responding to customer needs quickly & courteously. BAL should capitalize on its competitive advantage in products & services portfolio, by aggressive marketing and promotional activities. For internship programmes in future; the officers should be briefed about what they are supposed to tell the internees. In fact if the internees are provided with the job descriptions of the respective officers, they can have an idea about what functions are performed by the relevant person and they can directly come to the point instead of asking questions about things that do not relate to the respective officer.