INTERNSHIP REPORT

Specialization: Banking and Finance

Submitted to: CHAIRMMAN DEPARTMENT

OF BUSINESS ADMINISTRATION

Submitted by: AZHAR ABBAS

Q579120
05-PMH-0080

Address: HAJI MANZOO & SONS SHOP # 61

FRUIT MARKET (MANDI) TALERI
BYPASS MUZAFFARGARH.
066-2424277
0307-6969630

DEPARTMENT OF BUSINESS ADMINISTRATION

ALLAMA IQBAL OPEN UNIVERSITY
ISLAMABAD

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03. Acknowledgement
I complete my internship in different department of the Bank Alfalah Limited at branch
of Muzaffargarh. And get the knowledge from the different department’s employees.
There are following Departments where I go such as given below:
1 Operations
2 Rural Finance
3 Care Finance
4 Credits

There are following persons which provide me the useful information such as:
Name Department
Mr. Muhammad Ashraf Khan Branch Manager
Mr. Sajid Hameed Malik Operations
Mr. Asif Aleem Cash Deportment Incharge
Mr. Sajid Hussain Remittances & Funds Transfer
Mr. Shahiahan Khan Account opening
Mr. Mohammad Tariq Khan Clearing
Mr. Muhammad Atif saleem Accounts
Mr. Farhan qamer Chief Teller
Mr. Muhammad Bilal Teller
Mr. Wajid Khan Credit & Foreign Trade
Mr. Imran Ayuob Khan Care Finance
Mr. Muhammad Ikram Agri Finance
Mr. Adeel Iqbal Malik Information Technology
Finally, and most important, many thanks to my lecturer Nadia Rashid for providing
supports, understanding and good humor throughout revision process. To them, I will be
forever grateful.

Azhar Abbas …………

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04. List of contents

Executive Summary 05
Objectives 07
Overview of the Organization 08
Nature of the Organization 09
Business Volume of BAL 09
No. Of Employees 11
Product & Services 14
Organizational Structure 17
Account Opening Department 19
Types of Accounts 21
ATM Card Department 25
Remittance Department 26
Clearing Department 28
Foreign Trade Department 30
Credit Department 38
Agriculture Finance Department 43
Credit Card Department 44
Cash Department 45
Structure & function of Finance Department 46
Critical Analysis 51
Balance Sheet 51
Profit and Loss Account 52
Weakness of the Organization 69
Conclusion 70
Recommendation 70
Reference 71
Annexes 72

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05. List of tables & illustrations.
There are no tables or illustrations in this internship report.

06. Executive Summary:

The banking structure in Pakistan comprises of the following types, State Bank of
Pakistan, Commercial Bank of Pakistan; Exchange Banks, Saving banks,
Cooperative banks, specialized credit institutions. The state bank of Pakistan is
the Central bank of the country and was established on July 01, 1948. The
network of bank branches now covers a very large segment of national economy.
The State Bank of Pakistan issues the shares of these periodically. Bank
employees and other common peoples can also purchase these shares and earn
profit. To open an account the customer has to meet the general banking manager
with an introducer. The procedure begins with the punching of account opening
form to the customer file i.e. customer’s master file. Before closing any account,
bank send letter to the account hold for informing him that his account is going to
be closed. There is need an approval form higher authority to close any account.
Current deposits are those which are payable to bank whenever demanded by the
customer. Bank does not pay any profit on current deposits. The following are the
financial products/services of PLS Account, Saving Account, Term deposit and
Foreign currency accounts.

In remittance department like any other BANK AL-FALAH also have

instruments for transferring of money, Telegraphic Transfer, Mail Transfer. In
cash department both deposits and withdrawals go side by side. This department
works under the CD In charge and deals with cash deposits and payments. This
department maintains the following sheets, books, and ledger of account cash
received voucher sheet. Cash paid voucher sheet, Paying-in-slip, Cheque Book,
Cash balance book. The clearing in Karachi at BANK AL-FALAH or other banks
is being done through NIFT (National Institute of Facilitation Technology). Bank

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 provides this facility to the people who need advance money to meet their
requirement. Party dealing with other banks financial condition of borrower
business and as a first step credit proposal is being made. BANK AL-FALAH
provides advances, which are two types. Secured Advances, Unsecured
Advances.

BANK AL-FALAH usually classified advances in to following types Commercial

Advances, Corporate/SME’s Advances, Agricultural Advances. Commercial
Advances are of following types Demand Finance, Cash Finance, Export
Refinance Part I (Pre Shipment) & others. Banks Agriculture division deals with
the agriculture advances. Bank provides the Agriculture Advances in order to
enhance and support the agriculture sector of the country. Farm Credit & Non
Farm Credit. In foreign exchange, BANK AL-FALAH is dealing Foreign
Currency Accounts, Foreign Remittances, and Foreign Bills for Collection,
Imports & Exports Foreign currency accounts & the foreign currency department
deals with the following types of accounts, Current account, saving bank account,
Term deposit. Foreign accounts are convertible on floating rate available to the
bank. Letter Of Credit facility is being provided by BANK AL-FALAH in foreign
exchange.

07. Objectives of studying the organization.

My Objectives of studying the organizations are to improve my knowledge about

Finance Deportment and other Different deportments of this organization.
Through this internship I came to know how organization works and what
strategies it uses in financial planning and how they meet the challenges to
provide the maximum facilities and satisfaction to its customers. The purpose of
studying organization is how the theoretical knowledge can be applied practically.
During internship a student comes to know how practical knowledge is gained

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 and how it can be implemented and evaluated in the organization. Internship is an
important part of MBA. I have done MBA. that, this Internship report is aimed at
studying and analyzing Bank Alfalah LTD (BAL) in general and its branch office
at Muzaffargarh, in particular. Here I want to study about different sections of
Finance Deportments in bank alfalah limited. I found a great opportunity to make
critical analysis of the theoretical concepts relating to practical experience gain. I
learnt how an employee deals with a customer and how he behaves with them.
Practical study of the accounting and financial system, and role of bank with other
institutions, overall economy. The main purpose of the internship is to prepare
and submit a report as a partial fulfillment for the award of MBA degree from
Allama Iqbal Open University Islamabad.
08. Overview of the organization.
8.1. Brief history of the organization:

Bank Alfalah Limited was incorporated on June 21st, 1997 as a public limited
company under the Companies Ordinance 1984. Its banking operations
commenced from November 1st, 1997. The bank is engaged in commercial
banking and related services as defined in the Banking companies ordinance,
1962. The Bank is currently operating through 195 branches in 74 cities, with the
registered Office at B.A. Building, I.I .Chundrigar-Karachi.

Since its inception, as the new identity of H.C.E.B after the privatization in 1997,
the management of the bank has implemented strategies and policies to carve a
distinct position for the bank in the market place. Strengthened with the banking
of the Abu Dhabi Group and driven by the strategic goals set out by its board of
management, the Bank has invested in revolutionary technology to have an
extensive rang of product and services. This facilitates our commitment to a
culture of innovation and seeks out synergies with clients and service providers to
ensure uninterrupted services to its customers. We perceive the requirements of

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 our customers and match them with quality products and service solutions. During
the past five years, we have emerged as one of the foremost financial institution in
the region endeavoring to meet the needs of tomorrow today. Bank Alfalah
Limited was inaugurated on December 28, 1994. This branch is located on Taleri
bypass Muzaffargarh city. The location is connected to all the main trade centers
in Muzaffargarh. It is a prosperous branch streaming towards great achievements.

At the time of its establishment the main factored which were considered are as
follows
• Muzaffargarh is zone covering a large population.
• Muzaffargarh City is linked to many big cities.
• Agro based area constituting growers and gainers
• Thermal Power stations, Mills, Factories &PARCO
• Educational Institution
• Muzaffargarh is an industrial city
• Muzaffargarh is big business city

8.2. Nature of the organization

The nature of the organization where I complete my internship is a bank, which

deals in money; the basic purpose of the bank is to earn profit. This bank is
known as Bank Alfalah Limited. The head office of BAL is situated in Karachi. In
view of deteriorating operating environment, bank slowed down the expansion
plan and added one branch in 1998 making a total number of branches 27. In
2001, the total number of branches increased to 30 all over the country (Pakistan).
Muzaffargarh is a agriculture city, so to get the export market of cotton BAL open
its branch in Muzaffargarh in December 1994. In a short span of time this branch
increases their business remarkably. In 2001 this branch gets the trophy of
highest profit for the year 2001. This branch has highest deposits and advances as

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 compare to other banks working in Muzaffargarh. In 2007, the total numbers of
branches are 115 all over the country. Every bank deals in money, accept the
money from those people who have spare it, and give them who have need it,
basically bank is a business of money. BAL deals in money accept the deposits
from people and lend them who need it. Basic purpose of the bank is to earn the
profit. Bank lends the money in shape of consumer finance and agriculture
finance and auto finance and many more facilities, which provide the bank to its
customers.

8.3. Business volume of the Bank Alfalah Limited.

The five-year business value in term of Revenue, Deposits and Advances or as for as
business volume of the Bank Alfalah is concerned, the financial analysis of balance sheet
and profit & loss statement of last five years reflect a progressive business volume given
as under or bellow:

Business 2004 2005 2006 2007 2008

Volume
Investments 35,503,196 57,425,700 56,502,210 88,491,564 75,973,238
Advances 88,931,400 118,864,010 149,999,325 171,198,992 192,671,169
Deposits&O/C 129,715,891 222,345,067 239,509,391 273,173,841 300,732,858
Total assets 154,834,534 248,313,793 275,685,541 328,895,152 348,990,764
Total assets 154,834,534 248,313,793 275,685,541 328,895,152 348,990,764

The above table shows a progressive trend that the deposits and the revenue of BAL are
increasing gradually. On the other hand Advances also shows upward trend. This increase
is primarily attributable to overall increase in business volumes and includes capital gain
on sale of shares of Warid Telecom (pvt) ltd amounting to Rs. 10789 Billions. Deposits
of BAL are 129,715,891 in 2004 and 300,732,858 in 2008 that is true Deposits,

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Advances, Investments and Total Assets of BAL are increasing gradually every year
.that is why business volume shows upward trend.

8.4. Number of employees

The total number of employees of Bank Alfalah is 6000, which are working in
130 Branches.
Name of CEO of the Bank --------------------------------------------Mr.Siraj-din Aziz
1. C.E.O 01
2. Executive Incharges 09
3. Assistant Executive Incharges 09
4. Group Heads 18
5. General Managers 06
6. Regional Managers 03
7. Area Managers 19
8. Branch Managers 226
9. Operational Managers 226
10. Officers 5483

8.5. Products/Services offered by the BAL.

Bank Alfalah Limited offered the following products and service to its customer:
Deposits
Advances
Remittances
Other facilities

Deposit

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Deposits act as aback bond of bank. Deposits are like lifeblood of every bank. These
deposits are source generating incomes for the bank and for the general public to meet the
financial needs. The bank accept the deposits at a low rate of interest and lends it at
higher rate of interest, the difference between the lending and accepting rate is the source
of income for the bank.
Bank alfalah has taken progressive steps to provide customer variety of banking and
financing services. The classification of the deposits is mainly on the basis of duration
and purpose for which the accounts at a bank.

• Current Account
• Saving Account
• Royal Profit Account
• Basic Banking Account
• Kifayat Account
• Alfalah Mahana Amdan
• Alfalah Education
• Alfalah Kamyab Karobar
• Term Deposits

1. Current Account:

Non interest bearing checking account is minimum account opening requirement of Rs.
10,000 only. Debit card can be used to withdraw cash and make purchases at
thousands of outlets across Pakistan which provides access to funds 24 hours a
day. No restriction on number of withdrawals and on number of deposits.

2. PLS Saving Account:

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Profit and loss sharing saving bank account is minimum account opening requirement of
Rs. 5,000 only. No restriction on number of withdrawals and number of deposits. Profit
on saving accounts is credited to the customer account on half-yearly basis. Debit card
can be used to withdraw cash and make purchases at thousands of outlets across Pakistan
which provides access to funds 24 hours a day.

3. Royal Profit Account.

Minimum deposit requirement of Rs 50000 only is higher returns on higher balances. No

restriction on number of withdrawals and on number of deposits. Debit card can be used
to withdraw cash and make purchases at thousands of outlets across Pakistan which
provides access to funds 24 hours a day. Profit is credited to the customer account on
monthly basis.

4. Basic Banking Accounts:

Initial deposit for account opening is Rs. 1,000 with no minimum balance requirement on
interest bearing checking account. Amber 2 deposits & 2 withdrawals through cheque are
allowed. Debit card can be used to withdraw cash and make purchases at thousands of
outlets across Pakistan which provides access to funds 24 hours a day. No restriction on
ATM withdrawal.

5. Alfalah Kifayat Accounts:

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Any Pakistani resident over the age of 18 can open this account. This account is for
individual/joint customers only. Other customers like companies, corporate etc
are not eligible for opening of this account. Minimum balance requirement for
opening this account is Rs. 10,000/- with a maximum of Rs.1, 000,000/- Three
debit transactions are allowed in a month either through cheques or Debit
Card/POS machine. There is no restriction on deposit transactions. The bank will
issue the first cheque book of 25 leaves and a Debit card. Profit will be calculated
on monthly minimum balance basis and will be credited in the account on
quarterly basis. No profit shall be payable for a particular month, if the minimum
balance for any particular day of said month falls below the amount of Rs.
10,000/-.Yes it is. (Subject to fulfillment of all related requirements)All service
charges are as per the prevailing ‘Schedule of Charges’ Only one account per
customer will be allowed across all branches of Bank Alfalah. Account statement
will be generated on half yearly basis.

6. Alfalah Mahana Amden:

Alfalah Mahana Amdan is a 3 year TDR with expected rate of profit of 10% p.a. This
term deposit will provide an opportunity to individual/joint customers to enjoy higher
returns that will automatically be credited to his/her current/PLS/RP/BBA account on 1st
working day of each month. This facility is not available for business and corporate
customers.

7. Alfalah Education:

Alfalah Education is a Term Deposit product with No Additional Cost (NAC) education
insurance cover for account holders with school going children. Alfalah Education
Account , beside offering competitive return on TERM DEPOSIT , offers tuition fee
reimbursement of children for 15 years of schooling or up to their 20th birthday, in the

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unfortunate event of the death (either through accident, illness or natural causes) of the
main breadwinner (account holder) parent. Alfalah Education offers a competitive return
on term deposit and secondly, it creates a contingency provision for our school going
youth’s education in the hapless event of the death of any major breadwinner. The
product seems rewarding in the current scenario of increasing number of children of
school going age and the general public interest in quality education of their off springs.

8. Kamyab Karobar:

Bank Alfalah presents Alfalah Kamyab Karobar (KK) - a structured, branded, tier-based
current account that caters to customer’s banking needs & aspirations. This product will
provide customer the opportunity to enjoy free services alongside state of the art banking
facilities, linked directly to the deposit balances in customer KK account. Alfalah KK
Account can be opened with minimum deposit requirement of Rs 25,000, while the
degree of free services will be dependent on the minimum thresholds of respective tier.
Its will give customer the power to choose from different tiers and avail banking facility
from any of the Alfalah branches – PAN Pakistan. KK Accounts have strategically been
tailored into 3 different tiers, allowing customer to choose the allotted free service to
customer’s benefit. The three tiers are as following:

Silver

Gold

Platinum

The unique tier based structure ensures that customer can avail smooth & cost efficient
facilities based on customer’s current level of deposits i.e. Higher the deposit, higher the
number of free services.

Some of the Salient features include (tier-based):

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 • Free Online Transactions
• Free SMS Debit Alert (Subject to availability)
• Free PO/DD
• Free Accidental Cover( Valid for up to two People)
• Free cash deposit across Pakistan
• Gold VISA debit/ATM Card with every account

Advances

“The lending function of the banking for the production purposes is called Advances”. In
banking sector advance is the promise that carries the repayment of the original amount
plus an interest on the principal amount. The credit/advance is given on the base of the
confidence/trust and on the belief that the customer will be able and willing to pay at
some future time.

 Cash Finance
 Consumer Finance
 Credit card
 Care Finance
 Structured Finance
 Agricultural Finance
 Letter of Guarantees
 Letter of Credit

Cash Finance.

It is also offered for the working capital requirement of the customer. It is the type of loan
in which client is given cash in lump sum it is offered against the pledge of moveable
property or stock of borrower. In majority of the cases this finance is allowed against
pledge of stock. The amount of finance is credited to borrowers CD account and he/she

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utilizes it for business purposes. Adjustments are linked with delivery of goods kept
under bank’s pledge. Goods are depledging when the payment is done on delivery order
of the bank.

Eligibility
 Resident Pakistanis
 Individuals/sole proprietors aged up to 60 years.
 In the same business for the last three years

 Could offer mortgage urban residential/commercial/industrial properties

 Overall debt burden not to exceed 40% of projected cash flows over the period of
financing
 Validity of the small is initially for a period of one year.
 Maximum entitlement to be worked out by considering the lowest of 60% of
assessed market value of the mortgaged property.
 Time for the approval of cash finance would be 20 working days from the date of
receipt of all documents.
 Processing charges of is Rs 2,000/-

Consumer Finance.
It include car financing, home financing, credit and debit card etc

Credit card

Alfalah Visa Card

Credit card of mode of payment to concern parties on behalf of the creditor. Credit cards
are the best alternative to cash, are globally acceptable and offer security and
convenience at the same time joining Alfalah VISA without paying any fee. It is
acceptable at nearly 30 million locations in more than 150 countries around the global

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and over 22,000 bank alfalah establishment in Pakistan. Alfalah VISA is used shopping,
travel, entertainment, meals and much more. Card member are facilitate though a number
of promotions from time to time. In addition, there is strategic business partnership with
leading local and international brand for purchase of home appliance at exciting Step-
BY-Step (SBS) monthly installment plan with free home. Only 75% of amount is
withdrawn of Customer assigned credit limit. Whether transaction is in dollars are any
other currency, all billing will be converted in Pak Rupees for your convenience.

Features of Alfalah Visa Card

 No joining Fee
 No Annual/Renewal Fee
 Balance Transfer Facility
 Global Acceptability
 Cash Withdrawal
 Revolving card

 Free Supplementary card

 24-hours phone Banking Service

 Zero Loss liability

 All billing bin Pak Rupee
 Monthly Statement of Account

Car Finance
It’s a scheme that enables one to own his desired car at easily affordable and flexible
installments with minimum down payment and insurance. All brands of new Pakistani
assembled/manufactured cars are facilitated in bank Alfalah car financing. The loan can
be available from 1 year to 5 years with earl adjustment facility at any time before. the
maturity. Initial down payment is 10% of the value of the car. Rs.5000 is the processing

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and documentation charges. Bank Alfalah has made arrangements with the top insurance
companies who are offering especially lowest insurance rates for bank alfalah clients.
Repayment of loan is equal monthly installment to Bank Alfalah in the form of pot-dated
cheque. Customer having the option to pay the installment before the maturity. And
customer can include their spouse, children (18 years and above) or parents for the car
loan and the car can be registered in their names.

Eligibility
All Businessmen, Corporate Employees, and other salaried or self employed
professionals having income three times of the monthly installment.

Salient Features
 Lowest financing cost available in the market.
 Tenure of 1 to 5 years as per individual requirement.
 Quickest processing

 Minimum processing charges: Rs, 5000 payable once

 Down payment requirement of 10%

 Repayment through monthly installment

 Insurance rates available from banks approved insurance companies
 Lowest markup
 Easily affordable flexible installment
 Flexibility of adjustment at anytime during tenure

Structured Finance
When large amount are involved, it is common for a number of banks to take up portions
in financing of a project. This becomes necessary, when the amount of credit exceeds the
lending limit of the principal bank as per SBP Prudential Regulations. Bank may also
participate in such activity it is prudent to spread the risk amongst a number of banks,

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arrangements in which a principal lending bank pulls its fund along with one or more
other banks which are not a party to the original agreement, are called Consortium
Agreement. When the borrower deals with more than one bank all of which are party to
the credit agreement, it is called syndication. In all syndication/Consortium the bank
should not take a subordinate position to other members of the syndicate/participants and
the securities should be shared without preference or priority of one or more banks.
Structured finance Deportment comprised a team of professionals, dedicated to
syndicated loans and structured products. The team’s expert is well known in the market
place with its capability to assist public & private sector entities, major financial
institutions, and multinational corporation’s domestic and international institutional
investors, in innovative financing including underwriting & private placements.
The scope of SFU’s activities also advisory assignment, such as privatization, Mergers &
Acquisitions (M& As), domestic, IPO’s and restructuring. During the past five years,
SFU has been successful in sourcing and participating in number of prestigious
transactions involving large amounts.
 Some of the value added services offered by SFU include the following:
 Loan syndication

 Public flotation of Term Finance Certificates (TFCs) and equity

 Private placement Term Finance Certificates (TFCs) and equity underwriting.
 Guarantee syndications
 Financial restructuring
 Mergers & Acquisitions (M&As)
 Fostering join ventures
 Privatization
 Structuring new financial instruments

Agricultural Finance

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Agricultural sector is considered as a back bone of Pakistan. Bank Alfala Limited
acknowledging the vital role of a agriculture in the economic development of Pakistan
has designed Rural Finance Program named as “Bank Alfalah Zarie Sahulat”. The
product is designed to meet financing requirements of our farming sector. Agri loan is
available for Short, medium and Long term.

Objective:
 Provide reliable infrastructure for Agri customers.
 Help farmer utilize funds efficiently and effectively.
 Provide farmers an integrated package of credit, supervision and technical
knowledge.
Types
 Seeds
 Pesticides
 Storage
 Fertilizer
 Farm Machinery
 Tractor
 Tub Well
 Dairy farming and other Farming requirement

Letter of credit: (LC)

Foreign trade payment problems are mainly solved by a letter of credit. A letter of credit
is issued by the importer’s bank. If guarantees payment to the exporter up to specified
amount of money provided the terms and conditions laid down the L/C are fulfilled. A
letter of credit is a commitment on the part of buyer’s bank to pay or accept draft drawn
upon it, provided drafts do not exceed a specified amount. A letter of credit thus is a (I)
written undertaking by an importer’s bank to exporter’s bank. (II) That it will pay accept

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draft drawn upon it up to a stated amount with a specified time. (III) The payment will
only be made to the exporter if he compliers with the terms of credit.

Parties to a letter of credit:

There are four parties involved in letter of credit.
 Account party: The buyer or the importer on whose account and request the
letter of credit is opened is known as account party or opener.
 Issuing bank: The bank which issues or opens a letter of credit at the request of
importer is called issuing bank.
 Exporter or seller: The seller or the party in whose favor L/C is drawn is the
exporter. He is also called beneficiary.
 Negotiating bank: The paying bank in the exporter’s country, on which the draft
is drawn, is called negotiating bank or paying bank.

Application for letter of credit:

The importer will request himself own bank or any other bank, which deals in foreign
trade transactions to issue a letter of credit in favor of the exporter. He will prepare an
application on the prescribed form available from the bank. The information, which are
supplied in the application are based on the contract of sale and include only the
important feature of contract, such as value of merchandise, port of shipment, documents
to be presented, port of unloading, brief description of goods, import license etc.

Bill of landing
The importer receive LC, he examine it to ensure that it conforms to the terms of contract
of sales. He then shifts the merchandise and presents all required documents along with
the bill of landing to issuing bank.

Payment

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Importer pays all his obligations to bank then bank release the documents. In case of sight
draft, the importer’s bank pays the amount on the same day charging the importing
account. In case of a time draft the importer discharge his obligations to the issuing bank
on or before the maturity date of acceptance. The issuing bank will then release all the
shipping documents to the importer. The exporter can obtain payment fro, the negotiating
bank by discounting the draft (LC) immediately after shipping the goods and obtaining
shipping documents.

9. I). Organizational Structure of Bank Alfalah Ltd

Main Offices (Head office and branches)

The head office of the Bank Alfalah Ltd is situated B.A.Building, I.I Chundrigar, and
Karachi. And the total branches are 195. Branch structure of Bank Alfalah Ltd In given in
annexure at the end of report. It include following regions such as:
Conventional Branches 200

Islamic Branches 32
Overseas Branches 8

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 Branch Manager
Mr. Mohammad Ashraf
Khan

Office Asst/PA
Branch Manager

Credits/Foreign Operations Agri finance

Car Finance
Trade Mr. Sajid Mr. Muhammad
Mr. Imran Ayub Khan
Mr. Wajid Khan Hameed Malik Ikram

Account Opening
Remittance & Fund Transfer Remittance & Fund Transfer
Mr.Sajid Hussain
Mr. Shahan Khan Mr. Shahan Khan

Tele Operator Office/Tea Boys Sweepers

Ms. Saima Rani Mr. M.Iqbal Mr. M. Yaseen IT
Mr.Shahid Raza Mr. Abdul Rasheed Mr. Adeel
Mr. Yameen Iqbal

Accounts Guards
Mr. Muhammad Clearing Assistant
Mr.Safder
Atif Saleem MrM.Nazir Mr. Muhammad Tariq
Mr.Bashir Ahmed

Help Desk/Greeter
Mr. Naeem Shahzad

 Review of the various departments of the organization in terms of

their functions and responsibilities.

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DEPARTMENTS:

The bank has following department:

1 Account Opening department
2 ATM Department
3 Account Department
4 Remittance Department
5 Clearing department
6 Foreign Trade Department
7 Credit Department
8 Credit Card Department
9 Cash Department

ACCOUNT OPENING DEPARTMENT:

Borrowing funds from different sources has become an essential feature of today's
business enterprises. The borrowed capital of a bank is much greater than their
own capital. Banks borrowing is mostly in the form of deposits. These deposits
are lent out to different parties. Such deposit creation is done through opening an
account in the Bank.
In BAL Muzaffargarh Mr.Sheraz and Rohail are operating the account opening
department along with performing some auxiliary functions of Check Book
Issuing and receiving IBC’s (incoming Bank Cheque for Collection).

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 Procedure of Opening an Account

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TYPES OF ACCOUNTS
In BAL, there are the following types of accounts:
• Current Account
• PLS Saving Account
• Royal Profit
• Basic Banking Account
• Alfalah Kifayat Account
• Alfalah Mahana Amdan
• Alfalah Education
• Alfalah Kamyab Karobar

2. Current Account:

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Non interest bearing checking account is minimum account opening requirement of Rs.
10,000 only. Debit card can be used to withdraw cash and make purchases at
thousands of outlets across Pakistan which provides access to funds 24 hours a
day. No restriction on number of withdrawals and on number of deposits.

2. PLS Saving Account:

Profit and loss sharing saving bank account is minimum account opening requirement of
Rs. 5,000 only. No restriction on number of withdrawals and number of deposits. Profit
on saving accounts is credited to the customer account on half-yearly basis. Debit card
can be used to withdraw cash and make purchases at thousands of outlets across Pakistan
which provides access to funds 24 hours a day.

3. Royal Profit

Minimum deposit requirement of Rs 50000 only is higher returns on higher balances. No

restriction on number of withdrawals and on number of deposits. Debit card can be used
to withdraw cash and make purchases at thousands of outlets across Pakistan which
provides access to funds 24 hours a day. Profit is credited to the customer account on
monthly basis.

4. Basic Banking Accounts:

Initial deposit for account opening is Rs. 1,000 with no minimum balance requirement on
interest bearing checking account. Amber 2 deposits & 2 withdrawals through cheque are
allowed. Debit card can be used to withdraw cash and make purchases at thousands of
outlets across Pakistan which provides access to funds 24 hours a day. No restriction on
ATM withdrawal.

5. Alfalah Kifayat Accounts:

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Any Pakistani resident over the age of 18 can open this account. This account is for
individual/joint customers only. Other customers like companies, corporate etc
are not eligible for opening of this account. Minimum balance requirement for
opening this account is Rs. 10,000/- with a maximum of Rs.1, 000,000/- Three
debit transactions are allowed in a month either through cheques or Debit
Card/POS machine. There is no restriction on deposit transactions. The bank will
issue the first cheque book of 25 leaves and a Debit card. Profit will be calculated
on monthly minimum balance basis and will be credited in the account on
quarterly basis. No profit shall be payable for a particular month, if the minimum
balance for any particular day of said month falls below the amount of Rs.
10,000/-.Yes it is. (Subject to fulfillment of all related requirements)All service
charges are as per the prevailing ‘Schedule of Charges’Only one account per
customer will be allowed across all branches of Bank Alfalah. Account statement
will be generated on half yearly basis.

6. Alfalah Mahana Amden:

Alfalah Mahana Amdan is a 3 year TDR with expected rate of profit of 10% p.a. This
term deposit will provide an opportunity to individual/joint customers to enjoy higher
returns that will automatically be credited to his/her current/PLS/RP/BBA account on 1st
working day of each month. This facility is not available for business and corporate
customers.

7. Alfalah Education:

Alfalah Education is a Term Deposit product with No Additional Cost (NAC) education
insurance cover for account holders with school going children. Alfalah Education
Account , beside offering competitive return on TERM DEPOSIT , offers tuition fee
reimbursement of children for 15 years of schooling or up to their 20th birthday, in the

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unfortunate event of the death (either through accident, illness or natural causes) of the
main breadwinner (account holder) parent. Alfalah Education offers a competitive return
on term deposit and secondly, it creates a contingency provision for our school going
youth’s education in the hapless event of the death of any major breadwinner. The
product seems rewarding in the current scenario of increasing number of children of
school going age and the general public interest in quality education of their off springs.

8. Kamyab Karobar:

Online Current Account

Bank Alfalah presents Alfalah Kamyab Karobar (KK) - a structured, branded, tier-based
current account that caters to Customer’s banking needs & aspirations. This product will
provide customer the opportunity to enjoy free services alongside state of the art banking
facilities, linked directly to the deposit balances in customer’s KK account. Alfalah KK
Account can be opened with minimum deposit requirement of Rs 25,000, while the
degree of free services will be dependent on the minimum thresholds of respective tier.
Its will give customer the power to choose from different tiers and avail banking facility
from any of the Alfalah branches – PAN Pakistan. KK Accounts have strategically been
tailored into 3 different tiers, allowing customer to choose the allotted free service to
customer’s benefit. The three tiers are as following:

Silver

Gold

Platinum

The unique tier based structure ensures that customer can avail smooth & cost efficient
facilities based on customer’s current level of deposits i.e. Higher the deposit, higher the
number of free services.

Some of the Salient features include (tier-based):

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 • Free Online Transactions
• Free SMS Debit Alert (Subject to availability)
• Free PO/DD
• Free Accidental Cover( Valid for up to two People)
• Free cash deposit across Pakistan
• Gold VISA debit/ATM Card with every account

(2). ATM CARD DEPARTMENT:

Automated Teller Machine (ATM) is facility provided by the Bank Alfalah Limited
Muzaffargarh Branch. There are certain requirements, which are to be fulfilled, by the
person before he can have ATM card. There is a need of primary account number and
then the secondary account number. The primary account number is the regular account
number as maintained with the bank of the person and the bank on which the card is
issued gives the secondary account number. Apart from this there is Personal
Identification Number (PIN) without which ATM cannot be operated. The person can
change the PIN from time to time so that there is no chance of fraud in his account. If
someone gets to know the PIN of the ATM of a certain person he can operate that easily
so the PIN should not be disclosed to anyone. In case the card of a person is damaged or
the person loses his card, then charges of Rs.100/- are taken and a new card is issued by
the Head Office. In case of replacement, the charges are Rs.100/- and in case of faulty
card means when the card is inserted in machine and on the screen the caption faulty card
is written then no charges are taken by the bank for the issuance of new card

(3). ACCOUNTS DEPARTMENT:

Accounts department is a department which deals and checks all the activity
of all the department .It also deals in expression of finance of the bank.
Salary payment is also one function of the bank.

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Checking Bank’s Daily Activity:

Accounts department deals and checks the entire working of the Branch; all the vouchers
that have been posted at the computer are scrutinized in accounts department. The “End
of Day” i.e. computer print is also received from the computer. The next day the activity
is separated some statements from the “End of Day”. Then next day activity separated
some statements from the “End of Day”. The vouchers are sorted out head wise. The
vouchers are matched with the entries in the statements. Any abnormality if occurs, is
immediately dealt with. All the vouchers and instruction are checked individually are
checked individually against the computer printouts. After checking they are signed by
account’s officer and the internal auditor also prepare the weekly, monthly, quarterly and
yearly report.

Other Activities:
• Preparation of daily bank positions statement
• Payment of salaries
• Preparation of the statements
• Depreciation calculation
• Income Statement
• Balance sheet
• Cash Flow Statement
• Expanses

(4). REMITTANCES DEPARTMENT:

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The main function of the remittance department is to transmit money from one place to
another. By providing this service to the customer, bank earns a lot of income. Also
customer is Bale to meet its day-to-day financial requirements.
• Demand Draft.
• Telegraphic transfer.
• Pay order.
• Pay slip.
• OBC.
• IBC.

1. Demand Draft:
It is an instrument payable on demand for which value has been received, issued by the
branch of the bank drawn i.e. payable at some other place (branch) of the same bank. If
two banks are involved then the DD is sent to other bank but in other case it is handed
over to the applicant.

2. Telegraphic Transfer (TT):

It is the quickest way of transfer of funds from one place (Branch) to other place (Branch)
of the same bank. Generally, a mail transfer advice reaches the drawer branch the next
day through courier services. But sometimes, a customer demands that his funds should
be transferred through the quickest means. In such cases, transfer of funds message is
passed through telephone or telegram.
This mode of transfer was used before online. Online system is very effective for
this purpose now-a-days. In Bank Alfalah limited online system is used.

3. Pay Order:

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It is an instrument issued for payment in same city. Pay order issued from on e branch
can only be payable from the same branch. It is normally referred to as banker’s Cheque.
It is also called confirmed Cheque, because bank issues this on it own guarantee.

4. Pay Slip:
It is an instrument issued by the bank for the settlement of its own payment. It is used for
payment by the bank to anyone (may be employees) in this case only one bank is
involved. He is the issuer as well as the payer.
No Excise Duty
No Commission
5. Outward Bills for Collection:

The bills, which are received by the bank and sent to other cities (branches) for the local
clearing in that city, are called Outward Bills for Collection.

6. Inward Bills for Collection:

The bills, which are received by the bank from other branches out of the city for local
clearing, are called Inward Bills for Collection.

(5). CLEARING DEPARTMENT:

The word clearing has been derived from the word “Clear” and is defined as “a system by
which banks exchange cheques and other negotiable instruments draw on each other
within a specified area and thereby secure payment for their client through the clearing
house at specified time” in an efficient way.
Advantages of Clearing:

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 1. Since clearing does not involve any cash etc and the entire transaction
takes place through book entries, the number of transactions can be unlimited.
2. No cash is needed; as such the risks of robbery, embezzlements and
pilferage are totally eliminated.
3. As major payments are made through clearing, the banks can manage cash
payment at the counters with a minimum amount of cash in vaults.
4. A lot of time, cost and labor are saved.
5. Since it provides an extra service to the customers of banks without any
service charger or costs, more and more people are inclined and attracted towards
banking.

Clearing House:

It is a place where representatives of all scheduled banks sit together and

interchange their claims against each other with the help of controlling staff of State Bank
of Pakistan and where there is no branch of State Bank of Pakistan the designated branch
of National Bank of Pakistan acts as controlling member instead of State Bank of
Pakistan.

Working of clearing house:

All the bank which are the member of clearing house maintain accounts with
State Bank of Pakistan by debit and credit to which the clearing settlements are made. If
on a particular day, a bank delivers cheques and other negotiable instruments worth more
than the total amount of Cheque received by it that banks accounts with State Bank of
Pakistan will be credited with the differential amount. If on the other hand the total
amount of cheques and other negotiable instruments draw on a certain bank by other bank

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is more than the total amount receivable by it from other banks, then this bank’s account
will be debited on that day.
The Cheque delivered to the representatives of other banks for clearing are called
outward clearing, whereas cheques received from the representatives of other banks for
payment are called inward clearing.

(6). FOREIGN TRADE DEPARTMENT:

Foreign Exchange Department works like the general bank departments with the
difference that it deals in foreign currency. This department deals with the following:-
• Import
• Export
• Foreign Currency Accounts
• Foreign Remittance
• Submission of Monthly Reports to SBP

1. IMPORT:
The international trade transaction, in which one country buys goods from other country,
is called import. Import and export Act of 1950 govern the import trade in Pakistan.
Previously, the regulating body of imports was controller of Import and Export. But this
function has been shifted to Export Promotion Bureau. Foreign Exchange Departments of
all banks are restricted to work under the rules and regulations of government.

Import License and Registration:

The individuals and firms who desire to import goods from the foreign countries
are required to obtain import license. Import licenses are a type of artificial restraint on
the import trade of a country. To acquire import license, the importer has to submit
applications to the licensing authority. The importers can only get their merchandize

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cleared from the custom authorities if they have the import license duly issued in their
names. The import licenses issued by the Import Trade Controller are required to be
registered with the State Bank of Pakistan.

Contract of sale:

After getting the license, the importer then negotiates with the exporter. When
they reach to an agreement on all terms of sale, they sign a contract. Thus contract
includes all information of terms and condition of sale.

Letter of credit: (LC)

Foreign trade payment problems are mainly solved by a letter of credit. A letter of
credit is issued by the importer’s bank. If guarantees payment to the exporter up to
specified amount of money provided the terms and conditions laid down the L/C are
fulfilled. A letter of credit is a commitment on the part of buyer’s bank to pay or accept
draft drawn upon it, provided drafts do not exceed a specified amount.
A letter of credit thus is a (I) written undertaking by an importer’s bank to
exporter’s bank. (II) That it will pay or accept draft drawn upon it up to a stated amount
with a specified time. (III) The payment will only be made to the exporter if he compliers
with the terms of credit.
Parties to a letter of credit:

There are four parties involved in letter of credit.

1. Account party: The buyer or the importer on whose account and request the
letter of credit is opened is known as account party or opener.
2. Issuing bank: The bank which issues or opens a letter of credit at the request
of importer is called issuing bank.

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 3. Exporter or seller: The seller or the party in whose favor L/C is drawn is the
exporter. He is also called beneficiary.
4. Negotiating bank: The paying bank in the exporter’s country, on which the
draft is drawn, is called negotiating bank or paying bank.

Opening of letter of credit:

The main steps involved in the opening of the letter of creditor as follows:

Application for letter of credit:

The importer will request himself own bank or any other bank, which deals in
foreign trade transactions to issue a letter of credit in favor of the exporter. He will
prepare an application on the prescribed form available from the bank. The information,
which are supplied in the application are based on the contract of sale and include only
the important feature of contract, such as value of merchandise, port of shipment,
documents to be presented, port of unloading, brief description of goods, import license
etc.

Scrutiny of application:

Before issuing a letter of credit, the bank will scrutinize whether the importer is of good
financial standing, possesses the import license issued by import control. Authorities, the
amount available covers the letter of credit applied for, market demand of goods,
collateral offered to cover the credit etc.

Cash margin:

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The bank asks the importer to deposit cash or securities with the bank. The bank
depending upon the credit worthiness of the importer decides the proper margin of cash
or securities to be deposited.

Issue of the letter of credit:

The importer bank after being fully satisfied will issue a letter of credit in favor of the
exporter. The L/C may be sent directly to the exporter or the advising bank in the
exporter’s county. In such a case, the advising bank will inform the exporter about
opening a letter of credit.

Shipment of goods:

When the exporter receives L/C, he examines it to ensure that it conforms to the terms of
contract of sales. He then shifts the goods and presents all required documents along with
the bill to negotiating bank.

Role of negotiating bank:

The negotiating bank after receiving all the documents and the bill from the exporter will
scrutinize them whether these conform to the terms of letter of credit. If the documents of
title accompanying the bill are in order, these will be sent to the importers bank for
payment.

Liability of the issuing bank:

On receipt of documents and the bill, the issuing bank will examine them. If the
documents on the face appear to be in order, the payment would be released by the bank.

- 38 -
In case any defect is found in the documents and the draft is honored by the issuing bank
the importer can claim damages on the issuing bank. The issuing bank is only
accountable for the completeness of documents, not to see whether goods conform to the
contract of sale.

Payment by importer to the bank:

First the importer pays all his obligations the bank then bank releases the documents. In
case of sight draft, the importer’s bank pays the amount on the same day charging the
importing customer’s account. In case of a time draft, the importer discharges his
obligations to the accepting bank on or before the maturity date of acceptance. The
accepting bank will then release all the shipping documents to the importer.

Payment to the exporter:

The exporter can obtain payment from the negotiating bank by discounting the draft
(L/C) immediately after shipping the goods and obtaining shipping documents.

2). EXPORT:

The international trade transaction in which one country sells its goods to other country is
called Export. The controlling body of export in Pakistan is Export Promotion Bureau; it
gives different incentives to the businessmen for enhancing the exports and reducing the
Balance of payment deficit. It restricts the export of some goods and reinforces export of
other. The steps involved in import are described earlier from the importer’s point of
view. The procedure of export is same, as it can be described from exporter’s point of
view. The activities, which are different, described here.

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Foreign Bill Purchased (FBP):

Following requirements must be fulfilled before the purchase of Foreign Export Bills.
Exporter should be account holder of the bank. Bank issues the Form-E. Form-E should
be filled correctly and then bank authenticates the E-Form. Exporter goes to the custom
authorities for custom clearance. Shipping Company issues Bill of Lading or Airway Bill.
Exporter should bring other documents like certificates of Origin, commercial invoice,
packing list etc. Bank scrutinizes the documents.
After fulfilling these requirements, bank purchases the export bill and makes payment for
the value of goods in Pak Rupee to the Exporter.

Lodgment:

Lodgment means making the payment to exporter by bank against the purchase of bill.
Before the lodgment, bank records the export bill in the FBP register where name of
exporter, importer, the name of bank which open the LC, Tenor of bills maturity. Two
types of rates are used in evaluating the amount:

1. OD Buying rate/At sight rate:

It is the rate of export bill, payment of which is to be received within 12 days from the
date of lodgment.
1. Usance rate:
It is the rate payment of which is to be made at a future date, normally within 30, 60, 90,
120, 150, or 180 days.

Realization:

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Realization means receiving the payment from the foreign bank for the export of goods.
ACBL receive the credit advice from the treasury office situated in Karachi that the
payment of the FBP Number this receives. If the payment FBP is less than the amount it
was lodged than remaining amount will receive from the exporter.

Foreign Documents Bill for Collection (FDBC):

In FBP bank purchase the export bills from the exporter and make payment to the
exporter before the maturity of that bill, while in FDBC banks collect the export bill on
the behalf of exporter on the date of maturity. In FDBC bank acts as a intermediary
party. Bank gets little amount of commission for the collection of
FDBC. Like FBP exporter deposit all the important documents of export bill to the bank,
bank lodged this FDBC, it means bank record this export bill in the FDBC register where
name of exporter, name of importer, bank which open the LC, Tenor, maturity date is
written.

Advance Payment of Bills:

This is another function, which the export department of ACBL performs. In advance
payment bank pay the amount of export bill to the exporter before the shipment of goods.
For this purchase of bill bank gets more charges as compare to FBP.

3. FOREIGN CURRENCY ACCOUNTS:

A depositor can open account in US Dollar, Pond, Japanese Yen and Euro with
nominated branches. For opening of account a Form is provided to the person/party,
introduction of the new account holder or by the Officer of the Bank. Procedure of
opening foreign currency accounts is same as other accounts. No Zakat is deducted on

- 41 -
these accounts, no income tax deductions, no wealth tax deduction will be there, and
these incentives reinforce and motivate the people to invest in foreign currency accounts
rather to keep foreign currency idle.

5. FOREIGN REMITTANCE:

Bank also operates in Foreign Currency accounts. In accordance with instructions of

SBP, foreign currency accounts are opened in these currencies: US Dollar, Pond,
Japanese Yen, and Euro. Funds are transferred abroad by Foreign Telegraphic Transfer
Swift MT-100 is used for this transfer. Bank Alfalah limited has its agency arrangements
in those countries, where its own branches are not established. Its agency arrangements
with City Bank, American Express, ABN Amro, Standard Chartered Bank.

6. SUBMISSION OF MONTHLY RETURNS:

It includes reporting of Form-M and Form-E to SBP.

Reporting of Form-E:

Every Exporter is required to submit a declaration to custom authorities for goods

exported. This declaration is submitted on prescribed Form-E in quadruplicate, which is
certified by authorized dealer. Four copies of Form-E are maintained. Form-E is reported
to SBP at the end of the month, in which the amount is realized. There is a prescribed
Performa used for the reporting of Form-E. It includes the reporting period, currency,
Serial No. of Form-E, amount, Code No. of country and commodity.

Reporting of Form-M:

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Every foreign bank deducts some charges form the value of goods. It is for miscellaneous
purposes like foreign bank charges or foreign agent commission. Form-M is used to
declare this outflow of foreign currency. At the end of the month of realization of the
amount, Form-M is reported. It includes the list of Serial No, amount and purposes of
every Form-M.

(7). CREDIT DEPARTMENT:

Lending or financing is one of the basic functions of banks of all categories, through
which they gain major part of their profits. A bank accepts deposits of money and repays
cash to its depositors on demand. But this is not to say that; bank gives this service for
nothing. Bank borrows money at a lesser rate of interest and lends to the borrower at
higher rate of interest. And the difference between these two is the profit of the bank
Credit department deals in the following categories.

Consumer Banking Services:

1. Personal finance

One can avail unlimited opportunities through Alfalah Bank’s Personal Finance. With
unmatched financing features in terms of loan amount, payback period and most
affordable monthly installments, Alfalah Bank’s Personal Finance makes sure that
customer get the most out of your loan. No matter what customer’s need is, Bank Alfalah
has more ways to serve you than ever before.

2. Auto finance
Bank Alfalah offers you the most convenient and affordable vehicle-financing scheme to
help you own your favorite brand new car.

3. Business finance

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 You always wanted to put in that extra money into your business, which makes it grow
and grow now you can stop worrying about your daily cash requirements, and start
enjoying our unique Alfalah Business Finance facility.

4. Debit card

Alfalah Debit Card means freedom, comfort, convenience and security, so that customer
can have retail transactions with complete peace of mind. Alfalah Debit Card is customer'
new shopping companion which enhances your quality of life by letting you do shopping,
dine at restaurants, pay your utility bills, transfer funds, withdraw and deposit cash
through ATM anywhere, anytime.

5. Mortgage Finance.

Ever since the inception of life, shelter has been rated among the primary needs of
mankind. Owning a home for oneself still remains an exclusive dream for many. Bank
Alfalah has made the realization of customer’s dream to have a house of customer’s very
own possible. Whether customer plan to build a house, tailor made to customer’s
requirements or buy a constructed house, Alfalah mortgage finance enables customer to
pursue customer’s goal without any problems.

6. Travelers Cheques

Bank Alfalah offers customer its "Rupee Traveler Cheques" eliminating all financial risks
while traveling. So avoid risk of carrying cash through Alfalah Bank's Rupee Traveler
Cheques.

FUND BASED LOAN:

(1) RUNNING FINANCE: (R/F)
It is popularly known as overdraft. It is offered for working capital requirement of the
customer. It is created in current account adjustment from time to time finally on expiry
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date. This facility is normally issued against hypothecation of immovable property. It is
allowed to the borrower under a pre-sanctioned limit. A current account is opened and the
conduct of this account is kept under review for a period of three to six months.
Repayment in monthly installments is not required.

(2) CASH FINANCE: (C/F)

It is also offered for the working capital requirement of the customer. It is the type of loan
in which client is given cash in lump sum it is offered against the pledge of moveable
property or stock of borrower. In majority of the cases this finance is allowed against
pledge of stock. The amount of finance is credited to borrowers CD account and he/she
utilizes it for business purposes. Adjustments are linked with delivery of goods kept
under bank’s pledge. Goods are depledging when the payment is done on delivery order
of the bank.

(3) TERM FINANCE: (T/F)

Term finance is offered to client for investment in any project or business. It is issued for
fixed time period. The amount of finance is credited to borrower’s personal account by
debiting the Term Finance Account. The amount of finance is credited to borrower’s
personal account by debiting the Term Finance Account. The amount of Finance is
disbursed in lump sum. The repayment of Term Finance is usually in installments and
with other documents a letter of installments is taken from the borrower at the time of
disbursement. Monthly repayment amount is calculated by dividing the principal amount
by time period plus mark-up.

NON-FUND BASED FACILITIES:

(1) LETTER OF CREDIT:

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Letter of Credit issued by the bank can broadly be classified as under: -
 Sight letter of credit.
 Usance letter of credit.
The sight L/Cs calls for the draft to be drawn ‘at sight’. Documents negotiated
and received against sight are held as security till their retirement. Drafts drawn under
usance are for a tenure specified in the L/C and are payable by the customer on due date.
Credit line proposal must clearly state the type of letter of credit the branch is intended to
issue.

(2) LETTER OF GUARANTEE:

Guarantees issued by the bank can be classified under two broad categories.
(A) FINANCIAL GUARANTEE:
(B) PERFORMANCE GUARANTEE:
(C) SHIPPING GUARANTEE:

MODES OF CREATING CHARGE OVER SECURITIES:

Charges are created on the tangible assets in several ways depending upon the nature of
assets. Modes of creating such charges are as follows:

1. Lien
2. Pledge
3. Hypothecation
4. Mortgage
Lien:

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Lien has been defined as the right of a person to retain the property of the borrower until
a debt due from him (borrower) is repaid. In banker’s lien, as a banker’s lien is an
implied pledge and the banker has the right to sell the securities under lien after giving a
reasonable notice to the borrower in case of his default.

Pledge:

The bailment of goods as security for payment of a debt or performance of a promise is

called pledge. The relationship of a customer and a banker is this case is that of a pledge
(customer) and a pledge (banker). The ownership of the goods, pledge remains with the
borrower, while the possession is with the banker.

Mortgage:

A mortgage is the transfer of an interest in specific immovable property for the purpose
of securing the payment of money advanced or to be advanced by way of loan, existing
or future debt. The transferor is called a mortgagor and the transferee a mortgagee. The
mortgage does not transfer the ownership of the property and the actual possession of the
property is also not transferred. He (mortgagor) transfers only some of his rights as an
owner e.g. He now cannot sell the property without the consent of the mortgagee.

Hypothecation:

An agreement to give a charge to goods or documents of title without conferring

possession is called hypothecation. The goods are charged as security for a loan form the
bank but ownership and possession remains with the borrower. The security is granted by
the borrower to the lender by a letter of hypothecation, which contains the terms and
conditions of the hypothecation agreement. The hypothecated stock is liable to be

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inspected by bank’s authorized person. The creditor (Banker) has the right to take
possession of the hypothecated goods as and when required.
(8) Agriculture Finance Deportment

1. Kissan Ever Green Financing.

Bank Alfalah has launched this program with the sole motive to provide dignity,
prosperity and freedom to the tiller of the land. The program is designed to help small,
medium and large farmers in meeting their short-term input requirements against one
time sanction and automatically renewable up to 3 years subject to its stipulated
utilization/periodical adjustment. The credit line is sanctioned in the light of available
cash flows and input requirements i.e. Seeds, Fertilizer & Pesticides etc.

2. Kissan Aabpashi Financing.

Agriculture farming is impossible without adequate water. Alfalah can combat the
prevalent water scarcity by harnessing more natural resources. Increased use of
mechanical means thus provides a ready alternative. Keeping in view the scarcity of
water, which is the lifeblood of arable lands, Bank Alfalah has started a program for
farmers, to finance installation of Tube-Wells (electric, diesel and solar energy units)
water management equipments and water channel development etc., which will help
farmers to make optimum use of limited water resources.

3. Kissan Tractor Finance.

Traditional modes of cultivation viz Bullocks, Camels, horses etc can no longer keep
pace with the demands of present times due to manifold increase in the population. Power
in the form of modern technology is therefore the need of the hour. To meet this
emergent requirement, Bank Alfalah has launched a Kissan Tractor Finance to bring
power to the fields.

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4. Kissan Farm Mechanization Finance.

Beside Power at the farm i.e. Tractor, the benefits / advantages of power are maximized
with the use of Mechanical Support i.e. modern and improved equipments which
essentially complement one another due to their cost effectiveness and time efficiency.
Bank Alfalah has launched an Alfalah Kissan Farm Mechanization Finance for the
assistance of the small farmers and provides finance for farm equipment, trailer, thresher,
drills & motivators etc.

5. Kissan Live Stock Development Finance

In order to supplement the income of the farmer, Bank Alfalah has launched a program
enabling the farmer to purchase Animals, Goats, Sheep, Poultry and Fisheries without
incurring extra expenditure because of availability at his farm. He will be Bale to get
milk, meat and eggs etc., which normally do not form part of his diet. This program has
the added advantage that besides fulfilling his own family’s consumption needs he will
be Bale to market the surplus and earn additional income. This will further improve their
cash flows to repay their other Loans / Revolving Credit on due date.

(9). CREDIT CARD DEPARTMENT:

Bank Alfalah is authorized to issue the credit card of two companies, which are under
bank of America.
• Master Card
• Visa Card
But due unavailability of visa card machine in Muzaffargarh, BAL Muzaffargarh branch
deals n only Master Card.

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There are following types of master card.
• Silver card
• Local silver card
• Gold card
These are different due to their credit amount limit. For example for silver card,
cardholder can take the maximum amount ranging between Rs. 25,000 to Rs, 200,000.
While the local silver cardholder can use this card up to Rs. 25,000 to 500,000 for gold
cardholder this limit has been extended to Rs. 300,000.

Issuing Charges:

When the card is given to cardholder, there are certain fee charges to by the bank, which
is different for different cards.
• Local cardholder is charged Rs. 1200 but if the cardholder is Army officer
there is special discount for him. And he is special charged Rs. 750.
• Silver cardholder is charged Rs. 2500.
• Gold cardholder is charged Rs. 3500.

Issuing Procedure:

Credit card is issued to three types of parties.

• Professional (Gove & private officers)
• Business man
• Landlord.
(9). CASH DEPARTMENT:

Cash department deals in money; this department accepts the money on counter and
withdrawals on the counter. Cheques are cashes on the cash counter. Cash officer accept

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the utilities bills and perform different function with respect to bonds, cheques and other
primary functions. Credit card bills can be deposited on the cash counter. Cash officer
after identification pays the money to the Cheque holder at that time. Cash department is
the responsible for any fraud or any replacement of cash, that’s why this department is
very carefully fulfill his duties, efficiently and effectively perform his duties.

09. Structure and function of the finance department.

Established in 1998 in order to provide innovative investment banking services to valued

clients. A team of hand picked professionals, dedicated to syndicated loans and structured
products. The team’s expertise is well known in the marketplace with its capability to
assist public & private sector entities, major financial institutions, multinational
corporations, domestic & international institutional investors in innovative financing
including underwriting & private placements. The scope of SFU’s activities also
encompasses advisory assignments, such as privatization, Mergers & Acquisitions
(M&As), domestic listings, IPOs and restructuring. During the past few years, SFU has
been successful in sourcing and participating in a number of prestigious transactions
involving large amounts.

a. Structure of Finance Department.

The above figure is the structure of finance department of Bank Alfalah Ltd. The Vice
President of finance or Chief Financial Officer (CFO), generally reports directly to the
president or Chief Executive Officer (CEO). In Bank Alfalah Ltd. Financial operations
over seen by the CFO will be split into two branches such as:
1) Treasurer.
2) Controller.
CONTROLLER

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The controller’s responsibilities are primarily accounting in nature. Const accounting as
well as budgets and forecasts, concerns internal consumption. External financial reporting
is provided to the Internal Revenue Service (IRS), to the Securities and Exchange
Commission (SEC) and to stockholders.

TREASURER:
The treasurer’s responsibilities fall into the decision areas most commonly associated
with financial management:
 Investment (Capital Budgeting, Pension Management)
 Financing (Commercial Banking and Investment Banking relationships, Investor
relations, Dividend disbursement).
 Asset Management (Cash Management and Credit Management).

B) Finance & Accounting Operations.

Finance and Accounting operations are performed by finance/accounts deportment. The

main functions of finance /accounts/audit deportment are as follows:

 maintain record of accounts according to accounting principles

 Preparation of comparative statements
 Funds management
 Analysis of accounts
 Checking, verifying, examining and scheduling the invoice of work done as per
term and condition
 Responsible for budget preparation, cash flow, financial statement, local and
foreign payments
 Sorting and arrange the daily voucher

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  Binding of daily vouchers on weekly
 To keep the vouchers in safe custody
 To prepared the daily branch expense voucher and maintain the expense register
 Maintaining stock of printed and petty stationary
 General administration including repair and maintainace of the branch and
equipment, utility bills, customer’s entertainment
 Timely and accurate checking of activity
 Audit compliance and minimization of Audit error
 Proper record maintain
 Preparation of daily, weekly, monthly and annual statement
 WHT (Withholding Tax) deduction, submission of WHT challans in SBP,
submission of WHT Returns and Issuance of WHT challans to vendors.
 Monthly account closing

c) The role of financial manager:

The role of financial manager is to achieve goal and objective and what strategies he
applies. Financial manager also involve in financing decision in establishing/maintaining
relationships with other financial institutions and customers in terms of accounts, cash
management and credit management etc.
The main responsibility of Financial Manager is to evaluate the books/accounts
and take decisions with respect to the banks funds and finances. They have to developed
relations with various types of customers in order to ensure that they give maximum
deposits at cheaper rates. If they required working capital line, they must not make use of
a long term loan. The same shell have and adverse effect on bank balance sheet.
They have to make to sure that banks debt to equity remains within the required
SBP parameters. They also have to contact with their accounts department to make
decision based on bank position. I.e. advances, deposits, trade debts, cash cycle, Cash
flow, trade credits etc.
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 In short they have to issuer that maximum profit is being paid on their deposits,
and least priced funds are available to the bank in case of need.
Financial Manager stands between the firm’s operations and financial markets. Financial
manager must have considered the interest rates on the load and concluded that it was not
too high. Achievement of goals and objective based on financial manager how he can get
them and what activities he applies. Financial manager also involve in financing decision.
At Bank Alfalah Limited, Branch manager perform all said roles, he also visits
the different corporate clients periodically to further negotiate business term with them.

d). Use of electronic data in decision-making.

Now this is the age of information technology. So the banking system is also become
computerized. For this purpose Bank Alfalah used software which name is:
Uni-Bank Software
Its working is so simple and it is user interfering software.
It is very important for decision making and it is helpful in the following ways:
Used for entering the daily Deposits, Advances, Markup, A/R and Revenue.
Used for preparing the daily Reports.
Used for calculate the Profitability of the Bank.
So on the bases of these reports Manager decide the future planning for the Bank Alfalah.

e). Source of funds

There are many sources of fund, in Bank Alfala Limited. Time deposits, .Fixed deposits,
Bonds, Saving deposits, Certificate of deposits, Loan from financial institution, Loan
from SBP, borrowings and Bank also raise funds through issuing shares and by earning
markup on loans. The last five years data is as follows.

Source of Fund 2004 2005 2006 2007 2008

Deposits from customers 129,714 222,345 239,509 273,173 300,732

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Share capital 2,500 3,000 5,000 6,500 7,995
Borrowings 12,723 5,844 8,394 21,230 13,690
Sub-ordinate Loans 1,899 3,223 3,220 3,220 2,571

f) Generation of Funds:

There are many ways of generations of funds, Bank generates its funds by taking money
from People in the shape of deposits, and other source of generation of funds is through
Advances, investment, Credits, Financing, Leasing and Loaning to the people industries
and other banks. Allocation of funds in last five years in as follows.

Generation of funds 2004 2005 2006 2007 2008

Share capital 2,500 3,000 5,000 6,500 7,995
Lading from other banks 3,194 9,716 12,735 18,380 21,584
Landing From Financial Institutions -- 27050 12456 3452 3315
Markup Earnings 5,620 12,246 21,191 25,783 31,046
Non-markup Earnings 4,333 6,907 8,483 12,824 12,417

g) Allocation of funds.

Bank Alfalah allocates the funds in the following fields. Fund that are being raised are
first of all allocated to Administrated expense includes management salaries. Taking
money from the serves and lending it to the investors is the most prominent job of the
bank.
 Administrative expense
 Capital investment
 Payment of Long Term Financing
 Markup on Deposits

h) Mobilization of funds.

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 Bank Alfalah mobilizes the funds through the following activities.
 Loans and advances to trade, commerce and industry.
 Financing imports and exports trade.
 Purchase and discounting of bills.
 Investment in Government and other stock-exchange securities.

iii) Critical analysis of the theoretical concepts relating to practical

experiences.
By using different tools we are able to critical analyze the financial strength and
weakness of Bank Alfalah Limited, through which we are able to know clearly
about banks financial strength and weakness.
Balance sheet for previous five years data is given below:
a) Balance Sheet
Balance sheet
(Rupees in,000)
ASSETS 2008 2007 2006 2005 2004
Cash and balance with
treasury banks 32,687,335 29,436,378 27,859,360 24,798,070 19,708,518
Balance with other banks 21,581,043 18,380,738 12,731,952 9,713,369 3,183,957
lendingtoFinancialInstitution
s 3,315,500 3,452,059 12,456,653 27,050,493 -
Investments 75,973,238 88,491,564 56,502,210 57,416,255 35,503,196
192,671,16 171,198,99 149,999,32 118,864,01
Advances 9 2 5 0 88,931,400
other assets 8,989,186 6,013,097 5,633,051 3,851,529 3,226,959
fixed assets 13,773,293 11,922,324 10,502,990 6,620,067 4,280,504
348,990,76 328,895,15 275,685,54 248,313,79
Total assets 4 2 1 3 154,834,534
Liabilities & Owners
Equity
Bills payable 3,452,031 4,138,243 3,091,135 3,733,124 2,233,671
Borrowings 13,690,222 21,230,697 8,394,130 5,844,389 12,723,830
300,732,85 273,173,84 239,509,39 222,345,06
Deposits & other accounts 8 1 1 7 129,714,891
Sub - ordinate loans 2,571,169 3,220,858 3,222,106 3,223,355 1,899,480
Deferred tax liabilities 208,465 1,379,809 1,921,338 484,066 275,834

- 56 -
other liabilities 11,291,280 9,531,860 7,305,496 5,219,666 2,725, 344
Share capital 7,995,000 6,500,000 5,000,000 3,000,000 2,500,000
Reserves 3,166,056 2,414,833 2,749,533 1,851,218 1,008,772
Unappropriated profit 3,447,465 4,851,840 2,823,072 1,886,845 860,300
Surplus on revaluation of
assets - net of Tax 2,436,216 2,453,171 1,669,340 726,063 892,412
Total liabilities & Owners 348,990,76 328,895,15 275,685,54 248,313,79
Equity 2 2 1 3 152,109,190

b) PROFIT AND LOSS ACCOUNT

There is Profit & Loss Account for previous five years data is given
below:

Bank Alfalah Ltd.

Comparative Profit & Loss
For the years ended 31st Dec2008,2007,2006,2005, & 2004
(Rupees In ,000)
2004 2005 2006 2007 2008
5,620,20
Mark-up/return/interest earned 3 12,246,811 21,191,470 25,783,871 31,046,583
Mark-up/return/interest 2,434,45
expensed 9 7,204,992 15,232,886 16,620,963 20,331,194
3,185,74
Net mark-up/interest income 4 5,041,819 5,958,584 9,162,908 10,715,389
Provision against loans &
advances -370,208 -402,298 -697,690 -2,370,867 2,035,997
Provision for diminution in the
Value of investments -2,165 23,163 - - 1,479,062
Bad debts written off directly
-351 -512 -1,537 -5,844 -28,298
-372,724 -379,647 -699,227 -2,376,711 -3,543,357
Net mark-up/interest income 2,813,02
after 0 4,662,172 5,259,357 6,786,197 7,172,032

Non mark-up/interest income

Fee, commission & brokerage
income 675,868 1,158,747 1,804,998 2,429,599 2,539,321
Dividend income 52,539 52,014 37,393 64,722 300,943
Income from dealing in foreign
currencies 218,820 290,091 386,997 474,510 914,845
Gain on sale of securities 180,751 2,053,192 424,220
Unrealized loss on revaluation -27,599 -14,929 -181,571

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of
Investments classified as held
for
trading
Other income 572,822 744,518 842,099 1,031,372 1,247,669
Total non mark-up/interest 1,520,04
income 9 2,245,370 3,224,639 6,038,466 5,245,427
4,333,06
9 6,907,542 8,483,996 12,824,663 12,417,459
Non mark-up/interest expenses
2,677,63
Administrative expenses 5 4,313,023 5,874,745 8,272,587 10,471,339
Other provisions/write off - 10,125 - 6,959 28,582
Other charges 1,700 21,104 43,306 9,565 122,758
Total non mark-up/interest 2,679,33
expenses 5 4,344,252 5,918,051 8,289,111 10,662,739
1,653,73
4 2,563,290 2,565,945 4,535,552 1,794,320
Extra-ordinary/unusual items - - - - -
1,653,73
Profit before taxation 4 2,563,290 2,565,945 4,535,552 1,794,320
Taxation
Current 586,159 592,635 476,226 1,726,810 1,730,051
Deffered -3,663 267,524 427,902 -321,487 -1,014,835
Prior year -30,000 -7,000 -100,874 - -
Deffered (prior year) 9,249 8,037 - - -
561,745 861,196 803,254 1,405,323 493,491
1,091,98
Profit after taxation 9 1,702,094 1,762,691 3,130,229 1,301,301

c) Financial Ratio Analysis of Bank Alfalah Limited

Information from balance sheet and income statement is typically supplemented by

financial ratio analysis. The commonly used financial ratios are of essentially two kinds.
The first kind summarized some aspect of the firm’s “financial condition” at a point in
time – a point at which a balance sheet has been prepared. We call these balance sheet
ratios, quite appropriately, because both the numerator and denominator in each ratio
come directly from the balance sheet. The second kind of ratio summarizes sum aspect of
a firm’s permanent over a period of time, usually a year. These ratios are called either
income statement or income statement/balance sheet ratios.

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 Current Assets
Current Ratio = -------------------------
Current Liabilities

This ratio measures overall bank financial position it known as current ratio in this ratio
current assets(cash, Bank, A/R , N/R, B/R & Inventory) divided by current liabilities
(A/Payable, N/P, B/P Short term Loans).

No. of Years 2004 2005 2006 2007 2008

Currant ratio (Current
Assts/Current liabilities ) 1.01 0.99 1.01 1.03 2.61

it shows s firm’s ability to cover its current liabilities with its current assets. A currant
ratio of 2.0 is occasionally cited as acceptable, but a value’s acceptability depends on the
industry in which the firm operates. Current ratio of 1.0 would be considered acceptable
for a utility but might be unacceptable for a manufacturing firm. The more predictable a
firm’s cash flows, the lower the acceptable current ratio. Current ratio of bank has been
successfully stable and it is lower.

Net Working Capital

Ratios 2004 2005 2006 2007 2008

Net Working Capital (Current Assets/Current (Rupees 981 -607 1,740 7,898 8,658
Liabilities in,000)

It is commonly used to measure a firm’s overall liquidity. Bank Alfalah Limited Shows
Sufficient amount of working capital in all the years of its performance except 2005. It
has increased from Rs.981 Millions in the year 2004 to Rs.8, 658 million in the year
2008. This increasing trend has a very good effect on bank.

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 Cash + Balance with other banks
Cash Ratio = ----------------------------------
Current Liabilities
Ratios 2004 2005 2006 2007 2008
Cash Ratio (Cash + Balance with other Times 0.15 0.14 0.15 0.15 0.17
banks/current liabilities)

Cash of the Bank Alfalah Limited has increased to 0.17 in the year 2008 from 0.15 in the
year 2004.this shows that cash in hand increases. Therefore, the profit of the bank also
increased.

Total liabilities
Leverage Ratio = ------------------
Total assets

Ratios 2004 2005 2006 2007 2008

Leverage Ratio (Total % 95.1 95.1 95.6 96.9 96.6
Liabilities/Total Assets)

Leverage Ratio refers to the use of debt in the hope that the borrower can generate
earning exceed the cost of debt, thereby increasing the potential return to the business’s
owners 9stockholders).

Profit before tax

Profit before tax ratio = ------------------------------
Gross murk up income

This ratio measures profit before tax divided by gross mark up income multiplies
percentage. This ratio known as profit before tax ratio.

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No. of Years 2004 2005 2006 2007 2008
Profit before tax Ratio
%
(PBT/Gross Mark up income) 29.43 20.93 12.11 17.59 5.78

Profit before tax ratio measures the percentage of each sale Dollars remaining after all
costs and expenses other than tax are deducted. It represented the pure profits earned on
each sales dollar. A high operating profit margin is preferred. Profit before tax ratio of the
bank has been decreased as compared to 2003. It is 21.29% in 2004. This has decreased
due to increase in markup on deposits.

Net mark up income

(e) Gross spread ratio = -------------------------------
Gross mark up income

This ratio measures overall income ratio because net mark up income divided by gross
mark up income. The ratio is known as gross spread ratio.

Ratios 2004 2005 2006 2007 2008

Gross spread Ratio (Net mark up % 56.69 41.17 28.12 35.54 34.51
Income/ Gross mark up income

The grass spread ratio measures the percentage of each sales Dollar remaining after the
bank has paid for its deposits. The higher the gross spread ratio, the better and the lower
the relative cost of deposits. Gross spread ratio of the bank has decreased 35.54% in the
year 2007, which was 49.71% in the year 2003.

Profit after Tax

Profit after tax ratio = ------------------

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 Gross Markup

Ratios 2004 2005 2006 2007 2008

Profit After tax (Profit after % 19.43 13.90 8.32 12.14 14.78
tax/Gross Markup Income

Profit before tax ratio measures the percentage of each sale Dollars remaining after all
costs and expenses, including taxes, have been deducted. Higher the firm’s net profit
margin, the better. The net profit margin in commonly cited measures of the firm’s
success with respect to earnings.net profit margin of the bank has decreased to 14.78% in
the year 2008 against 19.43% in the year 2004. This has just reduced due to the high
competition and high markup on deposits.

Net profit after tax

(g) Return on Average Assets (ROA) = --------------------------------
Total assets

This ratio measures overall effectiveness in generating profits with available assets by
earning power of invested capital. This ratio is also known as Return on Assts (ROA)

No. of Years 2004 2005 2006 2007 2008

Return on Assets 0.86 0.84 0.67 1.04 0.38
The relationship for the net sales to total assets is known as the total asset turnover, or
capital turnover ratio. Due to this ratio the fewer assets used to achieve a given level of
sale, the more efficiently management is using the bank’s total assets. If we look towards
graph it is clear that this ratio is increased in 2008
Total Income
Income/Expense Ratio = ----------------------
Operating Expense

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This is measured that who income is available after less expense time ratio is known as
Income or expense ratio.

No. of Years 2004 2005 2006 2007 2008

Income/Expense Ratio 2.67 3.34 4.13 3.84 3.42

The income/expense ratio shows the margin for profit. Income/expense ratio has
increased 4045 times in 2008 as compared to 2.67 times in 2004, which shows that bank
has good margin for profit.

Net profit after tax

Return on Average Equity (ROE) = -----------------------------
Shareholders’ equity

This ratio measures overall effectiveness in generating profits with available equities by
earning power of invested capital. This ratio is also known as Return on Equity (ROE).

No. of Years 2004 2005 2006 2007 2008

Return on Equity 26.89 30.65 20.37 25.72 9.17

Bankers used this ratio to measure the efficiency of assets to generate profits. But the
graph show that this ratio is becomes better in the 2008 as compare to the 2007 ratio.
Return on equity shows that what will be return for the stockholders. As we can see that
the ratio has increased 26.89% in2004 to 27.85% in 2008.

Advances
Advances/Deposits Ratio = --------------------------------

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 Deposits and other accounts

This ratio measures overall check bank provision in this ratio advances divided by
deposits and other accounts multiply by percent is called advances/deposits ratio

Ratios 2004 2005 2006 2007 2008

Advances/Deposits Ratio 68.56 53.76 62.63 62.67 64.07

This ratio shows that how the bank is using its deposits in advance for earning profit.
Advances/deposits ratio decreased by 64.07% in 2008 as compared to 68.56% in 2004.
This is a negative sing, due to less advances banks profit are also decreased

Total Debt
Debt to Total Asset = ----------------
Total Assets

The Debt-to-total-assets ratio is derived by dividing a firm’s total debt by its total assets.
It shows the relative extent to which the firm is using borrowed money; we may use
several different debt ratios. The debt-to-total-assets ratio is computed by simply dividing
the total debt of the firm (including current liabilities) by its shareholders’ equity:

No. of Years 2004 2005 2006 2007 2008

Debt to Total Asset 3.40 3.00 4.44 4.93 4.90

Dividing a firm’s total debt by its total assets derives the debt-to-total asset ratio. This
ratio is showing the percentage of the Alfalah bank’s assets that supported by debt
financing. The higher the ratio, the more leveraged the organization. During the last five
year this ratio is not so much differed

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 Earnings before interest and taxes
Interest Coverage Ratio: -----------------------------------
Interest expense

This ratio is simply the ratio of earnings before interest and taxes for a particular
reporting period to amount of interest charges for the period; that is

No. of Years 2004 2005 2006 2007 2008

Interest coverage ratio 230.86 169.97 139.12 101.55 101.52

Horizontal Analysis

An analysis of percentage financial statements where all balance sheet or income

statement figures for abase year equal 100% and subsequent financial statement items are
expressed as percentages of their values in the base year.

d) Horizontal Analysis of Balance Sheet:

Bank Alfalah Limited

Horizontal Analysis – Balance Sheet

Assets 2004 2005 2006 2007 2008
Cash & Balance with Treasury 100% 125.52 141.36 149.36 165.85
Balance with other banks 100% 305.07 399.87 577.29 677.81
Investments 100% 161.75 159.15 249.25 213.99
Advances 100% 133.66 168.67 192.51 216.65
Operating Fixed Assets 100% 154.66 245.37 278.53 321.77
Other Assets 100% 119.35 174.56 186.34 278.57
Total Assets 100% 160.37 178.05 212.42 225.40

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Liabilities & Shareholder's Equity
Bill payable 100% 167.13 138.39 185.27 154.55
Borrowings 100% 45.93 65.97 166.86 107.60
Deposits & Other Accounts 100% 171.41 184.64 210.60 231.83
Sub-ordinated Loans 100% 169.70 169.63 169.57 135.38
Other Liabilities 100% 191.52 268.06 349.75 414.31
Deferred Tax Liabilities 100% 175.49 696.56 500.23 75.58
Share Capitals 100% 120.00 200.00 260.00 319.8
Reserves 100% 233.07 272.56 239.38 313.85
Unappropriated Profit 100% 161.20 328.15 563.97 400.72
Surplus on revaluation of assets 100% 81.36 187.05 274.89 272.99
Total Liabilities & Shareholder Equity100% 160.37 178.05 212.42 225.40

Horizontal analysis in balance sheet long-term loans have been increased in 2008 as
compare to 2003 that’s mean the bank will have to pay higher fixed cost in 2009 and
future coming years. The fixed asset has increased also in2008 as compared to 2004. The
overall business level of the bank increased in the year 2008.

e) Horizontal Analysis of Profit & Loss.

Bank Alfalah Ltd.

Horizontal Analysis – Profit & Loss
2004 2005 2006 2007 2008
Mark-up/return/interest earned 100 217.90 377.05 458.77 552.41
Mark-up/return/interest expenses 100 295.95 625.71 682.73 835.14
Net mark-up/interest income 100 158.26 187.04 287.62 336.35
Provision against loans & advances 100 108.67 188.46 640.41 549.96
Provision for diminution in the Value of 1069.8
investments 100 8 ---- ---- 68316.95
Bad debts written off directly 100 145.87 437.89 1664.96 8062.11
100 101.86 187.59 637.66 950.67
Net mark-up/interest income after
provisions 100 165.74 186.96 241.24 254.96

Non mark-up/interest income

Fee, commission & brokerage income 100 171.45 267.06 359.48 375.71
Dividend income 100 99.00 71.17 123.19 572.79
Income from dealing in foreign currencies 100 132.57 176.86 216.85 418.08

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Gain on sale of securities
Unrealized loss on revaluation of
Investments classified as held for trading
Other income 100 129.97 147.01 180.05 217.81
Total non mark-up/interest income 100 147.72 212.14 397.25 345.08
100 159.41 195.79 295.97 286.57
Non mark-up/interest expenses
Administrative expenses 100 161.08 219.40 308.95 391.07
Other provisions/write off 100
Other charges 100 124.41 2547.41 562.65 7221.06
Total non mark-up/interest expenses 100 162.14 220.88 309.37 397.96
100 155.00 155.16 274.26 108.50
Extra-ordinary/unusual items
Profit before taxation 100 155.00 155.16 274.26 108.50
Taxation
Current 100 101.10 81.25 294.59 295.15
- -
7303.4 11681.7
Deffered 100 1 4 8776.62 27705.02
Prior year 100 23.33 336.25 -- --
Deffered (prior year) 100 86.89 -- -- --
100 153.31 142.99 250.17 87.85
Profit after taxation 100 155.87 161.42 286.65 119.17

• Comments
An analysis of profit & Loss account with the 2004 as a base year we come to know
that there is an increase in the markup/interest earned but the markup/interest
expensed is increased by 735% which is greater than the increase in interest/markup
earned by 236%. The administrative expanses have also increased. The operating
expense has increased by 8.05%. Net profit has also increased by 19.17%.

f) Vertical Analysis:

An analysis of percentage financial statements where all balance sheet items are divided
by total assets and all income statement items are divided by net sales or revenues.

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Bank Alfalah Limited

Vertical Analysis – Balance Sheet

2004 2005 2006 2007 2008
Assets
Cash & Balance with Treasury 12.7 9.98 10.1 8.9 9.4
Balance with other banks 2.1 3.91 4.6 5.6 6.2
Lending with financial institutions 0.00 10.89 4.5 1.1 0.9
Investments 22.9 23.13 20.5 26.9 21.8
Advances 57.4 47.87 54.4 52.1 55.2
Operating Fixed Assets 2.1 2.67 3.8 3.6 3.9
Other Assets 2.8 1.55 2.1 1.8 2.6
Total Assets 100 100 100 100 100
Liabilities & Shareholder's Equity
Bill payable 1.4 1.50 1.1 1.3 0.9
Borrowings 8.2 2.35 3.0 6.5 3.9
Deposits & Other Accounts 83.8 89.55 86.9 83.1 86.2
Sub-odinated Loans 1.2 1.30 1.2 0.9 0.7
Liabilities against Finance Lease 0.0 0.0 0.0 0.4 0.1
Deferred Tax Liabilities 1.8 0.19 0.7 2.9 3.3
Other Liabilities 0.2 2.10 2.6 2.0 2.3
Share Capitals 1.6 1.21 1.8 0.7 0.9
Reserves 0.7 0.95 1.0 1.5 1.0
Unappreciated Profit 0.6 0.56 1.1 0.7 0.7
Surplus on revolution of Assets 0.5 0.29 0.6 0.7 0.7
Total Liability & Shareholder's Equity 100 100 100 100 100

Analyze the assets side of the balance sheet, the operating fixed assets have increased
from 2.7% to 3.95% in the year 2008. The operating fixed assets are more productive as
compared to curt assts so it is better for the bank bur on the other hand current assets have
decreased from 97.24% to 96.05% in the year 2008. The borrowing has reduced from
8.22% to 3.92% and current liabilities have increased from 82.42% to 88.6%, whereas
share capital and reserves has increased from 3.4% to 4.89% in the year 2008.

g) Vertical Analysis of Profit & Loss:

Bank Alfalah Ltd.

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Vertical Analysis – Profit & Loss
2004 2005 2006 2007 2008
Mark-up/return/interest earned
43.32 58.83 64.46
Mark-up/return/interest expenses % % 71.88% % 70.65%
56.68 41.17 35.54
Net mark-up/interest income % % 28.12% % 38.56%
Provision against loans & advances -6.59% -3.28% -3.29% -9.20% 2.02%
Provision for diminution in the Value of
investments -0.04% 0.19% 0.00% 0.00% 0.43%
Bad debts written off directly -0.01% 0.00% -0.01% -0.02% -0.07%
-
-6.63% -3.10% -3.30% -9.22% 11.45%
Net mark-up/interest income after 50.05 38.07 26.32
provisions % % 24.82% % 28.23%

Non mark-up/interest income

12.03
Fee, commission & brokerage income % 9.46% 8.52% 9.42% 10.45%
Dividend income 0.93% 0.42% 0.18% 0.25% 2.45%
Income from dealing in foreign currencies 3.89% 2.37% 1.83% 1.84% 3.68%
Gain on sale of securities 0.00% 0.00% 0.85% 7.96% 1.86%
Unrealized loss on revaluation of -
Investments classified as held for trading 0.00% 0.00% -0.13% -0.06% 0.005%
10.19
Other income % 6.08% 3.97% 4.00% 4.85%
27.05 18.33 23.42
Total non mark-up/interest income % % 15.22% % 22.21%
77.10 56.40 49.74
% % 40.03% % 49.12%
Non mark-up/interest expenses
47.64 35.22 32.08
Administrative expenses % % 27.72% % 11.35%
Other provisions/write off 0.00% 0.08% 0.00% 1.03% 1.14%
Other charges 0.03% .17% 0.20% 0.04% 1.80%
47.67 35.47 32.15
Total non mark-up/interest expenses % % 27.93% % 35.34%
29.42 20.93 17.59
% % 12.11% % 29.98%
Extra-ordinary/unusual items 0.00% 0.00% 0.00% 0.00% 0.00%
29.42 20.93 17.59
Profit before taxation % % 12.11% % 29.68%
Taxation

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 10.43
Current % 4.84% 2.25% 6.70% 6.81%
-
Deffered -0.07% 2.18% 2.02% -1.25% 10.21%
Prior year -0.53% -0.06% -0.48% 0.00%
Deffered (prior year) 0.16% 0.07% 0.00% 0.00%
10.00
% 7.03% 3.79% 5.45% 3.53%
19.43 13.90 12.14
Profit after taxation % % 8.32% % 20.25%

An analysis of percentage financial statements where all balance sheet items are divided
by total assets and all income statement items are divided by net sales of revenues. In the
balance sheet the ratio of the advances and the deposits are high which is good. Deposits
are increase in 2005 due to high interest rates. Vertical analysis of Profit & Loss account,
interest markup earned ratio has increased from 43.32% to 40.65%, GP ratio has
decreased from 56.68% to 36.56% and the administrative expenses has also decreased
from 47.64& to 11.35%. The operating profit has increased from 29.42% to 29.68% in
2008. Net profit has reduced from 19.43% to 20.25%.

h) Organizational analysis with reference to the industries listed on the

stock exchange.
In Pakistan Banking sector plays a vital role in stock exchange. Banking, Cement,
textiles, Oil & Gas sector are the leading industries in Pakistan’s stock exchange.
Following main industries are prevailing in stock exchange.
1. Banks
2. Cement
3. Oil & Gas Marketing Companies
4. Automobiles
5. Insurance
6. Fertilizer
7. Cement

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 8. Transport & Communication
9. Sugar & Allied
10. Textiles
11. Refinery, Power Gen & Distribution
12. Chemicals & Forma
13. Commission traders
14. Others
15. Banking sector is the most active sector of stock exchange in respect of share
volume and BAL shares trading are maximum as compared to other banks and
also there is stability in its shares price.

I). Future vision of the management

The outlook for the rest of the year 2008remains challenging and is dependent on the
success of the Government’s economic policies and n improvement in the investment
climate. The bank’s commitment and endeavor to excel in rendering contemporary
banking services along with acceleration of business mobilization will, Inshallah, further
enhance the portfolio of its business, and the profitability, in the ensuing half-year.
The Future vision of the management of the Bank Alfalah Limited in Muzaffargarh is
starting the Mobile ATM services in the Muzaffargarh. This service is already provided
in the Karachi Lahore and Islamabad.

iv) Weaknesses:

 BAL has lesser number of branches as compared to many other bank

branches.

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  The human resource department is not performing the function of
selection and recruitment very effectively. Selection process is not on
merit due to which competent persons cannot be selected.
 Bank is not introducing new products and new saying schemes. Bank
should boost the product development and increase the range of facilities
offered for customers.
 Bank is weak in its credit management. Bank should lend to very sound
parties and increase its payment rate.
 In Bank Alfalah Employee Turnover is 13%
 Mixed Culture
 Staff is lesser.
 New setup
 Inflationary pressure
 Long and fussy documentation
 Error occurs during the use of Bank smart software.
 Burden of work on employees
 Global issues like terrorism war.

v) Conclusion.
Bank Alfalah Limited is a leading and emerging bank of Pakistan and made a significant
progress. Bank Alfalah Limited views specialization and service excellence as the corner
stone of its strategy. The people of bank innovation, creativity, reliability, customized
services and their executions are the key ingredient for their future growth. Based on this
approach, their treasury Division and the Structured Finance Unit have been geared to
provide specialized services to the corporate customers. Revenues from these activities
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 have started yielding dividends and they expect significant growth in these areas in the
coming years. While building on their in-depth familiarity with their customer’s needs
and anticipated development in the banking industries, the Retail and Corporate areas of
their operations will continue to provide a strong and stable base to the business of the
bank. They are aware that they have stepped into the 21st century and they must meet its
challenges by acquiring the highest level of Technology. They will thus be accelerating
their enable them distribute their product and services through most efficient and high-
tech means. They say that they will invest in the modern tools and substantial allocation
of resources will be made to achieve this objective during the current year. Their focus
would be to constantly seek out growth opportunities through increased quality assets and
by offering a wider range of products and services to their esteemed customers. There are
significant growth opportunities for Bank Alfalah Limited and they are confident in their
ability to grasp them. They are committed to enhancing the shareholder’s value and look
forward with greater optimism to a prosperous future for Bank Alfalah Limited.

Vii) Recommendations.
Based on my six weeks stay with Bank Alfalah Limited, I want to give some suggestions
for improvement in its operations as under:
 Misdistribution of work:
In Bank Alfalah, there is misdistribution of work; some people are over burdened
with the work. So I suggest that there should be fair distribution of work in all the
departments.
Participative management:
Participative management concept should be adopted, where ideas from the
employees should also be taken, not only for developing products but also on service,
efficiency, employee morale etc. in order to improve them.

 Fax Machines and Photocopying Machine:

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 The number of Fax machines and photocopying machine in the bank are also less
than they are needed. For photocopying one has to go upstairs. So there should be
more machines and also their placement should be at the right place.

 Training programs
BAL should introduce more training programs for their employees. It will help less
educated and less experienced staff to grow and be a valuable part of the bank.

viii) References.
1. Officials of Accounting, Finance and MIS departments of Bank Alfalah Ltd.
2. Manuals of Rules and Regulations.
3. Personal findings during my internship
4. Brochures and journals of Bank Alfalah Ltd.
5. Annual Reports of Bank Alfalah Ltd.
6. Banking Act, 1962.
7. Officials of Internal Audit department of Bank Alfalah Ltd.
8. Books:
1) - Financial Management (Author: Van Horne).
2)-Practice and Law of Banking in Pakistan (Dr. Asrar H.Siddiqi).
9. Web Site of Bank Alfalah Ltd.

IX) ANNEXES
Organizational Structure of Bank Alfalah Limited

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 BOARD OF DIRECTORS

CHIEF EXECUTIVE OFFICER

CHAIRAM

Executive Executive Executive Executive Executive Executive

incharge incharge incharge incharge incharge incharge
Strategic Human IT Credit System &
planning &
international
& treasury Resource Divisions Divisions Operation
global Division Divisions
Marketing Divisions

Executive Executive Executive Executive

Executive Executive
Incharge Incharge Incharge Incharge
Incharge Incharge
Establishment Business Legal Audit &
Credit Finance
Administratio Development Affairs Inspection
Monitoring Divisions
n
Divisions
Executive
Executive
Incharge Executive Incharge Executive
CoBanking Incharge New Incharge
sme Islamic Product & Cards
financing Banking
Services Divisions
House Divisions
Divisions
Loans

AREA MANAGER NORHT

AREA MANAGER SOUTH

BRANCH MANAGERS

Struture of Finance Deportment Organogram

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 BOARD OF DIRECTORS

PRESIDENT
(Chief Executive Officer)

VICE PRESIDENT Finance VICE PRESIDENT

VICE PRESIDENT (Chief Executive Officer) Marketing
Operations

TREASURES CONTROLLER
• Capital • Cost
budgeting accounting
• Cash • Cost
management management
• Commercial • Data
banking and processing
investment • General
banking ledger
relationships (Payroll,
• Credit accounts
management receivable/paya
• Dividend ble)
disbursement • Internal
• Financial control
analysis and • Preparing
planning financial
• Investor statements
relations • Preparing
• Pensions
management
• Insurance/risk
management
• Tax analysis
and planning

Note:
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In small firms the treasurer and controller functions may be combined into one position
due to common activities.

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