Beruflich Dokumente
Kultur Dokumente
SUBMITTED BY: MARYAM MUSTAFA MEMON BBA-III INSTITUTE OF BUSINESS ADMINISTRATION, KARACHI
FOR THE DURATION OF: SIX WEEKS (12TH JULY 2011 -20th AUGUST 2011)
EXECUTIVE SUMMARY
In todays fast paced business environment, banks operating in retail space require a change resilient vertically integrated value chain for delivering the most competitive products and services. This need is redefining the boundaries of a banks value chain creating greater thrust for this value add, right from the lowest end of the delivery channels. BAL-IBD has entered into a Shariah Consultancy agreement with the Centre of Islamic Economics, Karachi, which is a noted and well-known seat of learning for Shariah scholars and a prominent institution dealing in Shariah Advisory services. Besides assisting in advancement of the Divisions product portfolio, the Centre also stamps approval of the Divisions conduct of business following periodic audits. These audits are in addition to those carried out by the State Bank of Pakistan and the internal audits undertaken by the Division itself. Bank Alfalahs Islamic Banking Division (BAL-IBD) started operations in 2003 and at its yearend reflected a modest capital base of Rs 100 million and deposits totalling Rs 113.7m. By following yearend, BAL-IBDs equity had risen more than 4 times to Rs 569m and the balance sheet footing had swelled to Rs 7,799 million. Deposit size had grown from less than Rs 114m to over Rs 7,229 million. The pace of frenetic, triple digit growth was continued over the next twelve months as equity more than doubled to Rs 1,278 million from Rs 569m. Assets also recorded a more than 100% growth, climbing to Rs 15,634 million from Rs 7,799 million. Deposits alone failed to double rising to Rs 12,476m from Rs 6,548 million yet managing a healthy 90% increase. Financial results as of June 30, 2006, reflect growth but at more modest pace. Total balance sheet size fell shy of Rs 18 billion Rs 17,970m vs. Rs 15,634m and deposits climbed to Rs 14,111 million, rising Rs 1,635 million in six months period. Income for the 6-month period was Rs 111.23 million. 1
MISSION STATEMENT
To practice Islamic banking in its desired spirit that unfolds its true economic potential resulting in prosperity to our customers and commercial rewards to our sponsors and our employees. 2
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http://bankalfalah.com/islamic/index.asp http://bankalfalah.com/islamic/about_islamic_banking.asp
ACKNOWLEDGEMENT
I have done my internship at bank alfalah, Islamic banking (sadar, Hyderabad branch) from 12th august 2011 to 20th august 2011. I gained a lot of knowledge as dealing with clients in corporate world under the kind supervision of the branch manager and employees. During the internship I visited different cells of the bank and was thoroughly briefed about the procedure and working by cordial senior staff there. This report is based on my experience and knowledge gained in six weeks duration. I would like to present a token of thanks for the staff members of bank alfalah who were very cooperative and helped me at each and every step of completion of this report. I was offered to handle delicate operations even after the consideration of the secrecy of the bank operations. I present my special thanks to Mr. Saeed Anwar (Branch Manager), Ms. Afsheen sheikh and Mr. Akhtar khowaja (CRO, Finance and Accounts), Mr. Zeeshan, Mr.Adnan Ahmed and Mr. Farman Ali Qureshi (Cash Department), Ms. Erum Memon (Human Resource Department) and lastly Mr. Faisal Qureshi (Trade Fianc) along with all the other helpers and staff members.
State Banks Shariah Board Approves Essentials and Model Agreements for Islamic Modes of Financing Procedure for Submitting Claims with SBP In Respect of Unclaimed Deposits Surrendered By Banks/Dfis. Banking Sector Supervision in Pakistan Micro Finance Small Medium Enterprises (SMEs) Minimum Capital Requirements for Banks Remittance Facilities in Pakistan Opening of Foreign Currency Accounts with Banks in Pakistan under new scheme. Handbook of Corporate Governance Guidelines on Risk Management
http://www.sbp.org.pk/
http://www.nift.com.pk/
MUARBAHAH
MUSHARAKAH
Joint venture
IJARAH
WAKALAH
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Agency
MUDARABAH
INVESTMENT BY CUSTOMER (DEPOSIT)
LOSS
IJARAH
SALE OF THE ASSET TO THE BANK
VENDOR
ISLAMIC BANK
CUSTOMER
OPERATIONAL
ADMINISTRATION
1. CASH DEPARTMENT
GENERAL ACCOUNTING
Bank mainly uses four major accounts ACCOUNT TYPE DEBIT EFFECT CREDIT EFFECT ASSETS Increase Decrease LIABILITY Decrease Increase INCOME Decrease* Increase EXPENSE Increase Decrease* *the debit of income and credit of expense requires special approval from higher authorities. Debit of income is more detrimental than credit of expense because it leads to reduction of profits at closing. At the start of the say the bank transfers money from safe vaults to the teller or cashiers account. As the cash reduces from the vault so it is credited and the teller account is debited. The amount in the teller account is the used for the respective days transactions i.e. deposits and withdrawal. The teller account if of asset nature and the customers account is a liability on the bank. At the end of the day the teller should have nil balance anyhow and should not either exceed or be short. This process is repeated fro every day. However if the money exceeds 10 million then it is transferred to the banks account in state bank of Pakistan which acts as an insurance company for the bank. The bank generally manages a customer account and general ledger accounts. The customer account is a liability on bank. There are two cases: 1. Deposit: in this case the customer is lending money to bank hence the cash or asset of bank is debited while the liability in terms of money increases on bank thus the customer account is credited. 2. Withdrawal: in this case there is a decrease in cash hence cash or asset is credited and as the bank pays some amount to customers so there is a decrease in overall liability thus the respective customer account is debited. *the bank performs one of the above activities i.e. the customer account on front end while the cash related activity is done automatically. However the customer account is identified by an account I.D generated at the time of account opening.
ACCOUNT ID:
Account I.D is a 14 digit code comprising of 4 parts: 537 BRANC H CODE 036 PRODUCT CODE FOR SAVING ACCOUNT 052819 01
ACCOUNT I.D
18th AUGUST 2011 *This means if the customer wants to open a saving account on his NIC he will be given this I.D. but if the customer wants to open a second account of saving type then all the details of account I.D remain same except the last code changes to (02).
CHECKS
A check is a negotiable instrument that allows the drawer with an account in respective bank, to draw money on demand, under the limit of its account balance only. It starts with writing the name of payee. However there are two possibilities in this case. a. If the check is open check i.e bearer is open (not cancelled) then money is paid to the bearer of the check no matter what is written in payees space. b. If the check is order check i.e bearer is closed then the amount is only paid to whoever is the payee and not to anyone else. Signature by the bearer or payee is taken on the back of the check and is verified against their respective CNICs. The payers signature on the check is verified against signature specimen card of the bank. *the above condition and explanation is for simple checks only. BANK ALFALLAH LIMITED, ISLAMIC BANKING PAY AMOUNT IN WORDS NAME OF PAYER AMOUNT (FIG) OR BEARER, CHECKNO
CROSSED CHECKS: Cross means two parallel lines anywhere on the face of the check. If a check is cross then it means the money can never be paid on the cash counter in this case and is an account to account transfer phenomena. If the check is open then money can be transferred to the account of bearer. However if the check is closed or there is a stamp of account payee only in between the crossed lines then the money can only be transferred to the payees name and not to anyone else. A crossed check with closed bearer looks like this: EITHER ACCOUNT PAYEE ONLY OR PAY OR. OR BEARER.
SPECIAL CROSSING: Special crossing is crossing done by a financial institution only. For example if stamp of BAL is posted in between the parallel lines, it means the money can only be transferred to BAL. This case is possible when customer pays the lease installments to the financial institution so he draws a check on the name of the bank through endorsement or a cloaed check with the institutes name.
18th AUGUST 2011 SCRUTINIZING: This is a process through which any bank verifies whether the check is acceptable or not. It has following principles: 1. 2. 3. 4. 5. 6. 7. The branch and banks name should be checked. It should be observed whether a check is crossed or a simple one. Words and figures should be matched exactly. Payees account should be verified. Signature should be verified by comparing it with SSC. Any post dated check is not honored. It can only be honored on that respective date. Any check within the duration of six months is acceptable by the bank. A check which exceeds the duration of 6 months is termed STALE and is not honored.
TRANSFER TRANSACTIONS:
Cash transaction has been explained at the start of the topic. Now we come to transfer transaction that occurs with a crossed check. In transfer transaction the total debit should always be equal to the total credit and this process is merely theoretical so no change occurs physically in the teller account. In an account transfer both the accounts are of liability nature and simultaneously deposit and withdrawal occurs at the same time. For example if a person A transfers money to person B account. Then As account is debited as withdrawal decreases the liability and Bs account is credited as deposit increases the liability on the bank.
2. CLEARING
Clearing is a process by which banks exchange negotiable instruments drawn on each other within a specific time period. The process of clearing is done through NIFT. The controlling staff of NIFT acts as a medium where all the members of bank sit and clear their claims against each other. Clearing if of three types: 1. Local clearing (48 hours). Further divided in inward and outward clearing. 2. Intercity clearing (3-4 days) 3. Same day clearing (4-5 hours)
1. Payer is of bank A but payee is of bank Alfalah (INWARD CLEARING by bank A) 2. Bank A receives those checks through NIFT at 9a.m. (1 DAY) 3. Inward clearing return (11a.m) Along with system entry each bank has a state bank treasury account where physical money is withdrawn and deposited in to respective bank accounts. For account entry of inward clearing lodgment: Debit: customer account For account entry of inward clearing return: Debit: M/O account credit: customer account credit: M/O account
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18th AUGUST 2011 For account entry of outward clearing lodgment: Debit: M/O account For account entry of outward clearing return: Debit: customer account credit: M/O account credit: customer account
The return may be due to any of the following reasons: 1. Insufficient balance 2. Post dated checks 3. Check not pertaining to the respective bank 4. Stamps not clearly or wrongly affixed. etc The return checks are attached with a reason memo and recorded in a register. The respective customers are called to inform them to collect their respective checks
Clearing process
1. In clearing checks are crossed. Crossing is parallel line on the face of the check with or without anything written between them. 2. Before outward clearing stamp, following days date and payees account credited is fixed on the front and bank side of the check. The inward checks received are checked for the above mentioned things made by other banks. 3. All the checks received for inward clearing should be of same branch and bank which is receiving it. 4. The signature of payee must be checked with SSC when the payee is of that bank. 5. If any institute has received money then stamp of money received should be affixed on the check. 6. Customer account must be credited before launching it for outward clearing.
INTERCITY CLEARING:
Intercity checks are those that are of banks out of the city e.g. Karachi, Lahore etc. For these checks no system entry is made until and unless the check is realized within 3 days. For that duration the stamp placed is payees account will be credited, which means liability will be recorded when realization occurs.
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3. COLLECTION
Collection is a process for those checks that are out of the city where clearing is not availed or NIFT is not present in that city. There are two types of collection i.e. OBC (outward billing collection) and IBC (inward billing collection).
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18th AUGUST 2011 EXAMPLE: In this case the check is sent to BAL Hyderabad by any other branch of BAL in other cities. These checks are then sent for local clearing by BAL Hyderabad to the respective banks. In this case after clearing the checks are dispatched back to BAL branch in other city and all entries by BAL Hyderabad are reversed. The endorsement is confirmed by BAL Hyderabad. As neither the payer nor the payee is belonging to the BAL Hyderabad hence the initial entries are made in general ledgers which are reversed after clearing and money is either sent through IBCA or online in this case.
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4.REMITTANCE
Remittance means transfer of funds from one place to another or one person to another. Four parties are involved: remitter, remittee, issuing bank and paying bank. There are three types of remittance instruments: 1. Pay order 2. Demand draft 3. Call deposit receipt
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CONSUMER FINANCE
BAL provides the facility of car ijarah and home musharaka in the field of consumer financing. Ijarah is the transfer of usufruct of a fixed asset to another person for an agreed period, at an agreed consideration. Under ijarah agreement asset will be given to the customer on a rent for the period agreed at the time of contract.
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CORPORATE FINANCE
Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value. In terms of banking it is done at a short scale for factories and industries, both property and equipment.
TRADE FINANCE
In its simplest form, an exporter requires an importer to prepay for goods shipped. The importer naturally wants to reduce risk by asking the exporter to document that the goods have been shipped. The importers bank assists by providing a letter of credit to the exporter (or the exporter's bank) providing for payment upon presentation of certain documents, such as a bill of lading. The exporter's bank may make a loan to the exporter on the basis of the export contract. In order to continue trade goods needs to be transported from one place to another. There are three ways to do so: 1) BILL OF LADING: A bill of lading is a document issued by a carrier to a shipper, acknowledging that non specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified7. The BL must contain the following information:
Name of the shipping company; Flag of nationality; Shipper's name; Order and notify party; Description of goods; Gross/net/tare weight; and
2) AIRWAY BILL: Air Waybill (AWB) or air consignment note refers to a receipt issued by an international airline for goods and an evidence of the contract of carriage, but it is not a document of title to the goods. Hence, the AWB is non-negotiable. Waybills are non-negotiable documents unlike bills of lading which are negotiable. The words non-negotiable are printed clearly at the top of the air waybill. This means that the air waybill is a contract for transportation only and does not represent (the value of) merchandise mentioned in the box nature and quantity of goods. The ocean bill of lading, if negotiated may represent (the value of) the goods and must be endorsed by the party ultimately accepting the goods. 3) RAILWAY RECEIPT: It is the receipt of payment followed by goods carried through railway.
There are three common types of non-funded trade financing: 1) letter of credit 2) consignment
http://www.tradefinancemagazine.com
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LETTER OF CREDIT:
Letter of credit is given by issuing bank on the request of buyer (applicant/importer) to seller (beneficiary) to effect payment to stated sum within prescribed limits against stipulated documents. If another bank requests the issuing bank to provide L/C to beneficiary then it is termed as advising bank. The payment is made in international currency i.e. ACUD which equals one dollar. L/C is communicated through network of swift. PROCEDURE: 1) Signature of customer is verified on L/C, Performa invoice and review of insurance note to ensure that the shipped goods are insured. 2) Credit report is obtained from state bank of Pakistan if the worth of goods is greater than Rs 500,000. 3) Proposal for approval of LC and credit report is sent to import department for reviewing it. 4) After approval LC number is allocated and entry is made in the register. DR customer liability on L/C CR Bankers liability on L/C DR Customer account CR Commission income CR Postage charges CR Margin on L/C. 5) Documents of L/C are prepared through mail, signed and stamp is affixed. There are total 7 copies. 1st and 2nd to the advising bank. 3rd to reimbursing bank 4th and 5th to customer. 6th in master file 7th in L/C file.
18th AUGUST 2011 documents for completeness and accuracy as per requirement stated in the L/C and submits the documents to the bank that issue the L/C. on realization of foreign bills purchased the entries made are:
DR HO account DR customer account for the charges recovered CR foreign bills purchased
Export collection:
If the bank service of collection of export bill, then in such case bank has no financial interest except commission charges. To realized export bills through collection the entries performed are: DR customer liability- foreign documentary bills for collection. CR bankers liability- foreign documentary bills for collection.
Import collection:
IFBC (inward foreign bills for collection) are received for collection by the remitting bank and are lodged in IFBC register. After the importer accepts the documents customers liability IFBC is debited and bankers liability IFBC is credited. SETTLEMENT: 1) Authority letter is received from importer and signature is verified 2) Cost memo in accordance to current exchange rate is prepared by the bank. 3) Following entries are performed: DR bankers liability IFBC CR customers liability IFBC DR customers account CR commission and other charges. 4) Treasury department is intimidated of the date of maturity of bill in case of D/A letter of credit. There are two tenors sight and D/A. sight involves payment after receiving on documents as per sight. However in deferred payment or acceptance payment is made on the maturity of the bill and documents are handed to the importer prior to payment. ** (Credit can be revocable as well as irrevocable as per agreement. A revocable credit can be cancelled by the issuing bank at any time where as an irrevocable credit cannot be cancelled. Is the papers are affixed as transferable then the credit can be transferred from first beneficiary to the second beneficiary but only once.)
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SHIPPING GUARANTEE:
Shipping guarantees are required to enable customers to clear goods from the port before arrival of documents of title. A shipping guarantee is given after the presentation of invoice and bill of lading or airway bill. Before issuing guarantee the remittee bank is sent for confirmation of bill amount, invoice value, goods description, country og origin, drawee/consignee name and drawer/shippers name. an undertaken is consequently taken from the customer providing that he will accept the import documents against any discrepancies and payment of bill at maturity under D/A. An account of margin against shipping guarantee is maintained for each customer. Shipping guarantee is redeemed when original bill of loading is surrendered to shiping company and original shipping guarantee is returned to the issuing bank. Entry for shipping guarantee: DR customers account CR income (commission) CR deposit margin on shipping guarantee DR customers liability on letter of guarantee CR bankers liability on letter of guarantee CANCELLATION OF SHIPPING GUARANTEE: 1) 2) 3) 4) 5) Negotiating banks send documents such as lading or airway bill etc Reversal of entry is performed. That is bankers liability is debited and customers liability is credited respectively. For sight bill settlement is made against margin and for D/A negotiating bank is informed of the due date. Shipping guarantee cancellation request is forwarded. An amount of rupee one is kept as bankers liability to affirm that original shipping guarantee has not been returned yet. 6) When original guarantee is received the notional amount is reversed.
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BUSINESS FINANCE
Business finance comprises of salam and istisna.
SALAM:
Salam is a sale whereby the seller undertakes to supply some specific goods to the buyer at a future date in exchange of advanced price fully paid at spot. The buyer is called rabb-us-salam, the seller muslam ilaih and the cash price is ras-ul-mal. 1) salam can be effected in those commodities only the quality and quantity of which can be specified exactly. The things whose quality or quantity is not determined by specification cannot be sold through the contract of salam. 2) It is necessary for the validity of salam that the buyer pays the price in full to the seller at the time of effecting of sale. 3) The exact date and the place of delivery must be specified in the contract.
ISTISNA:
Istisna is the second kind of sale where the commodity is transacted before it somes to existence. It means to order a manufacturer to manufacture a specific commodity for the purchaser. There are evident differences between salam and istisna: 1) The subject if istisna is always a thing which needs manufacturing, while salam can be effected on anything. 2) It is necessary for salam that the price is paid in full in advance, while it is not necessary in istisna. 3) The contract of salam once effected cannot be cancelled unilaterally, while the contract if istisna can be cancelled before the manufacturer starts working. 4) The time of delivery is an essential part of the sale in salam while it is not necessary in istisna that the time of delivery is fixed.
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RECOMMENDATIONS:
I observed the revolving of employees to gain knowledge of other departments with eagerness and found it impressive. There was also a greater tendency to adopt new methods of handling bank procedures. However I ought to give some recommendation that might help the bank to improve further and move a step ahead in corporate competition. 1) The employees seemed to work till late night after office hours, so more employees could bring relaxation and more integrity. 2) The bank should advertise and communicate its policies to attract more customers and inform them about policies. 3) IT drawbacks were found to be readily occurring and lately resolved. An improvement in backup measures would be appreciated. 4) In terms of my knowledge of internal controls, the security in that sense was not appreciated. The accounts and record keeping were maintained by same person which could bring issues at later stage.
THANKYOU
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