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CHAPTER ONE: THE ORGANIZATION BANKING IN RETROSPECT

The word Bank is of a European origin and is derived from the Italian word BANCO, which means a table or a counter. In the opinion of the eminent scholars of banking, the reason why this word was given to the banking business was the then prevailing traditions of Lombardian money changers. It was at the end of the middle ages when the trade and the business of exchange of money was flourishing in the Northern cities of Italy and the money changers used the wooden benches to carry out their business in the markets of buying and selling of various currencies. It will be no use to involve the origin of the word BANK. It,

however, found its way through the passage of various conditions prevailing at various stages. Banking, however, did not become a coordinated and systematized business. It has evolved and developed according to the conditions and requirements ever since. A through study of subject will reveal that modern banking is not very much different from its past, and therefore, it would, no doubt, be useful to have a general comprehension of the methods which were practiced in this field in the ancient days. It is a difficult task to establish the first starting point of the banking business, but one thing is clear that the money as means of exchange at the beginning of organized agriculture, industry and trade gave birth to the banking transaction first and then converted the scattered money transaction into an organized shape. The

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conditions needed for the growth of the system are the development of civilization, its stability and the environment in which the confidence grows and trade flourishes. The first were the cultures of Sumerians and Babylonians under which the various activities were quite different in the form and appearances, were introduced in the banking system. The Greeks, in the early stages, had almost the similar banking activities to that of Babylonians. At that time the sacred temples were the most popular place of banking operations but did not monopolize it totally. The financial activities like accepting deposits giving loans, checking and exchanging money and making remittances between different cities, to minimize the risk of carrying money were being carried out during 4th Century B.C. The Romans, when appeared on the horizon of a new civilization, served their apprenticeship in the art of banking under the Greeks and altogether changed the banking procedure in most of the ancient world along with the expansion of their influence. After the fall of Roman Empire till the dawn of Islam the world passed through the darkest period and faced the most corrupt and unsettled conditions known in the history of banking. With the dawn of Islam, the darkness was removed from the face of life and the environment of security and stability re-established in the areas which came under the influence of Islam. Islam came as a religion for the guidance of the misled humanity and to rectify the deviation of belief, to establish justice and to guide life to righteousness and goodness. For a better understanding of the above principles the ban on usury (RIBA) was necessary for the way of life. Islam

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introduced in the society which was aimed to honor and provide protection from being ether the oppressor or the oppressed.

MODERN BANKING
The banking which was known in various forms and guises in the ancient civilization in various parts of the world did not coincide with the emergence of the modern Banks. The banking which had its roots in the flourished culture and had lost its required effectiveness regained the strength with the development of the modern banking. The development of modern banking operations began when the trade in the cities of North Italy flourished due to the advantage of their locations, as they were situated near the passes of Alps and were being used as trade routes. Thus the birth of the modern banking took place in the same area which had witnessed the burial of the ancient relations of cultures of this field. Probably this might be the reason the name of first bank was given as BANCO which means the wooden desks. The money changers of Lombardia used to sit behind their wooden desks and, therefore, the place became known as Banco. At a later stage, this word became closely connected with banking title in the current age. Lombardia, Geneva and Milano became famous but Florence and Venice excelled. The various conditions and factors which were responsible for the slow beginning in the development of banking in the early period had a significant effect on giving banking operations a form which was pragmatic. It was because of the various laws which remained inconsistent, reflecting the difference and disparity of the points of view of the various legislation on those subjects.

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BANKING ORGANIZATION IN PAKISTAN


Pakistans financial sector consists of Scheduled Commercial Banks which include nationalized, foreign, and private banks; and Nonbanking Financial Institutions (NBFIs) which include Development Finance Institutions (DFIs), Investment Banks, leasing companies, Modarabas, and housing finance companies. Scheduled Banks and NBFIs (excluding Modaraba and leasing companies) are both regulated by the State Bank of Pakistans Prudential Regulations, albeit through different wings, and are subject to different SBP regulatory requirements such as capital and liquidity reserve requirements. Modaraba and leasing companies are being regulated by the Securities and Exchange Commission of Pakistan (formerly Corporate Law Authority), which is a body corporate. Compared to commercial banks which cater mostly to short term working capital requirements, NBFIs cater to medium and long term financing needs and, thus, are barred from engaging in any commercial banking activities including trade business and issuing cheques. However, the SBP allowed commercial banks to undertake long term project lending. Among the scheduled banks, only Pakistani commercial banks are listed.

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BRIEF HISTORY OF BANKING IN PAKISTAN


Prior to partition in 1947, banking in Pakistan was dominated by branches of British banks. The State Bank of Pakistan, the central bank, was formed after partition in 1948. It assumed the supervisory and monetary policy powers of the State Bank of India. In the period of 60s to 70s, the emergence of a number of specialized development financial institutions (DFIs) such as Industrial Development Bank of Pakistan (IDBP) and the Agricultural Development Bank (ADB). These DFIs were either controlled directly by the state or through the SBP, and were intended to concentrate on specific priority sector lending. In 1974 all domestic commercial banks were nationalized by the Government. The Pakistan Banking Council was established, which assumed the role of a banking holding company but with limited supervisory powers. authority for banks and financial institutions in However, Pakistan. PBC was dissolved in 1997, leaving the SBP as the sole regulatory Nationalization of the banking sector led to pet projects. The branch network of NCBs also proliferated in an effort to provide banking services to all regions/territories of the country, often with disregard to the viability or feasibility of such expansion.

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HISTORY AND BACKGROUND OF FAYSAL BANK


Faysal Bank started operations in Pakistan in 1987, first as a branch set-up of Faysal Islamic Bank of Bahrain and then in 1995 as a locally incorporate Pakistani bank under the present name of Faysal Bank Limited. On January 1, 2002, Al Faysal Investment Bank Limited, another group entity in Pakistan, merged into Faysal Bank Limited which resulted in a larger, stronger and much more versatile institution. In fact it has the highest share capital amongst private banks in Pakistan and is amongst the largest in terms of equity. Faysal Bank Limited is a full service banking institution offering consumer, corporate and investment banking facilities to its customers. The Banks widespread and growing network of branches in the four provinces of the country and Azad Kashmir, together with its corporate offices in major cities, provides timely and differentiated services in an effective manner. The strength and stability of Faysal Bank Limited is evident through the Credit Rating assigned by JCR-VIS Credit Rating Company Limited of AA (Double A) for long to medium term and A-1+ (A One Plus) for short term. The remaining The majority share holding of Faysal Bank Limited is held by Ithmaar Bank B.S.C an investment bank listed in Bahrain. institutions. shareholders comprise of general public, NIT and other Pakistani

VISION
Excellence in all that we do.

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MISSION
Achieve leadership in providing financial services in chosen markets through innovation.

Group Information
Ithmaar Bank B.S.C. is licensed by the Central Bank of Bahrain and listed on the Bahrain Stock Exchange (ITHMR). It has a paid-up capital of US$360 million, total equity of US$1.1 billion and is a full investment bank with its direct business covering the Middle East and North Africa (MENA) region, as well as South Asia, Asia-Pacific and Europe. Besides holding significant investments in the banking, financial services and real estate sectors in different markets, the main activities of the Bank include underwriting (equity and other financings), private equity (structuring, participation and portfolio management), Islamic financing, private banking, and advisory services covering project financing, investments, capital markets and mergers & acquisitions.

Capital and Ownership


The majority share holding of Faysal Bank Limited is owned by companies of the Dar Al Maal Al Islami Trust (DMI) including Shamil Bank of Bahrain E.C. The remaining shareholders comprise of the general public, NIT and other Pakistani institutions. The Banks shares are quoted on the Karachi and Lahore Stock Exchanges.

Conformity to Islamic Shariaa


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

Board of Directors
Syed Naseem Ahmad Naved A. Khan Graham Roderick Walker Mohamed A. R. Hussain Mohammed Bucheerei Farooq Rahmatullah Tariq Iqbal Khan Director Director A. Chairman President & CEO Director Director Rahman Director

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Shahid Ahmad

Director

The members of the board are highly respected individuals who have substantial knowledge and experience of corporate law and regulatory practices and running successful businesses, industries and financial sector enterprises. The day to day affairs of the bank are managed by professionally qualified and experienced finance, business and banking professionals with substantial exposure in their respective fields of specialization providing the bank with a fine blend of expertise in various financials/banking disciplines under one roof.

Management Information
Naved A. Khan Nauman Ansari President & CEO Head of Corporate & Investment Banking and Acting Head of Commercial Banking Aarij Ali Head of Retail Banking & Acting Head of Strategic Development Salman Ahmed Usmani Ahmed Kamran Mehreen Amin Nasir Islam Bashir A. Shaikh Head of Treasury Head of Services Head of Human Resources Head of Compliance Advisor on Special Assets and

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Acting Chief Risk Syed Majid Ali

Officer

Chief Financial Officer

PRODUCTS AND SERVICES


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

Deposit Products (Accounts)


Faysal Savings Account Rozana Munafa Plus Account Basic Banking Account Faysal Moavin Faysal Premium Faysal Izafa Mahfooz Sarmaya FCY Saving Plus Faysal Savings Account Faysal Savings is specially designed to cater to the need of those who like to earn on their hard earned savings. This account provides convenience for the account holders. Features: Account can be opened with an initial deposit of Rs. 10,000/. Profit is calculated on monthly minimum balance.

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Profit is paid on six monthly basis. Access to account through on-line banking at all Faysal Bank branches across Pakistan.

Easy access through cheque book and Pocketmate Visa Debit card. Pocketmate can be used at more than a million ATMs and 29 million points of sale (POS) terminals around the world.

Faysal Sahulat Faysal Sahulat is a transactional account specially designed for individuals and business customers who seek instant access to their funds at any FBL branch in Pakistan. Features: Account can be opened with an initial deposit of Rs. 5,000. Free access to account through online banking at all Faysal Bank branches countrywide. Unlimited transaction facilities. On maintaining a monthly average balance of Rs. 500,000 or more following additional facilities are provided, free of cost: o Cheque Book o Pay orders o Small Locker (Subject to Availability) o Visa ATM/Debit Card o Statement of Account

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Easy access through cheque book and Pocketmate Visa Debit card. Pocketmate can be used at more than a million ATMs and 29 million point of sale (POS) terminals around the world.

Rozana Munafa Plus Rozana Munafa Plus is a savings account in which profit is calculated on day end balance, and is disbursed on a monthly basis. The customer gets benefited because it provides customer with the option of a high value, monthly profit account. Features: Account opening and minimum balance requirement of Rs. 100,000 for individual customers and Rs. 500,000 for corporate customers. Profit is calculated on daily balance basis. Profit is disbursed on monthly basis. Access to account through online banking at all Faysal Bank branches countrywide.

Easy access through cheque book and Pocketmate Visa Debit card. Pocketmate can be used at more than a million ATMs and 29 million points of sale (POS) terminals around the world.

Basic Banking Account

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As per SBP prudential communicated via BPD circular No.30, Faysal Bank has introduced the Basic Banking Account (BBA) to cater the needs of low income groups having the following features. Features: Account can be opened with Rs. 1000/. No requirement for maintaining a minimum balance. Maximum of two free deposits and withdrawals through counters/clearing are allowed in a month. Unlimited transaction facility through ATMs. Free of charge statement of account for customers once a year. In case more statements are required than standard charges would be applicable. Free ATM transactions on Faysal Bank ATM machines. However charges would apply on non Faysal Bank ATM machines as per SOC Faysal Moavin Savings Account Faysal Moavin is a Savings account made for genuine individual savers. Faysal Moavin offers the perfect combination of savings account matched with the flexibility of a current account. Features:

Account can be opened with an initial deposit of Rs. 20,000.

No restriction on the number of transactions. Profit is calculated on daily balance basis. Profit is paid on monthly basis.

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Tiered profit structure providing an incentive to save more. This means, as the deposit amount increases, the profit also increases. Access to account through on-line banking at all Faysal Bank branches across the country.

Easy access through cheque book and Pocketmate Visa Debit card. Pocketmate can be used at more than a million ATMs and 29 million points of sale (POS) terminals around the world.

Faysal Premium Faysal Premium is a savings account specially designed for high value deposits with attractive profit rates. Features: Account can be opened with an initial deposit of Rs. 5 million. Profit is calculated on daily balance basis. Profit is paid on monthly basis. Access to account through on-line banking at all Faysal Bank branches across Pakistan.

Easy access through cheque book and Pocketmate Visa Debit card. Pocketmate can be used at more than a million ATMs and 29 million points of sale (POS) terminals around the world.

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Faysal Izafa Faysal Bank realizes that every customer's financial needs are different. As a result, the Faysal Izafa Term Deposit is designed to provide individuals and corporate customers an opportunity to grow their money securely and earn attractive profits. Features: Minimum required investment as low as Rs. 25,000/. Tenure from one year to five years. Annual, six monthly and monthly profit payment option available. Financing facility of up to 90% of the invested amount. First cheque book is provided free on investment of Rs. 300,000/ or more. Access to profit through online banking at all Faysal Bank branches and more than 3,000 ATMs countrywide. Faysal Mahfooz Sarmaya Faysal Bank endeavors to build and strengthen customer

relationships by providing innovative banking products and services. To provide convenience and value to customers with foreign currency related needs, Faysal Bank's Mahfooz Sarmaya foreign currency account offers attractive features: Features:

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Account can be opened in three major international currencies: US Dollars, Pound Sterling and Euro. Minimum balance for opening Mahfooz Sarmaya is 1000 units of the currency in which the account is opened. Account can be opened in any of the following types: o Savings Account o Term Deposit Account o Current Account With Mahfooz Sarmaya Account, the account holder becomes eligible for Pak Rupee financing facility of up to 75 percent of the deposit in the account at very competitive financing rate. With Mahfooz Sarmaya Account, the account holder automatically qualifies for special rates for car and home financing.

FCY Saving Plus FCY Saving Plus is a new foreign currency savings account with attractive profit rates where customers get their profit on a monthly basis. Features: Account can be opened in US Dollars, Pound Sterling and Euro currency. Minimum balance for opening FCY Saving Plus is 500 units of the currency in which the account is opened.
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Profit is calculated on monthly average balance. Profit is disbursed on monthly basis. Tiered profit structure providing an incentive to save more. No FCY cash deposit charges. On maintaining the monthly average balance equivalent to USD 50k or above, the following additional facilities are provided. o Free online banking. o Priority Banking. o Borrowing in PKR up to 90% of FCY. o Preferential rates on consumer finance.

Consumer Finance Products


Faysal Car Finance Faysal Housing Finance Faysal Finance Faysal Car Finance Product Features Vehicle Type Lease Term: Markup Rate Locally manufactured. Up to 5 Years. Variable (12Mths Kibor+5% -

Annually revised). Equity Minimum 20%.

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Eligibility Criteria Age Service/Business Age 21 years to 55 years. 2 years of corporate

employment. 3yrs of established business. Qualifying Income 70: 30 (i.e. Max installment not higher that 30% of your net disposable income which includes all credit commitments including FBL Car Rental). Insurance Comprehensive Insurance

inclusive at nominal rates.

Documentary Requirement Salaried Individual


Copy of CNIC. 2 Photographs (passport-sized). Salary Certificate. Bank Statement for Past 6 months / 12 months. Proof of Profession (for SEP). Tax Returns for Past 2 years (SEB/SEP).

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Certificate

of

Commencement

of

Business

Registered

Partnership Deed / Memorandum & Article of Association / Form A & 29 (SEB/SEP).


Utility Bill / Bills of Cell Phone / Credit Card Bills. NTN Certificate. Valid Driving License. Completely filled application form.

Faysal House Finance Product Features


Buying a new home. Building a new home.

Buy a Land plus construction.

Remodeling or Renovation of Existing home. Financing: Minimum Rs.500,000/- or maximum 70% of the property value (50% in

Minimum Financing

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renovation) Repayment Period Markup Rate 1 year to 20 years Variable (12Mths Kibor+5% -

Annually revised) Repayment Disbursement Equal monthly installment In single tranche 1. tranches against In tranches In approved

against approved amount 2.

amount, first tranche will not be more than 50% of the sanctioned facility limit or 50% of land value whichever is lower 3. agreed installment approved amount 4 In preagainst

Eligibility Criteria Age Service/Business Age 25-60 years of age. 2 years of service, with 1year current

employment

employer is mandatory. 2 years of established business / profession. Qualifying Income 60: 40 (i.e. Max installment not higher that 40% of you

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disposable income which includes all credit commitments including FBL House Rental). Residency Tax Payer Education Pakistani / NRPs. Proof of Tax Payment. Intermediate level or equivalent.

Documentary Requirement

Copy of Computerized National Identity Card. 2 Photographs (passport-sized). Tax Returns for Past 3 years. Copy of last months paid utility bill (any one utility). Professional degree (for self employed professionals). Proof of last drawn salary (for salaried applicants). Salary certificate from the employer (for salaried applicants). Bank Statement for Past 12 months (for Past 24 months for SEP/SEB).

Company Financials for the last 2 years (for businessmen). Proprietorship letter (if proprietorship concern). Partnership Deed (if partnership concern). Certificate of Commencement of Business / Registered

Partnership Deed / Memorandum & Article of Association / Form A & 29.

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Faysal Finance Product Features Maximum Financing Rs.500, 000/- (up to Rs.1M in secured cases residential property). Repayment Repayment Period Markup Rate Residency Collateral Financing Margin Equal monthly installment. 3 Months to 60 Months. Fixed (Variable in secured cases). Pakistani / NRPs. Liquid / Residential Property. 90% & 70% (for Liquid / Residential Property). Income Clubbing Facility of clubbing of spouse income is available. Eligibility Criteria Age: 21 years to 60 years (up to 65 years in SEB/SEP). CCM A Min 06 months employment

tenure required. CCM B& others 02 years employment tenure

required (1year employment with current employer is mandatory). Business Age Min 3 years in the current

business and associated with the industry for the at least 5 years
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(SEB). Qualifying Income 67:33 (i.e. Max installment not higher than 30% of applicant net disposable income which include all credit commitments including FBL - Faysal Finance rental).

Documentary Requirement

Clear Copy of valid CNIC / NICOP. 01 Recent photograph (passport sized). Recent Salary Slip/Salary Certificate. Bank Statement for 06 months for CCM A rated companies and 01 year for CCM B rated & others companies which reflecting salary.

Bank Statement for last 12 months (SEB/SEP). Copy of NTN Certificate (SEB/SEP). Utility Bills/Credit Cards Bills for CCM B rated & others. Completely Filled and singed application form by the applicant.

Corporate and Investment Banking


Corporate Financing SME Finance Trade Financing

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Treasury & Capital Markets Investment Banking Agricultural Financing Cash Management

Corporate Financing Faysal Bank Limited is fully geared to meet the changing economic challenges present in Pakistan. FBL is ever striving to build meaningful relationships with its customers and become partners in their growth and progress by acting as financial advisors and consultants as well as financiers. Its Corporate Finance Group extends both short and long term financing facilities designed to fulfill the individual need of each corporate customer. Small and Medium Enterprise Financing Small and Medium Enterprise (SME) unit of the Bank is geared towards catering to the banking requirements of small to medium businesses in a timely and therefore cost effective manner. All the branches of Faysal Bank are equipped to speedily attend incoming financing requests from SMEs. FBL helps its customers grow from strength to strength by acting as their bankers and financial advisors. Trade Financing Faysal Bank has established a strong presence globally in Trade Financing through its network, affiliates and correspondents. The Bank has conveniently maintained relationships with major banks in

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the international financial market and continues to develop new ones wherever needed. Its Trade Finance services include a full range of import, export and guarantee products, thus offering tailormade solution to fit the individual need of each customer. Treasury and Capital Markets Faysal Bank's Treasury is one of the leading market makers in quoting competitive prices in all major currencies and provides dynamic corporate and institutional marketing teams with up-todate market information. The banks cutting edge is the in-time advice and execution of deals for its customers. Faysal Bank's treasury team strives to satisfy the customer's financial needs in a timely and a flawless manner. Faysal Bank has earned immaculate reputation in the field of Capital Markets, which is quite evident from its track record and market share in this area. Investment Banking With the ever-changing business environment in Pakistan,

companies need expert partners with a keen understanding of business to help achieve profit objectives. At Faysal Bank, the leaders of businesses and institutions are offered, corporate advisory services and a wide array of tools to help them accomplish their goals. The bank advises and facilitates the arrangement of commercial customers paper, require syndications, financing of a mergers, project acquisitions or managing and of underwriting arrangements amongst many others. Whether the investments, it can guide them through the markets and tailor a solution to meet their specific needs.

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Agricultural Financing Faysal Bank offers specialized products for the agricultural sector. All of its branches located in agricultural areas of Pakistan are equipped to help the local farmers improve their yield and methods of farming by offering timely and affordable modes of financing to suit their needs. To increase its outreach into agricultural regions of Pakistan, Faysal Bank has entered into strategic partnership with the specialized entities engaged in the Agro related supplies and services. Cash Management Faysal Bank's Cash Management department has emerged as one of the leading cash management solution providers in strategic markets such as local corporates, multi-national companies, and mid-tier markets. Faysal Bank's role in these segments, span the entire spectrum of services including, but not limited to Strategic Receivables/Payables Management, Corporate Electronic Banking, Payroll and Fund Management Services, Dividend Processing, and Process Re-engineering. Success of Cash Management services is primarily attributable to its focus on providing streamlined and customized solution that adds value to business process of its clients.

Services
PocketMate Visa Debit Card Travellers Cheques Transfer of Funds

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Safe Deposit Lockers Non-stop Banking

PocketMate Visa Debit Card Combining the wide acceptability of a credit card and the thoughtful prudence of an ATM card, Faysal Bank PocketMate is the most convenient way to carry cash. No more fear of overspending. No more searching for the nearest ATM. PocketMate Visa Debit Card provides customers with the freedom of world wide acceptability at over 27 million merchant outlets as an ATM card operative at all ATMs in Pakistan plus at over 1 Million ATMs worldwide bearing VISA logo. Travelers Cheques Customers can purchase American Express, US Dollar and Pound Sterling Travelers cheques at selected branches of Faysal Bank.

Transfer of Funds Customers can deposit and withdraw cash from any branch of Faysal Bank, regardless of which branch the account is in. Customers need only to carry their cheque book. Money Transfer through SWIFT and Western Union Service Customers of Faysal Bank can now easily and speedily transfer

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funds in foreign currency through the SWIFT system installed at the Bank. Customers who receive money transfers from overseas through the Western Union service can now withdraw their funds through any Faysal Bank branch. Safe Deposit Lockers At Faysal Bank, customers are offered Safe Deposit Lockers in a pleasant and secure environment. All lockers are discretely placed within the Banks professionally guarded premises. Lockers are available in three different sizes to suit individual customer needs at reasonable rentals. Faysal Bank also offers an added insurance feature with locker. Non Stop Banking All branches of Faysal Bank remain open for business from 9 a.m. to 5 p.m. from Monday to Thursday and Saturday. On Friday, the bank is open from 9 a.m. to 12.30 p.m. and then again from 3 p.m. to 5 p.m. To suit customer needs, FBL has extended its banking hours on Saturdays. Now customers can enjoy its consistent and quality service from 9 a.m. to 5 p.m.

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GENERAL PROFILE OF FBL


Company Profile Ticker Exchanges 2009 Profit Major Industry Sub Industry Country Employees Branches Website Faysal Bank Limited FYBL LSE, KSE, ISE Rs. 476,392000 Financial Commercial Banks Pakistan 5000 approximately 129 www.faysalbank.com

ORGANIZATIONAL STRUCTURE
The organisational structure of Faysal Bank is functional. Faysal Bank has nation wide network of branches. Most of the departments have been divided on the basis of functions. Although the current structure of the organization promotes economies of scale because all employees are located in the same department and share the same resources but this structure has also restricted coordination among the departments and hence lead to a lesser degree of innovation. In order to have a flat, fast and agile corporate structure, the operating model of the Bank was restructured in line with internationally acceptable banking standards. A number of policies

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and procedures including the prudent risk management have been put in place.

Structural dimensions
Formalization Faysal bank is highly formalized. The reason is that the customers are to be satisfied and the management cant bear any negligence in the customers records. To have a proper and quick database of customers, formalization is there. High formalization in Faysal bank is specified to every employee in the departments but there is no rigidity found in this context, every employee is volunteer to help other. Some rules are there, like to maintain the record of customer first or to deal customer fairly, no smoking and the things which irritate the customers are not allowed, things are to be done properly and in pleasant manners and procedures are there to perform those rules. Specialization In todays dynamic environment and tough competition, banks need efficiency and have to perform specialized tasks. There are many departments in Faysal Bank and jobs are divided among the employees of each department. Specialization among the department is there. As every department is performing its task separately, the employees are highly efficient in performing their work in the specialized environment.

Standardization

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In Faysal Bank, standardization is there. There are standard rules and procedures defined by the top management for the execution of tasks. The organization of the standards keeps every employee aware of the procedures adopted during different situations. Hierarchy of Authority Hierarchy of authority of Faysal bank is short because there are so many people working under the supervision of one person. So the span of control is wide. Centralization In Faysal bank the Centralization is high and the goals are set by the top management and low-level management just works according the guideline provided by the top management. Complexity Complexity refers to the variety in the tasks performed. In Faysal bank the vertical complexity is low and the horizontal complexity is high because of variety of activities performed and the number of departments there in bank. Professionalism Professionalism is high in Faysal Bank. After every 3 months employees are trained under the experienced and skilled researchers in terms of education, career development and above all, ethics training.

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ORGANOGRAM AT THE HEAD OFFICE LEVEL Board of Directors

Chief Executive Officer Executive Committee Executive Incharges

Area Manager North

Area Manager South

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ORGANOGRAM AT THE BRANCH LEVEL

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DIFFERENT DEPARTMENTS OF FBL


Different departments of Faysal Bank are as under: Operations Department Operations departments: Remittance Cash Account Opening Customer Service Agri-Finance Department This department provides agriculture loans to the formers at nominal rates with easy terms. It includes short term financing for fertilizers, seeds, pesticides etc and long term financing for purchase of harvesting machines and installation of tube-wells etc. Credit Administration Department This department supervises the loans either given or received in the form of deposits. It administers the conditions imposed at the time of delivering of loan like security etc. Marketing Department It peruse the customers to make business with the bank either in the form of deposits or by applying for financing. Different tools and
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Department

is

subdivided

into

following

four

techniques of marketing are used such as making contact personally with the customers, advertisement through television, news papers and on the website. Consumer and Finance Department This department provides loans to the ultimate consumer in the form of car leasing, house financing and as well as personal loans. Besides this it also administers the loans already given. Documentary Credit and Foreign Trade Department This department provides assistance to customers regarding foreign trade, such as it deals with the international companies and provides goods and services required by customers. The kind of assistance it provides includes letter of credit facility, guarantor and also helps in foreign remittances.

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Overall Appraisal, Problems


Faysal Bank is enjoying the status of leading commercial banks in Pakistan. Faysal Bank operates in retail banking, consumer banking, and investment banking etc. with the IT infrastructure. The branches are working online giving 24 hour services to the customers. Faysal Bank promises the innovative product and services to the customers and adopts the changing trends in the market and therefore going towards the new era of success. Despite the success of Faysal Bank, there are some problems associated with the bank:

The employees are important part of the bank, but they are not satisfied with the pay- scale which is very low. The bonus given and the annual increase in pay are very low which may cause dissatisfaction in employees or it may lead towards the high turnover of the employees.

Salaries are given on individual basis but the company should adopt the policy of performance base salary system. There is no separate human resource department in each branch of Faysal bank. The company is not adopting the policy of direct hiring.

The performance appraisal has been done on traditional basis (yearly basis).

Transportation facility has not been provided to all the employees except Branch manager. No mobile facility is to be provided by Faysal bank.

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There is no proper job rotation in Faysal bank. No Traveling allowance is to be provided by Faysal bank. Some time the working time exceeds the limits of twelve hours.

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CHAPTER TWO: INTERNSHIP ACTIVITIES Departments, I served


During my internship at FBL, I got a chance to work in three main departments. These are: Clearing Department Account Opening Remittance

CLEARING
I started my internship in the clearing department where my supervisor was Madam Shabnam Riaz. I spent 4 weeks in this department. During my stay in this department, my supervisor told me the basics and the practical work involved in cheque clearing and cheques received for collection purposes. I would like to start from cheque clearing. The major things involved in this context are to be discussed here. Types of Clearing The Clearing process is of two types: Inward clearing Outward clearing The clearing facility is provided by the state bank of Pakistan for offsetting of cross obligations between the different banks. The

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facility is now handed over to NIFT abbreviated as National Institutional Facilitation Technologies Pvt. Limited. I will discus both clearing through SBP and through NIFT and their roles after discussing inward and outward clearing. Inward Clearing Inward clearing is where the FBL customer draws cheque in the favor of a non- FBL customer. The inward clearing process decreases the deposits of the bank. Procedure of Inward Clearing Before Centralization Before the centralization of the inward clearing process, the cheques of different banks drawn on FBL branches were received at the concerned branches along with the schedule of other banks. The NIFT riders used to give cheques to the branches. The respective branch used to make jotting of cheques and schedule of banks separately. Both jottings must tally. The posting of cheques in the system was also done at the branch level. If for any reason, a cheque received in inward clearing is not honored, it was returned with the memo showing the reason for not passing the cheque. The cheques returned were entered in the inward clearing returned register. After Centralization In FBL, inward clearing is now centralized and the CPU (Central Processing Unit) at the Mall does all the inward clearing like verification of cheques, stamping and posting etc. In case of any difficulty, the CPU sends faxes to the respective FBL branches regarding the confirmation of client and also the signature

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verification of the client. The branches then reply to the faxes after necessary verification and fax them back if the status of the client is ok and ask the CPU to make the payment. In case of any difference in the signatures of the client as per stored signature database, the bank carefully monitors and discourages the payment of such doubtful cheque. The branch only maintains all the correspondence with the CPU in a separate file named as Inward Clearing to CPU. Outward Clearing Outward clearing means cheques drawn by non- FBL customers in favor of the FBL customers and deposited in one of the branches of the FBL. The outward clearing increases the deposits of the bank. Procedure of Outward Clearing Before Centralization Before the centralization of the outward cheque clearing process, the cheques were received and posted by the branches after the necessary scrutiny and stamping of the cheques. After Centralization The outward cheque clearing process is now centralized meaning there by all the posting of the cheques is done at the CPU. When a branch receives cheques to be sent for local clearing, the following work is done: Counter foil of the pay-in slip signed by an authorized officer of the branch bearing the stamp Received for Clearing is returned to the customer for his/her record. The cheques received at the counter are then given to the clearing department for the purpose of clearing.

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The clearing officer does all the necessary scrutiny of the cheques like:

Checks the date of the cheque. This is the most important thing in the cheque clearing process. The post dated cheques should not be received for clearing. They should be received on the date mentioned on the cheques.

The amount in words and figures must be matched. The account title must be same on the cheque and the banks copy of the deposit slip.

The cheques are checked for crossing whether it is simple crossing or payee account crossing. In simple crossing, the cheque is deposited in the account but it can be endorsed in favor of another party other than the name of the payee on the cheque. In account payee crossing, the amount must be credited in the account bearing the name on the cheque. The clearing officer also checks that there should not be any cutting and overwriting on the cheques. The cheque should not be mutilated. If so, the stamp of Mutilation Guaranteed must be affixed at the back of the cheque and is duly signed by the authorized officer.

After looking for the necessary components of the cheque, the next procedure is to affix stamps on the cheque and the deposit slips.

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Stamping on the Cheques and Deposit Slips For cheques, two stamps are affixed:

Payees Account Credited on the back of the cheque. Clearing Stamp on the front of the cheque.
For deposit slips, only one stamp is used:

Clearing stamp. bank. In FBL new garden town branch, the manager operations Mr. Ahsan Iqbal Sheikh signs the stamps.

The stamps are duly signed by the authorized officer of the

The date on the clearing stamp is always one day ahead, because the cheques are presented in the concerned branches the next day for payment. Preparation of Excel Sheet All the cheques are entered in the excel sheet in lots of 50. In the excel sheet, following are the fields that are filled:

Cheque amount. Deposit slip amount. Depositors account number.


Jotting After the preparation of excel sheet the cheques and the deposit slips are separated and jotting of cheques and deposit slips is separately done in order to assure that the total of all cheques agrees to the total of deposit slips/vouchers. Cheques ready to sent for clearing
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After jotting of cheques, the cheques are bundled in lots of 50 and a bundle cover is attached to the cheques which are provided by the NIFT containing the following information:

Bank /Branch code. No. of Instruments. Date. Amount of total cheques.


Signature by the Manager Operations After preparing bundle covers, a sheet is prepared named as Outward cheques for Clearing which includes the total number of instruments and the deposit slips and the consolidated amount of the cheques. The sheet is duly signed by the Manager Operations and is then attached with the bundle of cheques and the deposit slips and send for the purpose of clearing to the CPU Mall where these cheques are again scrutinized and entries are posted in the system. After posting the cheques, the NIFT riders come to CPU and collect the cheques for clearing. Filing of Documents NIFT sends daily scroll sheet to the banks branches which contains the detail of both inward and outward cheques returns. This sheet is kept along with the print out of daily excel sheets in a separate file named as Outward Cheques for Clearing. Same Day Clearing The practice of issuing SBP cheque on behalf of the customers for the purpose of same day adjustment adopted by the banks have

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been dis-continued and a system has been introduced for same day clearing through NIFT. Pre- Requisites for Same Day Clearing The following are the requirements for availing this facility: Same day clearing is restricted to instruments valued at Rs. 500,000/- and above and received by 10:00 AM. The depositor must make specific request to the branch for same day clearing.

The same day clearing is restricted to the branches that are designated only which will ensure that the timings in this respect are strictly followed.

Cheques Returned in Outward Clearing The cheques which are sent for local clearing may be returned for the following reasons: Funds Insufficient Signatures Differs Dormant Account Stop Payment by the Drawer etc. The returned cheques are entered in the separate register called Returned Cheques in Outward Clearing the day when they received. After making the entries, the client is called for the collection of such cheques. If the client does not come to the bank after the reasonable time period, the cheque is then dispatched to the customer along with the letter containing the details of the
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cheque like cheque date, cheque number and the reason for return of the cheque. The photocopy of both the cheque and the letter is kept in a file called Returned Cheques Dispatched. If the client comes to collect the cheque, photocopy of the cheque and the return memo is also kept and then receiving of the client is taken on the cheque return register and the photocopies of both the cheque and the return memo are kept in a file named as Returned Cheques. Now I would like to discuss the procedure of clearing through State Bank of Pakistan and the role of NIFT in the clearing process. CLEARING THROUGH STATE BANK OF PAKISTAN Before the incorporation of NIFT (National Institutional Facilitation Technologies Pvt. Limited) in 1995, the State Bank of Pakistan used to provide the services of clearing and settlement of commercial bank accounts. This clearing process was very time consuming, inefficient and costly. Procedure of Clearing through SBP At the time when NIFT was not incorporated there were around 8 national and the branches of international banks working in Pakistan and representative of each bank used to sit in the clearing room of State Bank of Pakistan. The cheques were collected by each branch of the respective bank. Before the end of working hours each branch used to send the collected cheques to the head office of the particular bank where they segregate and sort the cheques with respect to the bank name

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and branch code. After this process the agent of each bank took those cheques to the State Bank of Pakistan where the representative of every bank negotiates with each other and collects the respective bank cheques. The representative of each bank after the clearing collected the cheques and those cheques were transferred to the head office where they again sorted the cheques according to the branch codes and then sent to them. That clearing process was not efficient and the cost was high, chances of dishonor of the cheques were high and process of clearing was lengthy. State Bank of Pakistan also kept no proper records of clearing cheques. THE ROLE OF NIFT IN CLEARING What Is NIFT? NIFT stands for National Institutional Facilitation Technologies Pvt. Limited. The institution was incorporated in September 1995 as joint venture between a consortium of six banks and entrepreneurs from the private sector. All banks in Pakistan, a total of 42, are participating members of NIFT with branches spread throughout the country. Six equity holder banks are:

Habib Bank Limited. MCB Bank Limited. National Bank of Pakistan. United Bank Limited. Allied Bank Limited. First Women Bank Limited.

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As of June 2007, 40 commercial banks and their 4500 branches in 100 major cities utilize NIFTs services. NIFT has signed an agreement with the central bank for provision of automated clearing services to all banks and their branches; SBP has a monitoring role in the clearing operations of NIFT. NIFT has setup elaborate data centers geared to provide automated services for document processing particularly in the payment arena. NIFT is responsible for the establishment and management of automated clearing house facilities in Pakistan. NIFT is actively involved in the modernization of payment systems in the country. All commercial banks in Pakistan are members of NIFTs clearing system and bank plays monitoring role on the clearing operations of NIFT. Services Provided by NIFT The services provided by NIFT includes collection and delivery, interbranch settlement, reconciliation, return (un-paid) cheques processing, the same day clearing (express) two-hours, clearing services and inter-city clearing to all commercial banks and their branches in Karachi, Lahore, Rawalpindi, Islamabad, Hyderabad, Faisalabad & Peshawar. NIFT services cover over 90 percent of all cheques clearing transactions that take place in the country. Explaining the procedure, the NIFT collects the outward clearing directly from every branch and arranges processing, presentment and processing of returns, providing the net position, etc to the banks and their branches.

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Automated Cheque Clearing House The opening of automated cheque clearing house is another milestone in the field of payment of settlement system, which is known for its fast cheque clearing process. The automation of clearing operation which commenced with the establishment of the first centre at Karachi (in 1996) has now been propagated to all the major cities of Pakistan. NIFT has established data centers in Karachi, Lahore, Islamabad, Rawalpindi, Gujranwala, Sialkot, Faisalabad, Hyderabad, Peshawar, Multan, Bahawalpur, Quetta, Sukkur, D.I.Khan and Muzaffarabad. NIFT has set up a grid of automated clearing which provides efficient and cost effective intercity clearing involving 15 major and over 85 satellite cities in Pakistan. NIFT has facilitated setting up of citizen data base by National Database and Registration Authority (NADRA) by image archiving of 64 million census forms. Automated Clearing Automated clearing services are provided by the NIFT at most of the field offices. Through electronic clearing, different risks of commercial banks and customers have been minimized and payment processing costs have also been reduced. Increasing volume of non-cash payment instruments like cheques, drafts, payment orders etc are being processed through a network of clearing house. Each participating banks net position is generated through automated clearing house. The introduction of the automated clearing involved creating local standards for encoding cheques and other instruments, assisting
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banks in preparing standard code line and training bank branch staff. Procedure of Clearing through NIFT Payment and settlement systems are crucially important to the smooth functioning of the economy. It is the responsibility of a central bank to promote sound and efficient payment and settlement systems. Financial institutions use payment systems to settle financial market transactions. State Bank of Pakistan has made incredible efforts for improving the efficiency of the payment system. Being an operational arm, the SBP facilitates in maintaining an efficient, safe and reliable payment and settlement system. During the period under review, payment instruments of commercial banks have been standardized to facilitate the automated clearing facilities provided by the National Institutional Facilitation Technologies (NIFT). In major cities, the functions of the SBP clearing house have been handed over to NIFT to the extent of sorting of payment instruments and preparing clearing schedules. The agent of NIFT directly collects the cheques from each branch of the bank instead of collecting from head office. Now the process of segregation and sorting the cheques is done by the NIFT rather commercial banks through the automated system. NIFT also keeps the record of cleared cheques and also provides the net position to the banks.

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After discussing the role of NIFT and SBP, I would like to discuss the procedure of cheques on collection which is as follows Cheques on Collections Cheques for collection are those which are not included in the local clearing. They are outside city cheques. There treatment is somewhat different as compared to local clearing cheques. Procedure for Cheques on Collection (COCs) The collection is also handled by the clearing officer. When the concerned staff at the counter collects the cheque for collection purposes, the customers copy of the deposit slip is returned by affixing the stamp Cheque Received Subject to Realization, which means that on the realization of the cheque, amount will be transferred to the customers account. The same scrutiny of the cheques is done as in the case of clearing. Stamping of the cheques The following stamps are used for collection:
Crossing stamp of Faysal Bank Limited on the face of the

cheque. Payees Account will be Credited on Realization stamp on the back of the cheque. Outward Collection Number stamp on the back of the cheque. The same stamp is also affixed on the deposit slip.

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Entries in the Register After stamping, the entries of the cheques are made in a register called Outward Bills for Collection (OBC). The register contains the following fields:

Date. Beneficiary Name. Cheque Number. Account Number. Amount. Bank Name and Address.

Posting Entries in the System After stamping and entries, the cheques are posted in the system. The software used for this purpose in Faysal Bank is SYMBOLS. After posting of cheques, the letters are printed from the system containing the address, name, cheque number, amount of the cheque. The letter is stamped with the Faysal Bank crossing stamp and is duly signed and stamped by the authorized officer, here in this case is the Manager Operations of the bank. The stamps are also signed by him. Collection Area where FBL has its Branch For those outside city areas, where Faysal bank has its branches, cheques on collection are sent to these branches which collects the funds from the branches on which cheque is drawn and then credits

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the same in the customer account. This branch sends those cheques in its local clearing and after the clearing process the funds are transferred to the customers account. Collection Area where FBL has no Branch Those areas where FBL has no branch, the cheques are directly sent to the branches on which the cheques are drawn. These branches draws a Demand Draft in favor of Faysal Bank which when received by the branch lodge in the local clearing for the release of funds. Time Period for Collection Where FBL has a Branch Where FBL has no Branch Filing of Documents After the preparation of the letters and cheques, the photocopies of the cheques and the letters and also the deposit slips are kept for the banks record and are maintained in the file called Cheques on Collection (COC). The cheques along with the original letters are then dispatched to the respective branches for collection purpose. Reminders for Delayed COCS The cheques which are sent for collection, if not realized after a reasonable period of time, reminders are issued to the respective banks branches. For record purposes, photocopies of reminders are maintained in the file called COC Reminders. Realization of COCS 3 Days 7 Days

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When cheques are sent for collection, they are treated as a liability for the bank. When COC gets realized, the entries are made in the OBC (Outward Bills for Collection) register bearing the realization date. The realized cheques on collection are also kept in separate file called as COC Realized. COC Returned Those cheques which are returned in the collection are recorded in the returned register in the collection returns portion.

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ACCOUNT OPENING
After working in the clearing department, I was moved to the account opening department where my supervisor was Madam Rabia Shafqat. She told me the basics of account opening. I spent one week in this department. The things which I have learned in this department are shown as below: Procedure of Account Opening Account opening is the most important department of a bank; the reason is that it is where a customer- banker relation starts. The procedure which I am going to explain is the general procedure of account opening which is applicable to all categories of accounts. The required documentation is discussed after the procedure for each category of account. The three significant steps in the account opening process are:

Obtaining the Required Documents. Proper Introduction of the Account. Know your Customer (KYC) details.

The following procedure is followed for account opening purposes:


Introduction of Account. Introduction by Staff. Obtaining CNIC from the Customer. CNIC Verification from NADRA. Occupation/ Employment Evidence.

Verification of the Customers Name.

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Customer Profile Form (CPF). Verification of signatures on Account Opening Form and SSC (Signature Specimen Card). Signature Scanning from AOF/SSC. Sending Documents to CPU. Initial Deposit. Letter of Thanks. Issuance of Cheque Book.

Introduction of Account Introduction of an account is one of the essentials from State Bank of Pakistan. The introduction of an account can be given by the Faysal Banks existing customer and in this case the bank ensures that the account is at least 3-6 months old with satisfactory conduct. The account opening officer verifies the signature of the introducer from the system containing his/her information. Introduction by Staff The introduction of the new customer can be given by the permanent staff member of the bank. In this case the name of such staff member is provided on the AOF [CRF] by means of a notation underneath the introducers column Personally Known to me. Obtaining CNIC from Customer After the introduction of the account, the customer is given the account opening form and he/she fills out the necessary columns which are required for the purpose of account opening. After filling out the form, photocopy of the CNIC is obtained from the customer.

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The account opening officer ensures in this case that CNIC must not be expired. For expired CNICs, customer has to submit copy of expired CNIC and a NADRA receipt in evidence of having applied for renewal of CNIC. CNIC Verification from NADRA The CNICs of the customers are verified through the NADRAS specialized software which is called as VERISYS. This software is being used in FBL for the purpose of the confirmation of the clients information regarding address, name, CNIC number etc. which is provided by him/her in the account opening form. Verification of the Customer Name The persons name whose account is to be opened is confirmed from the following two documents:
OFAC (Office for Foreign Asset Control). Concerned Party List (CPL).

The OFAC and the CPL contains the list of those customers which have been blocked for any kind of financial and public dealings. Occupation/Employment Evidence The occupation or the employment evidence is obtained from the customer in the shape of a letter confirming occupation, alternatively a business card (only subject to on spot verification) or a valid student ID (If student account is being opened). Customer Profile Form (CPF)

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The customer profile form serves the purpose of identifying the customers various credentials such as how marketed, past banking history, introducers particulars, expected transactional activity and average amount of transactions etc. The CPF also pinpoints based on the above parameters as a derived conclusion whether the customer is rated as an average risk as (or) higher than average risk customer by the bank. The completion of this form as a part of KYC strategy is fundamental to account opening formalities. Verification of Signatures on AOF and SSC The signatures on the completed AOF and SSC must match with each other. The account opening officer must give reasonable attention for the purpose of verification of the signatures. This is manually done by the officer without using the system. Signature Scanning from AOF and SSC It is a decentralized activity. The branch is responsible for the scanning of signatures from SSC and AOF. The scanned signatures are recorded in the database of the system and are promptly considered for future transactions of the customer. Stamping of the Account Opening Form After gathering the necessary information from the customer along with the documents and internal documentation of the bank, the stamping is done on the AOF. The following stamps are required for this purpose:

A/c Opening in my Presence stamp.

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OFAC/CPL Checked stamps. B.M and O.M stamps and their signatures. Original Seen stamp on ID cards.

Sending Documents to CPU After stamping on the account opening form, the account opening set is sent to the Central Processing Unit (CPU) for the purpose of the verification of the account opening documents because the account opening process is also centralized. The account opening set contains the following things:

Cheque Book Requisition. SSC (Signature Specimen Card). A/c Opening Form.

Initial Deposit After the confirmation from CPU after three working days that the account has been opened for the customer, the account number is allotted to the customer and the customer deposits an initial amount in cash. Cheques may only be accepted as part of the initial deposit in the case of undoubted customers and on the personal responsibility of the branch manager. Letter of Thanks Letter of thanks is the letter issued by the bank to the customer for two purposes:

First purpose is to say thanks to the customer for opening the account in their bank.

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Second purpose is to confirm the address provided by the customer while opening the account. Issuance of Cheque Book Cheque book is issued to the customer after sending the letter of thanks when the customer comes with the letter of thanks and requests for the issuance of the cheque book. A cheque book (usually having 25 leaves) is issued to the customer. The first cheque book is issued free of cost, but the subsequent are charged Rs. 5/- for every leaf. The procedure in this manner is to complete the cheque book requisition containing title of account, account number, type of currency and signature of the customer. Signature of the customer on the cheque book requisition is verified through the system. Particulars are entered in the cheque book issuance register. After taking these necessary steps, the customer is given the cheque book and the concerned staff takes the customers signatures on the cheque book issuance register and affix stamp of signature verification. After verifying signatures from the system, the account opening person signs the stamp and issues the cheque book after taking signatures of the account holder on the cheque book requisition acknowledging that he/she has taken the cheque book. Closing of Account At any time the customer can come to the bank and ask for the closing of the account. For this purpose, the following requirements are to be fulfilled: Filling the Closing A/c Form.
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The cheque Book is Torne.

Nil the A/c of the Customer.

After doing this, the documents which are to be sent to the Central Processing Unit (CPU) are:

A/C Opening Form. the Account Holder.

Inter Office Memorandum (IOM) containing the basic details of

Closing A/c Form.

Statement describing the Nil A/c. The CPU confirms the credentials of the account holder and after necessary verification, closes the account of the customer and confirms the branch via fax. Categories of Accounts An account can be opened in any of the following categories: An Individual Account. Joint Account. Proprietorship Account. Limited Company Account. Partnership. Club, Society, Association and Trust. Documentation In Case Of Limited Company Accounts

Photocopies of National Identity Cards of each Director. Copy of Companys Memorandum and Articles of Association.
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List of Directors. Copy of Board Resolution. Certificate of Incorporation. Power of Attorney/ Mandate.

Documentation In case of Partnership Account


Certified Copy of Partnership Deed. Power of Attorney/ Mandate (If Required). Attested Copy of Registration Certificate with the registrars of Firms. CNIC Copy of Partners. Partnership Mandate. Original Authority Letter of Partners Favoring Persons Authorized to Operate the Account.

Documentation In Case of Club, Society, Association or Trust

Certified Copy of (By- laws rules and Regulations and Certificate of Registration). Certified Copy of the Resolution of the Governing Body for Opening the Account and Authorizing the person(s) to operate the Account.

Copy of CNIC of Authorized Persons. Undertaking signed by all Authorized Persons Mentioning Intimation to the Bank in case of change of Authorized Persons Operating the Account.

Documentation In Case of Individual/ Proprietorship

Copy of CNIC.

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Copy of Services Card or any other proof of employment. Power of Attorney. Declaration of Proprietorship.

Documentation In Case of Joint Account Copy of CNIC. Completed Signature Specimen Card. Power of Attorney. Income Proof. Any Other.

REMITTANCE DEPARTMENT
In the last week of my internship I was moved to the remittances department where my supervisor was Mr. Siddiq Ahmed. He was very encouraging personality and helped me in each and every way to know the domain of remittances and the practical work involved in it. Before discussing in depth about the remittances, I should first define the term remittance: It refers to the transfer of money from an individual, usually a person who has emigrated from his/her city or country of origin, to another individual, usually a relative who remains at home. Remittances are financial flows arising from the movement or transfers of money from one place to another within or outside the city or country.

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Remittances contribute to economic growth and to the livelihoods of needy people worldwide. Moreover, remittance transfers can also promote access to financial services for the sender and recipient, there by increasing financial and social inclusion. My supervisor told me that the remittance includes the following things:

Pay Orders. Demand Drafts.

Travelers Cheques.

Tele-graphic Transfer through SWIFT. Western Union Money Transfer.

Pay Orders Pay order abbreviated as P.O is a negotiable instrument (such as a draft) which instructs a payer bank to pay a certain sum to a third party within the city. It is a payment instrument which is used by the banks to settle payment obligations on behalf of their customers. This instrument is guaranteed by the bank for its full value and is similar to a demand draft. In FBL, P.O is payable at any of the Faysal banks branch in Pakistan. Payment through pay order is a confirmed payment. The reason is that when pay order is made, the applicant who has an account with the Faysal bank is debited and the amount is added to the pay order account. And from that account, the beneficiary account is credited

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for the amount of pay order. FBL only issues Payee Account Only pay orders. Pay orders in cash are not issued in FBL. Validity Pay order is valid for 6 months after the date of issue. If the customer does not claim the payment within 6 months of the issue then the amount of the pay order is included in the Unclaimed Account and the amount stays there for 10 years. Procedure for the Issuance of Pay Order When a customer comes for the issuance of pay order, the processing steps includes the following: The customer is given the Funds Transfer- Application Form. The customer fulfills the application form which includes the following details:
o

Transaction Details.

It includes Amount in Figures and Words. The desired Currency. Mode of Payment.

o o

Beneficiary Details (In whose favor P.O is issued). Applicants Detail (Who Requests for P.O).

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The

filled form along with the cheque is given to the

remittance officer who verifies the form through the following stamps: o Sign Verification (Where the customer has done the Signatures) on the application form. o Transfer Posted (Means amount is transferred from the Applicants account to the Beneficiaries Account). o Time Stamp (Contains the Date and the Time of Receiving of Application). The remittance officer then makes the necessary entries in the system by debiting the account of the applicant and crediting the account of the beneficiary. The commission is deducted at the time of issuance of the P.O. The commission charges are flat Rs. 80/which are charged to the applicants account. After the entries, the P.O is ready to be given to the customer. Demand Draft A demand draft referred to as DD is a bankers own draft drawn upon another banker as per agency arrangement (or) upon one of its own branches payable on presentation by the drawee bank. Types

Local DD. Foreign DD.

Local DD

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In FBL, local demand drafts are not issued. Local DDs are those which are issued by the banks for the settlement of funds between the cities. Foreign DD Foreign currency demand drafts are issued in FBL. Foreign DD is the bankers own draft drawn upon another bank/ correspondent bank in a country other than the country from where it is issued and drawn and payable in currency of the country in whose bank/ branch it is drawn. For this purpose, the bank has maintained its Nostro A/c with Standard Chartered Bank, HSBC and Mashriq Bank for demand draft Purposes. FBL does its remittance in abroad with HBL. Through Nostro account, outward remittance in DD takes place. I will explain the term Nostro A/C for outward and Vostro A/c for inward remittances as follows: Nostro A/c To best remember it is Our account with them in their currency. Nostro accounts are usually in the currency of the foreign country. This allows for easy cash management because currency does not need to be converted. Vostro A/c To best remember it is Their account with us in our currency. These accounts are maintained by the correspondent banks in the currency of the country in which the account is opened. These accounts are also known as Loro Account.

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For the purpose of inward foreign currency demand drafts, FBL is maintaining Vostro account of Shamil Bank of Behrain and Qatar International Islamic Bank. Travelers Cheques Traveler cheques (TC) is form of currency cheques for travelers which is convenient to carry and incase of misplace or lost one can easily have their cash again. In previous years businessmen were mostly carrying their cash in form of currency notes, usually they were worried about their cash, and it shouldnt be stolen or lost by them. For those reasons and for the comfort of the business community internationally countries decided to issue them travelers cheques, and now a days business community could use it easily without any fear of lost and steal. In Faysal Bank, the travelers cheques are issued at the selected branches. In Faysal Bank new garden town branch, travelers cheques are not issued. Telegraphic Transfer through SWIFT It is largely the obsolete method of transferring funds through a telegraph or telex link from one country to another. With the help of this service a customer can transfer money to the bank account of a beneficiary in most foreign countries of the world also called wire transfer; it has been replaced by secure cable and wireless telecommunications networks. In FBL, the transfer of funds through this medium is implemented through SWIFT which is the standard in all banks of the industry. The telegraphic transfer is of two types:

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Local TT. Foreign TT.

Local TT In local telegraphic transfer, the funds are transferred from one city to another. The local transfer system is not been used in FBL. The method was that the customer who wanted to avail this facility was given the funds transfer application. The person who wanted to remit the money used to provide the details of the receiving person. The transaction was done between the banks. The bank remitting the money used to credit the account of the person sending the money and the paying bank used to debit such account and made payment to the receiving person. The payments were done on the counters. The NIC of the persons were taken in that kind of transactions. This system has not been used today because the SBP has started restricted the counter payments due to the fraudulent nature of the transaction. Foreign TT The foreign telegraphic transfer means the transfer of funds to a foreign country. Both inward and outward is done at FBL. The foreign TT is done through SWIFT which is acting as a quickest mode for the transfer of funds to abroad. The TT is only done account to account in FBL. The procedure for the foreign TT followed by the remittance officer is explained as: The customer comes to the bank for the purpose of TT.

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The customer is given the Funds Transfer Form on which the customer provides the details like:
o o o

Amount of the Transaction in Words and Figures. The Desired Currency. Beneficiary transferred. Details to who the funds are to be

o o

Beneficiary Banks details in the abroad. Applicants Details.

After filling out the information, the customer signs the form and hands it over to the remittance officer along with the cheque.

The remittance officer in the scrutiny process assures himself that the requirements of the Anti- Money Laundering (AML) regulation of the SBP in this context are fulfilled.

The name of the person who is remitting is confirmed from the Office for Foreign Asset Control (OFAC) list. The Know Your Customer accounted for. The remittance officer makes sure that the purpose of the remittance must be provided by the customer. (KYC) requirements are duly

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The charges of TT are deducted from the account which is flat 16 US dollars. The stamping is done on the form and the remittance officer signs the form. The form also gets signed by the operations manager. The completed form along with the cheque is sent to the FBL head office where all the SWIFT operations are taken place. The head office makes all the dealing with the correspondent banks in abroad for the purpose of TT. THE ROLE OF SWIFT IN TELEGRAPHIC TRANSFER SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication, a member-owned cooperative through which the financial world conducts its business operations with speed, certainty and confidence. Over 8,300 banking organizations, securities institutions and corporate customers in more than 208 countries are the members of SWIFT and every day exchange millions of standardized financial messages. Its role is two-fold. They provide the proprietary communications platform, products and services that allow its customers to connect and exchange financial information securely and reliably. They also act as the catalyst that brings the financial community together to work collaboratively to shape market practice, define standards and consider solutions to issues of mutual interest. SWIFT enables its customers to automate and standardize financial transactions, thereby lowering costs, reducing operational risk and

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eliminating inefficiencies from their operations. By using SWIFT customers can also create new business opportunities and revenue streams. SWIFT has its headquarters in Belgium and has offices in the world's major financial centers and developing markets. SWIFT is solely a carrier of messages. It does not hold funds nor does it manage accounts on behalf of customers, nor does it store financial information on an ongoing basis. As a data carrier, SWIFT transports messages between two financial institutions. This activity involves the secure exchange of proprietary data while ensuring its confidentiality and integrity. Services Provided by SWIFT SWIFT network provides the following services to the banks: The exchange of real-time messages using XML standards. The exchange of bulk messages (e.g. non-urgent and low value payments). A secure browser for accessing account information.

Joining SWIFT In Pakistan the banks get the membership of SWIFT through State Bank of Pakistan. The Financial documents along with the registration application are submitted to State Bank and from where

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these are transferred to the SWIFT. After verification SWIFT gives the membership to the Bank. Following are the steps below to learn how to join SWIFT, connect to the SWIFT network and become fully operational. Procedure Every client has its own SWIFT BIC code, in order to identify Financial Institutions. BIC stands for Bank Identifier Code. To transfer messages securely and efficiently, the client bank connects through SWIFTNet network by the assigned SWIFT BIC code. SWIFT clients can configure their existing email infrastructure to pass email messages through the highly secure and reliable SWIFTNet network instead of the open Internet. SWIFTNet Mail is intended for the secure transfer of sensitive business documents, such as invoices, contracts and signatories, and is designed to replace existing telex and courier services, as well as the transmission of securitysensitive data over the open Internet. SWIFT code The SWIFT code is 11 characters made up of:

4 characters: Bank code (only letters). 2 characters: 3166-1 alpha 2 country code (only letters). 2 characters: location code (letters and digits). 3 characters: Branch code, optional (xxx for primary office) (letters and digits).

Procedure for International Clearing

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Outward Transfer For the purpose of outward transfer, as the foreign bank branch receives the SWIFT message, the Nostro account is debited for the banks record. The transferee has account with the foreign bank, the funds simply transfers to the transferees account. Inward Transfer For the purpose of inward transfer, as the domestic bank branch receives the SWIFT message, the Vostro account is debited for the banks record. The transferee has account with the domestic bank, the funds simply transfers to the transferees account. Western Union Money Transfer The Western Union Company, under the Western Union, Orlandi Valuta and Vigo brands, touches people around the world with 379,000 Agent locations in 200 countries and territories. Hundreds of millions of people currently live outside of their home countries and use Western Union services to remain connected to their families and homelands. Western union money transfer is a fastest way to receive money worldwide. There are other banks and institutions that are dealing in Western Union. They include National Bank of Pakistan, Pakistan Postal Service, Dollar East, and Master Currency etc. FBL acts as agent between the sender and the receiver. Only receiving money option is there in FBL.

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Procedure of Payment The Western Union is a counter payment which means that the sender of the money does not need to have an account with FBL. The procedure followed by the remittance officer in this context is as follows: The person who wants to receive money is given the Western Union Money Transfer form. The person fulfils the following details on the form: o Date. o MTCN (Money Transfer Control Number). It is a unique number which is given to the person remitting the money abroad by the money exchanger of that particular country. o Sender Name. The name of the sender must include the surname. o Sender Country. o Amount in PKR (Approximate Amount). o Receiver Contact. When the customer completes the form, the remittance officer asks for the photocopy of the valid identity card of the receiving person. If the ID card is not available, the photocopy of the passport is taken from the customer. The officer then makes the needed entries in the Western Union software which is installed at FBL. The entries are
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made in the software in the form called as To Receive Money. After making the entries, the print out of the form is taken, the officer signs the western union form. The money transfer form is kept by the bank for its own record purposes. The customer is given the To Receive Money form and the customer puts his/her signatures on the form and takes the payment from the counter by presenting such form and photocopy of ID card. At the remittance department, my supervisor also told me how to issue a term deposit receipt because this was also the responsibility of the remittance officer. Term Deposit Receipt (TDR) TDR is an amount of money either in Pak rupee or foreign currency kept for a fixed term subject to profit and loss. The receipt is a nonnegotiable item. The minimum amount for opening a TDR is Rs. 25000. Duration The following are the period for which these terms deposits are issued:

1 Month. 2 Month. 3 Month. 6 Month. 1 Year.

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2 Year. 3 Year. 4 Year. 5 Year. 6 Year. 7 Year. 7 Days Notice.

Profit Rates The profit rate on TDR is of two types:


Wrack Rate. Grid Rate.

Wrack Rate Wrack rate is the normal rate which is decided on the basis of KIBOR. It is a bi-annually rate. This rate is given to most of the customers. There is no special approval for this rate. This rate is negotiable on the basis of the amount of investment. Grid Rate Grid rate is the special rate which is given to the prime customers and is determined on daily basis. In FBL, the approval is to be taken from the area manager for providing such rate to the customer.

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Processing of a New TDR


When the customer comes to the bank for the opening of a new TDR, then the following procedure is adopted for this purpose: The customer is given the Term/Notice Deposit- Application Form. The customer fulfills the form which contains the following fields:
o o o o

Title Account. Amount of Investment in Words and Figures. Term/Notice Deposit Duration. Profit Payment Frequency (Monthly, Quarterly, Half

Yearly, Yearly, and On Maturity). After filling the application form, the customer signs the form and hands it over to the remittance officer. The remittance officer after scrutiny of the form affixes the following stamps on the form:

Time Stamp.

Sign Verification stamp After stamping, an Inter Office Memorandum (IOM) is prepared which contains the TDR amount, its tenure, profit rate, account number. The IOM is duly signed by the branch manager and the manager operations.

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The completed form, IOM and the profit rate approval sheet from the branch manager or area manager is sent to the FBL head office (Karachi) for the approval of TDR. Redemption of TDR On the date of maturity, the customer has the option to re-invest the amount. There are three options available to the customer: Principal Re-investment. Principal plus Profit Re-investment. No Re-investment.

Premature withdrawal of TDR The premature withdrawal occurs where the customer encashes the TDR before the expiry of the term (Maturity). Penalty is imposed on the premature encashment. The penalty is imposed as: Tenor equal to (or) less than 0.5 % on the principal amount 1 year for the remaining equal to days, profit maximum worked out. Tenor greater than 1 year 1.0 % on the principal amount for the remaining equal to days, profit maximum

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worked out.

MANAGEMENT STYLE
Management of Faysal Bank is fully responsible for establishing and maintaining value and adequate significance. controls and procedures. policies and The banks management fully recognizes this responsibility and appreciates its Accordingly, procedures encompassing various functional and administrative areas have been developed and circulated across all pertinent levels of the organization. These policies and procedures are approved by the senior management and ratified by the board of directors as and when developed. The banks internal audit function keeps monitoring compliance with these policies and procedures and regularly apprises the board on the same through the Audit Committee. Similarly, financial performance is kept under regular

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review and the board is kept updated on the same through the Executive Committee. The management feels confident by adopting the above mentioned measures and the internal control environment is maintained at a satisfactory level. In Faysal Bank, the management has a participative style. From the branch manager to the officer, all are fully involved and interlinked with each other. The branch manager has a full control over the branch. The regularity, punctuality and work appraisal is implemented under their authoritative style of management. The bank allows subordinates to voice their opinions about their immediate supervisor and this becomes a welcome addition to the practice of participative management.

APPLICATION OF KNOWLEDGE/ SKILLS LEARNED DURING IBIT STUDIES


The study at IBIT is definitely very helpful in my internship. The practice of making projects and assignments at the semester system has done a great job while I was doing my internship. These projects and assignments have taught me how to work in a timely and smart manner. I have really found these things helpful in my whole internship where I had to complete the work in an effective and efficient manner. The IT skills at IBIT acted as a plus point for

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me as it was not difficult for me to understand the routine work performed on the software and the basic implementation of IT.

NEW THINGS LEARNED


My internship experience has given me a realistic preview of my field of education. Now I feel that I am better prepared to enter the world of professional work. I feel honored that I have worked with such experienced professionals. I must admit that such interaction in this respectable professional community will help me in seeking out job opportunities in the near future. Each task I performed was a different experience in itself. By the end of it, I must say I realize my potentials, I have realized that earning money is not so easy after all, it takes a lot of hard work and devotion, and not to forget time. I definitely have learned things, which will impact my career and my character. The overall experience of my internship was very good; I have learnt the sense of responsibility in its literal meaning. I am now capable of dealing with different sort of customers, and how to be patient while doing so. Besides this I also gained knowledge about banking which I previously lacked and many more products being offered by the bank. So in a nutshell, this internship gave me the experience, which would no doubt boost my confidence to work in future.

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CHAPTER THREE: OVERALL SUMMARY AND RECOMMENDATIONS OVERALL SUMMARY


Faysal Bank Limited is a full service banking institution that offers consumer, corporate and investment banking facilities to its customers. The bank offers a variety of consumer products such as auto finance, home loans, saving schemes and debit cards. The bank also offers specialized products for the agricultural sector. Its trade finance services include a range of import, export and guarantee products. The bank also offers services such as cash management, automated teller machines, travelers cheque, transfer of funds, safe deposit lockers and non stop banking. Faysal Bank continues to pursue a goal of improving upon its risk management procedures with the aim of attaining full compliance of the State Bank of Pakistan guidelines. I observed Faysal Bank Limited a financially sound bank. Its profits are increasing year by year. Its staff is very good and sincere with bank. Faysal Bank views specialization and service excellence as the cornerstone of its strategy. The people at Bank realize that innovation, creativity, reliability, customized services and their execution are the key ingredients for their future growth They are aware that they have stepped into 21st century and they must meet its challenges by acquiring the highest level of
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technology. They will thus be accelerating their technological advance to enable them to distribute their products and services through most efficient and modern technology means.

RECOMMENDATIONS FOR FAYSAL BANK LIMITED


Global competition, customer attrition and the pressures to reduce the operating costs have created a harsh environment for the worlds financial institutions. Banks face many challenges in todays dynamic market place. In a global economy, bank needs efficient development of products that can quickly satisfy a more demanding customer base and build long term customer trust. Customers now have many choices than ever before. Many institutions are struggling to find the right mix of retail and commercial strategies as well as the optimal way to combine their self service, online and branch channels. In order to cope with todays turbulent environment, Faysal Bank must adopt a strategic approach toward information and process management that enables customer centricity, demonstrates a commitment to world class customer service and improve the depth of their relationship with customers. I have a very limited knowledge to give suggestions about the bank. But my stay in Faysal Bank as an internee has given the chance to explore different aspects of the organization. In view of these aspects, I have some suggestions for the bank which are as follows:

Faysal Bank should increase the efficiency and effectiveness of their marketing campaigns.

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Faysal Bank should have a close look on regularity measures of anti-money laundering.

Effective implementation of corporate governance is the key for sustainability of banking sector. Faysal Bank should also consider this point.

The promotion criterion in Faysal Bank is not satisfactory. It must initiate reasonable steps for the improvement of this system and should develop a performance based reward system.

One way to retain customers is to offer a wide range of services such as tax advice, free life insurance equivalent to amount deposited, shares portfolio management and fund management facility etc. Banks should have a slightly different mix of services and means of providing these such that customers can choose the mix that suits them best.

The top management should immediately start thinking in terms of rotating the employees in various departments, as this transforms work force into human capital. If a particular individual keeps on employing his/ her efforts in one sphere of banking it would not only create a sense of monotony and boredom, but also let the employees not interested in polishing their skills.

One of the most pressing needs of the time is to advertise the products and services in the electronic media. Faysal Bank Limited has not yet employed advertisement in electronic

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media as a full fledge marketing tool, It should start doing this as a mean to attract potential customers.

RECOMMENDATIONS FOR THE INSTITUTION IBIT

The institute should start a separate department for the internship program. There should be a liaison officer in this department who should make contacts with different well reputed banks and organizations for the arrangement of internships for the students.

As MBIT degree is still not familiar in the market as compared to the MBA degree, the institution should contact seminars and invite the HR managers of different organizations and banks and make them aware the benefits of this degree.

Only one banking course is in the curriculum. The institute should add more advanced banking courses in the course outline. Latest articles on financial crisis, discussions boards and other informative material like business journals and magazines should be placed on the institutions website from where the students can easily take help for their assignments and projects.

Case studies and reading articles about the banking problems should be given to the students in the class.

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RECOMMENDATIONS FOR INSTITUTE FOR NEXT INTERNSHIP IN THIS ORGANIZATION

The teachers should have a contact with the managers with whom the student is attached.

There must be some visits by the teachers in the organization during the time of students internship.

There must be a clear statement obtained from the bank about the activities of the student on weekly basis. The institute must make counseling in making the internship reports.

TABLE OF CONTENTS
CHAPTER ONE: THE ORGANIZATION.......................................................1 BANKING IN RETROSPECT......................................................................1 MODERN BANKING................................................................................3 BANKING ORGANIZATION IN PAKISTAN..................................................4 BRIEF HISTORY OF BANKING IN PAKISTAN..............................................6 HISTORY AND BACKGROUND OF FAYSAL BANK.......................................7 PRODUCTS AND SERVICES...................................................................11 GENERAL PROFILE OF FBL...................................................................30 ORGANIZATIONAL STRUCTURE.............................................................30 Overall Appraisal, Problems ................................................................37 CHAPTER TWO: INTERNSHIP ACTIVITIES...............................................39 Departments, I served.........................................................................39

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MANAGEMENT STYLE...........................................................................80 APPLICATION OF KNOWLEDGE/ SKILLS LEARNED DURING IBIT STUDIES..81 NEW THINGS LEARNED........................................................................82 CHAPTER THREE: OVERALL SUMMARY AND RECOMMENDATIONS...........83 OVERALL SUMMARY............................................................................83 RECOMMENDATIONS FOR FAYSAL BANK LIMITED..................................84 RECOMMENDATIONS FOR THE INSTITUTION IBIT...................................86 RECOMMENDATIONS FOR INSTITUTE FOR NEXT INTERNSHIP IN THIS ORGANIZATION...................................................................................87 TABLE OF CONTENTS...........................................................................87

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