credit facilities by banks

7/29/2019 Credit Facilities by Banks

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Products and services (Askari Bank)

Consumer banking

ASK 4 CAR

ASKCARD (Askari debit card)

Master card

Mortgage finance

Personal finance

Islamic banking

Declared weight ages

Deposit schemes

Home Musharakah

Ijarah Bi Sayyarah Profit rates

Branch banking

Deposit multiplier account

Investment certificates

Mahana bachat account

Paishgi munafa account

Roshan mustaqbil deposit

Rupee traveler cheques

Value plus deposits

Agriculture banking

Kissan aabpashi finance

Kissan evergreen finance

Kissan farm mechanization finance

Kissan tractor finance

Kissan livestock development finance

Corporate & investment banking

Bill discounting

Export financing

Fund transfers/remittances

Letters of credit

Letters of guarantee

Receivable discounting

Structured trade finance facilities

Term loans

Working capital facilities


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Accounts Opening DepartmentAccounts opening department is one of the departments that come under the retail/general banking

facilities provided by Bank Alfalah Abdali road. Some of the major deposit accountsopened by Bank Alfalah Abdali road are as follows:

Major Deposit Account Products

Current AccountCurrent Accounts are non interest bearing accounts that have a minimum account openingrequirement of Rs. 10,000. No zakat is deducted on the accounts balance. Furthermore all cu r r en ta c c o u n t h o ld e r s r e c e iv e a H i l a l d e b i t c a r d a n d t h e r e a r e n o r e s t r i c t i o n o n t h enumber of withdraws or deposits made to and from the account.

Profit& Loss Saving AccountProfit& Loss saving accounts can be opened with a minimum balance requirement of Rs.5,000 andprofit is credited on a half yearly basis. There are no restrictions on the number of deposits andwithdrawal made to and from the account and all account holders receive a Hilal debit card as well.

Profit and loss saving account cannot be opened by a business corporation, however can bejoint ly opened by ind ividua ls. Profi ts are pa id at 2% on al l account balances.

Basic Banking Account (BBA)B a s i c B a n k in g A c c o u n t w a s i n t r o d u c e d b y b a n k s o n a n o r d e r b y t h e S t a t eBank of Pakistan and is current in nature. There is no minimum balance requirementfor BB

However initial deposit must be Rs 1000. Maximum two withdrawals and deposits areallowed by cheque, while there is no restriction on ATM withdrawals.

Royal Profit Account

Royal profit accounts are opened with a minimum balance requirement of Rs 50,000. The basic aimof this account is that the higher the balance the higher the return, as profit is creditedon a monthly basis. The profit paid to account holders is as follows: Profits paid on Royal ProfitAccountA m o u nt P r o f i t p a. F r o m R s . 5 0 , 0 0 0t o 9 9 9 , 9 9 9 2 . 5 0 % F r o mR s . 1 , 0 0 0 , 0 0 0 t o 4 , 9 9 9 , 9 9 9 3 .5 0 % R s . 5 , 0 0 0 , 0 0 0 a nd a b o v e N e g o t i a b l e

Kifayat AccountKifayat account is another saving account product that can be opened with aminimum ba lance requ i r ement o f Rs 10 ,0 00 , wi th a maximum l imi t o f Rs 1mi l l i o n . P r of i t i s calculated on a monthly basis, while it is credited on quarterly basis. BankAlfalah pays7% pa interest on Kifayat Account.

Mahana Amdan AccountM a h a n a A m d a n a c c o u n t i s T e r m D e p o s i t R e c e ip t ( T D R ) f o r t h r e e y e a r s t h a tca n b eopened with a minimum balance requirement of Rs 100,000, with a maximum limit of Rs15million. Profits are paid at 10% pa, credited on a monthly basis. Other features of thisaccountinclude free personal accident insurance and automatic renewal for another 3years, afterthe expiry of original period.

Alfalah Education


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A lf a l a h e d u c a t i o n i s a o n e y e a r T D R th a t c a n b e p u r c h a s e d b y p e o p l e h a v in gs c h o o lgoing childrens. A person can purchase a unit for Rs 100.000, with a maximumof 3years. This TDR pays 7%, paid at maturity and gives an additional advantage ofgivingmonthly school fee of the childrens if the breadwinner of the family dies.

Basic Requirements for Account OpeningThe basic requirements to open an account for individuals/self employed are as follows:

CNIC

Source of income (salary slip etc)

NTN certificate (optional)

Company letterhead or authorization (as required)

The basic requirement to open an account for a partnership:

Partnership Deed

Partners CNIC

Company Letterhead

NTN certificate (optional)The basic requirement to open an account for companies:

Memorandum of Association

Article of Association

Directors CNIC

Company Letterhead

NTN certificate (optional)

Internal Codes for Bank Alfalah AccountsSome of the major account opened at Bank Al falah Abdali road and their internal

codesare as follows:Internal Codes for SomeAccountsA c c o u n

t T y p eC o d e C u r r e n t A c c o u nt 0 1 0 * * * * * P r o f i t & L o s s A c co u n t 0 2 0 * * * * * BB A A c c o u

n t 0 1 8 9 * ** * R o y a l

P r o f i t s 0

2 9 * * * * * C u


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r r e n t A c c o u n tU S D 0 1 8 * * * * *Major Work Done by Account Opening DepartmentStop Payment

a customer looses their cheque book, then that customer will have to come to the bank and firstlyreport the loss and then stop payment, by telling the series of cheque he has lost. Bystopping pa yment, the customer is guaranteed that no il legal payment is made from theiraccount. The process for stopping payment, after the customer tells that he has lost is cheque book isthat he fills a Form B, which is same as a cheque book requisition form and an indemnity form,

stating no responsibility on behalf of the bank if any illegal payment is made before the time ofannouncing a cheque book lost.

Bank Statement and Bank BalanceA b a n k s t a t e m e n t t e l l s t h e w h o le a c t i v i t y o f a b a n k a c c o u n t o v e r a p e r i o d o f t i me . Customers often come and want their bank statements and have to fill a form, relating to the

time period for which the bank statement is needed. As part of my internship, I was to assist the

customer to fill the Bank Statement Form and printed statement is given through thebanks so ftwa re . Of ten cus tomers want to know the ir accoun ts ba lance over the phone andthus I had to tell them their account balances using the banks information system Bank Smart.

Account OpeningW h e n e v e r a c u s to m e r c o m e s t o o p e n t h e i r a c c o u n t , t h e y h a v e t o f i l l ar e l a t i on s h ip contract with the bank. As part of my internship I had to fill these forms and then usethe appropriate bank stamps to complete these forms. Also as part of the relationship form, I also hadto do a Verisys, a verification system started by NADRA on the CNIC of the new account opener. AVerisys tells, if more information pertaining to the customer is needed to open the account ornot. Furthermore as all relationship forms have to be sent to Karachi, a central location, forall account relationship forms.

RemittancesThe need of remittance is commonly felt in todays business. A major function of

anybank is to transfer of funds form oneplace to another. There are two main types ofinstruments that are used to transfer money, which are as follows:

Pay order: Used to transfer money within the city

Demand Draft: Used to transfer money outside the city

Pay order

Pay orders are made to transfer money within the city and this is a safe way totransfer money as the person who makes the t ransfer throug h pay order pa ys inadvance. The procedure that is carried out in transferring money through pay order is as follows:

Procedure for Transferring Money through Pay OrderThe customer will come to the bank and fill in the pay order application, giving in thed e t a i l s t o w h ic h a c c o u n t t h e m o n e y i s b e in g t r a n s f e r r e d , t h e a m o u n t e t c a n d

a t t a ch a cheque to pay for the pay order. Pay orders can also be made through cash but mainly it ismade through cheque. The officer checks all the details in the application, makes out the charges for

the transfer that the customer will pay and then make the pay order for the customer andpa ss the following entry: Customer A/cPay order payable When the customer in favour ofwhom the pay order was made gives the pay order to his branch, the entries passed are:Payorder payable Customer A/c


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Demand DraftDemand Draft is another way in which customers can transfer money outside the city.There are two types of situations for transfer of money through demand drafts:

Outward DDsWhen a customer comes to Bank Alfalah to make a DD to transfer money outside the cityis known asoutward DD. The customer will fill the details in a DD application form, and will attach a cheque orpay cash as he wish.Then the officer will check all the details and make a demand draft for thecustomer and pass the followingentries:F o r C h e

q u e : F o r C a s h : Customer A/C Sundry A/c14

Head Office Head Office

Inward DDsThis is the procedure adopted when the issuing branch sends copy of the instrument as an advice.When the bank receives the advice, the officer will pass the following entries: Head Office A/cDDPayable A/c When the cus t omer come s wi th the DD to ge t h is pay ment , t hef o l l owi n g en t r i e s a r e passed: DD Payable A/cCash If that customer is a Bank Alfalah accountholder then the following entries are passed: DD Payable A/c Customer Account

Foreign RemittancesAnother type of remittances is foreign exchange transfer from another country to a Bank Alfalahaccount in Pakistan, through SWIFT. Bank Alfalah for foreign exchange transfers takes the help ofCiti Bank for routing.

Procedure for Foreign TransfersThe customer will come to Citibank to transfer money to Pakistan. The entries passedwill be: Customer A/c15

CREDIT MARKETING DEPARTMENTCredit means belief or trust. The quality of being credible or trustworthy.Anotherwords we can define credit as trust in ones integrity in money matters and ones ability tomeet payment when due.Credit marketing department deals with extending loans (creditfacility) to customers before sanction advice. State Bank of Pakistan (SBP) has

pr escr ibed regul at ionsw h i c h a r e c a l l e d P R U D E N T I A L R E G U L A T I O N S . E v e r y b a n k h a s t o

f o l l o w t h e s e regulations. If any bank violates the regulations it should be liable for penalties.The Bank Alfalah limited credit is extended on the basis of these rules and regulations.These regulations tells the term and conditions under which you can extend loans to

the borrower and to what extent.


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CREDIT FACILITIESAt BAL there are two types of credit facilities

Funded facilities

Non funded facilities

FUNDED FACILITIESThese are the facilities in which there is direct involvement of cash fund. Fol lowingarethe funded facilities.

Current finance CF

Term financeTF

Finance against foreign bills FAFB

Finance against packing and credit FAPC

Finance against imported merchandise FIM

Finance against trust receipt FATR

Local bills discounted LBD

Current Finance CFThe extensively used financing mode at BAL is current finance (CF) current financeisused to finance both individuals and industries. Individual take current finance for their

pe rsona l use while in indust ri es . It is taken for fulfilling the requirement of working capital.

Term Finance TFTerm finance is for specified time period. Term finance is given for fixed asset financing.

Finance against Foreign Bills FAFBIn FAFB facility exporter take loan from bank on the behalf of their foreign export bills. L i kee x p o r t e r s e n d s s h ip m e n t b u t a t t h a t t im e h e n e e d s f u n d f o r t h e o p e r a t i o n o f t he business. He may go to the bank and surrenders all the documents including L/C, Bill of ladingetc. bank checks all the documents to be in accordance with terms and conditions. If they find nodiscrepancy, they give money to exporter but take some margin on it.

Finance against Packing and Credit FAPCFAPC is taken for the preparation of consignment. It has two forms.

Pre shipment

Post shipment

1 ) P e r S h i p m e n t Pre shipment loans are export related working capital financing.

2 ) P o s t S h i p m e n t Post shipment financing is essentially the receivable financing to the exporters tillthe period he is out of cash after the shipment.


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Finance against Imported Merchandise FIMThis facility is allowed against the commodities imported from other countriesusuallythrough letter of credit. Some time importer does not have enough amount for payingtheimported merchandise therefore. He request to the bank to pay all dues to theexporter against the security of imported merchandise. Bank pays t he amount and

re leases thegoods, when the importer pays off its liability partially / fully.

Finance against Trust Receipt FATRFinance is extended upon the trust receipt signed by borrower. Importer has to import the product.There are three conditions.

Pay money and get thing

Get fine facility And third is that if that client is trust worthy for bank believing on himbased upon his past record. He releases the goods against the trust receipt. Trust receipt is given to

the bank by the customer. The customer in turn commits t hat I wil l pay on such an d

such da te . Ban ks pays a l l t a xe s and ge t s merc hand ise and t hen g ive s i t toc l i e n t . Ba n k do charges markup against such financing. FATR is for specific period of time. Ifclient does not pay with in specified time then bank will charge higher per day mark up.

Local Bills Discounted LBDPayment against documents or local bills is made by the banks as payment againstL/Ccomes due payment is made for imported documents. For example when seller of phutti(rawcotton) gives all the documents or bills to bank as to get bills discounted in which he gets immediately

payment which he would receive after the season.

NON FUNDED FACILITIESThe facilities where there is no direct involvement of banks fund. There are two types of unfunded

credit line facility, which are as follows:

Letter of Credit (LC)

Letter of Guarantee (LG)

Letter of CreditsA letter of credit is a written undertaking by a bank (issuing bank) given at the requestand accordance of a buyer (the applicant) to the seller (the beneficiary) to a fact payment up to astated amount of money within prescribed time limit provided that the terms and conditions arecomplied with. Letter of Credits issued in the international trade business. There are two types ofLetter of Credits:

Usance LCUsance LC is a form of LC, whereby the bank engages to honor the beneficiary usancedraft on an acceptance that the items are in accordance with the conditions. Payment ismade against acceptance.

Sight LCTheses are letter of credit where the bank engages to honour the beneficiarys sightdraft upon presentation provided that the documents are in accordance with thecondi tions o f the L /C. T h is i s a more sa f e fo r m of l e t t e r o f c r ed i t a s pa ymentis made against the documents.


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Letter of GuaranteesLetter of guarantees is a guarantee that the bank gives to an organization on behalf of the bank. Letterof Guarantees are mainly used when a tender for a specific job is filled by a customer. There arethree main types ofLGs:

Bid BondBid Bond are filled at the time of filling out the tender and states that if the companyisgiven the tender, it will start working on it and will not walk away.

Performance BondsPerformance Bonds are issued to the beneficiary, to guarantee him that the applicant

of the tender wil l perform the contract under a specific period o f time. Performancebo nds are issued after the tender is approved of the applicant.

Mobilization against LG (MALG):This is a guarantee that the bank gives when the beneficiary (the firm that issued the

tender) that pays an advance of tender to the applicant (the firm that gets the tender), tha the willreturn that advance amount

Flow Chart of Processing of fresh proposal201. Interview prospective borrower 2. Receipt of request Prepare visit report

Viable3a. Refuse Request4. Request given to credit officerA

I nt er vi ew pr os pe ct iv e bo rr ow er i nthe presence of credit Manager.

2 . R e c e i v e r e q u e s t s t a t i n g t h e amount, type, tenor andpurposeof facilities as well as repaymentand securities offered.

3 . P r e p a r e v i s i t r e p o r t t o a s s e s s w he t he r t h e bo r ro w e r i s a

goodcredit risk.3a. Where proposal is not viable thenrefuse request

.4 . W h e r e p r o p o s a l i s v i a b l e a l l o c a t e task to credit officer

a . S e e k c o n s e n s u s o f m e m b e r o f B C C w h e r e c o n s e n s u s n

o t obtained reject proposal.

1 6 . W h e r e c o n s e n s u s o b t a i n e d i f w i t h i n t h e p r e -

d ef in ed l im it s of BCC. If not recommend sanctionand forward to credit divisionfo r approval of H.O.17.Retain a set of photocopy

of CLP.1 8 . O n r e c e i p t o f s a n c t i o n a d v i c e f r o m c r e d i t d i v i s i o n r e t a i n

o n e c o p y f o r r e c o r d a n d f o r w a r d o r i g i n a l t o c o n c e r n e d c

r e d i t officer. Prepare OfferLetter and proceed with other documents

Alfalah Branded Products

Karobar FinanceAlfalah Karobar Finance is short term facility that is only provided to individualsandsole proprietors. This facility also has one year validity with markup charged on

theamount used. This facility again provides individuals to maintain their workingcapitalmanagement and is again given to individuals for a security. Karobar finance is


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type of current financing with difference i.e., in karobar finance, the individual has to clear allhis balance in his account, once in a year.

Milkiat FinanceAlfalah Milkiat Finance is a long term facility that is provided to SMEs and there are four main types

of facilities provided:

Acquisition of rented commercial/industrial property

Construction on an owned commercial/industrial plot

Purchase of a commercial/industrial property

Renovation of owned commercial propertySome of the features of Milkiat finance are as follows:

Tenure of 2-15 years except for renovation, which is for 2-4 years

Mark up of (KIBOR+5%)

Financing from Rs 0.5 million to Rs 30 million

Eligibility age should be less than 65, with 3 years of existing business

Quick FinanceAlfalah Quick Finance is another short term and a type of current financing facility that is onlyprovided to individuals for the fulfillment of personal or family needs. The financing is given againstthe deposits and government securities up to the 90% of the cash value of security. Financing ismade from 50,000 up to 25 million

The five Cs of Credit

i) Capital:The capital & resources of the borrower his capital structure and the gearing ratios either borrowerUnder-capitalized? Does the borrower have its own resources to fall back on, incase of need?

ii) Capacity:Capacity or the capability of the borrower to manage his business profitably and thecapacity to repay the advances and service the facilities according to agreed terms. Is the borrower ina capacity to borrow? Or is there any legal complication?

iii) Collateral:

T h e s e c u r i t y p r o v i d e d a g a i n s t t h e f a c i l i t i e s . I s t h e s e c u r i t y p r o v i d ed : A d e q u a t e , R e a l i z a b l e , M a r k e t a b l e , V a l u a b l e , S t o r a b l e , N o n -p e r i s h a b l e , D u r a b l e , a n d Transferable/with clear Title.

iv) Character:Are the borrower's personal character, market standing and reputation impeccable? Hashe met his part commitments? Does he have good bank reference?

v) Conditions:Have the conditions of lending been drawn up taking into account all possibilities Isthesector/industry in decline, is growing or it has reached at plateau? Is there a market

for the products and the market size to justify production plans and sales forecasts? Are the economicconditions feasible generally and for the business, in particular


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Credit Administration Department (CAD)

Taking cognizance of the sustained progression of the bank business and the inherent risk factorsattached to expansion, the management felt a need for setting up of independent Credit

Administration Department (CAD) i n its branches so as to minimize the losses occurringfrom giving credit. According to the Bank Chairman Review Conservative yet dynamic creditpolicy While adhering t o the above policy it is imperative t hat the perfection of securityand enforceability of support documents are ensured for affective Management .Its main purpose isto streamline the working of CAD to mitigate the chances of losses arising fromincomplete security and documents covering advances. It is suggested that CAD headed by amanager is to be set up in branches meeting the following criteria Aggregate funds andnon-fund based credit portfolio of RS.500 million and above and minimum number ofborrowing customers be ing twenty five. The personnel of CAD are furthered advised tokeep themselves update by thela te s t ins t ruc t ion / regu la t ion i s sued f rom Head Of f ice , S ta te Bank of Pak is tanand Other regulatory institutions.

Receive sanction advice from credit manager Start Obtain Security as per Sanction advice Check allFacilities Documents Complete registration of the Banks charge over security with SECP/ Govauthorities Appraise Relationship/credit manager and branch manager Any exception to the terms andconditions of sanction advice, ensure waiver obtained for competent authority If CompleteAComplete Standard facilities and security documentation

ALodge security and documents attested by the concerned credit manager Feed limits in the systemRelease facilitiesEND29

Credit Administration Process

1. Registration of chargeT h e C A D m a n a g e r h a s t o r e g i s t e r c h a r g e w i th s e c u r i t y a n d e x c h a n g eco mm i ss i on of Pakistan (SECP) of mortgage/ hypothecation within 21 days fromthe date execution of documents.

2. Securities/ Facilities DocumentationThe CAD manager has following options while securing credit.

F i r s t e x c lu s iv e C h a r g e s : I n f i r s t e x c lu s iv e c h a r g e s , f i r s t t h e c l a im o f b a n k i ssatisfied in the case of default of the borrower.

Ranking Charges: In this, the ranking is given. The first on the ranking is satisfied and then comes thesecond and so on.

Pledge: It confers physical possession of movables but not ownership.

Hypothecation: It is a security for a debt, which remain in the possession of the borrower.

Mortgage: It is a claim against real estate or fixed assets. The deposit of titledeedswithout documentation can create a mortgage.

LCs, Bank Guarantees, other guarantees


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3. ValuationA CAD manager can take value and evaluate security worth from the following sourcesS e c u r

i t y S o

u r c e D e p o s i t s C o m p u t e r

p r i n t s o u t s h o w in g a c t u a l a m o u n t G

o v e r n m e n t s e c u r i t i e s F a c ev a l u e o r e n c a s h a b l e

v a l u e r a t e s published by the government of

PakistanS h a r e s S t o c k e xc h a n g e s r a t e s i

n d a i l y n e w s p a p

e r M o r t g a g e o f p r o p e r t y / a s s e ts V a l u a t i o n r e p o r t b y b a n k s e v a l u a

t o r showing market

valueS t o c k ( u n d e r p l e d g e , h y p o t h e c a t i o n ) F o r p l e d g e K a r ac h i C o t t o n A s s o c i a t i o n i s s u es i t s r at e s . F or h yp ot he c at io n s t oc k report submitted by

borrower

Issuance of guaranteesEND

Stock reportFrequent submission of stock reports is necessary as per term of sanction advice.

5. Stock InspectionVerification of stock is made and it should be the same as given in stock report.Thefollowing are usually checked.

Stock break up

Evidence of ownership

Quality/condition of warehouse

Fire Protection adequacy

Adequate protection from theft, burglary etc.

6. InsuranceAssets charged to the bank should be insured through an approved insurancecompany.One month before expiry of the insurance policy, the concerned customers

shou ld be reminded to renew the policy.

7. Search reportA l l p u b l i c /p r i v a t e l im i t e d c o m p a n ie s a r e r e q u i r e d t o r e g i s t e r b an k s c h a r g eo ve r i t s current and fixed assets with SECP. Search report is prepared from the records of SECPshowing the ranking of charges over borrowers assets to different banks.

8. Credit Information Bureau (CIB)State Bank of Pakistan requires banks to obtain detailed information from CIB, SBPwhen considering proposals of over Rs. 0.5 million to any borrower. In case CIB reportindicates over exposure/ default in meeting obligation etc. The accommodation to theconcerned borrower can be derived.


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9. Borrower Basic Fact SheetSBP requires that all facility application should be accompanied by the Borrowers FactBasic Sheetas per approved format of SBP

BorrowersThe following are the categories of the borrowers

1. Corporate BodyThe term Corporate Body will include:

A company incorporated under the companies act.

A corporation created by a ordinance/ a statute/ act of legislature

a. Obtain memorandum and Articles of association of the company

Whether company is public limited and quoted on stock exchange, not quoted onstock exchange is a

private limited.

Whether it is empowered to borrow?

Are there any restrictions on the companys power to borrow?

What are directorspowers?

b. Obtain board resolution and ensure that it contains

Authorization to raise facilities

Create Charge on company assets/pledge securities which are in companies name

2. PartnershipThe partnership deed is obtained. In its absence banks standard letter of partnership, duly signed bypa rtners is ob tained. Al though al l pa rt ne rs are joint ly and sever al ly liable for the debt of

the firm, however, it is considered inexpedient to obtain personal guarantees for good business reason.

3. Sole proprietorshipIt is owed by an individual and there being no formal procedure to be followed for setting thebusiness so a decl arat ion on the fi rm let ter head evidencing propr ietor s name et c is taken.

4. IndividualIt is ensured that borrower is not suffering from any incapacity and is not a minor, insane or insolvent.These people are not capable of contracting and therefore any borrowing by them is unlawful.5. Clubs, Associations, Trusts, Charitable societiesExtra care is taken as these borrowers may enjoy legal protection, which is not available to others.

Trade Finance DepartmentT r a d e F in a n c e i n v o lv e s t h e im p o r t a n d e x p o r t a c t i v i t i e s . T h i s d e p a r tm e n t p r o vi de s protection to the rights of importer and exporter. The function of thisdepartment is to serve as a bridge between the importer and exporter in order to settle a transaction.When trade is taking place between the representatives of two countries (exporter and importer),the

exporter involves his bank (


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the Advising Bank

) in the transaction, as he wants to feel secure regarding timely payment of his goods in the requiredcurrency. On the other hand the importer involves his bank (

the Issuing Bank

), in order to get a sense of security regarding timely supply of the required product,in the required manner. Trade Finance Department handles two activities:-

Import

ExportIMPORTImport Department of BAL deals with the import of merchandise. Import can be defined as :Thebringing of commodities into Pakistan from outside by sea, land or air.Requirement for the ImporterThese requirement / document must be fulfilled from importer before doing the import:

NTN (National Tax Number) certificate

Sale Registration Certificate

Membership from Chamber Of Commerce

Questionnaire duly filled in

NIC (attested copy)ExportsExports are major sources of earning foreign exchange and play an important role in the economicdevelopment of the country. It helps to utilize excess resources of the country.Exports mean selling

goods to another country.Exports of all eligible commodities through authorized banking channelsare admissible under exchange control regulation.Requirement for the ExporterThese requirement / document must be fulfilled from exporter before doing the export:-

Account holder of Bank Alfalah Limited

Must be a Pakistani

Membership from Chamber Of Commerce

NTN (National Tax Number) certificate

The person must have the Sales Tax Registration Certificate.

Form E ( export form) dully filled in

Sale Registration CertificateMethods of Doing International Trade

Letter of Credit

Contract


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LETTER OF CREDIT (L / C):1) LETTER Of Credit (L / C) ADVISINGLetter of Credit (LC) is a written and conditional undertaking by a bank on the behalf of applicantto the beneficiary to pay a certain amount at a certain date; if the stipulated terms andconditions are complied with. The process of International Trade starts with asking of importer to its

bank for L/C. Then importers bank wi ll be ca lled as issuing bank . The issuing bank sendsthe L/C to Bank Alfalah Limited. A bank that r eceives the L/C is called an advisingbank because af ter receiving the L/C, it performs the L/C advising function.

A cover letter is prepared and is se nt to t he be ne fi ci ar y of th e L/ C, ad vi si ng hi m hi s

L/ C ha s re ac he d Ba nk Al fa la h Limited and he should collect it immediately. A copyof the L/C is sent along with the letter.

2) ISSUANCE OF E-FORMSGovernment has provided facility to exporter in taking E-Form from any bank and isa part of the exchange control mechanism of the State Bank of Pakistan. When an exporter receives

an L/C, his next job is to get an E-form from an authorized Bank. On the E-form sent by the

commercial bank following things are mentioned

Description of the commodity

Quantity of the commodity exported

Amount realized

Foreign bank charges

Country of the importer

3) CERTIFICATION OF THE E-FORMAfter filling in the complete information about the goods to be exported, theexpor te r b r ings th e E - fo rm to the bank fo r ve r i f i c a t ion . B ank i s sues E -

f o r m ce r t i f i c a t i on t o exporter and he submits it to the custom officer along with E-formcertification to certifyE-form

) THE DOCUMENTSAfter getting the E-form verified the exporter starts preparing his shipment. Banks only deal indocuments. In order to receive payment fr om his goods the exporter has to send certaindocuments to the issuing bank via his negotiating bank. These documents are.

Bill of exchange:

A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker,directing a certain person to pay a certain sum of money only to, or to the order of, a certain

pe rson or the bearer of the ins trument. It is dr awn by the exporter (drawer ) and orde rsthe importer or the importers bank (drawee) to pay to the order of B a n k A l f a l a hL im i t e d ( p a y e e ) a s p e c i f i c a m o u n t . I f t h e d r a f t i s d r a w n a t s i g h t , t h eim p o r t e r m u s t m a k e t h e p a y m e n t o n r e c e ip t o f t h e d o c u m e n t s . I f i t i s t im ed r a f t , t h e payment must be made within the specified time limit.

Commercial InvoiceThe exporter prepares it. Its amount must tally with that of the L/C. It shows the nameand address of the importer as well as the invoice number. This number is very significant as it is usedin all the correspondence between the exporter and his bank. It also containsa l l t h e s p e c i f i c a t i o n s o f t h e c o m m o d i ty b e in g e x p o r t e d . T h e s t a n d a r d d e f i n i tion of commercial invoice is that it is


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an it em iz ed li st of go od s sh ip pe d to a bu ye r, st at in g quantities, prices, and shippingcharges.

Bill Of Lading

The shipping company or the airline that has been assigned the task of transporting thegoods issues these. The shipper must ensure that the goods are shipped and handed over the rightperson when documents are presented to him. The standard definition of a bill of lading is contractbetween the seller of the goods and the carrier. The following are types of bill of lading:

OCEAN Bill Of Lading

Air Waybill

Inland Bill Of Lading

Packing List / Weight List

The exporter prepares these lists in order to show that the consignment is according to the order of thebuyer. It gives a detailed account of the manner in which the goods have been packed and the number

of cartons they have been packed in.

Certificate of OriginThis document certifies the origin of the exported goods. In the case of exports fromP a k i s t a n , t h e c e r t i f i c a t e o f o r i g in s h o w s t h a t t h e c o u n t r y o f o r i g in o f t h e

goods is Pakistan. The certificate of origin is a document in which the exportercertifies to the place of origin of the goods to be exported.

E-FormIt is a necessity for all exports out of Pakistan. All commercial banks always issue the E-form in

quadruplicate.

Original: is sent to the custom officer

Duplicate: Bank receive the duplicate

Triplicate: is sent to the State Bank Of Pakistan

Quadruplicate: is kept by the exporter for his personal record.

Export VisaThis document is required when the destination of consignment is Canada, America, andU.K.

Different countries fix quota for different commodities and restrict imports of those goods with in aspecific limit. Therefore visa is required which is in fact a permission to export goods to the specified

countries.

Payment by importerExporters bank sends all the documents negotiated in LC to importers bank. Once thes h ip m e n t a r r i v e s i n im p o r t i n g c o u n t r y , d o c u m e n t s a r e k e p tw i t h t h e ban k u n t i l t h e importer makes full payment to bank.

COLLECTION / NEGOTIATION:When the exporter comes to the bank with the documents, he has two options.

Send them for collection


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Get Them negotiated

Collection:T h e b a n k s e n d s t h e d o c u m e n t s o n b e h a l f o f t h e e x p o r t e r t o t h e im p o r t e r sb an k f o r payment. The payment is made in Pak Rupees and the exchange rate is the Buying rate

of the day normally called the T.T. Clean Buying Rate. When the reimbursing bank is to pay BankAlfalah Limited it credit s its no stro account maintained with i t (the reimbursing bank),and afterwards bank debits the exporters account with the local equivalent of the export proceedscalculated at the TT clean buying rate.Negotiation:T h e b a n k p u r c h a s e s t h e d o c u m e n t s f r o m t h e e x p o r t e r i . e . t h e e x p o r te r g e t s t h e m discounted before their maturity. For example, the drafts are at 90 days from B/Ldate. In simple words, the payment for t he exports would be received after three months.The e x p o r t e r m i g h t n o t w a n t t o b l o c k h i s f u n d s f o r s u c h a l o n g t i m e .H e c a n g e t h i s documents negotiated the day he presents them to the bank. The exchange ratehe will get will however be lower than the TT clean buying rate because the bank is

paying hi m an amount that it is going to receive after three months itself. C on t r a c t s a r e

no t nego t i a ted howeve r in any ca se . Th is i s because they a re unsa fe documentsand the bank does not take the risk.

Dispatch:The documents brought by the exporter are in the form of sets containing an original and number ofcopies. The number of each document required by the importer is mentioned on the credit. Usuallythey are:

Manually signed commercial invoice

Bills of lading

Packing list in quadruplicate

Bill of exchange

F i l i n g : A separate file is maintained in each case and if the documents have been negotiated, it ist i t l e dF D B P th a t i s t h e a b b r e v i a t i o n o f Fore ign Documentary Bi lls Purchased. I f t h e documents have been sent for collection, a file in the similar fashion is keptbu t it is labeled FDBC i.e.Foreign Documents Sent For Collection.

CONTRACT:The exporter might export the goods based on a CONTRACT with the importer. In such a case,there is no surety to the exporter that the importer will make the payment. The

im p o r t e r m ig h t r e j e c t t h e g o o d s o n r e c e ip t a n d d e n y a n d p a y m e n t t o t h ee x po r t e r . Therefore, the contract is an unsafe document. There are two types of contracts.

CAD (Cash against Documents):The documents are sent to the issuing bank. The issuing bank informs the importer thathis documents have arrived. The importer deposits the amount of the contract with

the bank and takes possession of his documents have arrived. The is suing bank thenmakes thepayment to the exporters bank.

DA (Documents Acceptance):


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D r a w e e t a k e s d o c u m e n t s a n d p o s s e s s io n f r o m th e i s s u in g b a n k a n d s i g n s ab i l l o f exchange in return giving his acceptance for payment on a specific maturity date. Now, if hedoes not make the payment to the issuing bank no payment is made to the exporter and there is noliability on either bank

Application of Class Room LearningDuring my Internship at Bank Alfalah Abdali Road, I saw some practical application ofsome class room learning. I saw most of knowledge application in Trade finance department, CreditAdministration and Credit marketing. Operation department had less knowledge application.

Trade Finance Department:At Trade Finance Department, I got a lot of practical exposure of studying International Finance.Since this department mostly deals with imports and exports, I saw th e p r oc ess in g o f l e t t e r o fcre di t an d th e do cum ent s nee ded fo r imp or ts and ex por ts . Customers were comingfor the purpose of their business and they were informed about the rules and regulation fori mpo rt in g a nd ex po rt in g. Le tt er of gu ar an t ee s w er e a ls o issued by the department.

Credit Department:At the Credit Department, my practical learning was excellent. At this department, theloans are to be disbursed. So for this purpose a complete interview with borrower is conductedand borrower is asked about its financial strength then a CLP is made. Loan isdisbursed after the complete study of financial reports such as balance sheet and incomestatement. Making of instalments, interest charging and calculation and others all were practicallyperformed at the department.42

Learning as an InterneeMy internship experience has given me a realistic preview of my field of education. Now I feel thatI am better prepared to enter the world of professional work. I have come to know andbeen appreciat ed by a nu mber of pr ofes sion als who are lending thei r se rvices to the

banking sector for more than a decade. I feel honoured that I have worked withsuche x p e r i e n c e d p r o f e s s i o n a l s . I m u s t a d m i t t h a t s u c h i n t e r a c t i o n i nt h i s r e s p e c t a b l e professional community will help me in seeking out job opportunities in thenear future. Each task I performed was a different experience in itself. By the end of it, Imust say Realize my potentials, I have realized that earning money is not so easy after all, it takes alot of hard work and devotion, and not to forget time. And I now know that if I want Icanm a k e t h i n g s p o s s i b l e , a n d I a l s o k n o w h o w g o o d i t f e e l s t o h a v i ng a c c o m p l i s h e d something and being appreciated for it. I definitely have learnt things, whichwill impact my career and my character. T he o ve ra l l ex p er i en ce o f my in t er n sh ip wa sve ry goo d; I hav e lea rn t th e sen se of responsibili ty in i ts l i teral meaning. I amnow capable of dealing with different sort of customers, and how to be patient whiledoing so. Besides this I also gained knowledge about banking which I previouslylacked and many more product s being offered by the bank. So in a nutshell, t hisint ernship gave me the experience, which would no doubt boost my confidence to workin future