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Executive Summary

The banking structure in Pakistan comprises of the following types, State Bank of

Pakistan, Commercial Bank of Pakistan; Exchange Banks, Saving banks,

Cooperative banks, specialized credit institutions. The state bank of Pakistan is

the Central bank of the country and was established on July 01, 1948. The

network of bank branches now covers a very large segment of national economy.

The State Bank of Pakistan issues the shares of these periodically. Bank

employees and other common peoples can also purchase these shares and earn

profit.To open an account the customer has to meet the general banking manager

with an introducer. The procedure begins with the punching of account opening

form to the customer file i.e. customers master file. Before closing any account,

bank send letter to the account hold for informing him that his account is going to

be closed. There is need an approval form higher authority to close any account.

Current deposits are those which are payable to bank whenever demanded by the

customer. Bank does not pay any profit on current deposits. The following are the

financial products/services of PLS Account, Saving Account, Term deposit and

Foreign currency accounts.

In remittance department like any other United Bank Ltd also have instruments for

transferring of money, Telegraphic Transfer, Mail Transfer. In cash department

both deposits and withdrawals go side by side. This department works under the

CD In charge and deals with cash deposits and payments. This departmentmaintains the following sheets, books, and ledger of account cash received

voucher sheet.Cash paid voucher sheet, Paying-in-slip, Cheque Book, Cash

balance book. The clearing in Karachi at UBL or other banks is being done

through NIFT (National Institute of Facilitation Technology).Bank provides this

facility to the people who need advance money to meet their requirement. Party

dealing with other banks financial condition of borrower business and as a first

step credit proposal is being made. UBL provides advances, which are two types.

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Secured Advances, Unsecured Advances. UBL usually classified advances in to

following types Commercial Advances, Corporate/SMEs Advances, Agricultural

Advances. Commercial Advances are of following types Demand Finance, Cash

Finance, Export Refinance Part I (Pre Shipment) & others. Banks Agriculture

division deals with the agriculture advances. Bank provides the Agriculture

Advances in order to enhance and support the agriculture sector of the country.

Farm Credit & Non Farm Credit.

In foreign exchange, UBL is dealing Foreign Currency Accounts, Foreign

Remittances, and Foreign Bills for Collection, Imports & Exports .Foreign currency

accounts & the foreign currency department deals with the following types of

accounts, Current account, Saving bank account, Term deposit. Foreign accounts

are convertible on floating rate available to the bank. Letter Of Credit facility is

being provided by UBL in foreign exchange.

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Date Established

November 7, 1959

Chairman

His Highness Shaikh Nahayan Mabarak Al Nahayan

Deputy chairman

Sir Mohammed Anwar Pervez OBE

President & CEO

Mr. Atif R. Bokhari

Branches

1039 Domestic, 15 Overseas Branches

Joint Venture with NBP

United National Bank Limited , U.K

Representative Offices

Tehran and Cairo

Subsidiary

United Bank AG Zurich, Switzerland

Associated Company

Oman United Exchange Company, Muscat

Offshore Banking Unit

Export Processing Zone, EPZ Branch, Karachi, Pakistan

Employees

8,998

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Evolution of Banking

It has not so far been decided as to how the word 'Bank' originated. Some authors

have the opinion that this word is derived from the words `Bancus' or `Banque',

which mean a bench. Other authorities hold the opinion that the word `Bank' is

derived from German word `Back', which means `joint stock fund'. It is therefore,

not possible to decide as to which of the opinion is correct, for no record isavailable to ascertain the validity of any of the opinions.

Banking in fact is primitive as human society, for ever since man came to realize

the importance of money as a medium of exchange; the necessity of a controlling

or regulating agency or institution was naturally felt. Perhaps it was the

Babylonians who developed banking system as early as 2000 BC. It is evident

that the temples of Babylon were used as 'Banks' because of the prevalent

respect and confidence in the clergy.

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HISTORY OF BANKING IN PAKISTAN

At the time of independence, there were 63I offices of scheduled banks inPakistan, of which 487 were located in West Pakistan alone. As a new country

without resources it was very difficult for Pakistan to run its own banking system

immediately. Therefore, one expert committee recommended that the Reserve

Bank of India should continue to operate in Pakistan until 30th September1948,

so that problems of time and demand ability, coinage currencies, exchange etc.

are settled between India and Pakistan. The non-Muslims started transferring

their funds and accounts to India. By the end of June 248 the number of officersof scheduled banks in Pakistan declined from 631 to 225. There were 19 foreign

banks with the status of small branch offices that were engaged solely in export of

crop from Pakistan, while there were only two Pakistani institutions, Habib Bank

of Pakistan and the Australian Bank. The customers of the bank are not satisfied

with the uncertain condition of banking. Similarly the Reserve Bank of India was

not in the favor of Govt. of Pakistan. The Govt. of Pakistan decided to establish a

full-fledge central bank. Consequently the Governor-general of Pakistan Quaid-I-

Azam inaugurated the State Bank of Pakistan on 1st July 1948. Thus a landmark

was made in the history of banking when the state bank of Pakistan assumed full

control of banking and currency in Pakistan. The banking structure in Pakistan

comprises of the following types.

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FORMS OF BANKS

State Bank of Pakistan

Commercial Bank of Pakistan

Saving banks.

Cooperative banks

Specialized credit institutions.

COMMERCIAL BANKS :

Commercial banks have been the most effective mobilizers of savings and have

been providing short-term requirements of working capitals to trade, commerce

and industry. Up to 31'` December 1973, there were 14 Pakistan cemmercial

banks that were performing their functions all over the country and in some

foreign countries through a network of branches, the name of these were:

National Bank of Pakistan

Habib Bank Limited

Habib Bank (Overseas) Limited

United Bank Limited

Muslim Commercial Bank Limited

Commerce Bank Limited

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Scheduled Banks

Non-ScheduledBanks

Central Bank

CommercialBanks

FORMS OF BANKS

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Australia Bank Limited

Standard Bank Limited

Bank of Bahawalpur Limited

Premier Bank Limited

Pak Bank Limited

Lahore Commercial Bank Limited

Sarhad Bank Limited

Punjab Provincial Co-operative Bank Limited

All these commercial banks were nationalized in 1st January 1974, and were

recognized and merged into the following five banks:

National Bank of Pakistan

Muslim commercial bank limited

Habib Bank Limited

United Bank Limited

Allied Bank of Pakistan

The state bank of Pakistan is the Central bank of the country and was established

on 1'` July 1948. The separation of East Pakistan and its repercussion in the form

of economic depression has caused a lot of difficulties to the banking system in

Pakistan. The network of bank branches now covers a very large segment of

national economy. The numbers of branches have increased appreciably and

there is now one branch of bank for every 3000 heads of population

approximately. There is done reasonable growth in deposits from the

establishment of Pakistan. Besides this growth, specialized credit and financial

institutions have also developed over the years.

The Government of Pakistan in the late 90's introducing the need for the

privatization of state owned banks and companies. The private sector has

accepted the challenge and most of the banks are privatized today. The State

Bank of Pakistan issues the shares of these periodically. Bank employees and

other common the people can also purchase these shares and earn profit.

Through out the period of banking history the banks have been expanding rapidly

and achieved the desired goal of progress.

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Introduction of United Bank Ltd.

HISTORY

The decision to establish UBL was taken in June 1959 and the company was

registered on July 24, 1959. It was on November 7th that United Bank Limited

appeared on the banking horizon in Pakistan and started operations with its first

branch namely Mcleod Road now I.I Chundigar Road at Karachi. On 9th

November 1959 the Gazette of Pakistan notified and included United Bank

Limited in its list of scheduled banks operating in Pakistan.

With its shortest span of time UBL emerged as dynamic and large international

organization. In 1969 the Management of Union Bank Limited incorporated in

former East Pakistan, was handed over to UBL, which was later merged with UBL

in early seventies.

The Bank continued its operations as private banking company until 31st

December 1973 when it was nationalized along with other banks operating in the

country and other two Banks namely Pak Bank of former East Pakistan and

Commerce Bank Limited were merged with UBL.

A Batik, like the society it serves should be dynamic as banking is about people

customers with their needs and opportunities and staff with skills, experience and

resources. United Bank Limited has shown dynamism since its inception. There

have been many changes in the structure, functions and the services provided.

These changes reflect the changing requirements of our developing economy as

a whole and those of Industry. Commerce and private Individuals.

On October 19th 2002, biggest event occurred in the history of UBL. As UBL was

privatized. The government handed over the management of united Bank Limited,

the third largest bank of the country, to the successful bidder - Consortium Of Abu

Dhabi group (UAE) & Bestway Holding Limited (UK). The sales agreement for the

transfer of 5 1% shares was signed by Privatization Minister Altaf M. Saleem and

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Bestway Holding, Sheikh Nahayan Mubarak A1 Nahayan at a ceremony. This

event was declared as a "New journey For UBL".

On May 18th 2004, Atif Bokhari took over the charge as new Chief Executive

Officer of United Bank Ltd from Amar Zafar Khan, who served UBL for more than

seven years. United Bank officially announced the appointment of Atif Bokhari as

its Chief Executive Officer. Bokhari was previously Senior Executive Vice

president & Group Head, Corporate and Investment Division of Habib Bank. He

was also a member of the HBL management committee.

In the view of highly impressive growth and development achieved during its 45

years of experience, UBL has come to be accepted as one of the most

progressive and dynamic components of the banking industry in Pakistan.

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VISION STATEMENT

To be a world class bank dedicated to excellence, and tosurpass the highest expectations of our customers and allother stakeholders.

Mission of United Bank Ltd.

Our mission is to:

Set the highest industry standard for quality across all

areas of operation, on a sustained basis;

Optimize people, processes and technology to deliver

the best possible financial solutions to our customers;

Become the most sought after investment;

Be recognized as the employer of choice

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STRATEGIC THRUST

Causative factor making UBL's vision to become a world-class bank a reality is

the strategic thrust that drives its impetus from People, Premises, Products and

Processes. UBL continues its journey towards these four strategic pillars by hiring

and developing a world-class team, investing in new premises, launching

customer-focused products and through continuous improvements of our

processes.

FUTURE STRATEGY :

UBL expects its strong customer focus to drive the Bank's future business

strategy. On the domestic side bank has already launched its consumer banking

business. Increased investment is targeted in developing human resources;

infrastructure and internal system support the aggressive consumer initiative and

explorations of new avenue generation. The first step under this initiative is the

launch of the Bank's ATM/Debit Card, branded as UBL Wallet. Furthermore UBL

has plans to introduce a full suite of innovative consumer finance products

designed to capture a significant share of the local consumer financing market

and tap into the current growth in demand of such financing.

Personalized Service and Dynamic Approach :

In order to meet its goals and capture the market share the Bank employed

professional and skillful approach to the management, which took a series of

successive measures to educate the people of Pakistan banking and savingsminded. Various drives for the mobilization of savings and other accounts were

initiated. The knowledge of customer's business market research and business

planning, visits to customers at their doorsteps, development of personalized

relationship with the business community, fixation of seasonal business targets

and follow-ups to achieve these goals attained prominence. Flexibility, delegation

of authority to the lowest possible level and encouragement by initiative were the

key factors, which helped the bank, to achieve the objectives.

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CATALYST OF CHANGE :

UBL emergence proved catalyst and brought changes in the banking sector as a

whole. The Bank-Customer relationship attained a new dimension and courtesy,

politeness and efficiency gained fundamental importance. Convenience for the

customer remained a core and criterion for this relationship. UBL initiated the

scene in the office and the branches redesigned and modernized.

UBL Corporate Banking :

UBL's mission is to serve all corporate needs of its customers and ensure full

satisfaction through the product innovation, personalized banking through

Relationship Banking,. Best Customers Service & Key Contacts.

UBL Investment Banking :

IBG specialized with providing innovative and unique advice to its clients to assist

them in meeting challenges in an ever-changing market. A healthy mixture of

structuring , advisory and project Finance business deals in either leading or

participating in TFCs.

UBL Treasury :

Responding to customers need and to provide treasury services with the

reorganized dealing room. This department is interacting with the market and

dealing with Core Treasury Products in the money market and Foreign Exchange.

INTERNATIONAL OPERATIONS :

After achieving dynamic progress domestically, the Bank took a basic decision to

make its presence felt internationally and to cater to the needs of Importers and

Exporters as well as its shares in the international market, foreign trade, UBL

opened its first branch in 1963 in London UK, the most important center of the

international finance and trade.

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The UK operations of Unite Bank Limited were closed during the year 2002 and

along with the branches of National Bank Of Pakistan a new bank namely

Pakistan International Bank has been incorporated in UK with 55% share holding

of UBL.

In Oman the share holding in Commercial Bank of Oman was withdrawn however

an exchange company namely Oman United Exchange Company a joint venture

was formed in 1983. The bank has also withdrawn its share holding the United

Saudi Commercial Bank, Saudi Arabia as well as United Bank Of Lebanon and

Pakistan SAL.

The UBL global network with its strategically located overseas branches and

affiliates, covering almost all major financial markets of the world, is well

positioned to act as a correspondent bank for Pakistan and currency transaction.

With its strategy to reach its customers in various diversified markets across the

globe, UBL is progressing fast in the arena of' cross border ventures with an

appetite for commercial and country risks. To meet the required international

standards of modern banking United Bank Limited is the first Pakistan bank to

shift its international division from Karachi to Dubai.

At present UBL and its subsidiaries are:

United Bank Limited - Holding Company

Pakistan International Bank - Joint Venture

Oman United Exchange Co. - Joint Venture

United Bank Ag-Zurich - Subsidiary

United Assets Management Co. Ltd - Subsidiary

United Executor & Trustees Co. Ltd -Subsidiary

United bank Financial Services (pvt) Ltd - Subsidiary

Ready For 21st Century :

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United Bank Limited has stepped into the 21st century with confidence. Now that

the bank has been privatized and 51% shares have been purchased by investors

i.e. The Best Ways Group UK and Abu Dhabi consortium electing H.H Shaikh

Nahyan al Mubarik as Chairman UBL. UBL has geared itself to provide services,

which the customers in modern banking expect from the bank.

The Bank has also planned to play its dynamic role in the overall development of

the country. It is now well equipped with latest technologies and professional

experience to face the future with determination and confidence and with its high

aims and sense of direction to serve the Nation with zeal and devotion.

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ORGANIZATIONAL HIRARCHY OF BANK

The Structure of UBL follows the following Hierarchy:

15

Chairman

Chief Executive Officer(PRESIDENT)

Senior Executive Vice President

Executive Vice President

Senior Vice President

Assistant Vice President

Officer Grade I (OG-I)

Officer Grade II (OG-II)

Officer Grade III (OG-III)

Junior Officer

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The Structure of UBL Main Branch thull hamza

BranchManager

CSMAccount OpeningDepartment

CreditDepartment

Clearing DepartmentComputerDepartment

Foreign RemittanceDepartment

Bills andRemittances

Cash DepartmentFinanceDepartment

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Board of Directors

Name Designation

His Highness Shaikh NahayanMabarak Al Nahayan

Chairman

Sir Mohammed Anwar Pervez,OBE, HPK

Deputy Chairman

Mr. Atif R. Bokhari President & CEO

Mr. Omar Ziad Jaafar Al Askari Director

Mr. Zameer MohammedChoudrey

Director

Dr. Ashfaque Hasan Khan Director

Mr. Muhammad Sami Saeed Director

Mr. Amin Uddin Director

Mr. Aqeel Ahmed Nasir Company Secretary & Chief Legal

Mr. Aameer Karachiwalla SEVP/Group Chief Financial Officer

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Map of Regions

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PROVINCE WISE REGION ALLOCATION

Province/Area Region Name

SindhKarachi

Do Hyderabad

Punjab

Do Faisalabad

Do Multan

Do Islamabad

NWFP Peshawar

Baluchistan Quetta

Azad Kashmir MuzafarAbad

Domestic Network of Multan Region

Multan Region 225Branches

Head Office 1

Multan 48

Bahawalpur 38

Dera Ghazi Khan 36

Rahim Yar Khan 32

Sahiwal 38

Vehari 32

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Major Operations

ACCOUNT DEPARTMENT

OPENING OF ACCOUNT .

To open an account the customer have to meet the general banking manager with

an introducer (the person who is going go introduce that person in the bank) and

get an application form used for account opening. Single Account Opening

Application Form is available for all types of account. Along with the form a card

for specimen signature is also supplied to customer. Manager has every right not

to accept this contract if he is not satisfied by the details provided by the

customer. In case the contract is acceptable to both, then it is the time to open

the account formally.

PROCEDURE

The procedure begins with the punching of account opening form to the customer

file i.e. customer's master file. The manager records the necessary details into

this register and allots an a/c number from this a/c opening register. This register

is maintained for each type of account and the A/c no's allotted serially. After

opening a saving and current account every applicant's data is entered into thecomputer to maintain a safe record and application form is properly filled so that it

can be available when necessary. Checking officer is responsible to Tele the

manual application form with the computerized a/c opening file. For fixed deposit

only that application form is needed this is prepared manually, because most of

the procedure of fixed deposit is done manually. The signature specimen card

contains three signatures of an applicant, applicant a/c no, a/c type, branch code,

title of a/c, it will be attached with an application form. Banker uses this card at

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the time when he receives the cherub; he compares customer's signature with the

signature on the cherub for avoiding fraud.

TYPES OF ACCOUNTThough in theory there many types of accounts but commonly account operators

can be

classified in one of the following categories.

a) Individual

b) Joint

c) Partnership

d) Private Limited

e) Public Limited

f) Sole Proprietorship

g) Minor

a) INDIVIDUAL ACCOUNT :

Only one person can operate this a/c. An individual who can fulfill the requirement

of bank can open this a/c. We can call it a personnel or individual a/c. Therequirements for this type are National Identity Card Photocopy, Minimum

Deposited Balance, Account Opening Form, Letter of Kinship (Photograph

requires only for illiterate people) etc.

b) PARTNERSHIP ACCOUNT :

For partnership a/c, along with the application form other requirements needs

satisfied. The requirements for this type are National Identity Card Photocopy,Minimum Deposited Balance, Account Opening Form, Registration certificate,

agreement among partners and Commencement of business and private

registration, resolution of board of directors, commencement of business,

memorandum and articles of association and balance sheet etc.

c) JOINT ACCOUNT :

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In case of joint a/c applicant mentions that how much person will operate a/c,

Instruction are given for joint a/c such that the account shall be operated by

anyone or more. The requirements for this type are National Identity Card

Photocopy, Minimum Deposited, Balance, Account Opening Form, Letter Kinship,

Additional Signature Form (For Joint Account), and Declaration regarding the

operator of account.

d) PRIVATE LIMITED ACCOUNT :

Such type of account is opened in the name of the businesses having private

limited concern and mostly medium business enterprises open such kind of

accounts. All the board of directors have to submit the declaration regarding the

account operator on the company pad and with the rubber stamp with the

signature of the all the members of the board of directors. In case of any change

in director's bank must be informed regarding that. In case funds are borrowed by

the company all the directors approval is necessary rather not only the authorized

partner who can be the operator of the account.

e) PUBLIC LIMITED ACCOUNT :

Public Limited A/C type of account is opened in the name of the businesses

having Public limited concern and mostly medium business enterprises open such

kind of accounts. All the board of directors have to submit the declaration

regarding the account operator on the company pad and with the rubber stamp

with the signature of the all the members of the board of directors. In case of any

change in director's bank must be informed regarding that.

f) SOLE PROPRIETORSHIP ACCOUNT :

Sole proprietorship account is an account that is opened in the name of the

company that is owned by a single person and only that owner is allowed to have

transaction with the bank in terms of withdrawals.

g) MINOR ACCOUNT :

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In Pakistan Minor person is one having age less than 18 years and that person is

not feasible to have an individual account with the bank. For that particular reason

account of minor person can be opened with some mature person it is a sort of

account opened for a child by his/her guardian. Until the age of 18 of minor

his/her guardian will be allowed to withdrawal transaction with the bank and his

signature will be verified for payment not of the minor.

CASH DEPARTMENT

In cash department both deposits and withdrawals go side by side. This

department works under the accounts department and deals with cash deposits

and payments. This department maintains the following sheets, books, ledger of

account:

Cash received voucher sheet.

Cash paid voucher sheet.

Paying-in-slip

Cheque Book

Cash balance book

Cash department is performing its job completely through computers. The

following staff member is performing their duties with patience and hard work.

Cash Payment :

The instrument that can be used to withdraw an amount from an account is the

Cheque book. Cheques can be of two types:

Open Cheques:They are payable in cash at the counters of the bankers in accordance with the

practice of the bankers.

Crossed Cheques:

They are not payable in cash at the counter of the banker, but can be collected by

only the banker who would credit the proceeds to his customer's account after

realization.

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While making the payment of cheque, special attention must be given to the

following important points.

Drawer's signature have been duty verified from the relative SS card after affixing

the rubber stamp of "signature verified" and putting the initials by the verifying

officer. Dates of Cheque have been checked.

Two signature of the recipient of cash on the reverse of the cheque have been

duly obtained

Amounts in words and figure should be checked and it should be confirmed that

there isn't any discrepancy in the amount written in figures and words.

The Cheques should not be stated as post dated. If in the Cheque there may

discrepancy regarding any of the aspects described above the Cheque is returned

to the customer for rectification. On other hand if the Cheque is valid in all

respects, the cashier enters the necessary inputs in the computer and posts the

entry so that account balance is updated. When manger posts these entries,

computer automatically display the balance before posting the transaction

amount, balance after posting. The cashier easily and quickly see whether the

amount being withdrawn so exceed the balance or within the balance.

Cash Receipt :

For depositing the cash into customer's accounts, there is need to fill in the

paying-in-slip giving the related details of the transaction. This paying-in-slip

contains the date, A/c/no, A/c title, particulars, amount being deposited and

details of the cash. There are two portion of the paying-in-slip. The depositor

signs the one part of the paying-in-slip one is retained by the bank to show an

acceptance of the entries made in the slip. The paying-inslip serves as a voucher

to update to computerized transaction ledger. The transaction ledger is only

updated by paying-in-slip and Cheque. The cashier responsible to receive both

the paying-in-slip and cash from the depositor. The cashier check the necessary

details provided by the paying-in-slip and accounts the cash and tallies with the

amount declared in the slip. If the amount does not tally with the cash given, the

deposit is not entertained until the customer removes the discrepancy. On the

other hand if the two amounts tally, the cashier fills in the "Cash voucher received

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Record Sheet" and assigns a voucher no. to both the transaction being made in

the sheet and the slip. This voucher no. starts with one and continue by serial

increments of one for each day till the closing of the sheet, the cashier fills the

voucher no, an account, cash day till the closing of the sheet. The cashier fills in

the voucher no, an account of, cash entry in the related type of A/c and he posts

his initials on both part of the voucher. Then the cashier send both to the

accountant who verifies all the entries in the two documents, if the entries in the

two documents, if the entries in the two documents tally with one another, the

manger authenticates the two by singing on the two documents and posting

stamps on the slip.

One part of the slip is then returned to the customer and other is given to the

computer operator. A very important check is that the dates mentioned into the

two documents must be the same. Then cashier posts the transaction entries in

computer ledger. This ledger contains the A/c no, A/c title, voucher no, voucher

date, transaction code, transaction amount. After posting these entries, computer

display before posting balance and after posting. On every transaction computer

generates an output of transaction ledger. He assigns the stamp "POSTED" on

the voucher to show voucher transaction entries are posted. Checking officer

receives this voucher and the compute output transaction ledge, he manually

inspects the entries of ledger and voucher. If both are tallied, he then signs the

ledger and put a mark of cancellation on the voucher. After the verifications from

the checking officer, manger receives the voucher.

CASH BOOK BALANCE :

At the end of the working day cashier is responsible to maintain the cash balance

book. The cash book contain the date, opening balance, detail of cash payment

and received in figures, closing balance, denomination of government notes

(Currency). It is checked by manager. The consolidated figure of receipt and

payment of cash is entered in the cash book and the closing balance of cash is

drawn from that i.e.

Opening Balance of Cash + Receipts - Payments = Balance

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The closing balance of today will be the opening balance of tomorrow. This

department is one of the most important departments of the bank. Manager

checks all the books maintained in this department.

DEPOSIT DEPARTMENT :

Bank deals in money and they are merely mobilizing funds within the economy.

They borrow from one person and lend to another, the difference between the

rates borrowed and lend from their spread or gross profit. These deposits are

liability of the bank so from the viewpoint of bank we can refer to them as

liabilities. This department maintains all formalities of the accounts and account

holders like it account name, account holder's name, code number and full

address.

TYPES OF DEPOSITS :

Different types of deposits that are treated in UBL are described as follows:

CURRENT ACCOUNT :

In this type of accounts, the client is allowed to deposit or withdraw money as and

when he likes, but there is requirement of maintaining the minimum balance of

Rs.10, 000/- other wise Rs.50/- will be deducted every month. Usually the

businessmen open this type of account and the bank pays no profit on it. These

types of deposits are also exempt from compulsory deduction of Zakat.

PLS SAVING BANK ACCOUNT :

This type of account is for those persons who want to make small savings. This

type of account is opened with a minimum deposit if Rs.200/- If the balance in the

account falls below the minimum requirement then a flat charge of Rs.150/- is

made in the account once in a half year. Zakat is deducted @ 2.5% on 1 st of

Ramzan each year on the minimum balance declared by the central Zakat

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committee. Tax is deducted @ 10 % on profit paid to the depositor irrespective of

the amount of profit.

FIXED DEPOSITS :

In this type of account a certain amount is deposited for a certain period such as

six months, one year, two year or longer. A fixed deposit receipt is issued in the

name of the depositor. The receipt is signed by the officer in charge and the bank

manager. A notice is given to the depositor on a prescribed from two weeks

before the Fixed Deposit Receipt (FDR) falls due, requesting the depositor to

withdraw his money or to renew his deposits. The interest is allowed on fixed

deposit varies with the period for which the deposit is made.

SHORT NOTICE TERM DEPOSIT :

This kind of deposit is for a short period as the name indicates. The depositor

may withdraw his deposit at any time by giving seven days notice to the banker.

This type of deposit facilitates the trader to withdraw his amount with interest of

the deposited period.

CALL DEPOSIT :

Call Deposits are the sorts of deposits, which are deposited with the banker

against any tender. This is with out interest deposit, this may be with interest

provided with the depositor has agreed to keep this amount with the banker for

some fixed period.

FOREIGN CURRENCY ACCOUNT :

All persons, firms and companies of local or foreign origin, whether resident or

non resident, can open foreign currency accounts all foreign currency accounts

are interest based and are not PLS based. Accounts may be opened in US

Dollars, pound Sterling, deutsche marks, and EURO.

Deposits in FC Accounts may be made in the form of cash, traveler's cheque,

Bank or any other agency cannot enquire or raise any question about the sources

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of funds, deposited in foreign current Accounts by the customer. Any amount at

any time can be withdraw form these accounts. There is no limit for CASH

withdrawls.

REMITTANCES DEPARTMENT :

BANK DEMAND DRAFTS (DD):

A bank draft is an order instrument issued for the payment of certain sum of

money to or to order of certain person and drawn on one office of the bank by

another office usually. There are 3 parties to the draft.

Drawer - Issuing Bank

Drawee - The bank on which the draft is drawn.

Payee - The named person to whom the payment is to be made. He

may be an endorsee if the draft has been endorsed properly.

Where request is received by the banker to issue a bank draft, it is written request

on specifies DD application form. While issuing a draft it is necessary that the

draft should be free from alternation. All the details must be written neatly and

clearly in ink.

In UBL demand drafts are categorized into two forms one is for the amount of

Rs.5000 or below and the second is for the amount greater than 5000. As an

additional precaution the draft should be protect graphed across the face of the

same. In case the protect graph is not available a sum slightly in excess of the

amount payable must be written in red ink preceded by the words "Under" or " Not

over". It is known as " Protective Crossing" or security notation.

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After the issuance of a bank draft, it is handed over to the applicant and its advice

containing the particulars of the draft is sent to Drawee branch for their necessary

information and payment of the draft on its presentation.

It is not necessary to be an account holder of payee in Drawee branch. But if DD

is crossed then payee must be the account holder of Drawee branch.

Payment of Demand Draft:

The payment of demand daft may be executed in two possible ways.

On receiving the dd credit advice (IBCA) at the drawee branch.

Payment before the IBCA is received (EX-advice).

The original DD is to be retained by Drawee branch in each of the above

mentioned cases and serves the purpose of the debit voucher. A record of the

situation pertaining to the payment or otherwise of a particular DD is maintained

in the DD payable register at the Drawee branch.

1. Practical procedure regarding the payment of DD in United Bank limited is

summarized. The branch which issue DD is called originating branch. Afterissuance of DD, it passes following entry:

Dr. - Cash

Cr. - HO A/c

2. All drafts drawn on the branch are routed through the general ledger account

"Draft Payable" of the bills payable account. The Drawee branch on receipt of the

advice credits this account.Following entry is passes after receiving advice.

Dr. - HO A/c

Cr. - DD Payable

3. Drafts are to be retained as debit voucher to the relative account when a draft

has been paid.

Following entry is passes after payment.

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Dr. - DD Payable

Cr. - Payee account on Cash

4. In DD is presented In other bank, then it comes to Drawee branch through

clearing and following entry is passed:

Dr. - DD Payable

Cr. - HO A/C

5. Signatures are always verified on all drafts drawn on a branch.

6. Normally, payment of a draft should be made after receipt of a corresponding

advice. In case the advice has not been received. Payment should be executed

through the approval of the manager at the Drawee branch who should satisfy

himself with the authenticity of the draft in term of signatures and otherwise. The

draft paid ex-advice should also be debited to the demand draft payable account.

7. On the receipt of advice from the drawer branch, signature should be verified

and test verified if the amount of draft exceeds Rs. 5,000/-

8. The particulars of draft should be entered in DD payable register. The draftwhen paid should be marked in the DD payable register.

Mail Transfer :

Sometime a constituent of the bank wants to transfer funds from one account to

another, or a non-constituent wishes at remit funds in a particular account

maintained at some place with a branch of the bank or when the accounts aretransferred from one branch to other, such amount/balances are remitted by

means of mail transfer. The procedure for issuance of a mail transfer is the same

as discussed for the draft except that the applicant is provided with the

memorandum for money received from him for issuance of a mail transfer on the

particular branch of the bank. Mail transfer advice is sent to the paying branch

where it is treated as a credit voucher because money only transfers in the

account of payee in paying branch.

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Documentation:

Issuing Branch Name & Code

Beneficiary Branch Name & Code

Number of MT

Amount in words & Figure

Commission charged

Telegraphic Transfer (TT):

Generally mail transfer advice reaches the Drawee branch next day when courier

arrangements exist. However when it is sent through post offices it usually take 2

to 3 days to reach its destination. But sometimes an individual whether customer

or no, demand that this funds should be transferred from one place to another

through the quickest means. In such cases transfer of funds message is passed

on though a telegram, ordinary or express, to the Drawee branch of the bank. A

tested message is sent to the drawee branch followed by the confirmation copy.

In case the payee immediately requires the payment, the tested message is given

on the telephone. For telegraphic message, bank charges one additional expense

of Rs. 100/from the customer.

Documentation

Issuing Branch Name & Code

Beneficiary Branch Name & Code

No. Of TT

Amount in words & Figure

Commission

Pay Order :

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A Banker's pay order or branch Cheque is an instrument drawn by a banker on

himself. Implicit in a payment order is an undertaking on the part of banker to pay,

certain sum of money on the presentation of the instrument.

The payment orders are generally issued for anyone of the following practical

purposes. To facilitates all locally payable expenses on account of a bank for the

reason that such payments are not executed through Cheques.

For all local payments under instructions of customers for sundry purposes like

payment of insurance premium, payments to third parties, club bills, rent and

taxes etc.

Issuance :

For the issuance of the payment order, the purchaser giving his name and

address thereof will tender an application on bank's standard form. In the case of

request from the bank customer for the issuance of payment order, a letter in this

respect will be obtained giving full particulars of the payee authorizing the bank to

debit the account.

The cost of the payment order along with an amount of Rs.50/- as commission

plus excise duty will be paid on the counter.

In case of letter of authority, the total amount i.e. payment order amount,

commission, excise duty and postage, if any, will be debited to the customer's

account as per bank instructions and contra credit will be passed to bills payable /

payments orders account, commission, excise duty and postage account.

The transfer voucher as above shall be processed through bank transfer book.

The manager/second officer shall sign the application form for the issuance of

payment

Order.

The cash receipt voucher or transfer credit voucher duly passed by the authorized

officials containing bank transfer stamp and its running serial number shall be

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appended with the next payment order serial number under the authentication of

the authorized official.

The particulars of payment order shall be inserted on the blank payment order

leaf either through a trying machine or shall be neatly hand written using indelible

ink. Subsequently, the particulars of the each payment order shall be recorded in

payment order issued register.

The payment order shall be signed by two authorized officers of the bank

simultaneously authenticating entry and verify the following.

Name, code and address of issuing branch.

Name of payee.

Amount in words and figures.

Date of issue.

Nature of crossing if desired by purchaser.

Payment :

Payment shall be duly identified by the bank customer or by manager/second

officer in case the payment order is presented for cash payment on the counter orthe payee shall be requested to present it for payment either through clearing or

some account according to the type of crossing it contains and it will be ensured

that the payment order is properly receipt on it reverse on appropriated value or

revenue stamps which will serve as endorsement also.

The payment orders will be entered in payment order issued register after

marking the date of issue against the date of payment and date of payment

against the date of issue in the contra columns under authentication.

The payment as given above will be adopted in case of all payment orders

received for payment either through clearing or bank transfers except that usual

precaution shall be observed to ensure that the bank stands discharged from the

payment in due course.

Uni-Remote:

Uni-remote is another application which has two main points:

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o funds transfer

o funds debit

Funds transfer:

Funds transfer from one (UBL) branch to another online branch. This helps us to

transfer funds from one location to another in some seconds. It has no limit we

transfer required money from one (UBL) branch to another online (UBL) branch.

Because in which there are no chances of lose or fraud.

Funds debit

Funds debit is another feature of uni remote. In which we debit

Funds as an employee need. But it has some limit. Only one million

rupees allowed to debit. So for a big amount of currency debit chances

of farad may be occurs.

In this way following security will be remaining from employee

Point of view.

Only those persons which has there own account can fund debit.

Signature verification is necessary.

Branch conformation is also necessary.

So this is the simple over view of (UBL) uni-romote application. So this is also

free application for customers.

ACCOUNTS DEPARTMENT :

Accounts department handles all the activity that is happening inside the branch.

They have to keep view of all the transactions and have to determine that in the

transaction right sources are used for debits and credits and if they find any

discrepancy then they are authorized to make amendments and if the case is

serious then branch manager get involve in it. They are responsible for preparing

the monthly reports of the branch and have to provide state bank with the report

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They also have to keep into account all the expenditure of the branch like the

stationary, pages for print, tea used in the branch, any equipment purchased like

printer or mouse etc all the small and big expenditure are kept into account by

them.

LOCKERS:

Lockers are provided just for valuable customers. Customer who has some

valuable goods as jewelry, ornaments or other valuable documents, they hire a

locker in the branch that is the safer custody. When client want to open the

lockers, he has to first open an account in the branch and along with that he has

to submit the application for the locker opening.

Operation of Lockers:

Whenever any one who is locker holder visits the officer first match the signature

put

down the initial information in the lockers register as time of operating the locker,

date, locker number and signature of client as well as the officer.

Officer first open the locker with master key and then client operate the locker by

using his/her key. Only the key of locker holder can lock the locker.

Lockers available at UBL:

In every branch of UBL lockers facility to the client to provide them secure place

for the precious goods as jewelry or any other things as a safe custody. Bank gets

a specific fee for the lockers annually for different types of lockers. Lockers are of

three types as gives below

Lockers Size Fees Security

Small Size Lockers Rs.1000/- Rs.2000/-

Medium Size Locker Rs.1500/- Rs.2500/-

Large Size Locker Rs.2000/- Rs.3000/-

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Extra Large Locker Rs.3000/- Rs.4000/-

A refunds security is also taken from the customers at the time of issuing of

lockers. A locker fee is recovered in advance when the year is completed bank

fee is charged next year when the client comes to operate. In case, if the client do

not pay the fee the will inform him for the payment of annual fee but if the fee is

not paid; bank can call their lockers and took action for law suits.

For each locker holder the bank requires another person for operation of locker in

case of death or any other accident that person can operate the locker. For

availing the locker facility client has to open the personal account in bank.

To get the locker facility clients has to fill a form that is application format that

contains all rules and regulations regarding to obtain a locker specimen

signatures card is also signed by both the persons and terms and conditions are

also negotiated with the client have some extra instruction for operation the

locker. He can tell the bank and can get that facility. Bank assigns a password to

every client for secrecy. Locker number and key number are not the same for

safety purpose.

ADVANCES DEPARTMENT :

It is major part of the branch. Bank provides this facility to the people who need

advance money to meet their requirements. The function of Advances and Credit

Department is to lend money in the form of clean advances, against the

promissory note, as well as secured advances against tangible and marketable

securities.

For getting the advances, the first step is the preparation of credit proposal. Some

principles of lending are considered whenever financing is made. These principles

are:

Character

Capacity

Collateral

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Capital

Condition

Nature of Products:

Running Finance:

The lending product which was called overdraft before Islamisation of Banking

system in Pakistan has been named Running Finance in the post-Islamisation

era. This is temporary facility when drawing is allowed in excess of the credit

balance in account.

Cash Finance:

It is the Islamic name of what previously was called Cash Credit. This facility is

usually extended against pledge or hypothecation of goods, produce, or

merchandise. Markup is payable on the amount actually utilized by the customer.

The drawing power changes too frequently as the movement of the pledge goods

from and into the godown is the normal trade activity.

Demand Finance:

It is the name of what was previously called Demand loan or Fixed Loan. It is the

credit facility for a fixed amount for a fixed specified period. Usually the period is

one year and if the extension is desired, the limit is renowned on yearly basis.

Repayment is made in periodical installments. The sum of money once credited in

the loan cannot be withdrawn as the limit is automatically reduced with each

deposit made into the account by amount of the deposit.

Bills Purchase Facility:

Bills are purchased or discounted by the way of making advance against

cheques, bills of exchange etc. received for collection. These are called clean

bills. When financial documents are accompanied by documents of title to goods,

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such as, bill of lading railway receipt, carrier's receipt, or airway bill, these are

called documentary bills. The discounting bills may be either inland or foreign.

Bridge Finance:

Public limited companies need temporary accommodation to bridge up their

financial stringency during the time lag between their incorporation and

subscription of share capital by general public. This accommodation is called

bridge finance. It is secured by the mortgage of company's assets and is payable

as soon as the share capital is paid up.

Consortium Finance:

Where funding of huge amount is required to finance a massive project for a

considerable long period, one single bank does not prefer to take the entire risk

alone. In this situation two or more banks join hands and form themselves into a

consortium for financing the project jointly, sharing risk proportion to the funds

provided by them. In consortium financing, pari passu charges on the securities

are created in the favor of the, members of the consortium. These are long-term

loans for huge amount.

SECURITIES

1. BANKERS' LIEN:

(Moveable property possessed to the lender cannot be sold in case of default)

Lien is the bankers' right to hold the property until the claim on the property is

paid. The bankers look at their lien as a protection against loss on loan or

overdraft or any other credit facility. In ordinary lien, the borrower remains the

owner of the property, but the actual or constructive possession remains with the

creditors, though he has no right to sell it.

2. GUARANTEES:

When an application for an advance can offer any tangible security, the banker

may rely on personal guarantees to protect himself against loss on advances or

overdraft to the applicant.

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3. MORTGAGE:

(Immoveable property possessed to the lender can be sold in case of default)

A mortgage is the transfer of an interest in specific immoveable property for the

purpose of securing the payment of money advanced or to be advanced by way

of loan, and existing of future debt, or the performance of an engagement, which

may rise to a particular liability. The person in whose interest the property is

transferred is called mortgagee.

4. HYPOTHICATION:

(Immoveable property possessed to the borrower can be sold in case of default)

When property in the shape of goods is charged as security for a loan from the

bank, the ownership and possession is with the borrower, the goods are said to

be hypothecated. The essence of hypothecation is that neither the property in

goods nor the possession of them passes to the lender, but the security is

granted by means of letter of hypothecation, which usually provides for a banker's

charge on the hypothecated goods.

5 . PLEDGE:

(Moveable property possessed to the lender can be sold in case of default)

In a pledge, the ownership remains with pledger (borrower), but the pledgee has

the possession of property until the advance is repaid in full. While in case of

defaulter, the pledger has the right of sale after giving due notice.

BASIC TENETS OF LENDING

While there is no single right answer to a lending proposal, a banker needs to

sure that he has not overlooked any of the relevant facts before reaching a

conclusion.

SEVEN STEP SCALE (SSS):

A seven step scale as under tends to cover all the basic tenets of lending.

Certain writers on banking, for brevity, for sake, have reduced this scale to 3-word

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phenomenon, namely, Safety, Liquidity and Profitability. All lending proposals

irrespective of their nature and size should be evaluated against this scale to

ensure that all the relevant aspects have been covered.

1. Borrower:

The first consideration in lending proposition must be borrower himself. The

various aspects of an indenting borrower, which need to be looked into, are as

under.

Connections:

Connections of an intending borrower, which maybe useful for the bank over a

period of time---such as treasure of a project maintaining huge funds with the

bank--- may be given due weigh. However, this should not be an excuse for bad

lending. It may at times be preferable to lose a connection rather to lend where

repayment is doubtful.

Length of Association:

This means the length of time banker has known the borrower. Longer the

association, better are the chances of having meaningful insight into the affairs of

borrower. On the contrary, a newly introduced client hardly merits any

accommodation.

Credit Worthiness:

The expression means and includes the integrity --- an evidence of effective

willingness to repay promptly---, and repaying capacity of the borrower.

Integrity:

Whether facilities have been repaid without problem in the past and whether the

borrower general reputation is good are the two questions to be answered. If any

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doubt exists in the mind of the banker concerning the integrity of the intending

borrower, obviously he would not lend.

Repaying Capacity:

Stake of the Sponsors:

The term refers to the net assets of the borrower. This may be appropriately

called worth. It is obviously confirming to know that sufficient monetary reserves

or assets are owned by the borrower to repay the advance if the repayment

cannot be made from the originally agreed source.

Repaying capacity of the borrower is also linked with the debt-equity ratio in theproject. The fixed debt equity ratio falls short to take care of the future cash flow

hazards. For example when projects do not generate enough cash for the number

of years resulting in non-servicing of the debts, equity at the fixed ratio keeps the

borrower comfortable at the cost of the creditor.

In case of cost overrun also if the banks do not obtain from the sponsors their

share of the cost escalation, the so-called ratio dogma is frustrated, and defacto

risks of the owner borrower in highly leveraged projects is considerably reduced.

The stake of the sponsors is further reduced to the extent the equity is offered to

and subscribed by the general public.

AGE:

To lend for 20 years to a person of 70 may not be a proposal worth considering.

Again special conditions apply when lending is to a minor. Similarly in the case of

a business concern, it is of significant value to know for how long it has been

trading.Experience:

Risk Managing Capability:

An individual setting up is business for the first time will be received with caution,

whereas management of a company, which has been successfully trading for

many years, will be duly regarded.

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Virtually all decisions are made in the atmosphere of uncertainty. Hence there is

some risk inherent in each decision. However, the degree of uncertainty will vary

from situation to situation and with it the degree of risk. Thus the capability of

management to manage risk plays a very significant role in making any business

venture a success. The evaluation of the risk-managing capability of the

management is, therefore, the most important aspect of the project evaluation.

2. PURPOSE OF THE ADVANCE:

The purpose of the advance must be legitimate and consistent with the bank's

policy.Generally bankers do not wish to be involved in risky or speculative

ventures.Advances may also be distinguished as those for the purchase of an

asset those for the replacement of a liability.

3. Amount:

The amount requested must bear a reasonable relationship to the customer's own

resources, and must be sufficient to achieve the purpose, or the bank will be

faced with the necessity of additional lending to safeguard the outstanding

advance. Likewise, the amount asked for may not be in excess of what is

genuinely required to achieve the purpose.

4. Security:

A security that bears the following characteristics is considered good. It should

be: easy to value, easy for the bank to obtain the title; easy to control; easy to

realize; and stable in value. Moreover it should provide a good margin over the

amount lent.

Nevertheless security is one of the last considerations in any proposition, and no

lending should be made purely because good security is offered. The proposition

should stand on its own with the security providing a cushion should things go

wrong.

5. Terms of Advance:

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The longer the term of advance the more risky it becomes as the future s more

uncertain. Long-term advances therefore need security sufficient to cover the risk.

The term helps also to determine the nature of advance. Running finance is

usually repayable in less than one-year time. Conversely demand finance will be

usually granted for longer period of time. The term of advance must not in any

case exceed the life of the asset being purchased.

6. Repayment/Liquidity:

A realistic repayment program which is commensurate with the term of advance,

the liquidity position of the borrower manifested by the proper cash budget, and

the revenue generating capacity of the project as evidenced by the capital budget,

should be evaluated and obtained as to its viability.

7. Yield/Return:

Bankers expect some rewards for the risk they undertake and the funds they

spare. They also need to be remunerated for the work and expenses in taking and

administering the security.

USE OF FINANCIAL STATEMENT IN THE SEVEN-STEP SCALEAPPROACH

An essential part of the seven-step approach is the examination of the financialstatement to analyze past performance of the business, and to compare its

present operating results with the overall performance of the industry.

These helps banks to assess the experience and skill of the borrower, the

appropriateness of the sum requested, whether the business is generating

enough profit to cover repayment of the advance and return on it, suitability of the

term for advance in the light of the profitability and growth of the business, the

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availability of assets as security, and the degree of risk involved and the ability of

the management to effectively manage that risk.

The break-even analysis and the analysis of the financial statements through

various ratios help achieve this objective.

ADVANCES DOCUMENTATION :

Documents relating to credit can perform two functions: they can be the evidence

of underlying credit transaction or they can be the security or support to ensure

the full repayment of the debt. In other words, there are some documents that we

necessarily should have in order to prove our claims against our clients: they are

the evidence that client owes us the money. Instead there are other documents

that we choose to take to ensure recovery through a " First or second way out in

case that the customer is unable to pay us back.

The promissory note is however the best example of a documents taken as

evidence of debt. Simply stated, promissory note is written commitment by the

borrower to pay bank a sum of money sometime in the future. The mere existence

of the promissory note is sufficient evident of the validity of the debt.On the other hand, a bank guarantee or a mortgage on a property or the

hypothecation of stock is not the document that proves the validity of the debt

itself. We take them only when we feel that we want to protect our exposure by

having direct access to some specific assets or to the guarantor in case any thing

go wrong with the original credit.

Whether they serve as evidence or security, however, credit documents have one

thing in common: they embody a legal claim of the bank against the client, againstcertain assets, or against the guarantor. In other words the protection that we get

from our credit documents is based on the law. If the documents do not confirm to

the law, we are just not protected.

Requirement to be met :

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In order to be effective not only from the legal point of view but also for our own

internal purposes, all credit documents must meet certain key requirements. For

Example:

Credit documents must be appropriate for the nature of transaction involved. They

must be sufficient to provide adequate coverage of the perceived risk. They must

be properly executed (filled in) by duly authorized signers.

They must be legally valid so that our rights will not be impaired by some formal

defects. For collateral security the documents must provide for fairly

straightforward access to the pledged assets.

In the case of documents on standard form blanks must be properly filled out.

Documents not on standard forms should be either drawn up or reviewed by our

attorney. Credit documents must be kept current. Some of them such as time

promissory notes and insurance policies have a specific date for expiration or

maturity.

Responsibility for the Documentation :

Regardless of how you look at it, there is no way to escape the fact that the

responsibility for having the unimpeachable documentation package falls squarely

on the shoulders of the RM. Other departments of the banks or even legal

counsel are available to help, but the RM, in the final analysis, is the person who

has to be satisfied that the documentation at hands meet all the applicable

requirements.

To begin with it is RM who based on his analysis of the risks involved, first

determines the kind of security documents that will be required to properly protect

the bank.

The RM is also the one who will physically obtain the documents from the client

and who will have to go back to the client if the documents received are defective.

The RM will also have to follow up with the clients to replace expiring documents

or to obtain those that were properly deferred.

The RM is also the one who has to satisfy him that the documents are in order

before sending them out for safekeeping to CAD and issuance of DAC.

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It is likewise the RM who has to review the documentation physically, whenever it

is required. There are at least two instances in which these physical review is

mandatory: at the time of annual review and when the account is adversely

classified.

Finally the RM again gets involved when the time comes to return the documents

to the client, to make sure that at no time are we exposed to a break in our

protection cover. Documents may be surrendered to the clients (a) To replace

them with new or updated ones (b) When the credit committee agrees to reduce

the security protection (c) when the facilities have been paid out in full.

The logic behind making the RM fully responsible for the documentation is quite

simple. The RM's involvement in an account does not end when he gets the CP

approved: from then he must see to it that the relationship is kept in good shape

and free of troubles. We not only make loans, we live with them. In assuming the

responsibility for the adequacy of the documentation, the relationship manager is

simply observing one of the many "C's" of credit: the control of the relationship.

To perform these duties the RM can enlist the help of other units both inside and

outside the bank. For example

The CAD provides second look at the documents, to make doubly sure that they

are indeed complete, in order, and in accordance with the approved

requirements. The CAD has the obligation to refuse to issue the DAC (in effect

blocking the implication of the approved facility) if the documentation is defective.

In addition, the CAD is responsible for getting up a tickler system to remind the

RM's of the documents still to be obtained. The CAD also is the focal point to

provide the required valuations in accordance with a schedule appropriate to a

volatile type of collateral (shares).

The CAD is basically the department who permits the RM to rest on the

assurance that the documents he obtained from the client are safely tucked away

in the vault and available for his inspection whenever necessary.

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The CREDIT COMMITTEE is also valuable source of assistance, not only

because of their shared experience but also because, in certain cases, the credit

committee may step in if it is willing to accept the additional risk entailed by a

slightly defective documents rather than going back to the client for correction.

Finally, legal counsel should be consulted in any case of doubt. (In some cases,

such as term loan agreements or loans to the government, referral to the

attorneys is mandatory). By and large, the efficacy of the document is more a

legal matter than a banking matter.

Request by Client

At start when the customer wants to avail the facility of loan/limit from the bank he

has to submit the "Request Letter". Submission of the request letter is the first

step in the procedure of providing credit facility to the customer. He himself has to

visit the bank and submit this request letter to the bank. Amount of request along

with relative information about the company as well as the purpose for which the

company wants to have the credit facility should be mentioned inside that letter. It

is preferable that the letter should be written on the letter pad of the company and

should be stamped and duly signed by the owner/chief executive. At the time of

request the client (who has come to the bank) is been asked some questions like

information about his line of business, about its customers and suppliers, about

its sales and growth, about the reason for the loan/limit and certain questions like

that by which it is initially determined either to invest in the form of loan/limit in

that business.

Basic Fact Sheet :

The second step that has to be covered is the filling of the form named "Basic

Fact Sheet". This is a sheet that is provided by the bank to the client and he has

to fill all the blanks properly. By this basic fact sheet UBL gets the information

about the client and his business.

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The information that is collected through the basic fact sheet is explained as

follows:

Borrower's Profile

Detail of Directors/Owners/Partners

Management

Corporate Status

Nature of Business

Requested Limits Business Handled/Effected With All the Financial

Institutions during the Last Accounting Year

Existing Limits and Status

Any Write-Off, Rescheduling/Restructuring Availed During the Last Three

Years Details of Prime Securities Mortgaged/Pledged

Details of Secondary Collateral Mortgaged/Pledged

Credit Rating

Dividend Declare

Share Price of the Borrowing Entity

Net worth (Particulars of assets owned in their own name)

Trade Checking :

Trade checking is a system at UBL that is implemented to check the credit status

of the party in terms that either the party has already sanctioned loan from other

banks or not. Incase if they are found as defaulter from any bank or leasing

company than their creditworthiness will be checked and securities requirement

will be tightened. UBL Cantt Branch normally does trade checking from four

banks these are National Bank of Pakistan, The Bank of Punjab, Bank Al-Habib

and Bolan Bank.

CIB Report :

CIB stands for Central Information Bureau. CIB is a department at SBP that has

all the information about the loans/limits that has been sanctioned in that region to

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the parties. A CIB report is requested from the SBP about particular party to

check whether they are defaulters or not of any bank or leasing firm.

Trade checking and CIB report have same purpose to check the party for default.

The question that can be raised here is that if one can get complete information

about the party through SBP than why it is necessary to do trade checking?

Reason of trade checking is that different banks provide the information of all

defaulters to the SBP, in some cases it may happen that the party is going to be

defaulted within 2 or 3 months but still information is not with the SBP cause party

has not defaulted yet in that case it is good to have trade checking to minimize

the risk.

Report of Financial Statements

For obtaining credit, party has to submit the last two to five years Balance Sheet

and Profit & Loss Statement duly attested to authorize auditors. It is preferred that

the statements should be properly prepared and audited by chartered

accountants that give the true picture of the business. But in some cases as I

observed in UBL most of the clients who lie in the category of Consumer Banking

Client don't have their financial statements. In such case UBL has to prepare the

financial statement on the behalf of customer and it is mentioned in other relative

documents that the financials submitted are self/un-audited. There is a high

percentage of risk involved in it.

Import & Export Data :

If the party is also involved in export or import business then the bank also

consider the data of three years about imports and exports.

Evaluation of Property :

Property that is been offered as security in the form of any sort of mortgage is

been evaluated by certain authorized company. This evaluation report helps in

determining the actual worth of the property and while keeping the margin of

about 20% its forced value is checked.

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"Forced Sale Value" is been referred as the minimum value of a property in any

case. This value is calculated by keeping the margin of 20%. Its formula is like

this.

Forced Sale Value = Actual Value -margin amount

Where "actual value" is the net value of the property today whereas margin is the

20% of the actual value and while subtracting this from the actual value gives a

Forced Sale Value of the property.

Call Report :

If the party seems to be good enough with whom the relationship can bedeveloped a Relationship Manger visits the company and view all the working

conditions of the company, meet with its management and try to get maximum

information about the company from inside and even from the outside of company

from its neighbors. A report that is prepare in which all the experience of visit to

the company is written. The property that is been provided as security in the form

of mortgaged property is also checked for confirmation either that property exist

at that particular place or not which was mentioned in the report and either it is

been evaluated properly. This property is also checked for pre-mortgage against

the loan from any other firm or bank. All this information is written in the report.

Visit Report/Visit Certificate :

Visit report has the same purpose as that of call report. But the main difference

between the call report and visit report/visit certificate is that visit report is just a

single statement for the evidence that RM has visited the place of both working

and of security whereas call report is a short summary of the visit and all

information is described briefly in that report so that CAD make the right decision.

Comparative Statement of Financial Condition :

This form is in tabular form and as the name indicates it helps in analyzing the

financial condition of the firm from all perspectives. In this form bank has to do the

RATIO ANALYSIS of the financial statements submitted.

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All the analysis that is covered by this form is described below:

Liquidity Analysis

Activity Analysis Profitability Analysis

Debt Analysis

Vertical and Horizontal Assessment of Profit & Loss Statement

Vertical and Horizontal Analysis of Balance Sheet

Management Assessment Form :

Management assessment form is a document in which varied skills regarding the

management prospective of the party are categorized and these skills in each

category are rated with standard rating criteria by RM. RM has to fill this form and

it requires a complete background and future prospective growth knowledge

about the management.

RM has to give marks to each category out of 5. The rating criteria are as

follows: Outstanding = 5, Strong = 4, Acceptable = 3, Weak = 2, Very Weak = 1.

MANAGEMENT ASSESSMENT FORM

RatingConcise QualitativeRemarks

Board Of Directors

Reputation

Involvement with the company

Experience/influence

Source of representation

Management Depth

Qualification/Experience

Exercise of duties/authority

Back-ups/second-level support

Continuity

Availability of authorized signers

Competence/Reputation of Management

Capability of administrative, strategic

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Industry reputation

Management Controls

Organizational/holding parent companyFinancial

Cost - evaluation

Production

Inventory

Distribution

Collections

Level of automation

MIS system

Risk Management

Awareness and identification of key risks

Measures implemented to address these risks

Financial risk management

Summary of Rating

Main weakness

Main strengths

Steps being taken to improve weakness

Special Features

Preparation of Credit Approval :

After having the trade checking from the banks nearby, receiving the CIB report

from the SBP, having a keen look at the financial reports and evaluation reports

the next step is the preparation of "Credit Approval" which was earlier termed as"Credit Proposal".

Credit Approval is a document that is to be prepared either by Relation Manager

or the Area Manager. In Regional Headquarter Multan Cantt branch of UBL

relationship manager was responsible for the preparation of credit approval. The

main purpose of preparing credit approval is that to make the decision about the

sanctioning of loan quite easier.

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Credit approval is a 6-page document at UBL and has a standard format. It

covers all the aspects that are of key importance in making a decision about the

limit/loan sanction. It is divided into different segments here is a brief summary

about the CA.

Borrower and Location :

Name of the borrower along with its full address is written in it.

Line of Business :

Work or business of the borrower is written in it.

Legal Structure :

It depicts either the business is Sole Proprietorship, partnership, Public Ltd.

Company or Private Ltd. Company.

Purpose of Credit Approval :

Credit approval is prepared at varied time span. Normally it is been categorized

into three purposes.

Initial Review:

At the start when the borrower requests for loan

Annual Review:

Right after one year again credit approval is prepared for the checking of

business condition and the position of loan.

Interim Review:If anything happens unusual during the year then this review is undertaken to

check the condition either borrower is moving in the right direction and is giving

markup or installment on regular basis.

Originating Unit :

The branch of UBL, where the request for advances was submitted.

Facility Type:

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The type of facility that is been used by the borrower either it is Fun Based like

NICF and NIDF or Non-Fund Based like LG and LC. Description of Credit

Facilities:

Every type of facility is being provided with certain format. Like in the format of

Running Finance Facility the accounts that are to be discussed in this format

table

LINE AMOUNT

FACILITY FACILI DESCRIPTION OF CREDIT Rs. In Mil lion

NO. TY FACILITIESPROPO

SED

NET

TYPE EXISTING CHANGE

+/

1 NICF For Running finance in CF Account-CF

Purpose: For working capitalre uirement to finance inventorreceivables.A/c No:

Markup: Existing: Nil P.A QuarterlyPro osed: % P.A Quarterl

Cleanup/Adjustment: Annual for 3

days on or before

Outstanding: Fresh Account

TOTAL

Security :

This is the most important section from the point of view of sanctioning loan to

the party.

All the securities against the loan that are provided by party are discussed in

this section.

Its standard format is like this in the CA.

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SECURITYFACILITY FACILITY DESCRIPTION OF SECUIRTY / SUPPORT HELD

NO. TYPE

1 NICF PRIME:

COLLATERAL:

Here Prime securities are those securities that have primary importance and

will be sold by the bank first in case of bankruptcy of the business.

Collateral securities are of secondary importance and will be kept under

consideration after prime ones.

As far as documentation is concerned with every sort of facil ity and against the

security there is some particular documentation that has to be performed that

gives the true evidence of the transaction and will act as security against the

loan availed.

Financials :

This section of the CA contains the financial data about the borrower. Thisfinancial data helps the managers of UBL to make the analysis of the company

and their creditability to determine either it is applicable to sanction them the

facility requested or not.

FINANCIALS FY FY 31.12.2002 FY 31.12.2003

Sales

Net Income

Days A/c Receivable

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Days Inventory

Net Operating Cash Generation

Tangible Net Worth

Working CapitalCurrent Assets

Current Liabilities

Current Ratio

Debit/Equity Ratio

This is the sample format of financials used in the credit approval.

Import & Export :Information about export and import is also a part of CA. As the table shows onlythe trade in terms of rupees is needed to be mentioned in this area.

VOULME OF BUSINESS FY FY FY

Imports

Exports

Other (Specify)

Deposits '

Comments/Recommendations :

In the section of comments and recommendations the RM and SRM give their

comments about the party and recommend either to sanction them facility or not.

RECOMMENDED BY:

RM NAME & SIGNATURE SRM NAME R.

SIGNATURE

AREA MANAGER

NAME & SIGNATURE

CREDIT COMMITTEE APPROVAL:

NAME / TITLE /

SIGNAURE

NAME / TITLE /

SIGNATURE

NAME / TITLE /

SIGNATURE

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DAC AUTHORIZED BY REGIONAL CREDIT

ADMINISTRATION DEPARTMENT

DATE: SIGNATURE

CREDIT APPROVAL REMARKS

UNITED BANK LIMITEDDATE

BRANCHCREDIT APPROVALREMARKS

CA #REVISION DATE:

1. PURPOSE :

Type of facility along with the purpose and amount of facility is determined in it.

2.ACCOUNT STATUS/STRATEGY:

The strategy at UBL is to ascertain that funded line approved is utilized properly

and at

the same time ensure that Bank's collateral position is not compromised.

3.JUSTIFICATION FOR ACCOUNT STRATEGY:

Following are the terms to justify the account strategy.

Satisfactory financial. Growth potential.

Good income /return potential.

(A) BUSINESS STRATEGY:

Business background of the party is mentioned in it and the products in whichthey are

dealing and their relationship with the suppliers and customers is mentioned.

(B) MANAGEMENT STRUCTURE/COMPETENCE:

Type of management is determined either it is sole- proprietorship or partnership

concern or others and their competency to run the business in mentioned.

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(C) FINANCIAL ANALYSIS:

It is mentioned that all financials submitted meet the requirement of SBP

prudential

regulations and either they are self/un-audited or audited by authorized

accountants. All

the ratios that were calculated earlier are analyzed in this portion.

4. TREND:

BETTER STABLE WORSE:

It is mentioned that either the business is stable enough or not and its Future

growth prospect is mentioned.

5. RISKS:

All the risks involved in providing the facility and about its recovery are mentioned

in this part. Here is an example of few of the risks involved in providing facility.

One-man show (In case of sole proprietorship).

Fire

Stocks become stale/out of date.

6. MITIGANT

Mitigates are the solutions to lessen the impact of the risk involved. Here are few

in response of the above-mentioned risks.

The proprietor is running its business with a team of expertise, who are looking

after different aspects of business. Frequency is rotation keeps them away from

this risk. Insurance cover with assignment of UBL as loss payee covers this risk.

7. WAYS OUT :

Different ways are mentioned to have recovery from the party against the facility

allotted.

8. CONCLUSION/RECOMMENDATION :

Conclusions are provided either to build long term relationship with the customer

or not.

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Basic Information Report

This page is attached withe the CA and covers the varied aspects about the party

that has

Applied for the credit facility.

BASIC INFORMATION REPORT

BRANCH:Originat