Every student of MBA at COMSATS institute of information technology has essential requirement to do 42 days internship in any of the well reputed organization. The purpose of this is to acquaint the students with practical applications of theoretical concepts taught to them during their MBA program. Really it was a nice opportunity to have a close comparison of theoretical concepts in practical field, involving the use of primary and secondary data all he efforts on the way are summarized in shape of this internship report. Report start with the topic evaluation of banking. The word bank is said to have been derived from the words Banque or Bancus. The history of banking is traced to as early as 2000 B.C. talking about commercial banking in Pakistan it was very difficult for Pakistan to build up its own banking system immediately after independence without sufficient resources. By 30 June 1948 the number of schedule banks in Pakistan declined from mere scratch. HBL was the commercial bank to be established in Pakistan in 1947. Now it has 1500 branches across the country and a customer base exceeding 5 million relationships.
In 2004 government privatized the HBL. Government granted 51% of rights to AGA KHAN Fund for Economic Development (AKFED) against an investment of PKR 22.409 Billion (USD 389 million). This report contains information about HBL board of directors, management, mission, vision and values. HBL operations are also discussed like cash, clearing and accounts departments.
During the time of internship I got the chance to work in different departments of HBL. Duties and learning in each department is given in this report. At the end of this report I have some suggestion for the improvement of operations.
WHAT IS BANK?
A bank is an institution for the custody, loan or exchange of money for sanctioning credit, for transferring funds by domestic foreign bills of exchange. It is a pipeline through which currency moves into and out of circulation. As it is clear from the definition of banking, the main activity or function of banking is borrowing and lending of money with a margin of gain. However, as far as the present day banking is concerned, there are a number of different banks, set up under specific different objectives, performing various functions.
EVOLUTION OF BANKING
History of banking is traced to as early as 2000B.C. The priests in Greece
used to keep money and valuables of the people in temples. The origin of banking is also
traced to early goldsmiths. They used to keep strong safes for storing the money and
valuables of the people. The goldsmiths used to issue receipts for the money and other
valuable assets deposited with them. These receipts could be used for settlement of
transactions because people had confidence in the integrity and solvency of goldsmiths.
When it was found that these receipts were fully accepted in payment of debts; then the
receipts were drawn in such a way that it entitled any holder to claim the specified
amount of money from goldsmiths. A depositor who is to make the payments may now
get the money in cash from goldsmiths or pay over the receipt to the creditor. These
receipts were the earlier bank notes. The second stage in the development of banking thus
was the issue of bank notes.
BANKING IN PAKISTAN
At the time of partition there were only 631 bank branches in area which came
under Pakistani control. But due to bloodshed and violence at large scale, most of the
branches were closed. At that time Bank of India was acting as central bank for both
countries and same currency notes were used in both territories. But Reserve Bank of
India was biased and Set down Pakistan on many occasions such as the issue of funds
transfer etc.
Thus some drastic steps were taken in government sector for the improvement of overall position. The private sector also responded positively. Some of the steps taken by the government in this regard were as under:
Inauguration of state bank of Pakistan (SBP) on first July, 1948.
Setting up of National bank of Pakistan in November.
Banking Companies Ordinance 1962 for protection and guidance to banks.
In 1990 the government decided to denationalize all the nationalized institutes. For this purpose, amendments were made to Nationalization Act 1974 and two nationalized banks were privatized. Along with this a permission to open banks in private sector was also granted.
The Privatized banks are:
MCB taken up by a private bank in April, 1991.
ABL taken up by its own employees in September, 1991.
UBL taken up by UAE party in 2002.
December 29, 2003 HBL taken by AKFED.
Today there are more than 7000 branches of commercial banks along with an established network of supplementary financial institutions. All this development in the banking sector is the result of untiring efforts of four decades.
ABOUT HABIB BANK LIMITED
HBL is the prime Bank in country, established in 1942, having its registered head office in Karachi. Habib Bank Limited was established by Mr. Ismail Habib on August 25, 1942 on the desire of Quaid-e-Azam Muhammad Ali Jinnah, father of the nation. It was established with paid up capital of Rs. 2.5 million. It was the first Muslim bank of sub continent. Quaid-e-Azam first of all opened his personal account. It was nationalized in 1974, but on 26th February 2004 it was privatized by Government of Pakistan and taken over by Aga Khan Fund for Economic Development (AKFED). They acquired 51 percent of shares of HBL.
The first branch of HBL started functioning on 30thAugust, 1942 at Muhammad Ali Road Bombay, In 1942, on the desire of Quaid-e-Azam, Habib family migrated to Pakistan and later on shifted the Bank's Head Office from Bombay to Karachi on 7thAugust, 1947 just one week past to independence, to play its pivotal role in the development of this newly born country.
It is one of the largest Banks of Pakistan with 1466 branches inside country and 112 overseas offices (presence in 25 countries) at different destinations around the world covering 5 continents. It internationally operates in countries including USA (New York), United Kingdom (London, Manchester, Birmingham), Scotland (Glasgow), Belgium(Brussels), France(Paris),Lebanon(Beirut) Netherlands(Rotterdam),Turkey(Istanbul),Kenya, Mauritius, Seychelles, Nigeria, Afghanistan, Bahrain, Oman, UAE, Iran, Sri Lanka, Sudan, Kuwait, Bangladesh, Egypt, Hong Kong, Singapore, Maldives, Indonesia and Australia. Currently HBL is having customer base of over 6 million.
PRIVATIZATION OF HABIB BANK
On December 29, 2003 Pakistan privatization commission announced that the Government of Pakistan had formally granted the Aga Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). On February 26, 2004 management control was handed over to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the chairman and the president/CEO and three Government of Pakistan nominees.
VISION, MISSION AND VALUES
Mission
"To make our customers prosper, our staff excel and create value for shareholders"
Vision
"Enabling people to advance with confidence and success"
Our Brand
Our brand identity is the outward expression of what we stand for as an organization. This is summarized in our vision, mission and is supported by our values.
Values
Our values are the fundamental principles that define our culture and are brought to life in our attitudes and behavior. It is our values that make us unique and unmistakable. Our values are defined below:
Excellence
Integrity
Progressiveness
Customer Focus
Meritocracy
BOARD OF DIRECTORS
Sultan Ali Allana
Sultan Ali Allana
Chairman
Sultan Ali Allana is the Chairman of Habib Bank Ltd (HBL), since the bank was privatized in February 2004. Prior to taking this position, Mr. Allana was the Chief Operating Officer of NIB Bank and a Director and founder member of Global Securities Ltd. Mr. Allana has 27 years of banking experience.
Mr. R. Zakir Mahmood
Mr. R. Zakir Mahmood
President & CEO
Mr. Zakir Mahmood holds Masters degree in Engineering and an M.B.A majoring in Finance both from University of California at Los Angeles (UCLA). He has over 34 years of working experience with international and local banks in various parts of the world including Europe, Middle East and Pakistan.
Moez Jamal
Moez Jamal
Director
Mr. Jamal holds an MBA in Finance and International Business from New York University and a BA (Hons) from Manchester University, England. He has extensive experience of over 32 years in the financial sector.
Sajid Zahid
Sajid Zahid
Director
Mr. Zahid is a Barrister-at-Law called to the Bar from Lincoln's Inn, London, in Trinity in 1972. He is a Jt. Senior Partner of Orr, Dignam & Co., a leading firm of corporate Lawyers in Pakistan.
Ahmed Jawad
Ahmed Jawad
Director
Mr. Ahmed Jawad holds Masters Degree in English literature and has a diploma in Development Economics and Planning from Italy.
Mushtaq Malik
Mushtaq Malik
Director
Mr. Mushtaq Malik is a government dignitary with a diversified background of 39 years of which he served in the Punjab Government for almost 15 years in various senior positions besides being a Director on ECO Bank from 2006 to 2008 he represented Pakistan, Afghanistan and Nepal on IDA Forum of the World Bank from 2003 to 2006.
Sikandar Mustafa Khan
Sikandar Mustafa Khan
Director
Mr. Sikandar Mustafa Khan qualified as a Mechanical Engineer from NED University of Engineering & Technology, Karachi in 1967.
LOCATIONS
http://www.hbl.com/images/gifs/spacer.gifHBL has the largest domestic branch network with over 1,400 branches and is present in 25 countries.
Head Office
Habib Bank Plaza,
I.I.Chundrigar Road
Karachi-75650, Pakistan.
Phone: 021-32418000 (50 lines)
Fax: 021-39217511
Registered Office
4th Floor, Habib Bank Tower
Jinnah Avenue
Islamabad, Pakistan.
Phone: 051-2872203 & 051-2821183
Fax: 051-2872205
Websites
Corporate website: www.hbl.com ibank (internet banking): www.hblibank.com
AWARDS
http://www.hbl.com/images/gifs/spacer.gif
2010
HBL wins Best Emerging Market Banks award in Pakistan 2010'
2009
'The Best Emerging Market Bank in Pakistan'
HBL among Top 500 Global Financial Brands
2008
'Best Bank In Pakistan'
'Most Innovative Global Trade Finance'
'Buzziest Brands'
SWOT ANALYSIS
STRENGHTS
The area where an organization is best at doing something or a feature that puts the company at an advantage in comparison to its competitors. HBL has following strengths:
HBL is a well established bank enjoying long history of 70 years of experience and profitable operations.
HBL is 2nd largest private bank in Pakistan and people trust is very high.
It has the largest branch network in Pakistan among private banks. It has approximately 1450 branches.
HBL has control its cost very effectively after privatization and restructured itself in a good way. During this process more than 1600 employees were relieved under a golden hand shake scheme and 110 branches were closed.
Excellent branches appearance gives an edge to HBL over other banks. The branches are well furnished even in less developed areas.
HBL has the ability to bring innovative products and services like personalized service, electronic funds transfer, sophisticated financial products such as electronic banking, auto-teller machines and evening banking.
The bank's rupee traveler cheques have been market leaders for the past seven years.
HBL's car to car bank loan scheme is unique in auto loan segment.
HBL is an internationally recognized bank because it has branches outside Pakistan in different countries.
HBL has strategic alliances with international banks for expanding its network further, both locally and internationally.
WEAKNESS
Weakness is defined as an area in an organization where the organization is not as good at doing something as its competitors or a thing which an organization lacks thus putting the organization at disadvantages in comparison to its competitors. HBL has different weaknesses that are given below:
Lack of communications between banks and customers about terms and conditions of products and services. Like centralization of cheque book issuing process.
Employees at branch level are not properly motivated to work by heart. They take the all routine activities as boring job.
Most of the employees in HBL are not properly educated. They do not have good managerial skills due to lack of education. Due to seniority, they have moved up on the hierarchy line to Grade-1, 2 or 3 positions having hardly bachelor degrees. This type of senior staff cannot apply the modern and innovative techniques of management in decisions making.
Mission of HBL is not well defined.
Although HBL is 2nd largest bank in Pakistan, yet the fact remains that it is not market leader as NBP. Its total assets are less than NBP. Its annual profit is less than NBP and MCB.
After the privatization of Habib Bank Limited GOVERNMENT support to HBL decreases as it was in past.
The employees of HBL has not good attitude. Their behavior with customers is not so good.
OPPORTUNITIES
Opportunity can be defined as a change in external environment which if properly exploited with the organizational strengths will result in enhanced sales, market shares or income. Using its strengths, HBL has following opportunities.
E-Banking
Three factors, quickness, easiness and cheapness have become the catchwords competitiveness and usefulness of all the business operations. It is commonplace today to say that banking is undergoing a radical transformation. This transformation is taking place across all sector of the banking industry. Habib Bank urgently needs to improve their ability, to think strategically about IT investments. Those banks that use their technology resources effectively have the opportunity to secure real competitive advantage in this fast growing industry.
High Mark up Rates
Customers are treated by different mark up rates by different banks. High mark up rates decreased the interest of people in loaning from banks. Present rates are approximately 17%. HBL can increase income by offering loan at lower interest rates than other banks.
Online Banking
It is doing banking transactions through our home P.C. The banks that do business through net have websites. Through these websites anyone can know about banks. Online banking is fast gaining ground in Pakistan. Habib bank has many online branches but still its most of the branches are not online. Especially in rural areas HBL should have online branches. HBL should facilitate its customers in rural areas with online bank. This is a good opportunity for HBL.
Automatic Teller Machine (ATM)
This system is known as "Any Time Money" because it allows customers who have an ATM card to withdraw money from anywhere. ATM machine can be installed anywhere like petrol pumps, Markets, railway station etc. Through this machine customer can transact money with the bank 24 hours at any time. In big cities HBL has ATM machines but in small cities ATM machines are very rare. HBL should install ATM machines in small city branches of HBL. This is an opportunity for HBL to attract the customers.
THREATS
A change in external environment which if not met with proper strategies will result in loss of revenues, market share or income. According to HBL's external environment, the following threats exist:
Other private banks with sound profitability is also a threat to HBL e.g. UBL, Alflah, MCB etc.
For last 4 to 5 years, Pakistan is facing economic problems and political instability which is a big threat.
Increased regulations from SBP may affect its business.
Foreign banks are flourishing in field of consumer banking.
High mark up rates is also threats for HBL.
Due to HBL's Employees rude behavior with customers in some areas is a threat for HBL.
Afghan and Iraq war has a deep effect on Pakistan's economy, which has affected HBL.
MANAGEMENT HIERARCHY
SERVISES OFFERED BY HBL
Habib Bank offers the following services to the customers:
Commercial Banking
Corporate Banking
investment Banking Global Treasury
Islamic Banking (referred to Modaraba)
Cash Management
Asset Management
Zarai Banking
TECHNOLOGY
Software used by HBL
HBL is enjoying the competitive advantage of vast operational area. There are two types of branches come under HBL network. One type is the online branches whereas other type is batch branches (offline branches). So obviously HBL uses two types of different software. All batch branches use SIMEX software while online branches use MYSIS software.
BANKING DEPARTMENTS OF HBL
In HBL branches various departments operated to facilitate the customers. Following departments are working in that branch where I did my internship:
Account opening department.
Cash department.
Advances department.
Bill clearing department.
ACCOUNTS OPENING DEPARTMENT
Function of account opening department is basically open a new account for customers and facilitate the customers. There are certain requirements and formalities for opening new account. These formalities are mentioned below:
FORMAL APPLICATION:
The customer is needed to fill account opening form. This is a formal request by a customer to bank for opening a new account.
Documents required for opening an account
Copy of CNIC
Utility bill
Provisional receipt
Service certificate or student card
Specimen Signature of the customer
Checque book issuing:
When the CNIC of customer who want to open the account is verified by NADRA, account opening officer issued him or her a cash book so that he can withdrawal from his account. This process take 6 days to complete.
Secrecy:
This is the responsibility of every official engaged in the bank service the secrecy of depositor's account.
Types of Accounts:
Individual Accounts
These are the most common accounts opened by single person. These accounts are the personal investment accounts.
Joint Account
An account that is open by two or more than two persons. According to law they are considered as
one person.
Business Accounts
Business accounts are mostly opened by institutions, companies, trusts and non-profit organizations.
BOOKS RELATING TO CUSTOMERS:
Deposit Slip:
photo1534.jpg
This is called deposit slip. There are two copies of this slip. One is called bank copy and other is for the customer. The customer takes it from the bank and completes it. He mentions the date and then name of the account holder and his account number. If he has a cheque and the cheque is of the other branch then we mention the branch name and cheque number and then put the amount in both words and figures. Then the cashier gets money from him and gives him customer copy.
Cheque Book:
photo1531.jpg
Through this type of chequ book customer can withdraw the money from his account. Customer fills the cheque, one copy is remaining with customer and the other copy gives to the bank. After
Verification of customer signature that he provides to bank cashier provides the money to customer as mentioned on cheque.
Closing of customer's account
The banker may close the account of customer due to following reason:
Notice by customer
Death of customer
Customer's insanity
Order of court
Notice by customer:
The banker closes the account of customer on the application of the customer for closing his account.
Death of customer:
On death of his customer the bank must stop the payment on cheque drawn on him by deceased customer because the death revokes his authority to pay such cheque.
Customer's insanity:
In case of customer insanity the bank cannot operate his account r withdraw. In such situation, it is usually considered that the banker's authority to pay his customer's cheque is revoked by the notice of insanity.
Order of court:
If the customer involve in corruption r in some other crime the court give the order for closing his bank account.
CASH DEPARTMENT
Cash department has vital role in the banking sector. All cash transaction represent in this account such as cash received from customer, import and export transaction, bill payment etc. It involves cash payment and receipt transaction in it. Main function of cash department is to deal with cash payment and cash receipts.
Cash deposit procedure
The customer fills the pay slip. The cashier receives the pay slip and cash. He counts the cash and makes the detail at the back of the pay slip. Then he compares the detail with amount written on the slip. Then he credits the entries in the computer by serial No, account type, account number and amount. Puts the stamp of cash received on the payment slip. One portion is for bank record and other for customer.
Cash payments procedure
When customer wants to withdraw a certain amount from his account, he brings a cheque along with him. The cashier receives the cheque and checks it whether it is post dated or predated. Cheque can be cashed within six months. Predated cheque cannot be cashed. Cashier takes two signatures at the back of the cheque from the bearer. He check from computer either there is balance in the account or not. After checking he gives the cash to bearer and respected account is debited.
Online fund transfer
Another function of cash department is of online transfer of funds. Customer has give filled remittances form with cash or without cash to the cashier in cash department who will than credits the beneficiary account.
Balancing cash and transferring cash
At the end day cash department is responsible for balancing the cash. Physical cash should be equal with the amount in the computer. HBL branch where I do my internship limit for cash is 5 million which it can keep within the branch over the night excess cash is transferred to NBP.
ADVANCES DEPARTMENT
Introduction
Securities
Types of credits
INTRODUCTION
The function of credit department is to lend money in the form of clean advances, against promissory notes, as well as secured advances against tangible and marketable securities. The bankers prefer such securities that do not run the risk of general depreciation due to market functions.
Common securities are as below:
SECURITIES
Guarantees
When an application for advance cannot offer any tangible security, the banker may rely on personal guarantees to protect himself against loss on advances or overdraft to the applicant.
Mortgage
A mortgage is the transfer of an interest in specific immovable property for the purpose of security the payment of money advance or to be advanced by way of loan, existing or future debt or the performance of an engagement which may rise to a pecuniary liability, the transferee a mortgage.
Pledge
The pledge of customer's property against some type of loan that he borrows from bank. In this case the customer property is engaged until the advance is repaid in full. While in case of default bank has power of sale after giving due notice.
Promissory Note
Sometime promissory note is also accepted as a security. Promissory note is an instrument in writing containing an unconditional undertaking signed by the maker.
TYPES OF ADVANCES
The advances which are given by HBL are as under:
DEMAND FINANCE (Ordinary Loan)
Demand finances are those advances which are allowed in lump sum for a fixed period and are repayable lump sum or gradually in installments.
RUNNING FINANCE (Overdraft)
Running finance are advances, which are generally, given to meet temporary requirements of the customers. A good customer use the banks running finance limit as a mean of protecting his credit in the market and as a line of security defense to meet his commitments.
FINANCE AGAINST THE FOREIGN BILLS (FAFB)
The advance facility is allowed to both local foreign bills and is classified as under:
FAFB advance against railway receipts and truck receipts, a company with bills of exchange and invoices, are given under this head.
AGRICULTURE LOANS
Loans to the farmers with holding up to 25 acres for meeting their short terms, medium and long term agricultural production requirements, such as:
Agricultural inputs
Tube wells
Live stock farming
Land improvement
INDUSTRIAL LOANS
Long term loans and short term loans provide to the people that are associated with industry. These loans are provided them for purchase of machinery and other capital nature goods.
BILLS CLEARING DEPARTMENT
INTRODUCTION:
Every bank acts in two way i.e.
Paying bank
Collecting bank
FUNCTION OF CLEARING DEPARTMENT:
Following are the main functions of clearing department:
To accept transfer deliveries and clearing cheques from the customer of the branch and to arrange for their collection
To arrange the payment of cheque drawn on the branch and given for collection to any other branch of Habib bank of Pakistan or any other members, or sub members of the local clearing area.
To collect amount of cheques drawn on members. Sub-members of the local clearing house, sent for collection by those HBL branches which are not represented the local clearing area.
TYPES OF CHEQUES COLLECTD BY CLEARING DEPARTMENT
Transfer cheques
Those cheques which are collected and paid by the same branches of bank
Transfer delivery cheques
Those cheques which are collected and paid by two different branches of a bank, situated in the same city.
Clearing cheques
Clearing cheques are those cheques in which the payee and the drawer of a cheque maintain the account with different banks.
Products and services of HBL
DEPOSITS ACCOUNTS
CURRENT ACCOUNTS:
In current account category HBL currently offer four types of account. Their detail and name is as under:
HBL freedom account
HBL business value account
Current account
Basic banking account (BBA)
HBL Freedom Account
Free cash withdrawal and deposit transactions through an HBL branch
Free online funds transfer functions
Minimum balance of Rs.25000
Free duplicate account statement
Free debit card issuance
Through HBL branch free ATM transaction
HBL business value account
Up to 5.35% profit per annum
Profit calculated daily, paid every year
No minimum balance requirement
HBL debit card and inter branch transaction system facilities
Funds transfer to any bank through HBL phone banking
Current account
Minimum balance of Rs.5000
Unlimited transactions
Non-profit bearing
Funds transfer to any bank through HBL phone banking
Basic banking account (BBA)
Can be opened with only Rs.1000
Non-profit bearing
No minimum balance requirement
Unlimited withdrawal through HBL Debit card
SAVINGS ACCOUNTS
Through savings account avail profit daily/monthly basis. Five types of savings account currently offer by HBL. Name and detail is as under
HBL value account
PLS-Savings Account
Daily Munafa Account
Daily Progressive Account
Remittance Munafa Plus Saving Account
HBL Value Account
7.19% profit per annum
Deposit ranges Rs.10,000 to Rs.1,000,000
Two withdrawal free every months
Profit calculated monthly, paid every year
PLS-Savings Account
5.06% profit per annum
Profit paid by-annually
Funds transfer to any bank through HBL phone banking
Minimum balance of Rs.20,000
Unlimited transactions
Daily Munafa Account
profit calculated daily, paid every month
up to 8.84% per annum
Minimum balance of Rs.20,000
HBL debit card and Inter Branch Transaction system (IBTS) facilities
Daily Progressive Account
Unique transactional account for institutions
Profit calculated daily, paid every month
Up to 11.57% profit per annum
Minimum balance of Rs.20,000
Remittance Munafa Plus Savings Account
Special account for receiving foreign remittances
5.12%profit per annum
Profit paid every annum
Minimum balance of Rs.20,000
TERMS ACCOUNT
Invest your savings in HBL term deposits for a fixed duration and earn profit while keeping your savings secure.HBL offer one type of account in terms of account category. Detail and name is as under:
HBL Advantage Account
Multiple option for tenure and profit payout
Loan facility up to 90%of investment
Minimum investment of Rs. 25,000
Profit paid at maturity
Minimum investment of Rs.20 million
Withdrawal at the end of fixed term
FOREIGN CURRENCY ACCOUNTS
HBL offers foreign currency account in multiple currencies as savings and terms accounts. Their detail is as under:
Foreign accounts offered in three currencies, Dollar, Euro and Pound
Tiered product, with rates depending on choice of currency
To earn profit, minimum balance in USD, EURO is 1,000
Interest is payable on a quarterly basis
Profit paid on maturity only. No interim interest is payable
Available in 1, 2, 3, 6 and 12 month in USD, EURO and GBP
Tiered product, with rates depending on choice of currency and term
