1.

Executive Summary
Every student of Bachelors in Business Administration at Bahria Institute of
Management Sciences has an essental requirement to do Six to Eight weeks
internship in any of the well reputed organization. The purpose of this program is
to acquaint the students with practical applications of theoretical concepts taught
to them during conduct of their BBA program. I did internship in Silk Bank. it was
a nice opportunity to have a close comparison of theoretical concept in practical
field, involving the use of primary and secondary data. All the efforts on the way
are summarized in shape of this Internship Report. Report starts with the topic
Introduction of banking. The word 'Bank' is said to have been derived from the
words Bancus or Banque or Bank. This 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 30th June 1948 the number of schedule banks in
Pakistan declined from mere scratch. 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 six decades.
During the time of my internship in Silk Bank I got the chance to work in all the
departments of Silk Bank working there. Duties and learning in each department
is given in this report. Talking about financial performance of the bank in 2008 all
the financial indicators are showing positive results when the financial
performance of the bank in 2008 is compared with financial performance of 2007.
During 2008 Silk Bank also won some awards. At the end of this report I have
given my suggestion for the improvement of the bank.
2. Introduction
2.1. Central background information
The word 'Bank' is said to have been derived from the words Bancus or Banque
or Bank. This history of banking is traced to as early as 2000 B.C. The priests in
Greece used to keep money and valuables of the people in temples. These
priests thus acted as financial agents. 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 persons who had surplus money found it safe and
convenient of deposit their valuables with them. The first stage in the
development of modern banking, thus, was the accepting of deposits of cash
from those persons who had surplus money with them.
The goldsmiths used to issue receipts for the money deposited with them. These
receipts began to pass from hand to hand in 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.
The goldsmiths soon discovered that all the people who had deposited money
with them do not come to withdraw their funds in cash. They found that only a
few persons presented the receipts for encashment during a given period of time.
They also found that most of the money deposited with them was lying idle. At
the same time; they found that they were being constantly requested for loan on
good security. They thought it profitable to lend at least some of the money
deposited with them to the needy persons. This proved quite a profitable
business for the_ goldsmiths. They instead of charging safe keeping charges
from the depositors began to give them interest on the money deposited with
them. This was the third stage in the development of banking.

2.1.1 History of Banking in Pakistan

The interesting point which I observed during the span of mine internship was the
historical background of Banking & Financial sector which is the one in which
great improvement and growth is observed since the formation of Pakistan. For
studying the growth of this sector we can divide it into three stages, which are as
follows:
Pre-Nationalization Era
Nationalization Era
Post Nationalization Era
A) Pre-Nationalization Era

There were only two Muslim banks in Indo Pak before partition; they were .Silk
Bank Ltd. (est. in 1941 at Bombay) & Australia Bank Ltd. (est. In 1944 at Lahore).
All other banks, at that time, were either owned by Hindus or Foreigners.

At the time of partition there were 631 bank branches in area which came under
Pakistani control. But due to blood shed and violence at large scale, mostly
branches were closed and the disparity can be assessed from the fact that on
July 1948 there were 195 branches with deposits of Rs.88 crore (880 million)
only. Also a factor lagging in Pakistani industry was a central bank of its own, by
that time Reserve 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.

In this period drastic steps were taken in government sector for the improvement
of overall position. The private sector also responded to these changes and
some very positive changes were observed. Some of the steps taken by the
government in this regard were as under:
Inauguration of State Bank of Pakistan (SBP) on 1st July, 1948.
Setting up of National Bank of Pakistan in November, 1949 to control the 'jute'
export in East Pakistan and to act as agent of SBP.
Larger powers were given to SBP through SBP Act (1956) for controlling
purposes.
Banking Companies Ordinance 1962 for protection and guidance to banks.
Establishment of specialized banks, such as ADBP (1952);
HBFC (Nov, 1952);
P1CIC (Oct, 1957)
IDBP (Aug. 1961);
NDFC (Jan, 1973).
These were the steps, which built a strong banking sector in Pakistan. This is
also obvious from the facts that by 1973 there were almost 10 foreign banks
were working in Pakistan and all over deposit position was around Rs.2300 crore
(23,000 million).
A bird eye view of 5 top banks was as given below:

BANK POSITION IN 1973

BANK NO. OF BRANCHES DEPOSITS

(Rs in Million)
HBL 667 6,160

NBP 579 5,660

UBL 497 5,670

MCB 506 1,640

ABL 145 570

B) Nationalization Period
On January 01, 1974 all Pakistani banks were nationalized through
Nationalization Act 1974. Under this law all Pakistani banks became a public
property. All small banks were merged in bigger banks to create 5 major
Pakistani banks Pakistani banks. These banks were to control by Pakistan
Banking Council. There are still controversies about this act of government as
whether it contributed in success of failure of banks. However the major changes
after nationalization were as follows:
Working of banks was extended to under developed areas.
Market expansion for credit and deposits.
Decrease in service level of bank officers.
Decrease in profitability as well.

However the effect of expansion was enormous and it can also be depicted with
the help of table 2 which shows the deposit & branch positions of different
nationalized banks.
BANK POSITION IN 1992

Bank No. of Branches Deposits (Rs. In Millions)

HBL 1926 153,431

NBP 1448 128,679

UBL 1684 87,482

MCB 1288 50,013

ABL 750 33,757

TOTAL 7096 453,362

Review of the Banking Sector-2008

Performance and prospects

The banking sector enjoys monopoly in providing financing to virtually all sectors
of the economy. The banking sector in Pakistan has even a greater role to play in
supporting the real sector by meeting its financial needs. Due to the recent macro
economic pressures banks need to make a sustained deposit growth by
increasing financial intermediation. The global financial crises and the closure of
the capital market followed by wihdrall from the banking system stressed the
Pakistani banks. However the Pakistani banks remained intact from a direct
impact of the crisis. Largely because there is no direct exposure to securized
instruments, risks of financial stability were largely restriced. Going forward the
impending economic slodan may dampen the growth rates of the baking system
in coming quarters. Low demand for banks advance will shift asset mix way from
advances to Govt papers and deposits are likely to grow at a steady pace

Historically the banking sector of Pakistan has enjoyed acceleration in economic

activites and strong growth in banks credit and deposits but the recent scenario
as marked by passive growth increase in credit risk and lowered reanings. The
assets base increased partly through deposit and partly through equity. There is
less dependence on borrowed funds although some of the small banks remained
highly dependant upon borrowings. Loans growth also remained low as
compared to the previous years. Due to the economin crisis there has been as
increase in the NPLs of the banking system. The deterioration business and
economic environment to some extent increased the credit risk. Which
constrained the banks to adopt cautious lending strategy particularly in consumer
sector here the advances have been decreasing during the CY 2008. the present
tough economic environment will also enhance the credit risk and affect the
earnings due to increased loans loss charges and constrained incomes.
The banking sector faced significant liquidity stresses also witnessed a minor
increase in advances and their share in total assets. This as aggravated further
by collapse of capital market in paksitan and the series of news on financial
meltdown in the advanced markets raised general public doubts about the
financial strength of some Pakistani banks. Ths further burdened liquidity profiles
of the banks. The impact as sever in some banks specially the small banks with
the constrained liquidity profile. The banking system is distinct with a high
concentration as a feer number of banks hold a major share of the systems total
assets and deposits. This concentration has been followed an overall declining
trend as the medium sized banks steadily gained market share. However, due to
unusal liquidity stress that affects mainly the small and medium sized banks. The
deposits in the previous witnessed strong growth/ during the CY08 the deposit
based grow slowly but the foreign remittances, a key factor maintained the
momentum of growth. There is am increase in share of fixed deposits while the
share of saving accounts slowed during the year. Advances witnessed a
significant slowdown in sharp contrast to previous years robust growth. There is
modest growth that is basically led by public sector enterprises. Segment wise
analysis shows that mainly corporate and commodity operations increased their
usage of bank credit during the year 2008. while Sme sector advances a slight
increase. The advances to agriculture sector slightly contracted which declined
their relative share in banks advances. The consumer finance after showing a
strong and persistent increase up till the end of CY07 has been gradually
declining since then. The decline in consumer loan as most significant in auto
loans category however personal laons contributing the largest share of
consumer finance followed by auto mortgage laons.

A general rise in interest rate and slowdown in stock market during the recent
quarters significantly marked down the value of both fixed income and equity
securities of banks. Accordingly the overall revaluation surpluses of the system
eroded. The equity investment portfolio of the bank faced a significant mark down
due to slump in capital market.KSE-100 index plummeted by 36 percent to 5.865
by the end of December 2008. the gradual recovery seen in the market is
expected to make up for the impairment losses
The heightened credit risk transpired in significant increase in mom performing
loans and associated assets quality indicators. The NPLs of banking system
increased. The eruption of npls is observed in all classifications catagories
requiring provisions with proportionately higher increase in substandard and
doubtful catagories. However the infow of fresh npls and deterioration of existing
npl hav substantially increased the amount of npls in substandards. Doubtful and
loss catagories.this trend indicates that in periods ahead , banks might have to
provide additional laons losses in case they are not able to recover restructure
These npls. The composition of segment-ise npls of the banking system shows
that infection ratio of all the segments except agriculture have increased. The
exposure to corporate sector has moved up to around 63 percent of the total
laons portfolio, from around 54 % a year ago . however with worsening business
climate, the infection ratio of the corporate sector which remained almost at the
same level during the previous to quarters has increased . npls of the sml sector
also rising at relatively fast pace analysis of npls by the end use of loans shows
that infection is more pronounced in working capital finance indicating slackness
in turnover of inventories and receiving in the come around of general slodon in
business activities. Consumer financing had been reduceing since the start of
CY05. however npls of the sectoe have been increasing in absolute as well as in
percentage terms. Rising inflation and contained disposable incomes coupled
with increasing lending rate have reduced consumers appetite for credit resulting
in increasing defaults rate in the consumer finance

Operational risk is an inherent feature o financial institutions by virtue of the

nature of their operations and constitutes an important component of their
enterprise-ide risk management systems. Theis make the bank to sudden event.
Such as equipment failure.a black out terrorism suppy chain interruptions or an
e-commerce failure can occur at any point in the time and seriously effect the
continuity of busness. Qualification of operational risk is concerned. It is a
relatively new area for financial institutions for which backs are still in the process
of developing formal models. State bank of Pakistan also asses the gravity of
threats emanating from lapses in banks internal control environment .for this
purpose it keeps track of the frequency and volume of frauds and forgeries
commited in the banking system.
A number of banks have moved into Islamic bank segment. Heigh percentage
share o cash and balances is itself a reflection of limited inverstment alternatives
available to Islamic banking, which has affecter the operating efficiency of these
institutions.

Factors suck as sbps new requirement for enhancing the min imum capital base
to 23 billion by end Cy13 and the introduction of variable CAR based on banks
Camels rating are likely to provide fresh thrust to the precess of consolidation in
financial secotr which could create strong marker participants and further
strengthen banks capacity to withstand any potiental decline in profits

The banking sector has shown strong buoyancy to recent and growing
challenges emerging from the macroeconomic environment on the back of a
healthy capitalbase healthy profitable and strong deposit growth. Going forward,
the impending economic sloden and domestic securities issues may dampen the
growth of the banking system in coming quarters. Low demand for banks
advances and increased risk aversion on the part of banking will further shift
asset mix away from advances to govt. papers. Banks will have to brace up ther
efforts for mobilizing the deposits. Which are still showing stagnancy in the latest
post quarter statistics.

Regulatory framework
The state bank of pakistn is commiter to develop and diversify the financial sector
in order to enhance its role on supporting the countys economic growth. In its
efforts to introduce and implement financial sector reforms essential for the
smooth functioning and progressof the financial sector the state bank of Pakistan
recently released its 10 year vision and strategy. Strategic plan is the
implementation of consolidated supervison of conglometerate groups tht include
banks. The need to supervise on a consolidated basis in addition to supervising
individual licencedbanks has long been accepted by the international regulatory
communities. The validation for implementing a consolidated aapproeach to the
supervison of banks is based on the nedd to protect banks from contagin risk the
most obvios regulatory concern with a conglometerate is that members bank
could be used as a central source of cheap funding for the group.
While it is clear commercially attractive for the owners of the conglometerate
group to use cheap deposit funding for acivities throughout the group prudential
concerns arise here intra group lending occurs with out proper assessment of
risks proper pricing for risks and proper consideration of exposure concentrations
. the impact of this conflict on market efficiency and fairness is greatly augmented
in the case of mixed conglomerates. The major regulatory concerns in the case
of a mixed conglomerate is that te group may shift impaired assets from
commercial entities with in the group to the bank, thereby shifting risk from
shareholders to depositors,weakening the bank and potentially the entire
financial system and imposing possible recourse on any depositor protection
scheme. In developing an aprro[riate famework for consolidated supervison. Sbp
has drawn on international experience and expertise while giving due
condisderation to the specific characteristics of pakian financial system and its
current stage of development.
No reform can be complete without aso further strengthening of the central bank
in this cpontext , sbp has lounched awork to modernize the central bank
egislation in line with the internation best practice . the sbp act is one of the
oldest laws in the world and as such it include some outdated provisions, evn
though the law has served the central bank well in delivering several of its
function.the new sbp act ought to provide more autonomy to sbp along with
proper accountability to persue clearly define goals of monetary and financial
stability and would make unambiguous how the sbp has to report on its
performacnce to its cabinet and parlimetn. Sbp has advovated commercialization
of mircro finance industy whch will elp provide financially and socialy sustainable
financial servicestnder this program efforts willl be made to enhance outreach to
initially 3 million people relative to feer than 1 million a year back. With the
ultimate goal to raise to 10 million sbp is steering the inslamic financial industy to
also deepen financial penetration to serve the requirnment of that segment of
population and industy which has slef excluded itself from faith reasons. Sbp is
planning to launch several initiatives to enhance sme financing and suck
initiatives include among others development of credit scoring credit products
and modalities . sbp plans to ntroduce a consumer protection bill requires
Pakistan banks association to adopt a banking code to commit banks fairmness
disclosure and ethical standards while nurturing competitive pricing of products
strengthen the consumer protecton department which as recently established in
sbp transforming banking sector ombudsman , introduce the small depositor
protection sceme and launch campaign of financial literacy
Consolidate and strengthen the banking secor by promoting continued mergers
and acquisition, while seeking to restructure the outstanding public financial
institutions. To promote consolidation, sbp will maintain its moratorium on new
licences but will on on exceptional bases issue license with capital requirement of
300 million dallors. Both exisiting conventional and Islamic banks will need to
comply with these requirements over an agreed timetable. Licences for
microfinance banks will continue but confined at national and provincial levels

2.2 Company Background

On September 15,2001, under the supervision of the state bank of Pakistan
(SBP), the prudential bank as acquired by the management and associates of
the Saudi Pak Industrial and Agricultural Investment Company(Pvt) Ltd.

On March 31 2008 a consortium comprising of international finance corporation,

bank Muscat and nomura European investments. The consortium is led by senior
bankers Shaukat Tarin and Sadeq Sayeed who have acquired an 86.55% stake
in Silk Bank for around $213 million or %0.47 per share (PKR 29.3 equivalent per
share).
Under the new leadership, the bank will continue to focus on sme and consumer
financing resulting in efforts of increased profitability. The year 2007 marked the
year of consolidation for the bank. The bank as at December 2007 had a shortfall
of rs.3.1 billion in minimum paid up capital requirement. The shortfall be met by
the new sponsors after assuming the control of the bank as per the share
purchase agreement.

After the bank acquired by the consortium there is been a change in the senior
management of the bank. Mr. azmat tarin has taken over as President and CEO
of the bank. The change in management taken as is good sign of consolidation of
the bank after years of deteriorating profits. The new management bought in a
new image for the bank. The bank is currently in process of re-banding with new
vision, mission and core values. A new organization structure has been
established which supports clear lines of communication and tired level of
authority with accountability. The bank also availed the services of a consultancy
firm for professional guidance. The new management team bought in focus on
the employee training in the areas of internal polcies and procedures, prudential
regulations. The management belives tht this will strengthen the control
environment.

The silk bank has a network of 65 branches throughout Pakistan. Bands head
office is in Karachi. The bank offers online and mobile banking. The bank offers
online and mobile banking. The bank plans to increase the branch network to
increase the market share. Ten new branches were opned to provide banking
facilites and develop the outreach. This will help the bank to increase its
customer base.

With new management in place the bank now focus on investmen in technology
and aligning it to the business strategy. The bank has purchased state of the art
core banking system,temenos T-24. the bank belives that this will improve the
business efficiency when will aligned with employee training. The bank has
developed new policies and procedures and is creating awareness through
training workshops covering 32882 participants during the current period.

The bank re-organizes itself on modern lines clearly segregating the functions of
business risk and operations. Critical functions such as compliance risk
management and middle office were setup.

The main strategic aim of the bank after the takeover by the consortium is to
increase the size of balance sheet by significantly increasing the deposit base
with major emphasis on quality and reduction in the NPLs. To achieve its
strategic aim the bank plans to increase its branch network, provide highly
innovative customer deposit and develop strong risk management systems.

Performance of the Silk bank bank

• Deteriorating overall performance

• Gigh npls
• Declining spreads
• Lower capital gans

Silk bank bank achieves a modest increasing in its total assets during the year
2008. the banks also expanded the breanch nework from 65 (end jully). The bank
mamges to secure high growth in credit comparable to its peer banks. The bank
focuses more on the corporate sector financing while the share of consumer
financing decreased. Theis is translated into low credit risk.

Saudi pak banks performance measured in terms of the both ROE and Roa
marked a significant decline. This as mainly due to continues erosion of
revaluation surplus and negative spreads with low volume frowth. There is been
a substantial growth in other operations system with fee based having a greater
proportion. The bank with enhances focus on treasury function achieved higher
income from dealing with foreign currencies. This continues to be a stable cource
of revenue. The operating cost of bank increased almost doubled mainly becuae
of increase in branch network and higher employee compensation. The total net
revenue could not be sustained by low net revenue of the banking resulting in pre
provision operating profit

Suring 1Q09 the banks performance still showed negative ROE the bank has
been acquired by a constrotium and still undergoing the consolidation process.
The current macro economic sitation and bullish market further agrivate situation
by eroding of revaluation surplus

Going forward the new management polans to grow and increase the size of
balance sheet by enhancing market share this is planning to launch a suite of
products\alternativedelivery channels and services it also plans to launch
specialized business units for customer corporate and investment banking the
step taken will help the bank move to the next level and change the iage to
vibrant progressive and growing bank

3 Company’s analysis (in terms of)

3.1 Operational analysis
Various departments are working in all the branches of Silk bank to facilitate the
customers. Following are the banking departments functioning in silk.

3.1.2 Operational departments of Silk Bank

 Account opening department.
 Cash department.
 Credit department.
 Lockers department.
 Bill clearing department.
 Foreign exchange department.

Accounts opening department

Basic function of the accounts department is to open new account and facilitate
the customer for the account opening purpose. There are certain formalities
which are to be observed for opening of an account with a Bank. These
formalities in brief are as under:

FORMAL APPLICATION:
The customer is to fill "Account Opening Form. It is a formal request by a
customer to the bank to allow him to have and operate the account.
Documents require for opening an account:
Copy of CNIC
Service certificate or student card.
Utility bill
Provisional receipt
KYC (Know Your Customer)

SPECIMEN SIGNATURE:
When the Banker is satisfied about the integrity of the customer, he agrees to
open the account. The Banker obtains the specimen signatures of the customer
on the signature book or on card.

Posting the account on the system:

After that officer has to post the new account on computer system for further
processing. During the process customer id and account number is generated.
New account remains active for one day after that it is blocked by the head office
until CNIC of the customer is verified from NADRA.

Cheque book issuing:

After the CNIC verification account opening officer has to issue a cheque book to
customer so that he can be able to make withdrawal from his account. Now a day
in Silk Bank cheque book issuing process is centralized that take 06 days to
complete.

SECRECY:
The secrecy of depositor’s account is the. Responsibility of every official engaged
in the Bank service.

Types of accounts:

Individual accounts:
Individual accounts are the most common personal investment accounts.
Opened by single person.

JOIN ACCOUNT:
A joint account occurs when two or more than two customers have one account.
The parties to a joint account are considered in law as they are one person.

Business accounts:
Business accounts can be opened by institutions, companies, partnerships,
trusts and non-profit organizations. Following documents are required.

BOOKS RELATING TO CUSTOMERS:

Pay-in-Slip
When money is to be deposited in the bank the pay in slip is to be filled. The
object of this book is to provide the customer with the bank’s acknowledgement
for receipt of money to be credited his account.

Cheque Book
A chequebook contains a number of cheques, which is given to a customer upon
written request and after marking the payment for the chequebook. It enables a
customer to make withdrawal from his account or make payment to various
parties by issue of cheques.

GROUNDS FOR CLOSING THE CUSTOMER’S ACCOUNT:

The banker may close the account of the customer due to following reasons:
Notice by a Customer
Death of a Customer
Customer’s Insanity
By order of court

I) NOTICE BY CUSTOMER:
The banker closes the account of the customer on the application of the
customer for closing his account.

II) DEATH OF CUSTOMER:

On death of his customer, the bank must stop payment on cheques drawn on
him by the deceased customer because the death revokes his authority to pay
such cheque. The heirs or the executors of the deceased customer are not
authorized to operate on the account; it can act only in accordance with
provisions mentioned in the letter of probate issued by a competent courts.

III) CUSTOMER’S INSANITY:

If the customer becomes insane or mental it terminates the banker’s authority to
act as his customer’s agent. Since the banker customer relationship comes to
end, in such as situation, it is usually considered that the banker’s authority to
pay his customer’s cheques is revoked by notice of insanity. However, the
bankers treat their customers as it unless a fairly inclusive evidence of the
customer’s insanity is available to them.

IV) ORDER OF COURT:

A court of law may serve a banker with an order in garnish proceeding in
execution of a decree prohibiting him from honoring a customer’s cheques.

Cash department
Cash Department is very sensitive and risky part of the bank. Very causations
and competent personnel are needed for the Job. SILK BANK has really such a
diligent staff with appreciable competencies and will to do work. 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 of the notes at the back of the pay slip.
Then he compares the detail with amount written on slip and signs the pay Slip.
Then he credits the entries in the computer by serial No, account type, Account
number and amount. Puts the stamp of the “cash Received” on the payment slip.
The first portion is for bank record while other one is given to the customer.

Cash payments procedure:

When a customer comes to withdraw a certain amount from his account, he
brings a Cheque along with him. In this case the following steps are taken.
The cashier receives the cheque and checks it whether it is post dated or
predated. Cheque can be cashed within six months. A predated cheque cannot
be cashed. He takes two signatures at the back of the cheque from the bearer.
He gives the cheque for posting at the computer. The computer checks out
whether there is balance in the account or not. Other instructions are also
received e.g. blocked, frozen, Etc. the posting is done in the computer and the
cheque is stamped posted with the serial number and date. He gives the cash to
bearer and the respected account is debited.

Online fund transfer:

Another function of the cash department is of online transfer of funds.
Customer has give filled remittances form with cash or without cash (from
account transfer) to the cashier in cash department who will then credits the
beneficiary account.

Balancing cash at the end and transferring excess cash:

At the day end cash department is responsible for balancing the cash. Physical
cash should be balanced with the amount in the computer. Branch’s limit for cash
is 40 million.

CREDIT 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 fluctuations. Common Securities for the
banker’s advances are as under:-
SECURITIES:

1. 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.
2. Mortgage
A mortgage is the transfer of an interest in specific immovable property for the
purpose of security the payment of money advanced or to be advanced by way
of loan, and existing or future debt, or the performance of an engagement which
may rise to a pecuniary liability. The transfer is called a mortgagor, the transferee
a mortgage.
3. Hypothecation
When property in the shape of goods is charged as security for a loan form the
bank the ownership and possession is left with the borrower, the goods are said
to be Hypothecated The essence of hypothecation is that neither the property in
the goods not the possession of them are possession is left with the borrower,
the goods are said to be Hypothecated the essence of hypothecation is that
neither the property in the goods not the possession of them are possessed by
the lender, but the security is granted by means of letter of hypothecation, which
usually provides for a banker’s charge on the hypothecation goods.
4. Pledge
In a pledge the ownership remains with pledge, but the pledge has the exclusive
possession of property until the advance is repaid in full. While in case of the
default the pledge has the power of sale after giving due notice.
5. Promissory Note
Sometimes promissory note is also accepted as a security, "A promissory note is
an instruments in writing containing an unconditional undertaking signed by the
maker, to pay on demand or at a fixed or determinable future time a certain sum
of money only, to or to the order of certain persons, or to the bearer or the
instrument." A promissory note is incomplete until has been delivered to payee or
the bearer. Moreover, the sum promised in a promissory note may be made by
two or more makers who may be liable there on jointly and severally.

TYPES OF ADVANCES:

The advances which are given by Silk Bank Limited are as under:-

1. 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.
TYPES OF ADVANCES
Demand Finance (Packing Credit)
Scheme introduced by State Bank of Pakistan for exporter of carpet, surgical
instruments, at zero percent rate of interest. While banks provides at
concessional rate of interest.
Loan ordinary (Demand Finance to Students)
Qarz-e-Hasana Scheme Loans are allowed to the students, teachers without any
interest or mark up with the recommendations of the MPA or MNA.
Demand Finance (Staff)
Loans are offered to the staff of the following four categories.
House Building Loans against mortgage of property.
Loan for purchasing vehicles.
Loan equivalent to month’s salary.

2. Running Finance (Overdraft)

Running finance (old name overdrafts) 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.

TYPES OF RUNNING FINANCE

Unsecured
Under such type of overdraft the bank pay upon the personal security of the
customer’s mentioned on the customer’s account.
Secured
Under this type of overdraft the bank allows his customer to withdraw more than
his deposits after giving security against the amount overdrawn.
The securities against which they given are:
 Share certificate, Saving certificate
 Deposits
 Mortgage of property
 Guarantee of person

SMALL LOANS
Loan is allowed to contractors clearing and forwarding agents.

3. Finance against the Foreign Bills (FAFB)

The advance facility is allowed both to local foreign bills and is classified as
under:-
FAFB (Local) advance against Railway receipts and truck receipt, a company
with bills of exchange and invoices, are given under this head.
FAFB (Foreign) advances against foreign bill, covering bills of exchange bills of
lading airway bills of exchange bills of lading airways bills etc.
4. Agriculture Loans
Loans to the farmers with holding up to 25 acres for meeting their short terms,
medium and long terms Agricultural production requirements, such as:
Agricultural inputs
Tube wells
Live Stock Framing
Land improvement

5. Industrial Loans
Besides the short-term loans which play a part in working capital medium and
long-term loans are also given to industrial sector for purchase of machinery and
other capital nature goods.

Bills clearing department

Inroduction
Every bank acts in two way i.e.
Paying Bank
Collecting Bank
Here in theory no legal obligation on a banker to collect cheques, drawn up to
other banks for a customer. It is, however, an important function of crossed
cheques. A large part of this work is carried out through the N.I.F.T.

National Institutional Facilitation Technologies (Pvt.) Limited:

NIFT is a joint venture between a consortium of six major banks and private
sector. It is responsible for the establishment and management of automated
clearinghouse facilities in Pakistan. NIFT is proactively involved in the
modernization of payment systems in Pakistan.

Function of Clearing Department

The 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 silk Bank of Pakistan or any other members, or sub-
members of the local clearing area..
To collect amounts of cheques drawn on members, sub-members of the local
clearing house, sent for collection by those silk Bank Limited, branches which are
not represented a the local clearing area.

Procedure of Depositing Cheques in Clearing Department

Whenever a customer wants to deposit cheque, etc, he fills a pay in slip and
hands it over the counter along with the instruments he wants to deposit with
bank. As far as possible, the customer desire that on of the staff member fill in a
slip for him, he should be obliged promptly.
 One portion of the perforated pay in slip is handed over to the depositor and the
portion becomes the regular portion of a credit voucher

TYPES OF CHEQUES COLLECTED BY CLEARING DEPARTMENT

Transfer Cheques
Transfer cheques are those cheques, which are collected and paid by the same
branch of bank.

Transfer Delivery Cheques

Transfer Deliver cheques are 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 (Person who deposit
cheques for collection) and the drawer of a cheque maintain the account with
different banks.
These clearing instruments are handed over to NIFT after posting necessary
stamps and checking them for any errors. Then further process of clearing is
carried on the behalf of NIFT.

Forex Department
International trade is growing and with the development of international trade it
has become more imperative. For countries to devote more and more attention to
the complicated mechanism of Foreign Exchange. It is more important in case of
developing countries. It is need of time, that a country should conserve its foreign
exchange resources.

Meaning of Foreign Exchange

The foreign exchange term refers to the principles that determine the rate of
exchange. It covers following three senses:
The mechanism or system by which international obligations or indebtedness are
fulfilled.
The currency of one country is exchanged for that of another.
The principles on which the people of world settle their debts to one another.

Letter of Credit:
It is a negotiable instrument through which the bank of the exporter deals with
bank of the importer through the guarantee of a bank. There are different parties
involved in the L/C, e-g importer, exporter, importer bank, exporter bank, and
advisory bank. LC involves banking channels in foreign trade to mitigate risk.
The procedure of opening of an L/C is as follow
The first thing is the Performa invoice. The Performa invoice is a document (say
a clip), which is, sends by the exporter to the importer and includes the
information like. Descriptions of goods, what type of goods you are needed and
what are the quality, rate and originating country etc.
Before to open a L/C the bank also consider that the goods which the importer is
importing is allowed by govt. of Pakistan or not. Because the importer is not
allowed to import that goods which are prohibited by the Govt. of Pakistan.
The importer is asked to show the membership certificate of any chamber of
commerce and industry affiliated with the Pakistan federation of chamber of
commerce and industry.
Fill the import form of the govt. of Pakistan, which is the proof of this that there is
no objection on the goods, which the customer is importing.
What type of goods you are needed and what are the quality, rate and originating
country etc.
Necessary Documents required for L/C:
NTN
Tax Authority registration certificate
Chamber of Association’s trade certificate
Type of Business
NIC
Margin
Registration No.
Application for L/C

On providing these documents the importer will be given the L/C form named as
IB-8.

Contents of IB 8
Request for LC
Rate
Importer and Exporter’s particulars
Amount
Terms
Partial Shipment (Allowed, not allowed)
Transshipment (Allowed, Not Allowed)
Port of Loading and destination
Payment Mode
Sight
On seeing the documents the importer has to pay.
At Sight and Negotiation:
It means that exporter will submit his documents with the bank and immediately
asks for payment.
Acceptance:
On showing the documents to the importer, the bank asks him to accept that he
will pay within 30, 60, 90, 120, 180 etc days.
Documents Required:
Certificate of Origin.
Commercial Invoice
Bill of Lading / Air way bill.

Charges:
For L/C following charges are applicable;
Commission
Postage
L/C Advising commission
L/C amendment Commission
L/C confirmation Commission
L/C Negotiation Commission

Payment Mode:
In foreign trade payment modes are
Advance Payment: Importer makes payment before delivery of goods.
Open A/C: Importer makes payment after receiving the goods.
Issuing foreign exchange accounts cheques books
Another function of foreign exchange department is to issue foreign exchange
accounts cheques books to customers on request. This process is not yet
centralized. Cheque book is issued within 15 minute of receiving request from
customers after making necessary register entries and posting stamps on it.

3.2 Financial analysis

The main contribution to the profit of the bank comes from its net interest
earnings although the non-interest earnings are also quite a significant
contributor. Of these, the fee, commission and brokerage income takes the
highest share with 47% and other income, which constitutes to 30% of total non-
markup/interest.

The NPLs of the bank have been declining till FY07; a significant surge was seen
in mid FY08. The bank has been stringent in its policies indicating that it s
protecting itself from exposures to poor customer. 2009 has been the year with
highest NPLs for the bank. However, Silk bank is not alone in this matter, as the
whole banking system is trying to oust NPLs as an industry; players are heavily
investing out of consumer finance and are diverting their attention to government
bonds, public sector enterprises and corporate finance to move forward.

The above graphs compare two types of advances in 2008 and 2009. The
composition of short-term advances has decreased whereas that of the long-term
advances has increased. A decrease in short term advances indicates the bank s
aversion from quick money recovery and on-the-spot lending as the operating
environment does not bode favorable with NPLs rising and instability peaking.
Taking a more long-term approach for the time being is indicating that the bank
foresees visible benefit in locking their money with solid and stable clientele as
opposed to deteriorating and cash dry companies. The conservative approach
the bank is taking might benefit them in the long-run when matters in the country
at hand seem very dim and lackluster for spiraling economic activity.

The liquidity profile of the company shows good signs as most of the ratios have
been increasing. The earning assets (advances, lendings to financial institutions
and investments) of the bank have been within a safe range over the years. In
FY09 the lendings to financial institutions of the bank have been decreasing
whereas the investments have witnessed a major increase that has led to an
overall increase in the earning assets of the bank. Moreover, the investments
have been made mostly in the government securities. Keeping in mind the
current downward trend of the stock market, investment in the government
securities would protect the bank from the fluctuations being experienced by the
stocks.
As can be seen, the cost of funding the earning assets is much below that of the
yield on the earning assets, leaving a large net interest margin for the bank.
However, as evident, the cost of fund is rising and must be checked before net
interest margin begins to slim down in times where liquidity is of great concern.
The advances to deposits have also dropped from 0.76 to 0.67 in 2009 as the
bank tries to take a strong hold on whom and where they are disbursing the
money.
The Earning Assets Composition further highlights the fact the Silk bank has
significantly cut down on their advances and have allocated more towards
investments. As mentioned earlier, the industry and silk bank on the whole are
heavily investing in government bonds and Public Sector Enterprises where cash
stripped companies are in dire need of money to settle inter-corporate debt.
This year the bank gave 20% bonus issue (20 shares for every 100 shares
owned) thus increasing the total number of issued shares to 9,108,000. The debt
management of the bank indicates a shift to equity. Therefore we see a constant
decline in debt to assets ratio over the years. Hence, a shift to equity from debt is
evident. A systematic trend can be seen as silk bank continues to alleviate their
debt to equity ratio. In 2005, the bank had Debt-Equity of 11.84% whereas now it
stands at 9.24%. Debt to assets ratio has also declined since 2006 and been
maintained at 0.90% showing a continuous effort to release leverage and
strengthen the system with equity.
3.3 Human resource assessment
The importance of manpower cannot be denied in any organization. In case of
banks it is the most valuable asset, because the bank is very sensitive
organization and to be in harmony with this sensitivity, need for proper human
resource is felt badly. Critical analysis of silk bank necessities recommending
suggestions that would increase bank’s efficiency and effectiveness.

 D evelopment of Managerial Leadership

In services industries like banks the need of managerial skill is much more
important. It makes positive contribution towards higher effective results. Without
development of managerial leadership, the effective utilization of the human
resource will be impossible.silk bank should also focus on this area and should
avoid deficiencies in managerial leadership, by applying the modern styles of
management.

 Political interference:
The political intervention in the bank needs to be stopped so that the top
hierarchy as well as the personnel placed at other important levels of the
institution is not changed Just on political grounds and the on going
developmental work is not obstructed. It will enable the management to formulate
long term strategies and their proper implementation because the long term
policies, accurately based on calculated risk, have proved the pivotal role players
for organizational sustainable development.

 Basis for Promotion:

A sizeable portion of the officers of silk bank, are promoted in without test and
interviews to officers cadre. The promotion policy must be too tight and
transparent that no one may have the chance to be promoted on criteria other
than the required qualification, experience and performance. As for the present
excess staff, those not found up to the required criteria, may be given GHS etc.

 Management Changes on Merit:

In silk bank, though vary rare fresh recruitments are made, and the bank faces
saturation in personnel, now clipping will be more helpful. This downsizing will
leave the bank with the staff, to be retained on the basis of ultimate meritocracy
with zero tolerance of incompetence. Now in this remaining workforce, a cultural
change right from the top management down to the front line, that better suits to
the present day needs of banking environment could be included through proper
discipline and training.

 Needs of change in Recruitment Policy:

It is important to say that the external level market is full of the required talent like
MBA, M. Com etc, but on the country only graduation with simple subjects is still
the requisite qualification for officer’s cadre, which has already worked amply in
the devastation of silk bank. Therefore the recruitment qualification to the officer’s
framework should be enhanced for simple graduation, to professionally qualify
preferably Masters in their respective fields.

 Refresher Courses:
The Human of the bank should frequently conduct meaningful refresher courses,
seminars and workshops with a view to improve the knowledge of the staff. Due
to severe competition and technological developments, the banking business is
experiencing rapid changes therefore the HRD should have arrangements for
staff trainings to cope with the new changes that may become threats for the
interest of the bank.

 Computer Trainings:
The present conventional and orthodox training programmes need to be made
more comprehensive and reinforced with inclusion of computer training courses.

 Training for Credit Management:

Special trainings on credit management should be imparted to the finance
dealing Staff. Financing is main fountain bank’s income. Sound finance is
extremely necessary for opening of springs of the smooth inflow of the income.

 Training with Clear Objectives:

Training needs assessment is necessary so that only the relevant staff is sent for
the training courses.

 Change in Appraisal System:

The present performance appraisal system is good. However, it needs to be
implemented in true sense. The drawbacks that are obvious like nepotism and
favoritism etc. need to rooted out and the culture of ultimate meritocracy in
appraising needs be inculcated.

 I ntroduction of New Courses:

The human recourses division of the bank should focus on the restoration of the
corporate image of the bank by floating programmes such as, marketing
excellence, courses on corporate culture and others. Usually in businesses the
wholesalers, retailers and other intermediaries are finished by opening a network
of the business own outlets. It works as profit maximization devise. In my opinion
the above two programmes marketing excellence and corporate culture, added
with the best counter service and outdoor informal relationship with the potential
customers by the line managers will save the sum of money spent on various
media of advertisement.

 Cheaper means for Postings etc.

The culture of attachment of hopes with the elements outside silk bank, for
promotion, transfers, postings, and other benefits requires eradication from the
roots.

 Customers Orientation:
Every entrepreneur if concerned about the success of his business, has to
understand, recognize, carefully and appropriately that his customer is “The
King” of the business system and the original spring of the business revenue. Silk
bank should recognize its customers as the mainstream of the bank’s revenue.
They need to be provided the deserved respect, quality and in time service and
to be politely dealt with.

 Career Development:
As a matter of personnel policy HRD of silk bank should prepare a plan showing
the future growth potential of employees on the job performance and evaluation
and it should be made known to the employees. In this regard, employees should
be given opportunities to show their performances, which would help in their
career development.

3.3.1 Recruiting Process

Silk bank has a well established HRM department which is dedicated for hiring
capable, skillful and well educated employees which are selected through special
selection processes like interviews and written test to ensure that the most
appropriate candidates are hired .It also keeps in view the need and demands of
existing employees.

Selection Devices
In silk bank, the application forms must be submitted by candidate by their CV
and by giving basic information about himself/herself. Interviews are conducted
by top management and evaluate the candidate. Sometime written test are also
conducted.
Silk bank investigate the background of candidate and physical fitness tests are
used for selection of the candidates.
Orientation
When the new employee is hired the management organizes the orientation
program to introduce the rules, working and culture of organization to new
employee.
Types of Training
Silk bank have different training programs. Silk bank organize different training
programs for their employees for updating of knowledge of business and
technology. It may be on the job or rotation of job or in form of lectures.
Career Development
There are great chances of promotion for the hard working employees and for
those who shoe their best performance and achieve the goal effectively and
efficiently.

Employees Performance Management

In silk bank, top management evaluates the performance of his employees that
the employees are achieving their goals or not, what improvement in employees
makes them more successful. It is evaluated after a specific period of time.
Motivation In silk bank, the employees are motivated by giving them bonuses,
compensations and other facilities necessary for living a good life that fulfils their
social and the safety needs.

Marketing analysis

Marketing is the process of playing and executing the conception, pricing,

promotion and distribution of ideas, good and services to create exchange that
satisfy individual and organizational objectives.
Silk bank also adopts certain marketing techniques to enhance the image of the
bank. Most of the marketing takes place through various deposits mobilization
schemes through advertising in news paper and other media and there is more
emphasis on customer services to have more satisfied client who can
recommend to their associates and friends.
• SPONSORSHIPS
• PRINT
• ELECTRONIC
Environmental analysis (in terms of)
Silk bank has good relationship with their customers, suppliers. Managers try
their best to great good environment with them and solve problems in well
manner. The general environment effects on Silk bank economic. Silk bank work
in legal way, all the decisions of the managers are legal and they give benefit to
their customers, stakeholder, stockbroker and employees. Silk bank fulfils the
demographic conditions; Silk bank is introducing new types of accounts of
different age groups, level of education income of family location. Now in silk
bank, there is bit change of technology.

4.1 Industry & market analysis

4.1.1 Major products lines market segments

Deposit Accounts

Current Accounts
Make unlimited transactions while maintaining a low minimum balance every
month. silk bank is currently offering three types of accounts in current account
category. Their detail and name is as under.
 silk bank Business Value Account
 Current Account
 Basic Banking Account (BBA)

silk bank Business Value Account

Unique transactional account for Businessmen
Up to 5.35%* profit per annum
Profit calculated daily, paid every quarter
Minimum balance of Rs. 20,000
silk bank DebitCard and Inter Branch Transaction System (IBTS) facilities
Up to 10 Bankers Cheques free (at minimum balance of Rs. 500,000)
Funds transfer to any bank through silk bank PhoneBanking
Current Account
Minimum balance of Rs. 5,000
Unlimited transactions
Non-profit bearing
Silk bank DebitCard and Inter Branch Transaction System (IBTS) facilities
Funds transfer to any bank through silk bank PhoneBanking
Basic Banking Account (BBA)
Can be opened with only Rs. 1,000
No minimum balance requirement
Upto 2 withdrawal and 2 deposit transactions free every month
Unlimited withdrawals through silk bank DebitCard
Non-profit bearing
Savings accounts
Avail the flexibility of making transactions while earning profit on daily/monthly
basis. silk bank is currently offering five types of accounts in savings account
category. Their detail and name is as under.

silk bank Value Account

PLS-Savings Account
Remittance Munafa Plus Savings Account
Daily Munafa Account
Daily Progressive Account

silk bank Value Account

7.19%* profit per annum
Profit calculated monthly, paid every quarter
Deposit ranges from Rs. 10,000 to Rs. 1,000,000
Two withdrawals free every month

PLS-Savings Account
5.06% profit per annum*
Profit paid bi-annually
silk bank DebitCard and Inter Branch Transaction System (IBTS) facilities
Funds transfer to any bank through silk bank PhoneBanking
Minimum balance of Rs. 20,000
Unlimited transactions

Remittance Munafa Plus Savings Account

Special account for receiving foreign remittances
5.12%* profit per annum
Profit paid every month
Minimum balance of Rs. 20,000

Daily Munafa Account

Profit calculated daily, paid every month
Up to 8.84% profit per annum*
silk bank DebitCard and Inter Branch Transaction System (IBTS) facilities
Funds transfer to any bank through silk bank PhoneBanking
Minimum balance of Rs. 20,000

Daily Progressive Account

Unique transactional account for Institutions
Profit calculated daily, paid every month
Up to 11.57% profit per annum*
Inter Branch Transaction System (IBTS) facility
Funds transfer to any bank through silk bank PhoneBanking
Minimum balance of Rs. 20,000

4.2 Competitor analysis

4.2.1 Major competitors

Increase in competition due to increasing number of foreign and domestic private
banks offering highly specialized and attractive services.

UNITED BANK LIMITED

One of major competitor is UBL. It was established in November 7, 1959. Its
chairman was His Highness Shaikh Nahayan Mabarak Al Nahaya. UBL has a
large network of branches, which extends to the remotest areas of the country. In
December 1983, there were 1623 branches whereas in 1974 it had only 1238
branches and in October 2003 these figures show total number of 1007
branches. It has 1121 Domestic, 17 Overseas Branches. UBL has assets of over
Rs. 620 billion and a solid track record of fifty years - in addition to the
convenience of over 1121 branches serving you throughout the country and also
at several overseas locations

Its Subsidiary is:

United Bank AG Zurich, Switzerland
United National Bank Limited, UK (Joint venture with NBP)
UBL Fund Managers Limited
United Executors and Trustees Company Limited

Alfalah Bank
Bank Alfalah Limited was incorporated on June 21st, 1992 as a public limited
company under the Companies Ordinance 1984. Its banking operations
commenced from November 1st ,1997. The bank is engaged in commercial
banking and related services as defined in the Banking companies ordinance,
1962. The Bank is currently operating through various branches in Pakistan,
Bahrain, Bangladesh & Afghanistan, with the registered office at B.A.Building,
I.I.Chundrigar, Karachi. The Bank is currently operating through 195 branches in
74 cities, with the registered office at B.A.Building, I.I.Chundrigar, Karachi
Vision
To be the premier organization operating locally & internationality that provides
the complete range of financial services to all segments under one roof.
Mission
To develop & deliver the most innovative products, manage customer
experience, deliver quality services that contributes to brand strength,
establishes a competitive advantage and enhances profitability, thus providing
value to the stakeholders of the bank.

Standard Charter Bank Pakistan

The history of Standard Chartered in Pakistan dates back to 1863, when
the Chartered Bank of India, Australia and China first established its operations
in Karachi. In 2006 Standard Chartered Bank acquired Pakistan's Union Bank.
On 30 December 2006, Standard Chartered merged Union Bank with its own
subsidiary, Standard Chartered Bank (Pakistan), to create Pakistan's sixth
largest bank. Standard Chartered aspires to be the best international bank for its
customers across its markets. The Group earns around 90 per cent of its income
and profits in Asia, Africa and the Middle East, from its Wholesale and Consumer
Banking businesses. The Group has 1700 branches and outlets located in 70
countries. The extraordinary growth of its markets and businesses creates
exciting and challenging international career opportunities. Standard Chartered
Bank (Pakistan) Limited is Pakistan's oldest and largest foreign commercial bank.
It employs over 9000 people in its 162 branches in Pakistan.

Askari Bank
Askari Bank Ltd (formerly Askari Commercial Bank) was incorporated
in Pakistan on October 9, 1991, as a Public Limited Company. It started its
operations during April 1, 1992. The bank principally deals with banking, as
defined in the Banking Companies Ordinance, 1962. The Bank is listed on
the Karachi, Lahore & Islamabad Stock Exchanges and its shares are currently
the highest quoted from among the new private sector banks in Pakistan.
Askari Bank has expanded into a nationwide presence of 150 branches, and an
offshore banking Unit in Bahrain. A shared network of over 1,100
online ATMs covering all major cities in Pakistan supports the delivery channels
for customer service. As on December 31, 2007, the bank had equity of PKR
12.27 billion and total assets of PKR 182.17 billion, with over 800,000 banking
customers, serviced by 6,808 employees.

Muslim Commercial Bank Limited

MCB Bank Limited formerly known as Muslim Commercial Bank
Limited was incorporated by the Adamjee Group on July 9, 1947, under the
Indian Companies Act, VII of 1913 as a limited company. The bank was
established with a view to provide banking facilities to the business community of
the South Asia. The bank was nationalized in 1974 during the government
of Zulfikar Ali Bhutto. This was the first bank to be privatized in 1991 and the
bank was purchased by a consortium of Pakistani corporate groups led by Nishat
Group. As of June 2008, the Nishat Group owns a majority stake in the bank.
The president of the bank is Mr. Atif Bajwa (previously with Citi Bank). MCB is
Pakistan’s fourth largest bank by assets having an asset base of US$ 5.9 billion,
and the largest by market capitalization having a market capitalization of US$ 1.8
billion. The Bank has a customer base of approximately 4 million and a
nationwide distribution network of 1,081 branches, including 8 Islamic banking
branches, and over 300 ATMs, in a market with a population of over160 million.
uring the last fifteen years, the Bank has concentrated on growth through
improving service quality, investment in technology and people, utilizing its
extensive branch network, developing a large and stable deposit base and
managing its non-performing loans via improved risk management processes.
MCB has 1081 branches (as of 31st December, 2009) including local branches,
and business establishments in SriLanka and Bahrain including newly
established Rep.Office in Dubai, UAE. The Bank has also formed a private
company in Hong Kong (fully owned subsidiary of MCB) in partnership with
Standard Chartered Bank, handling trade transactions of select countries in the
Asia-Pacific region. MCB has been successful in turning around its operations
since its privatization and is moving forward to set high performance standards
with the continuous support of its customers and leadership in banking
technology.

4.2.2 Their market shares

The banking industry was faced with a rather challenging year in 2009. With the
repercussions of the financial global crisis still clutching world economies,
Pakistan was fighting domestic economic hurdles, which included but not limited
to the slowdown of exports, rising security concerns, inflation and energy crisis
gripping the country and a GDP achieved of only 2.5%.

The domestic remained largely immune to the financial stress faced by

developed nations; this was mostly attributed to the fact that our markets don t
has significant international exposure. Our financial markets also don t has
innovative and complex derivative products, which inadvertently have become
one of the many reasons why our situation is a lot better than theirs.

However, the financial markets in Pakistan faced various episodes of liquidity

stress during FY 09 as the year kicked started with the build-up of liquidity
pressure in the money market that peaked during October-November 2009. The
overall liquidity profile of the banking system was strained due to high public
sector demand for bank credit and pick up in credit to private sector. The SBP
continuously tried to offset the situation by injecting funds into the market through
discounting and open-market-operations OMOs to keep the market liquid. In
comparison, OMO average outstanding balance was Rs 76.2 billion in FY09 as
opposed to Rs 23.6 billion in the last quarter.
Due to inflationary pressure spinning off from rising international commodities,
SBP continued with its monetary tightening stance during the first two quarters of
FY09. With the subsequent decline in prices, inflationary pressures eased off
which lead to a decline in CPI post March FY 09 to which SBP acted by lowering
its discount rate by 100 BPS in April FY09. CRR and SLR requirements, which
were increased in May FY08, were reduced during the first half of FY09 to
alleviate temporary liquidity strains, which the financial market was facing come
October-November 2009.

INVESTMENTS
Overall banking investments for December 2009 were Rs 1,753 billion, a 62%
jump from CY08 where net investments of the banking system were Rs 1,080
billion. The total asset mix of the banks continued to invest heavily in government
papers and bonds in public sector enterprise. The increase has accounted for
more than one third of the overall growth in the banking systems asset base.
Major increase upon break up of government papers was seen in short-term
market treasury bills and long-term Pakistan Investment Bonds. Deposits showed
some robust growth, CY08 registered deposits of the banking industry at Rs
4,217 billion whereas in December 2009 deposits were at Rs 4,787 billion. The
deposit base of the system posted a 6.8% growth for the quarter but a 13.5% Y-
o-Y increase.
=========================================================================
========
Customers 2008 2009 Growth % of total
Since 2008 deposits
(2009)
=========================================================================
========
Fixed deposits 186,206,978 208,459,070 12% 31%
Savings 271,240,066 314,040,743 16% 46%
Current Account Remunerative 2,739,417 1,811,833 -34% 0.3%
Current Account Non-Remunerative 130,326,871 149,221,644 14% 22%
Fin.Inst - Remunerative deposits 2,368,970 1,616,443 -32% 0.2%
Fin Inst - Non-Remunerative deposits 4,208,243 7,600,346 81% 1%
===============================================================

Risk

Depleting asset quality

Weak internak risk management system

Risk management

The bank reorganizxed itself under the new management critical function such as
compliance risk management was setup. The bank has shifted its focus to more
effective risk management and for this bank as setup is risk management
committee and asset and liability committee (ALCO) in the year 2007
The RMC is responsible for determination of general principals for measuring
managing and reporting the risk explore of the bank risk policies over all risk
explore over all investment strategy and the capital development and risk
tolerance. The ALCO is responsible for compostion of assets and liabilties
management of liquitidy timely identification of sources of market and liquidity
risk, prices of deposit and avances deciding on required maturity profile and the
mix of incrememntal assets and liabilites defining the interna rate view of the bak
and seceding future strategies for treasury receiving funding policies and
evaluating the marker and liquidity risk n new product.
Saudi pak has taken over by new mamangemtn since the take over risk
managmnet function has been continuesly mproved.
Credi risk is overviewed by broads risk cometee in addition to which there are
committee of the management authorities have bbeen appropriately delegated
and separate risk management units operates for the corporate/ sme and
consumer business with properly laid down policies and procedures formulated in
the form of manuals and productsprogram . credit admin unit have also been
established in the various aforesaide segments of the bank.the bank ahs its on
credit rating system for corporate commercial and relationshipSME which is
further being revamped in consumer banking separate collection units also
operate for recovery and additionally a new collection system is beng procured
for the consumer business. A centralized special asset management unit is
responsible for the classigfied corporate/ sme portfolio and its recovery . a new
credit card policy manual has been finalized which will be approved by the board
in 2009 in which target market and risk acceptance critera have been outlined
and per party limits revised to spread the risk over a broader base heavy
investment in technology has been initiated to enhance the evel of effectivness
mis and monitoring . a process of mpost approval review of credit lines have
commenced which will be gradually converted into a risk asset review unit (RAR)
as thr RAR function is currently being performed by internal audit department .
Appropriate policies and procedures have been documented and disseminated
and internal control unit is in operation which is continuesly being expanded. An
independent audit function has been established by the bank. Repoting to the
audit commtee of the board .
A compliance department has been established to ensure that legal and
regulatory risks are properly addressed in addition to the implementation of anti
money laundering. Know your customer(AML/KYC) policies, and strict monitoring
of transaction appropriate training plans have been implemented including
training on AML/KYC contingency plans are in place and are in the procees of
being tested self assessment of key risk indicators KRIs and compliance of
standards codes and guide lines will be regularly carried out and documented.
Reviews of internal control system have been initiated and are planned to be
completed in 2009. the bank as reported above has aquired the t24 system from
temenos which is currently in process of implementation further the bank is also
implementing oracle financials to improve upon its mis and improve controls over
financial reporting.

Credit risk

Financital made upto 44% of the total assets of the bank at the end of year 2004.
the portfolio mix is more towards corporate financing wth major concentration in
textle sector. The bank has a diversified portfolio into various sub sectors of the
economy. More focus of corporate financing lower as the credit rsk profile of the
bak and major portion of trade financing mitigate liquidity risk
The consumer finances portfolio constituted about 7% of the total advances the
managers plan to continue minimum focus on consumers financing maximum
focus on consumer financing and maximum towards te corporate sector. The
owers the credit risk for the bank. The bank showed an increase in NPLs despite
low consumer focus.

4.3 Technology analysis

Silk bank was the first commercial bank to be established in Pakistan in 1947.
Over the years, Silk bank has grown its branch network and become the largest
private sector bank with over 1,450 branches across the country and a customer
base exceeding five million relationships.

Silk bank E-Bank

It provides services via a dedicated communication link on the internet. The E-
Banking services provide “anytime, anywhere” banking to all 5 million customers.
This service, designed to be user friendly, assures secured access and
confidentiality.

4.3.1 Technical methods that affect the industry

4.3.2 Innovations
Auto Cash (Debit/ ATM Card)
Silk bank icard is used for dual purposes-a debit card and an ATM card and
provides u the direct access to cash in your account.
silk Bank icard as your Debit Card

When payment is made at any merchant location using the card, exact purchase
amount is deducted from your account.
Convenient, secure, quick and easy payment option
Nationwide acceptability at various merchant locations displaying ORIX Network
logo
Free of charge debit card transactions

More advanced information systems in banks that are more secured than before
to eliminate any chances of fraud and which are even more user friendly to help
employees to use them not only to make critical decisions but also satisfy
customer need in a more timely manner.

Advancements in online transfer from inter branch to an even more helpful inter
bank transfers.

More advanced means of connectivity between branches through better and

advanced software and hardware to maintain connections with banks in remote
areas and during natural calamities in Pakistan. These might include better
connection through WiFi or WiMax, both new technologies.

Digital imaging of cheques will also be an innovative technology and introduce

paper free environment
5 Departments Worked During
Internship
During the time of my internship in Silk bank branch f-8 Markaz I got the chance
to work in different departments of Silk bank. Talking about financial performance
of the bank in 2009 all the financial indicators are showing positive results when
the financial performance of the bank in 2009 is compared with financial
performance of 2008. During 2009 Silk bank also won some awards. At the end
of this report I have given my suggestion for the improvement of the bank.
Following are the names of departments in which I got the chance to work in:
Account Opening
Remittance
Car Finance
Accounts
Clearing / Collection

6 Identification of a main problem

The management should try to decrease job insecurity among the employees.
Training program should be started for internees and newly appointed
employees.
There should be transport facility for the employees.
The number of employees should be increased in order to decrease the
workload.
The bank charges high service charges as compared to the other banks, so
these should be lowered down.
Surveys must be conducted regarding customer satisfaction level and all
employees of this dept. should look forward to getting feedback whenever
possible.
Adding of value added features that offer competitive advantage is also a means
of avoiding customer dissatisfaction.
Quick response to customer queries is necessary to maintain a healthy
relationship with the customer.
7 Findings
Silk bank among Top 500 Global Financial Brands
Top management is highly qualified and highly paid individuals
Silk bank is backed by high level corporate giants
Silk bank wins two Global Finance Awards
The Best Emerging Market Bank in Pakistan
Great market penetration

8 Conclusion and Recommendations

No doubt that Silk bank is the largest bank in the private sector and since its
establishment it has progressed and improved tremendously and has a customer
base exceeding 5 million but it can still advance further if it adopt new changing
IT technologies as there is still room for some improvements. It should train its
employees about the new IT trends. Moreover certain needs of the employees
should also be considered like bank timings should be acceptable and
employees should be given importance and must be consulted in some decision
making processes. Improved friendly relations are required between the top and
the middle management. This will make the employees work even better for their
organization.