INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN Industrial Development Bank of Pakistan (IDBP) INTRODUCTION:

Industrial Development Bank of Pakistan (IDBP) is one of Pakistan's oldest developmental financing institutions; scheduled bank was established in Pakistan under the industrial development bank of Pakistan ordinance 1961(XXXI). The Bank's registered and principal offices are situated at; State Life Building No. 02. Wallace Road, Karachi.

Industrial Development Bank of Pakistan (IDBP) was created with the primary objective of extending term finance for investment in the manufacturing sector of the economy. Over the years, however, the Bank has emerged as an institution fostering the growth and development of Small and Medium Enterprise sector stimulating industrial progress in the rural/less developed regions of the country. Industrial Development Bank of Pakistan has also become an important component of the financial sector of Pakistan and is playing an active role in money and capital market of the country. Therefore now the bank provides all types of banking services and is also engaged in term financing for industrial and commercial activities, fund management and leasing business. Industrial Development Bank of Pakistan has the unique distinction of financing the first ever projects for a diversified list of products.. For attaining its objectives, the Bank provided medium and short term finance in local and foreign currencies for the creation of fixed assets to new industrial projects as well as for expansion, balancing, modernization or replacement of existing projects. It extended technical, financial and managerial advice to its clients in planning and execution of the industrial projects. It also facilitated transfer of technologies from developed countries to industrial enterprises in Pakistan.. Industrial Development Bank of Pakistan is wholly owned by Government of Pakistan with 57% of its shares held by Federal Government, 36% by State Bank of Pakistan and 7% by Provincial Governments and other Public sector corporations. Its Board of Directors consisting of the representatives of private sector is appointed by Ministry of Finance, Government of Pakistan. A unique feature of Industrial Development Bank of Pakistan is that besides Development Financing Institution it is also a scheduled bank and authorized dealer of foreign exchange. The Federal Government has sanctioned the scheme of amalgamation on Investment Corporation of Pakistan (ICP) with and into IDBP under section 47(8) of the Banking Companies Ordinance, 1962 with effect from December 27, 2006. In terms of the scheme the assets and liabilities of ICP (defunct) stand transferred to and vested in the Bank from that date. The Bank as per provisions of the Scheme has covered the net assets value of the ICP (defunct) as of the effective date into the credit balance of ex-shareholder of ICP (defunct) in its book

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Accordingly, in pursuance of the aforesaid order a public company viz Industrial Development Bank Limited (IDBL) has been incorporated at April 10, 2007 under the Companies Ordinance 1984. IDBP is under the process of financial restructuring. A bill namely IDBP (re-organization and Conversion) bill 2005 has also been approved by the National Assembly and Senate. A new banking company namely IDBL as already been formed. Meanwhile on 27th May 2011, the Cabinet decided to wind-up IDBP for which an action plan is under preparation.

FUNCTIONS
DEVELOPMENT BANKING BUSINESS:

Provides medium and long term finances Provides guarantee, loans

COMMERCIAL BANKING BUSINESS:

Deposits Remittances Bills Short term advances Guarantees Letter of Credit Foreign exchange accounts

MERCHANT BANKING BUSINESS:

Underwriting of public issue of shares Bridge Financing Leasing

COLLECTION OF UTILITY BILLS:

Telephone Bills at all branches Gas Bills at Branches in Karachi

EQUITY INVESTMENT/TRADING ADMINISTERS OF THE EQUITY PARTICIPATION FUND

BRANCH WISE DEPOSIT POSITION.

AS ON 30TH SEPTEMBER 2008: TOTAL BRANCHES: 18 TOTAL ACCOUNTS: 33,431 TOTAL AMOUNT: Rs 4,469,157 (in millions)

INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN PAID UP CAPITAL

AS ON 30TH SEPTEMBER 2008: Rs 157 million.

SHAREHOLDING
(2008)
Government of Pakistan: 57% State Bank of Pakistan: 36%. Provincial Government & Others: 07%.

CUMMULATIVE APPROVALS/DISBURSEMENTS
(SINCE INCEPTION TO 30-09-2008) NUMBER OF CASES CUMMULATIVE APPROVALS CUMMULATIVE DISBURSEMENT CUMMULATIVE RECOVERIES 8,213 6,083 5,683 AMOUNT (BILLIONS) 48.24 34.60 26.69

Disbursement means paying out in the discharge of a debt or expense.

DISTRIBUTION IN TERMS OF RURAL/URBAN AREA:

LESS DEVELOPED RURAL AREA DEVELOPED/OTHER AREA TOTAL APPROVAL 31.59 (65%) 16.65 (35%) 48.24 DISBURSEMENT 21.80 (63%) 12.80 (37%) 34.60

STAFF STRENGTH OF IDBP

Permanent Contract Total Transfer (till 27-12-06) Grand Total Executive 20 03 23 04 27 Officer 57 17 74 06 80 Clerical 48 25 73 01 74 Non-clerical 02 69 71 00 71 Total 127 114 241 11 252

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HUMAN RESOURCE MANAGEMENT:

Human Resource Management is a process of bringing people and organizations together so that the goals of each are met.
Human Resource Management undertakes the following activities: 1. Human resource or manpower planning. 2. Recruitment, selection and placement of personnel. 3. Training and development of employees. 4. Appraisal of performance of employees. 5. Taking corrective steps such as transfer from one job to another. 6. Remuneration of employees. 7. Social security and welfare of employees. 8. Setting general and specific management policy for organizational relationship. 9. Collective bargaining, contract negotiation and grievance handling. 10. Staffing the organization. 11. Aiding in the self-development of employees at all levels. 12. Developing and maintaining motivation for workers by providing incentives. 13. Reviewing and auditing man-power management in the organization 14. Potential Appraisal. Feedback Counseling. 15. Role Analysis for job occupants. 16. Job Rotation. 17. Quality Circle, Organization development and Quality of Working Life.

IDBPs HUMAN RESOURCE MANAGEMENT makes policies for the ease of the employees to help them in resource usage effectively and efficiently.

RECRUITMENT POLICY
IDBP is a specialized institution and has been recruiting professional staff as MBAs, Engineers, Chartered Accountants, and Cost Accountants etc. The entry point of these specialized professionals in Bank Service is officer Grade II. In higher categories such as Grade I for the designation of AVP, VP etc, recruitment is made on the basis of specialized qualification with longer experience as per the job requirement. Other than these two grades the Grade III officers are also recruited directly and for Grade III minimum qualification required is graduation with some additional certificate in the desired field. The requirement plan is drawn each year based on the best judgment actual requirement of officers keeping in the view the retirements, expansions etc. Selection will be made on the basis of interviews by a selection committee of senior officers appointed by the bank. On unavailability of competent authority in particular subject, IDBP may outsource professionals for recruitment purpose. However recruitment in IDBP has stopped since 2005.

INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN PROMOTION POLICY

The promotion policy followed by the bank is prepared on the lines of the promotion policy for Nationalized Commercials Banks which was approved by the banking policy committee constituted by the Government of Pakistan. IDBP adapted the promotion policy after the approval of Board of Directors. For promotion in all grades employees' performance and result carries great importance. IDBP has introduced employee development policy i.e. to encourage employees to improve their knowledge and skills and to prepare them for new challenges. This employee development gives opportunities to employees to be eligible for Out Of Turn Promotion. MINIMUM ELIGIBILITY CRITERIA FOR PROMOTION:
a) b) c) d) e) f) g) Promotion from grade III to grade II: minimum 5-year services in the grade. Promotion from grade II to grade I: minimum 4-year services in the grade. Promotion from grade I to assistant VP grade: minimum 3-year services in grade with minimum 12 year banking/DFI experience as officer. Promotion from assistant VP grade to VP grade: minimum 3-year services in grade with minimum 15 year banking/DFI experience as officer. Promotion from VP grade to senior VP grade: minimum 3-year services in grade with minimum 17 year banking/DFI experience as officer. Promotion from senior VP grade to executive VP grade: minimum 3-year services in grade with minimum 20 year banking/DFI experience as officer. Promotion from executive VP grade to senior executive VP grade: minimum 3-year services in grade with minimum 23 year banking/DFI experience as officer.

However, board of director on recommendation of promotion committee can relax the condition of length of services in grades in exceptional cases.

PROMOTION POLICY FOR DEPUTATION: DEPUTATION is a term which defines Delegation (or deputation) is the assignment of authority and responsibility to another person (normally from a manager to a subordinate) to carry out specific activities. However the person who delegated the work remains accountable for the outcome of the delegated work. Employees on deputation to other organization would be considered for promotion by their parent organization on following basis; a) Seniority. b) Merit. c) Performance reports. TIME FOR CONSIDERING PROMOTION: At the beginning of the year on the basis of ACRs of last year ended 31st December. SUPERSESSION: Supersession means the act of replacing one person or thing by another especially one held to be superior. Reasons and justification should be recorded by the respective committee. DEFERMENT: 5

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Deferment means the action or fact of putting something off to a later time; postponement Promotions can be deferred due to disciplinary/ departmental or criminal processing against the candidates. APPEAL: A candidate can make an appeal against promotion committee for being unfair to MD, who would constitute committee consisting of non members of the promotion committee. DISQUALIFICATION: An employee will be liable for disqualification for promotion if one attempts to bring political and other influence from outside.

PLACEMENT POLICY
Placement policy is the concrete policy used by an allocator for choosing a free block to satisfy an allocation request. Placement of the officials is made by Bank according to the requirement of the departments, regional offices and branches and shortage of executives and officers. Although bank has a policy to rotate officials from department to department but it is not always possible as it may affect the functionality of bank services. MD is the competent authority to transfer all categories of executives and officers, whereas for Grade II and Grade III, competent authority is DMD. And as far as transferring officers except branch managers, VP and above within branch is concerned, Regional Head has an authority.

EVALUATION PROCESS
Promotions are made on the basis of employees' performance and the performance is evaluated on following important points. Determine the eligibility of candidates on the basis of: Seniority Performance. Assessment of suitability for promotion of the eligible candidates on prescribed criteria and through interview for positions of Vice President and above.

Performance evaluation carries 80 marks out of 100. These 80 marks are allotted on following basis: a) b) c) d) e) f) g) Educational qualification. (08) Professional qualification.(08) Service period in the grade. ( 1 mark for each completed year) Annual Confidential Reports for three years. (3 * 10) Operational performance. (20) Experience in different disciplines (horizontal services). (05) Mobility. (02)

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h) Posting in unattractive under developed areas of the country away from the district of domicile. (02) Other 20 marks out of 100 are allocated for interview. Interviews are conducted by the promotion committee which is comprises of at least 3 executive including 1 deputy managing director who will recommend additional increments and promotions.

EMPLOYEE BENEFITS:
For employees who opted for the new scheme introduced in 1975 for clerical staff and in 1977 for officers and for all new employees joining thereafter, the bank operates the following employees benefit schemes: PENSION SCHEME:
A pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment.

The bank provides post retirement pension scheme to its employees. Provision is made on the basis of actuarial valuation and such latest was carried out as at June 30, 2010 using Projected Unit Credit Method. SALIENT FEATURES OF PENSION SCHEME i. ii. iii. iv. v. Normal retirement age = 60 years. Early retirement is possible after 25 years of service. Minimum qualifying service for pension on retirement/ death in service is 10 years. No pension will be payable on resignation or termination as a result of disciplinary proceedings. In case of death of employees who had completed not less than ten years of total qualifying service or while in receipt of pension his family is entitled for pension at the rate of 50% of the gross pension from next day of his/her death.

NON- CONTRIBUTORY PROVIDENT FUND: The bank operates an approved non-contributory provident fund for all its permanent employees. Contributions are made by the employees at 12% to 20% of their pay. POST RETIREMENT MEDICAL BENEFITS: The bank also provides post retirement medical benefits to its employees. Provision is made on the basis of actuarial valuation and such latest valuation was carried out as at June 30, 2010 using Projected Unit Credit Method.

EMPLOYEES' COMPENSATED ABSENCES:

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The bank makes provision in the financial statements for its liabilities towards vested compensated absences accumulated by its employees estimated on the basis of actuarial valuation and such latest valuation was carried out as at June 30, 2010. BENEVOLENT FUND: A fund contributed to by employers and employees to provide employees and their families with financial help in case of sickness, injury or death.

PURPOSE: Benevolent funds are set up to provide employees with more security. The employers contribution to the staff benevolent fund was the most attractive of the fringe benefits offered with the job. The bank operates benevolent funds separately for officers/executives and clerical/non clerical staff. The benefits under Benevolent Fund are not related to the length of service. Further, the contributions of the employees and the Bank are prescribed under the Rules, although any deficit has to be met by additional contributions by the Bank. For a scheme of this type the Projected Unit Credit Actuarial Cost Method does not seem suitable.

KNOW YOUR CUSTOMER POLICY 2003.

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In terms of STATE BANK OF PAKISTAN, circular # 10 dated 29th March 2003, the banks are required to make efforts for preventing money laundering & other illegal activities/trades. To achieve this objective SBP has desired that Banks should make vigilance techniques like KYC & enhance due diligence at every level. Keeping in view that the global effort to prevent /stop the possible use of banking sector for money laundering, terrorist financing, transfer of illegal/ill gotten monies & as a conduct for white collar crime etc is increasing day by day. Bank has already developed a brief policy on "Know Your Customer (KYC)" which has been sent to all branches for guidance & strict compliance. However keeping in view the importance & sensitivity of the issues, the policy is being revised. APPLICATION OF KYC POLICY/ RULES: KYC policy is the most effective weapon being used to restrain & control the illegal activities such as Knowing the customers including depositors & other users of bank services, requiring appropriate identification & being alert to transactions that seem out of character for the customer or those that appear suspicious can help deter & often detect money laundering. It is neither practical nor possible to make a list of all criminal activities for being used as a guide for rejecting a customer or to ensure with total certainty that could implicate the bank in money laundering could be avoided. PURPOSE OF THE KYC POLICY: Complying with the KYC policy will help the bank to build effective relationship with customers. It will also lead to compliance with relevant laws & regulations &adherence to sound and recognized banking practices. It will also help to reduce the risk of the bank being used by criminals in routing of illegal activities e.g. money laundering, etc. Finally it will also safeguard the bank's name and reputation. CONCLUSION: The customer due diligence is not one time exercise to be conducted at the time of entering into a formal relationship with a customer / account holder. KYC is an ongoing process for Prudent Banking Practices; therefore, branches should maintain the perpetuity of the process.

PLAN FOR
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CORPORATION & PRIVATIZATION OF INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN.

STRATEGIES Conversion of GOP/SBP outstanding liabilities into equity. Injection of fresh equity Cleansing of Books to avoid transfer of any hidden gain to private owners. Restructuring/ settlement of NPL. Curtailing of administration expenditures. TARGET RESULT Net equity to ZERO.

FINANCIAL RESTRUCTURING

HUMAN RESOURCE RESTRUCTURING

REVAMPING OF PROCESSES & IT.

CORPORATIZATION.

Reduction of staff base to Separation of around 250 employees through around 250 persons & through induction of a few professional, GHS. Creation of appropriate creation of an appropriate staff mix. Human Resource mix by induction of 35 40 new hires/professional. Streamlining of Operation/ Introduction of IT based management information accounting system & system correlated with IT revamping of MIS with system. due controls. Rationalization/ simplification of operational & credit process/procedures. Conversion of IDBP into a public BANKING company's association of Article & limited company for facilitation of its privatization. Memorandum of Articles. Finalization of Board of Directors of IDBL. Incorporation of IDBL & its registration with SECP. Obtaining certificate of commencement of Business for IDBL Issuing of Vesting Order by MOF. (Immediately 10

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after completion of formalities). Expression of interest. Due of diligence by interested parties. Auction/ finalization of sale.

PRIVATIZATION.

Transfer of IDBP to a strategic investor.

POLICY FOR RECORD RETENTION

(UPDATED: August 16, 2010)

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The purpose of this policy is to ensure all records are retained systematically with exactness of period for prescribed period i.e. minimum 5 years and would be available when required. The records must be sufficient to permit reconstruction of individual transactions so as to provide SBP / law enforcement agencies for investigations. All unnecessary record should be destroyed with the approval of the Head Office. The record relating to suspicious transactions reported by branch officers shall be retained even after prescribed period and is destroyable after the approval from SBP. Record pertaining to Head Office department is permanent in nature and final decision to destroy it can be made only by HPC. HPC is comprised of Heads of following; a) Human resource. b) Risk management. c) Administration. d) Operation and finance e) Control division.

POLICY OF FIXED/ MOVEABLE ASSETS

Under this policy all the tangible fixed/ moveable assets of the bank shall be properly maintained. This policy has enlightened the process to maintain, to depreciate/ amortize, and to dispose of, as well as process of maintaining records of all fixed and moveable assets.

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