Habib Bank Limited

Banking System
The word Bank is derived from an Italian word “BANCO” meaning a
bench. It is also said that the Word Bank is derived from a German word
“BACK” meaning a joint stock fund, which was italicized when Germans
ruled a great part of Italy. He early bankers, Jews in Lombardy do their
business on benches in markets. The original meaning of Bank as a
commercial institution is identical with the bank of ditch where the
contents are piled up. There are three definitions of Bank, which are as
follows:
An institution for keeping, lending and exchanging money.
An institution for custody, loan and exchanging money.
An institution for dealing in money.

Therefore, we can say that it is a pipeline through which currency moves

into and out of circulation. Bank accepts deposits of money and repays
cash to its customers on demand. The bank borrows money at a lesser rate
of interest and lends it to the borrower at the higher rate thus It is a profit
lending concern. Bank cannot lend all the money, which has been
deposited with it so it has to keep a certain portion of the total deposits in
cash on hand with them in order to keep the cash requirements of the
individuals and business concerns.

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Habib Bank Limited

Evolution of Banking System in Pakistan

At the time of independence, there were 487 offices of scheduled banks in

the territories now constituting in Pakistan. As a new country without
resources, it was very difficult for Pakistan to run its own banking system
immediately. Therefore, in accordance with Indian Independence Act of
1947, an expert committee was appointed to study the issues. The
committee recommended that the Reserve Bank of India should continue
its business in Pakistan until 30 t h September 1948, so that the problem of
time and demand liability, coinage currencies, exchange etc is stalled
between India and Pakistan. In the mean time the Banks including those
having their registered offices in Pakistan, transfer them to India in order
to bring collapse for new state. By June 1948, the numbers of offices of
scheduled banks in Pakistan declined from 487 to 195. There were 19 non-
Indian foreign banks with status of small branch office, which were
emerged solely in export of crops from Pakistan. At that time, there were
only two Muslim institutions, which are Habib Bank Limited and
Australasia Bank.

Quaid-e-Azam Muhammad Ali Jinnah, inaugurated the State Bank of

Pakistan on July 1, 1948. When the State Bank of Pakistan ordered was
promulgated on May 12, 1948 then National Bank of Pakistan came into
existence in 1949.

The separation of East Pakistan and its repercussion in form of economic,

depression have caused a lot of difficulties to the banking system in
Pakistan. The network of bank branches now covers a very large segment
of the national economy. The number of branches increased appreciated
and there is now one branch for about 3000 heads of population

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Habib Bank Limited

approximately. There is reasonable growth in deposits from the

establishment of Pakistan besides this growth, specialized credit and
financial institutions have developed over the years.

In June 1948, Pakistan had only 81 offices of scheduled banks, but June
1993, they have risen to more than 7200. In June 1948, the total bank
deposit was only Rs. 880 millions and credit accounted to Rs. 200
millions. But by the June 1993, they have risen to more then 2.1 billion
respectively.

The Govt. of Pakistan in late 90s is introducing the need for the
privatization of State owned banks and companies. The private sector has
accepted the challenge and most of the banks are being privatized today.
Banks employees and other common peoples can also purchase these
stocks and earn profits. Through the period of banking history, in Pakistan
now banks have been expending rapidly and are achieving the desired goal
of organization.

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Habib Bank Limited

Functions of Bank

The following of modern commercial bank fall under the following four heads;

Accepting Deposits
Advancing Loans
Agency Services
General Utility Services

Accepting Deposits

Current or Demand deposits

Saving Bank deposits
Fixed deposits

Advancing Loans

Cash Finance
Loans
Purchase and Discounting of bills
Agency Services
Collection of cheques
Collection of Dividends
Purchase and sale of Securities
Executions of standings instructions
Acting as a trustee or executor
Transfer of funds
Act as an agent

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Habib Bank Limited

General Utility Services

Foreign exchange business
Acceptance of bill of exchange
Issuance of Travelers cheques

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Habib Bank Limited

Importance of Banks

The commercial banks play a very important role in the economic

development of a country. They are the 'dealers in debts'. They operate as
lender and deposit administrators. In the absence of banks, the commercial
and industrial revolution would not have taken place. The economic
significance of commercial banks is summarized below: -

1. Increase in Production: -

The banks mobilize the idle funds. They lend these funds to the
entrepreneurs for productive purposes. It is through the banks9 activities
that the optimum production is realized in the country.

2. Rote in Trade and Industry: -

The commercial banks provide loans to trade and industry. The various
credit instruments, (like checks, promissory' notes, and bills of exchange
used by the banks) have made it possible to make all the transactions in
money. With the use of credit instruments, internal and international trade
have been progressed both in the developing and developed countries.

3. Capital Formations: -

Capital formation is the basic requirement of a country. If a banking

system is well developed, it mobilizes idle savings of the people and puts
them in profitable channels of investment. The thinks therefore for
savings and investment and so increase the rate of economic development.

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Habib Bank Limited

Expansion in Business: -

Business activity is speeded up with the help of banks. They provide funds
to the businessmen for the purchase of raw material, semi finished and
finished goods. The businessmen are thus able to sell more goods than
they can with their own resources.

5 Promotion of Habit of Saving: -

There are persons who have money but cannot put them in profitable use.
The banks attract these persons by offering a variety of accounts. They
provide them not only the safety of the funds but also higher returns on
them. The hanks in this way promote the habit of thrift among She people,

6. Effective Implementation of Monetary Policy:

If a banking system is well developed in a country, a government can

regulate the trends in money supply and investment according to the
changing needs of the country.

7. Help to Business Sector:

The commercial banks provide credit to agriculture, small scale and big
industries. They thus serve the basic sectors of the economy and help n
increasing economic activities of a country.

8. Narrowing Regional Disparity: -

The banks help in bridging the regional disparity in a country. The surplus
funds of one region are sent to the centers of deficit. The less developed
areas acquire funds, put hem into productive channels and increase
reduction. The banks in this way help in the balanced growth of a country.

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Habib Bank Limited

KINDS OF BANKS

The banks are classified according to their spheres of activities. The main
types of banks are as under: -

CENTRAL BANK:

Every civilized country now has its own central bank. Its main function is
to manage the monetary system of the country internally as well as
externally. It is closely associated with the money market and banking
system in the country. It is not a profit making concern.

COMMERCIAL BANKS: -

These banks are engaged in performing She routine duties of banking

business. They collect surplus money from the people. They make loans
and advances in the form of overdrafts, cash credit, discounting bills of
exchange commercial banks also manufacture credit money. They also
perform agency services and general utility services. The banks in short,
are considered the lifeblood of the economic society.

EXCHANGE RANKS:-

These hanks mainly deal with international trade, these banks lake the
responsibility of settlement of foreign exchange and arrange the foreign
business in Pakistan; all the nationalized commercial hanks have been
allowed to do the business of exchange banks.

SAVING BANKS: -

These are the banks that collect and keep the small savings of the public.
They are called thrift promoting institutions. The saving banks invest the

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Habib Bank Limited

funds in the safest government securities. Post offices perform the

business of saving banks in Pakistan.

AGRICULTURE BANKS:

These are set up to provide financial assistance to the agriculturists. The

agriculture banks provide short-term credit to the farmers for the purpose
of seeds, manure, etc. They also make long-term advances for buying
tractors and introducing modern techniques in farming. In Pakistan A DBF
was set up in 1981 for meeting the financial requirements of agriculture.

INDUSTRIAL BANKS: -

These provide long-term credit to the industries. Since the industrial

banks have long-term deposits, so they are in position to permit long-term
investment in industries. In Pakistan, the IDBP was set up in 1961.

CO-OPERATIVE BANKS: -

These have been set up to provide credit m the field of agriculture re and
to reorganize the set up of the cooperative banks. Industrial bank for co-
operative was set up in 1976.

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Habib Bank Limited

HABIB BANK LIMITED

The Habib Bank Ltd. was established on August 25 1941 in Bombay and
in 1940 it was set up in Pakistan. It was the first Muslim Bank in the
subcontinent and it was the largest commercial bank.

Habib Bank Ltd. is working for the last 50 years and has become the
largest commercial bank in the country. It has the authorized capital of
Rs.5000 Million with a paid-up capital and reserves of Rs.858 Million and
its deposits are more than Rs.213 Billion in approximately 10.7 million
accounts, it has the advances of 131 Million. Habib Bank Ltd. has
innovated a numbers of financial schemes like term deposits. Special
Notice Term Deposits, ATM etc. As governments are hoping to be liberal
and their policies arc innovative, the scope of banking is increasing . HBL
is on step ahead if the growth and population very nigh in the economic
growth of Pakistan. Its Head Office is situated at Karachi and has highest
numbers of stories in Pakistan.

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Habib Bank Limited

REGIONAL HEADQUARTERS

Composing of a 9 regional headquarters, 48 zones and 1773 domestic

branches and about 66 overseas branches are providing financial services
to its worthy clients.

Regional Head office Zones

Lahore 8

Faisalabad 5

Islamabad 7

Multan 5

Karachi 8

Hyderabad 4

Peshawar 6

Quetta 2

Azad Kashmir 3

Total 48

LAHORE REGION

Lahore Zone

Gujranwala Zone

Gujrat Zone

Sailkot Zone

Sheikhupura

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Habib Bank Limited

BOARD OF DIRECTORS

In the management of the banks, the Hoard of' Directors is at the top of
the controlling bodies. The Board of Directors is elected:

1. To formulate the policies and the methods of implementing these

strategies and policies in order to promote the bank business.

2. To declare the profits on the deposits for the year.

3. To make the policies for the welfare of employees of the banks after
negotiating with the employees' union and officers association.

4. To announce the rate of interest upon loans, advances and all types of
deposits.

PRESIDENT

Normally the president of the bank is elected by the Board of Directors

and plays a very important role in the organization. The certain duties and
responsibilities of the president may be listed as follows:

I. Promotion of the business activities

II. Establishment of good relationships with the honored
customers/clients of the bank in the interest of the organization.
III. Search for the new areas for the investment

IV. Management & handling of the affairs of organization-

V. Liaison with the Government and State Bank of Pakistan.

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Habib Bank Limited

Chic/Executive

Each commercial bank has a number of circles. They are placed directly
under the supervision and control of the Chief executive. The Chief
Executive is usually Executive Vice President or Senior Vice President.

Zonal Chief

Each circle is divided into a number of zones, these ones are administered
by the Zonal Heads who hold the posts of Senior Vice President, Vice
President or Assistant Vice President. A Zonal Chief performs a certain
set of responsibilities, which may be listed as follows: I.

Establishment of the relationships with the industrial and agriculturists

for the promotion of banking activities.

Visiting the branches in order to promote

The business activities and conducting the discussions at the spot under
his discriminatory powers. Approval of loans for the heavy industries

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Habib Bank Limited

General Banking

General Banking was the First department from where 1 started my

internship. At this department, I came up with a situation where new as
well as existing customers are dealt. I observed that customers are
facilitated with the required information about the branch and different
ways of investments and Loans. This department also deals with Account
opening procedures, remittance, bill collection, clearing of checks, cash
receipts and payments. Now let me briefly describe the processes carried
out in various sub-departments of General Banking.

Account Opening Procedure:

There were certain formalities, which I observed for opening of a Current

or Saving A/c with the bank. These formalities in brief are as under:

Form of Application:

The customer filled in the account opening form. It was a formal request
from a customer to the bank to allow him to have and operate the Current
or Saving A/c.

Obtaining introduction:

The bank, before opening an account obtains introduction of the customer

from an existing customer, responsible person etc.

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Habib Bank Limited

Specimen Signature:

When file banker was satisfied about the integrity of the customer, he
agreed to open the account. The banker obtained the specimen signature of
the customer on the signature book or on the card.

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Habib Bank Limited

Types of Accounts

Generally three types of accounts were being maintained with the branch:

CURRENT ACCOUNT

A current account was a running account, which is continuously in

operation. The customers to transfer money or to withdraw deposes on
demand were using these accounts. The current accounts of the customers
were being maintained in a current account ledger by the branch. The
customers could withdraw the current deposits without prior notice to the
branch. The branch had to honor the checks provided they were within the
limits of the accounts. The customer who needed a liquid a balance had to
maintain a current deposit in the branch. The bank did not usually pay any
interest on these deposits, as they can be withdrawn without notice.

SAVING ACCOUNT

The saving accounts are important sources of funds for the banks, it was
opened to encourage thrift among the persons of small means. The school
children, workers, employees' firms usually kept their savings by opening
saving account in the bank. The bank pays interest on the minimum
monthly balances of the depositors at the end of June and December every
year. The depositors were normally allowed to withdraw a limited amount
of money only twice a week. customer wanted to withdraw a large sum of
money from his account, he then had to give a prior notice of 7 to S 5
days in writing to the branch.

Some important characteristics of the PLS Saving Account:

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Habib Bank Limited

1. A credit balance of Rs 100 was eligible for sharing profit and

loss of the bank.
2. Withdrawal could only be made by means of check issued by the
Bank.
3. Statement of Account was supplied to the account holder at
periodical intervals.
4. The profit and lost earned or incurred on the PLS Saving account
was credit/debited as determined by the head office on the basis
of its net working result at the end of each half/full year.

FIXED OR TIME DEPOSIT

Fixed or time deposit is considered as the major source of funds for the
commercial Bank. Fixed or time deposit as the name implies are
deposits kept with a bank for certain period of time. They are not
payable on demand like the current deposits. The can only be
withdrawn by the Depositor after the specified time period which
ordinally varies from 3 months to 5 years. The persons of rims who
have surplus funds keep the money in fixed deposits with the bank. The
rate of interest on the fixed deposit is higher than the saving deposits
and varies with the time of deposit. The longer the duration for which
the amount is kept, the higher is the rate of interest and vice versa.

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Habib Bank Limited

TOKEN AND CASH DEPARTMENT

This department consisted of three sections namely:

1. Cash Receipts
2. Token Department
3. Cash Payments

Cash Receipt Sections

In this section the cashier was receiving cash. He recorded the cash
received with a pay in slip and other documents ( if necessary) and
recorded it in the cash receipt register. There were two separate types of
pay-in-slips, which were used for depositing cash, checks, and drafts.
There were prescribed forms in which the information was fed. After
filling the pay-in-slip with the amount, the cash and slip both were
received by the cashier who entered those in the cash register and fixed a
stamp on the pay-in-slip. A part of this slip is given to the customer for
his record and other was maintained with the bank.

Token Section

All the check holders were used to go to the section. They presented the
checks to the person at the section. He checked that whether the check
belonged to the same bank, the amount in words and figures were same,
check was not outdated and the signature was their etc. Then he handled a
number to the check and a token was given to the customer/ check holder.

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Habib Bank Limited

Cash Payments

The check allotted with a number by the token department is sent to the
clearing officer/passing officer. After the proper verification of the
signature of account holder’s, cash balances and posting of that particular
check to the account, the check was passed to the cashier who ultimately
called on the number fixed on the check. The customer bearing that token
number arrived at the counter. The cashier checked out the number and
paid the amount as per checks and entered number and amount in the
cashbook maintained with him.

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Habib Bank Limited

CLEARING DEPARTMENT

Clearinghouse was first of all set up in 1773 for the speedier and
convenient settlement of checks. Clearing house is a place at the central
bank or any other leading bank of the locality where the representatives of
the banks come at a fixed time and exchange checks, drafts etc. drawn on
each other and settle the resulting balance through entries in the books of
The bank acting as clearing house as a process by which (he counter
claims of member hanks are offset and balances settled.

The State Bank of Pakistan acts as a clearinghouse and where there is no

branch of SBP, National Bank of Pakistan performs this function. All the
member banks (scheduled banks) have their accounts with the SBP.

Types Of Checks Collected by This Department

This department collected following types of checks:

Transfer Checks:

These were those checks, which were collected and paid by the branch.

Transfer Deliver Cheeks:

These were those checks, which were collected and paid by two different
branches of HBL.

Clearing Checks:

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Habib Bank Limited

These were the checks that had the payee or endorsee and the drawer .of a
check who maintained account with the different banks. The branch
collected these checks and received the amounts of checks from the
paying banker in any of the following manner.

It is sent its representative with the checks to each of the

paying bank and collected cash. This procedure was wasteful in time and
labor.

Pay Order: -

Pay order is less expensive method of transfer of money.

Normally this method is used to transfer money inside the city. if it is
used city wide, it takes a long time.

The bank charged Rs.10, which is flat for the pay order and
an excise duty of Rs l per leaf. With holding tax of 20 % on the sum was
also taken from the party. Now if the pay orders is to he cancelled or
duplicated, Rs.20 has to be paid in this regard.

Mail Transfer:

The money was transferred through the mail. One branch of

the bank sends advice to the branch of the same hank to credit the account
of payee. Funds are also transferred through the mail when a customer
requests the hank to transfer his money from one bank to another bank or
brunch of same hank in the same city, outside the city or outside the
country, the first thing, he has to do, is to till an application from in
which he states that I want to transfer the money from one bank to other,
by mail.

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Habib Bank Limited

If the customer is the account holder of this bank the bank

will debit his account. If the customer is not a account holder then first
has to depose the money and then rest of the procedure will be adopted to
transfer his money.

Copies of Mail Transfer:

The purchaser owns original remains with the drawee bank and duplicate
and triplicate is the possession of office.

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Habib Bank Limited

ADVANCE DEPARTMENT

This department has been working under the supervision of knowledge,

experienced and well-qualified banker, Ch. Rafique who has been serving
this bank for last 15 years. This department plays a part of backbone in
the banking sector because a bank accepts deposits and gives advances.

TYPES OF ADVANCES:-

There are the following types of advances, which are given by the bank.

Cash Finance: -

C.F. is the biggest loan given to the business loan,

industrialists; its limit is in crores and bank does require security for tins
purpose. After the proper investigation and documentation these finances
are given and genuine property is pledged as a matter of security. These
loans are taken for the purchase of stocks etc. The bank appoints its staff
of 2 o 3 persons at the place where that stock is lying.

Demand Finance:

It is very wide term. It is also called long term financing. In this type of
finance, a particular limit of credit is sanctioned and credited to the
account of the borrower. Interest is charged on the total amount of credit
sanctioned and for the period specified. Advance can be granted against
pledge or moveable property, mortgage of immovable property and
hypothecation of stock. Total sale price of an asset consists of purchase
price of the asset. Party can obtain rebate if it makes payment before date.

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Habib Bank Limited

Running Finance: -

To fulfill the day-to-day requirements of the business, R.F. is granted to

the party. A particular limit of the credit is sanctioned to the party for a
specified period. Bank can take any security for sanctioning the limit of
running finance. It is compulsory for the party to return the amount on or
before the expiry date. The main advantage of this finance is that the
party can withdraw or deposit any amount of money in it.

Machinery Loan: -

Certain loans are given for the purchase of the machinery. These loans are
called local machinery manufacturing loan. The hank finances for the
machinery, which is manufactured in the Pakistan like other loans after
the proper verification and documentation and with the prior approval
from the Zonal office, these loans are given. The bank pledges some
genuine property us a security. Personal security is also required in the
getting of this loan. The loan is to repay in certain installments, which
includes the mark-up also.

Normally these loans are for the period of five years and first six or three
months are exempted from the installments as the ease or as the terms and
conditions may be. The rate of interest to he paid by the party is 8% per
annum.

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Habib Bank Limited

METHODS TO CHARGE LOAN

There are following important methods to charge loans: -

PLEDGE

Pledge is very important method to charge the Scan. Pledge is an actual

delivery of the chattels (movable property) as security for the loan to the
bank. Transferring the goods from the owner's goodown to banker's
goodown may make the delivery of goods or handing over the keys of the
goodown or posting a hank chowkidar or delivering the documents of title
relating goods to the bank. A pledge as a bailment of goods as a security
for payment of debt or performance of promise. Ownership of the property
remains with the pledger (borrower). The main advantages claimed by the
bank for advancing against goods are as under:

Tangible Security:

The banks can safely lend against goods to the customers as they have
something tangible in their possession to dispose of, in case the debtor
refuse to pay are unnecessarily delay the payments.

2. Less Fluctuation in Price:

If the produced goods pledged with the banks are necessaries of life, their
price is not likely to wide fluctuation in normal times, as such, they offer
convenient security for advances.

3. Seasonal Advances: -

Another important advantage claimed for advancing against produced

goods is that the loan is normally seasonal and therefore for a short

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Habib Bank Limited

period. The banker is not to lock up its funds for along period of time as
is in case of advances against immovable property.

DRAWBACKS OF ADVANCES

AGAINST GOODS

The main drawbacks of making loans against goods are as under: -

1) Deterioration in Produced Goods: -

If the banker does not have adequate public warehouses, the goods stored
in the goodown as security may deteriorate or it may be damaged by
various kinds of insects. The banker, therefore, shall have to undergo loss,
in case the debtor fails to repay the loan.

2) Cut in Prices:

There are certain goods, which arc subject to wide fluctuation in demand
because of changes in fashions. If The banker has pledged and the prices
fall considerably during the loan period, the customer may not take them.
Therefore the bank shall have to hear the loss.

3) Risk of Fraud: -

There is also a risk of fraud in case of agricultural goods pledged with tile
bank, as they arc not standardizes. The hanker being a non-technical
person can be deceived in the quantity as well as in the quality of goods
pledged is security for the loan.

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Habib Bank Limited

HYPOTHECATION

Legal transactions whereby goods may be made available as security for a

debt without transferring property or the possession to the lender. The
advance of loans against goods without taking their possessions is very
risky on two main grounds. One, as the goods are in the possession of the
owner, the borrower may take out the goods without informing the bank.
Secondly, the bank does not has a legal claim as it does not have a valid
charge over the goods.

A) Rights of the Bank .

In case of hypothecated goods, the bank has the right to inspect the
goodown. It can also demand periodic report of the stock.

II. The hypothecated goods are to be insured by the borrower, in case

these are not insured, the bank has the right to get them insured and
recover the insurance charges from borrower.

III. The bank has the right to ask the borrower to maintain a balance of
goods, which in value is not less than the amount advanced to it.

IV. In case the bank finds that the contract is being violated, it has the
right to obtain stop order from the appropriate authority.

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Habib Bank Limited

B) Rights of the borrower

I. The borrower, as per agreement, has the right to keep ownership and

possession of the goods with him.

II. Since the hypothecated goods .ire in custody of the borrower, lie can

dispose them off.

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Habib Bank Limited

MORTAGAGE

The mortgage is a kind of written contract between the borrower called

mortgager and the lender called mortgagee. The mortgager gives an
assurance to the creditor of the legal or equitable interest in property as
security for the discharge of a debt, subject to the provision that on
repayment of the debt, the property shall be reverted to the borrower.

Kinds of Mortgage

There are many types of mortgages :

Simple Mortgage: -

In simple mortgage, the mortgager (borrower) keeps the possession of the

properly offered as security. The mortgager is personally responsible for
the discharge of debt. In case the mortgager defaults to repay the money,
the mortgagee (creditor) has the right to obtain decree for the sale of
mortgaged property to recover the Scan.

Mortgage by Conditional Sale: -

It is that mortgage where the mortgager sells the property to the

mortgagee on the condition that on repayment of the loan, the property
will be restored to him by the mortgagee (creditor).

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Habib Bank Limited

In case the mortgager fails to pay off the loan, the mortgagee obtains the
absolute proprietorship of the property. Mortgage by conditional sale is
not a favorite security with the bankers as it is a risky and cumbersome.

Mortgage by Deposit of Title Deeds: -

MDTD is also called an equitable mortgage. In this mortgage, the

mortgager deposits the title deeds of the properly with. the mortgagee as
security. Equitable mortgage is considered a weaker mortgage from the
point of view of banker (mortgagee).

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Habib Bank Limited

GUARANTEE

A guarantee is an undertaking given by a person to be answerable for the

debt, default or miscarriage of another person.

Contract to perform the promise or discharge the liability of a third person

in case of default.

Guarantee as security for the banker's advances arise only when the
borrower is not able to satisfy the banker of his creditworthiness. The
banker will not ask for guarantee if acceptable co! lateral securities are
provided to him.

CHARACTERISTICS

The main characteristics of the guarantee are as under.

A) Three Parties:

There must be three parties in the guarantee:

a) Principal Creditors
b) Principal Debtor
c) Guarantor.

B) Principal Debtor: -

The primary liability to pay the debt falls on the original debtor. The
guarantor will pay only when the principal fails to pay whole or pan of the
agreed debt.

C) No Interest of the Guarantor in the Contact: •

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Habib Bank Limited

The guarantor is answerable for the loan if the debtor defaults and has no
interest in the contact between the principal creditor and the principal
debtor.

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Habib Bank Limited

MODERN BANKING

As we know that the world is becoming a global village. There is no more

trade barriers in the world. The businessmen/clients are demanding more
and more facilities in respect of maintaining their accounts with the
banks. Now days, most businessmen don’t like to carry money along with
them. For example, if the customer is abroad/within the city and suddenly
needs some amount of money he must have some facility of getting the
money same time.

So, HBL is innovator to introduce ATM facility to its valued customers

first time in the Pakistan. ATM basically provides 24 hours cash services
to the valued customers/clients and Master Card facility. However, there
are many other services provided to the customers in the banking sector.

The main facilities are mentioned here:

AUTO TELLER MACHINE (ATM)

ATM is 24-hour cash facility provided by the HBL to its customers. HBL
is innovator to introduce this facility in the Pakistan first time. One just
has to enter his/her code for the card to have the cash. In order to avail
tins ATM facility the hank provides the card to the clients/customers.
Moreover, simply getting card is not enough. One must also have to get
the Personal Identification Number (PIN) on the card. It is the number,
which is used in conjunction with the ATM card, enables the customer to
avail of the A'I'M services. ATM facility can be given to all the customers
of the bank provided they maintain an average balance in their account.
Some important feature of the ATM may be

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Habib Bank Limited

Personal Identification Number: -

To keep secret your PIN code from the bank staff as well as from other
people, at the time of issuance of the card, the PIN is generated and
printed in a special manner by the computer on pre-sealed, temper-proof
PIN mailers. These are designed in such a way that they are visible only
when the customer opens the envelope.

PIN Change:-

As an additional safeguard, the customer is required to change his/her

allotted PIN to a number of your choice the first time you use the ATM. it
is very necessary to memorize the PIN as forgetting it would render your
ATM card useless.

Card Serial Number

The ATM card bears some numbers and alphabets. These includes include
dud Serial Number, cardholder's Name, Account Number and Expiry
date/month/year. A customer must make note of the card serial number, as
it is required in any correspondence/communication with the bank
regarding the ATM.

Withdrawals of Cash: -

There is certain limit for withdrawing the cash, which may be described as
follows:

On daily basis one may withdraw Rs.2000/-On weekly basis you Rs.9000/-
can de drawn.

Normally on deposits of Rs.25000/- the limit of the withdrawal on deposit

RS.3000/- per 30 days.

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Other Facilities:

The ATMs are at the customers' services round the clock on all days of the
year. Some other facilities except above arc as under:

Balance Enquiry:

This wills display/print the balance of your ATM deposit. This deposit is
kept in an electronic account on your behalf for providing the ATM
facility to you. Whenever one withdraws Cash from ATM (he deposit is
replenished form your PLS or Current A/C.

Mini Statement: -

This is a print out showing the most recent transactions affecting your
ATM deposit. These would include withdrawals made by you from ATM
as well as any replenishment from your PLS or Current A/C.

Conditions of ATM

The HBL ATM card is not transferable and shall be used exclusively by
the cardholder

In the event of cardholder at any time drawing the amount in excess of the
credit balance the bank will be entitled to create an overdraft in his
account and cardholder agrees to pay.

ATM shall remain the property of the HBL at all the time.

Individuals having personal current account or PLS saving account with

HBL can only get the ATM card.

The cardholder further undertakes to maintain sufficient funds to meet the

withdrawals and he undertakes not to overdraw the account unless the
bank has previously agreed to overdraft arrangements.

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MASTER CARD

Master Card is another modern facility, which is given by the HBL.

Master Card has the following benefits and privileges.

This is the card having the photograph and signature of the cardholder,
which gives the security against misuse.

HBL gives an easiness to manage monthly statements to keep track of

your transactions.

HBL Master Card is accepted at over 123 million establishments

worldwide.

Free air travel accident insurance is provided.

On this card cash withdrawal are available over 29000 outlets. over the
world.

CONDITIONS OF THE MASTER CARD

® The joining fee, annual and other payments made by the cardholder to
the bank shall be non-refundable.

• while using the card, the cardholder should sign the establishment bills
and charges slips with the same signature as that on the card.

• All possible steps shall he taken to safe guard the card. The card
remains the properly of the bank at ail times and has 10 be returned by the
cardholder on the bank's demand.

• The card can be issued to individuals on their request having Current or

PLS A/C.

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• The cardholder should promptly notify the banking knitting of any

changes in detail of employment/business or any change in address of
residences or offices.

The cardholder immediately upon receipt must sign • The card .

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CURRENT ISSUE

World trend has been changing very rapidly and competition is becoming
more and more stiff. Our country is towards the tendency of privatization
now days.

As we know HBL is a government organization and one of those

organizations suffering losses due to heavy operational and management
expenditures. There are so many employees at all levels of the
organization that really are the cause of heavy expenditures. These
expenses are the major causes of the weak infrastructure of the bank. Due
to this reason, the government has now decided to privatize tins
organization like many other huge organizations. This will ultimately
reduce the number of employees, in the organization. If we critically
analyze the organization, the reason behind the downsizing is 5% increase
in operational and management expenses against the deposits while it is
2% all over the world, in downsizing employees of the organization,
regardless grade/designation offered is Golden Handshake Scheme, in
which people are invited to great benefits against taking retirement from
the jobs.

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Habib Bank Limited

GOLDEN HANDSHAKE SCHEME

Golden Handshake Scheme is a particular type of the downsizing. In this

scheme, the employees of the organization (HBL) have been offered their
volunteer retirement from their jobs. The criteria for the scheme is that
the employee must have completed 25 years of his service in the
organization or he must be 55 years old then he will be awarded full
benefits i.e. cumulative pension and all other funds like medical facilities
etc. The employees accepting the scheme will not get the pension after
their volunteer retirement from their Jobs. This process has reduced the
manpower of the organization. This manpower may also include the
people that were unnecessary burden upon the organization.

incentives of the Golden Handshake Scheme

• Three months basic pay for each completed years of the service.

• An account equivalent to 10 years normal post retirement medical

facility will be paid in limp sump to the voluntarily retiring employees.

• The voluntarily retiring employees will be facilitated with 6 months

resident facilities and they may sell that resident, if previously allowed.
Moreover, the furniture shall also he provided as special case So all those
executives, who accept this scheme.

o The employees will also paid for 10 years in lump sump, the Benevolent
Fund, in advance at the time of settlement dues as a final payment.

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Information System

Mechanism is not just a cliché in modern times, it is indeed the most powerful medium to

enter in to the 21st century with honor and dignity. To meet the challenges of the time, the

Habib of Pakistan developed a comprehensive plan to mechanize all the operations of the

bank may it be the head office lever or at branch level. For this purpose, the bank

develops its own software system for unlimited operational rights. This software has been

specially tailored to the banking practices in Pakistan and is under usage of some other

leading banks in the country.

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Hard Ware

Input Hardware

There are five dumb terminals used for input purpose. Main server is also

used for inputting the data.

Processing Hardware

An 8896 (4) microcomputer system from “HP” has been acquired by the

bank for processing and control purposes. The same system acts as the

main server to support the workgroup activities in the bank.

Storage Hardware

There are two types of storage devices are used for the data storage:

Hard Disk

Tape Storage

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Hard Disk

The computer system has the hard disk with the storage capacity of 20-

GB.

Tape Storage

There are always the chances of system failure & system shutdown.

Therefore, there is a need to save the date external to the computer. The

media that is used for data storage and backups is the Cartridge Drive, the

only media for external storage of the data. For this purpose, the Habib of

Pakistan used the Sony branded types to save the data. The backup in the

Habib of Pakistan is taken on daily, monthly, half-yearly and yearly basis.

Output Hardware

There are two modes of output, which the users can use for analysis of the

data. These are as follows:

Monitor/Video Display

Printer

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Monitor/Video Display

If the manager or the user needs to review the data, to make any

transaction or to see the report, they may use the monitor. There are six

Monitor, five of which are dumb terminals and the sixth is connected with

the main server.

Printer

There are some routine printed reports and some may be provided to the

management on requirement. So for, printed reports, there is 132-columns

Epson Fx 2180 printer is attached with the main server in the computer

room.

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Software

The software, which is being used in the Habib Bank of Pakistan, is

developed in FoxBASE under UNIX operating system environment.

Features of the System

The software has the capability to serves the following three types of

purposes at the same time:

Off-line

On-line

ATM

Currently, the system is being used as on-line on the bases of inter-branch

transactions for speedier services to the customers. All the branches,

which are equipped by the computer, have Modem with it, use for

transmitting the data from one branch to the main branch and to the head

office. Another feature of the system is its ability to provide the facility

of ATM.

System/Data Security

Due to the nature of the operation, any bank using the computer system

requires highest level of security. The system under study seems to

provide all possible data security measures.

Authorization Levels

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The system has 20 to 99 authorization levels to deal with the system. Each

level has the limited access to the system, each user is allowed to operate

within his/her authorized level.

Passwords

Each user of the system is assigned password and it is possible to enter

into the system only after successful entry. There is no other way to

system’s access. After successful password entry, user has to give his

identity. A user can change its identity at any time. Each user is

responsible for the transaction processed through his identity.

Data Security

The cartridge drive is used for backup, which is the only way of coping

data from the system because there is no floppy drive is provided with in

the dumb terminals. Cartridge drive remains in the custody of computer

operator who is the sole responsible for the computer system and the data

security. Only the operator has the rights to copy the data to of from the

system.

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System Operations

Inputs to System

New account opening

Daily Transaction

Cheques book issued

Stop payment order

Account to be closed

Special Remarks

Reversal of the posting entries error

Computer input files

Check digits

Uni-Bank system has the following main menu :

Banking

Clearing

Customer Statement

Password Maintenance

Advance Remarks

Pak account menu

Display/Print

Account Inquiry by name

Quit session

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RECOMMENDATIONS

Habib Bank Limited is a very well reputed bank in the banking sector and
its deposits are growing day by day with reasonable amount of earnings
hut at the same time the expenditures are also traveling skywards.
Management has no control over these increasing expenditures. A huge
amount of loans has been stuck up due to ambitious credit management
policies. As the business environment is not suitable in the country due to
certain economic activities so the following recommendations may
improve the current conditions of the bank.

No Job/Qualification Mismatch: -

It means right man for the right job according to qualification,

professional skills and experience with the job. Employees with unique
characteristics, capabilities, and skills must be posted at the job. If this
will not be the case, the productivity of the organization will go down
ultimately.

No “Purchi” System: -

The employees must be posted at a job purely on the merit. Because if

there is no such activity, the employees will be discouraged and ultimately
will not work with interest and also they will not use the full capabilities
and skills. Political pressure must he avoided. In short, there must he no
likes and dislikes of the particular person.

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Recruitment and Promotion: -

There is great influence in recruitment and promotion of the staff officers.

So it is a main problem in the advancement of the bank. Promotion should
be given on the merit basis.

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SWOT ANALYSIS

STRENGTHS

Habib Bank Ltd. has very effective network of branches all over the
country. Every tenth Pakistani is account holder of HBL. The bank has
made huge investments in almost all the economic sectors of the Pakistan.
HBL not only has made investment in industry but also in small-scale
industry as well. HBL has efficient and less bureaucratic setup. HBL has
introduced monthly income scheme that provides almost highest interest
rate. ATM was introduced was introduced by HBL. Master Card facility is
also available to clients.

WEAKNESSES

No consumer banking has offered by the HBL to its clients like phone
banking, evening banking etc.

No Marketing setup or structure is there. Most of the people do not know

they have to promote their activities. Bad Debt rate is very high. No
special effort has been made to recover the bad amounts.

OPPORTUNITIES

People do rely on this bank with some additional efforts. Bank can attract
deposits from Pakistan and overseas. Instead of emphasizing on big and
long term projects, the bank should concentrate on small-scale

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investments having small maturity periods. Now-a-days HBL has been

investing almost 20% of its total investment on cotton business, along
with investments in cotton it should invest in other cash crops, i.e. rice,
sugar cane, tobacco, wheat etc. and there related agro. Based industry.

THREATS

First threat that bank has to face is the privatization, downsizing, and
restructuring. These changes could make drastic as well. New incoming
local and especially foreign banks those are main cause of stiff
competition DFFs are going very well in financial setup of Pakistan. So,
these are also affecting in the operation of the bank. Along with other
banks, the threat of the corruption has vital importance.

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