Introduction 1.

1 Background of Study The growing economy need sound banking sector which should be in tune with optimistic mood of the time and meet the demand for finance of growing industrial, commercial and agriculture sectors. United Bank Limited (UBL), which emerged on banking scene on November 7, 1959, had played a key role in the development of the country. Recently UBL growth in the range of financial services and the pace of new products, tailored to customer requirement has been accelerated which would further intensify the countrys current fragile economy take off. I got the opportunity to understand the ban operations during two months internship in UBL. It is the requirement for fulfillment of MPA degree. In this report I have tried to cover difficult aspect of the banking sector in general and of the UBL in particular. This report will help the future student of the IMS in understanding banking operations. 1.2 Purpose of Study The purpose of study is to give a comprehensive review of the UBL and to analyze its financial aspect. Beside that purpose of study is also: 1. 2. 3. To work in an organization to get acquainted with practical side of management. To analyze the different aspects of the organization and also to produce some solution for the problems pertaining to organization. To know how different operations are carried out in the bank

1.3

Scope of Work

In short period of two months internship it is difficult to understand each and every aspect of the bank. However this report has focused on the indepth study of the advances department. In relation to that product offered by credit department on determined criteria is discussed. And procedure followed for credit initiation, approval, disbursement and monitoring is also focused in the report. 1.4 ways. This study involves use of two types of data for report writing. 1.4.1 Primary data The data which is collected for first time and exist in raw form is called primary data. It includes i. ii. Personal observation Discussion with staff etc. Secondary data are those which have gone through the statistical techniques and exist in refined form. It includes i. ii. iii. iv. 1.5 Annual Reports Internet Documents published by bank Relevant books. Scheme of study It include four sections each section deals in particular aspect of the bank. Section I This section gives information about background, purpose, scope Methodology of study For writing this report I have tired to collect the information by following

1.4.2 Secondary data

methodology, and scheme of the report. Section II This section present a comprehensive review of a bank. It includes background history of UBL, its organizational structure, departmentation and personnel management. Section III This section analyses the credit department new policies, working and comparison with previous policies. It also includes financial analysis of the bank. Section IV It summarizes findings and recommendations on the basis of analysis done in section three and also on the overall organization for further improvements of the bank.

Chapter-2 Banking sector in Pakistan History 2.1 Definition of Bank Banking companies ordinance 1962 Section 5 (B & C) defines banking and Banking Company in following terms. i. Banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. ii. 2.2 Baking Company means any company, which transacts the business Functions of bank of banking in Pakistan.1 Section 7 of the Banking companies Ordinance, 1962, authories banking companies to engage in following forms of business or functions which are as follows. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Borrowing and lending of money. Discounting bills of exchange other negotiable instruments. Collecting Negotiable instruments on behalf of the customers. Buying and selling bullion and foreign exchange. Receiving valuables for safe custody. Granting of letters of credit to the customers. Underwriting and dealing in stocks, shares, debentures and other securities on behalf of the customers and others. Acting as agent to his customers, undertaking and executing trust. Carrying on guarantees and indemnities position. Dealing with any property that may come to it as security in satisfaction of its outstanding claims.2

2.3

Establishment of Banking Sector in Pakistan

In 1947, at the time of independence, there were 487 offices of scheduled banks out of which 197 left over to Pakistan because of Hindu domination over the banks. There were 19 non Indian foreign banks engaged in export of crops while there were only two Pakistani institutions i.e. Habib bank and Australasia bank for that business. Since economic development was not possible without sound Banking system therefore in 1947 expert committee was appointed. This committee recommended that Reserve bank of Indian would continue its function in Pakistan. Consequently on July 1st 1948 State Bank of Pakistan (SBP) was established. SBP assumed full control of banking and currency in Pakistan. And the Pakistani notes were issued in October 1948 in the denominations of Rs. 5, 10 and 100. State bank of Pakistan decided to expand the network of Habib bank and recommends government to establish agent of SBP. As a result the National Bank of Pakistan (NBP) came into being in 1949, and by 1952 it take over agency function. Korean War in 1950 resulted in the decline of Foreign exchange reserves. This induced banks to provide working capital for industries. For that purpose SBP set up industrial finance corporation. In period of 1956-58 further expansion in the banking and credit facilities resulted in the establishments of two banks. The Natioanl commercial bank Limited and Pakistan Industrial Credit and Investment Corporation (PICIC). The expansion in banking was further enlarged during 1959-66, two more Pakistani banks namely Easter Merchantile bank Limited and United bank Limited were established. In 1959 credit enquiry commission was setup to keep check on institutions to provide credit faculties and recommends measure for further improvements.

Government for rural development, 1960-64, set up rural credit fund for providing medium and long term credit. In 1974 concept of nationalization of banks was enforced in order to get maximum benefits to economy. But it was counter productivity and reversal has been initiated since January 1991. By June 1997 more than 7000 branches of above mentioned banks were expanded and mobilized more than Rs. 887 billion in deposits. Besides this growth other financial institutions developed over the years to cater the need of specific sectors. Natioanl investment trust (NIT), people finance corporation, Equity participation funds, bankers equity Limited etc are contributing their due share in the country economic life.3 2.4 History of United Bank Limited (UBL) The creation of UBL was response to challenges thrown by rapid growth of Pakistans economy when planned economic development began in 1956. Therefore the birth of the United Bank Limited was an economic imperative rather than an accidental development. The idea of United Bank Limited (UBL) was first born in the mind of Mr. Agha Hasan Abedi, an exceptionally talented banker. Although the bank commenced business by opening its first branch at Karachi on November 7, decision to establish the bank was taken in June 1959. After completing the requisite formalities the company was registered on July 24. On November 9, 1959 the Gazette of Pakistan notified and included the United bank in its list of scheduled banks operating in Pakistan. Mr. Agha Hasan Abedi was its founder president. Its head office was established in new Jubilee Insurance House 11 Chundrigar Road, Karachi. The bank was incorporated with an authorised capital of Rs. 20 million.4

Chapter-3 Organisation structure Organisational structure or hierarchy of a firm provides boundaries for authority of a persons, it clarifies responsibility and authority. It shows who is responsible to whom and who has authority to give order to someone. It is the tool by which a manger is able to exercise discretion and create an environment for individual performance.5 3.1 UBLs Organizational Chart An organizational chart is graphical representation of organization structure. UBL organizational chart represent a three layers of management, under which other division works. Each box in chart represent position in organization. The line joining each box represents the nature of relationships among different units. UBL first authority lies with the board of Directors (BOD). BOD takes important decisions relating to the banks operation and policies. President is the Chairman of BOD who supervise treasurer, finance, risk management division etc as shown in the chart. And in the same manner other positions are represented in chart shown on next page, which clarifies different positions in the organization.

Chapter-4 Departmentation Departmentation is the process of grouping jobs according to some logical arrangement to facilitate the accomplishment of organizational goals and objectives. There are several ways for organization departmentation which include departmentation by function customer, geographic, product and process. In UBL, departmentation is done on pure functional basis. In the functional form of departmentation, people and resources having a common activity to support are grouped together. Functions performed by some important departments of UBL have been discussed in the following text. 4.1 Departmentation at head office UBLs head office is located in Karachi. It exercises overall control on administration, operation and other areas of the organization. 4.1.1 Establishment division This division compile and produce operational procedures to systemise and standardise the activities and functions for various departments. 4.1.2 Credit Risk Management (CRM) UBLs business includes a broad spectrum of products involving high levels of risk. To achieve the objective of booking good quality assets, the CRM has developed risk management division. 4.1.3 International division The international division manage overseas operations including credits handled by overseas branch network. 4.1.4 Treasury division The primary responsibility of this division include enhancing returns on off and on balance sheet items. It also deals in treasury products for local and

international markets.

4.1.5 Audit and inspection division For monitoring the operations of the bank, audit and inspection division is created to checks whether the procedures are being followed. 4.1.6 Personnel division Bank is giving a lot of focus to the human resource management. This division is engaged in formulating personnel policies related to recruitment, training, compensation and retirement of its employees.6 4.2 Departmentation at regional head quarter. (RHQ) There are 11 RHQ offices working in the country. It supervise, support the functioning of branches and implement Head Office policies. 4.1 Departmentation at regional head quarter Peshawar.

Source: UBL RHQ Peshawar

4.2.1 Credit Administration Division (CAD) It is responsible for collection of documents required for sanctioning loans. Submission of overdue and reports to high level also comes under their authority. 4.2.2 Special Assets Management Group (SAMG) This department works for the recovery of defaulted loans. For dealing in this operation, Account status report is provided to SAMG. Account status report provide information about the stuckup, irregular and regular accounts. 4.2.3 Sales marketing department Sales department introduces new products of the bank among the public and to procure fresh deposits from the market. 4.2.4 General manager administration Department This department keep on effective administration in the bank on the basis of policies formulated by Head Office. 4.2.5 Operation head department Operational head department regulates the operational work in the hub and spoke branches. Recently in UBL the concept of Hub and spokes branches have been developed. Under this concept, big branches of a bank is given the title of Hub, where the activities of spokes branches (small branches) are monitored and controlled.

4.3

departmentation at branch level

UBL cantt branch administered by Regional Head Quarter Peshawar has also grouped activities on the basis of function which are as follows. 4.3.1 Deposit department Deposits department deals in opening of accounts, receipts and payments functions. There are three types of deposit accounts. Current deposit These deposits are payable whenever demanded. This account doesnt offers any profit or interest to client. Time deposit Bank pay higher interest on these deposits and remains with a bank for specified period. Withdrawal is not accepted prior to the expiry of that period. Saving deposit For opening, saving deposit account, initial deposit is Rs. 10,000 objective of it is to encourage saving. 4.3.2 Cash department or cash cell In cash departments cheque presented for payments are entered in token book and token is issued to the customer. The token is received by the cashier and makes entry in the paying book and payment is made to payee when cash is received, it is entered in the scroll book and receiving cashier book. 4.3.3 Remittances department Transferring of funds from one place to another is called remittances. In UBL remittances exists in three shapes which are as follows. Demand Draft (DD) DD is issued by the bank on the request of client. Before it client fulfil the request form and then he is able to get the amount from the specific branch

of the bank at another destination. Bank after issuing DD, send credit advice to concern bank.

 Telegraphic transfer (TT) It is message which is transmitted through telegraph, telephone or fax to concern branch, like DD customer has to fill the application form. Bank deduct telegraphic charge and with holding fax for these services. The concern bank issue credit advice to issuing branch for record keeping. Mail transfer (MT) also used for this purpose. Rupee Travelers Cheque (RTC) Another important function of remittances department is to issue rupee travelers cheque (TRC). Bank charges 2% withholding tax on RTC. When bank issue RTC, he credits the head office account and reversal is made when RTC is presented for encashment. 4.3.4 Head office (HO) extract department HO extract department keeps the records of DD, MT, TT, and transfer of other payments. Entries of all these transactions are made in the computer and at the end of the day HO reconciliation sheet is taken out to ensure that no double payment or misplacement of amount is made. This checking is carried out at head office. 4.3.5 Bills departments It deals in the collection and payments of the proceeds of the bills which include outward Bills for collection (OBC) and inward bills for collection (IBC). For OBC, which are out stationed bills bank charges commission for that bill. This department like remittances also issue some instruments, which are as follows: Pay order Used for local transfer of money with ease and security. Pay slip This instrument is initiated by bank for the payment of short term liabilities or expenses.

 TV license This is also issued by bill department for Rs. 300 charged from the client. Bank charges Rs.5 per license as commission for its services. Security deposit receipt (SDR) SDR is issued by the bank is security document required by various government agencies as basic requirement for taking part in auction UBL charges WHT, excise duty and commission in accordance with face value of SDR. 4.3.6 Foreign exchange department It maintains foreign currency accounts and provide facility of letter of credits (L/Cs) in case of international trade. UBL has also a foreign exchange department and is one of the few banks in Pakistan that are authorized to deal in foreign currency. It can open and operates accounts in four major currencies i.e. US dollar, Pound Sterling, Deutsche Mark and Japanese Yen. In addition to these services this department also handles remittances in foreign currencies. These remittance are usually made through foreign demand draft (FDD). Foreign Telegraphic Transfer (FTT) and Foreign Mail Transfer and Foreign Mail Transfer (FMT). 4.3.7 Credit department UBL credit department deals in advancing short term and long term loans short term loans persist for the period of six months to one year while long term loans exceeds one year. UBL main area for advancement are industry, trade and commerce. Profit comes to the bank in the form of interest charged on advances. 4.3.8 Accounts and IT departments There are 22 spoke branches works under the control of UBL cantt branch. Accounts section of UBL maintain the records relating to the deposits, check books, manual data, vouchers posting, salaries, monthly income and

expenditure of all spoke branches through computerized system. This section daily release balance sheet inorder to assess the financial condition of the bank while IT section helps to support daily operations of the bank. 4.3.9 Audit department or internal control unit (ICU) ICU prepare monthly report on the performance of the staff that whether work is in accordance to the procedure. Report contains list of mistakes committed by staff which is submitted to the operation manager who is answerable to the RHQ. If mistakes are continuously committed by staff then RHQ calls meeting of the staff and ask for explanation. ICU also seek ideas, suggestion from staff and try to make procedure more simple and adaptable.

Chapter-5 Human resource management The term Human Resources refers to the people in an organization. People are the great asset for achievement of organizational goals and objectives. The Human Resource Management refers to activities undertaken to attract develop and maintain an effective workforce within an organization.7 Therefore, it is great concern for the management to plan for human resources in order to have effective system of recruitment, selection, development, motivation and retaining competent people in organization. UBL has always been conscious of the importance of manpower development for the growth of the bank. In the beginning, the bank has school of banking in Islamabad and three staff colleges, one each at Karachi, Lahore and Rawalpindi. Recently personnel division is created for Human Resource Management. The primary objective of the department is the employment of the people, retention and development. 5.1 UBLs Recruitment and Selection Process Recruitment is defined a the process of discovering potential candidates for actual or anticipated organizational vacancies. Every organization has its own recruitment policy. UBL invites fresh qualified people through advertisement in the news paper they apply and compete for that position. The overall process involve the receipt of application, processing of application, arrangement for written tests, and interviews. After that candidates undergo a medical check up by the prescribed doctor. Appointment letters are sent to the selected candidates, whos names are on the merit list. For security purposes bank ask employee for signing the following documents. i. Banking secrecy bond.

ii. iii.

Security Bond Service Agreement Bond

After successful training programmer bank gives confirmatory latter to employee if he/she has satisfactory performance. 5.3 Training Training refers to formally organized programme aimed at increasing the skills knowledge and change in the behaviour of employees to ensure a high level of performance.8 UBL has been popular for training programmes of its employee to make the new person familiar with bank environment, and improve his/her ability to perform on the job. In this regard UBL arrange different training activities in accordance to the needs and challenges. These training activities includes. Workshop on leadership and effective team building. Condensed training courses. Computer training course. Workshop on processing/appraisal of credit proposals. Workshop on Managing for high performance. Training programme on management of non-performing loans (NPLS).

Various in-house training sessions covering key areas of banking etc.9

The employees of UBL are trained and developed in a number of ways. The two important methods of training are: 5.2.1 Preservice training It is given to the staff immediately after their appointments. The duration of pre-service training is 6 or 9 months. Here operational courses are taught to newly selected officer to enable them to enter into banking career. 5.2.2 In service training It is provided to on the job employees to equip them with the latest techniques and methods of business.

5.3

Salaries and allowances

Attractive salary packages make the employee more efficient in his/her performance. UBL has revised the salaries and allowances packages which have been raised 40% for executives/officers and 45% for other categories in 2001.10 5.4 Motivation Tools in UBL It is complex of courses inspiring a person at work in an organization to intensify his desire and willingness to use his potential for achievement of organizational goals.11 People who are motivated exert a great effort to perform some task than those how are not motivated. Motivation increases employee commitment to the organization and perform job best of their abilities. UBL has adopted different ways and means for employee standard performance which are as follows. The first resource mobilization campaign was lunched in 1998, which includes cash awards and prizes distributed amongst the staff. Attendance and punctuality award system has been introduced in the bank to improve attendance/punctuality and to create culture of competition towards time utilization. Performance related pay (PRP) is introduced in 2001 which is direct incentive for staff to achieve targets. Cash awards are distributed to 79 operation staff for excellent performance in 2001.12 5.5 Promotion Promotion refers to a change or movement of an employee in vertical direction involving greater responsibility and authority and also an increase in salary, better service condition, position and rank.13 The purpose behind a promotion policy is to attract and retain qualified people, promote job

satisfaction, recognize better performance and motivate the employees. In UBL promotion is on seniority bases after having fulfilled the minimum experience required for the grade. Generally person with master is promoted after 3 years, graduate after five years, FA 8 years and metric after 10 years. 5.6 Performance Appraisal Performance evaluations or appraisal are an integral part of most organizations. Properly developed and implemented. Performance refers to carry into the effect the on-going operations, programes and projects where as appraisal refers to assessment of the work been done. Performance appraisal is aimed at the measurement of work an individual has done. The objective of performance appraisal is to determine potential of individual for growth and management.14 In UBL, employee performance is evaluated through his/her annual confidential report (ACR) at the end of each year. 5.7 i. ii. iii. Termination An employee may be dismissed from service if charges against him/her proved after conduct of inquiry. An employee shall retire from service if he completed 30 years of his service or attained the age of 60 years. An employee may offer resignation by giving written notice before three months. The employees of UBL can be termianted in the following three ways.

References 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Siddiqi, Asrar H. (1998). Practice and law of banking in Pakistan. Karachi. Decent Print enterprise. Pp. 96 Ibid. Ibid. Alam Shamim (1984). The growth of United Bank. UBL House Journal. Pp. 9. De Cenzo. David A and Stephen P. Robbin. (1996) Human Resource Management. New York. John Wiley and Sons Inc. pp. 286. United Bank Limited (2001). UBL dialogue. Karachi. Pp. 4,5. Daft. Richard L. (1990). Management. New York. The Drydon Press. p. 124. De Cengo. David A and Robbins Stephen P. (1993). Human Resource Management. New York John Willy and Sons, In.c pp. 255. United bank Limited. (1999). UBL Dialogue. Karachi. P.4 United bank Limited. (2001). UBL Dialogue. Karachi. P.5 Dr. Hidayat Ullah. Lecture. Notes on Human Resource Management. IMS. United Bank Limited. (2001). UBL Dialogue, Karachi. P. 9 Dr. Hidayat Ullah. Lecture. Notes on Human Resource Management. IMS. Ibid.