Credit And Collection Policies Of Commercial Banks In Pakistan Finance Essay


This study is the practical portion of the most critical pattern of our MBA-Banking finance plan. The exclusive aim of my activity is to familiarise with the practical use of concern organisation. This study has been written to cognize how large organisations like Askari Bank pull off their squads to accomplish their common ends.

In the first stage of the study there is the general debut about the company and so different footings have been explained, so the mission, values, different services and different schemes of the organisation have been explained. In the following portion, SWOT analysis of the house have been done by the aid of which it is identified that what are the strong countries of the company and where it lacks so

that it can better, and so in the terminal most of import my experience while sing in the Askari Bank


This study is dedicated to the greatest adult male in the universe that shows us the right way. Who is the great frequenter of the world that is Holy Prophet Hazrat Muhammad ( PBUH ) .

I would besides wish to give this little attempt of infusion to my Parents and Teachers. They have ever been a reflecting star to look upon, to give visible radiation and to demo me the waies whenever I am lost. May Allah give them more strength and long life to steer me everlastingly. Ameen

Table of Contentss

Introduction of Topic

Practical Review of Company

Vision Statement

Mission Statement

Application of Topic

SWOT Analysis




Introduction of Topic

Functions of Commercials Bankss:

1. Receiving Deposits:

This is the chief map of commercial Bankss to roll up nest eggs of persons and houses. They offer different types of sedimentations for the installation of the clients.

I. Current History or Demand Deposits:

Any sum can be withdrawn from this history any clip without any notice. No involvement is allowed on this type of history.

two. Salvaging History:

This type of sedimentation history which is normally held by the in-between category group. The

salvaging history carries lower rate of involvement.

three. Fixed Deposit:

Sum can non be withdrawn before the fixed hereafter day of the month in this type of sedimentation. High involvement is allowed in fixed sedimentation which is different harmonizing to period.

2. Advancing Loans:

This is the of import map of the commercial bank. Credit is given to the people in different ways.

( a. ) : Making Loans:

There are three types of loans given to borrowers.

I. Short Term Loans:

These loans are advanced for the period of six months to one twelvemonth. High Interest rate

Is charged on this type of histories.

two. Average Term Loans:

Loans from one to five old ages are called average term loans.

threes: Long Term Loans:

Loans which are advanced for the period, more than ten old ages are long term loans.

( B. ) : Bank Overdraft:

Banks allows their trusting clients to pull more than the sedimentation they have in the

Bank. Bank charges involvement on overdraft.

( c. ) : Cash Recognition:

Bank besides gives recognition against immoveable belongings and involvement is charged by the


( d. ) : Discounting of Bills:

This is income beginning of bank to dismiss measures of exchange. They charge nominal

Interest and price reduction merely reputed and clear measures of exchange

Practical survey

Practical survey of Organization

Askari Commercial Bank Limited is a division of Army Welfare Trust of Pakistan. Askari Commercial Bank Limited was incorporated on

October 9, 1991. The Bank obtained concern beginning certification on February 23, 1992 and started its operations from April 1, 1992. It is a public limited company and its portions are listed in all three stock exchanges of Pakistan i.e. Karachi Stock Exchange, Islamabad Stock Exchange and Lahore Stock Exchange.

Askari Bank has expanded into a state broad presence of 115 subdivisions and an offshore Banking Unit in Bahrain. A shared web of over 1300 on-line ATMs covering all major metropoliss in Pakistan supports the bringing channels for client service. As on December 31, 2005 the Bank had equity of Rs.8.6 billion and entire assets of Rs.145.1 billion, with over 600,000 banking clients, serviced by 2754 employees.

Askari Commercial Bank Limited works under the prudential ordinances of the State Bank of Pakistan and is engaged in concern of banking as defined by the Banking Companies Ordinance 1962. State Bank of Pakistan awarded licence for Islamic Banking subdivision operations of November 21, 2005. The authorised capital of Askari Bank is Rs.50 Million.


Askari bank Ltd ( once Askari Commercial Bank ) was incorporated in Pakistan on October 9, 1991, as a Public Limited Company. It started its operations during April 1, 1992. The bank chiefly deals with banking, as defined in the Banking Companies Ordinance, 1962. The Bank is listed on the Karachi, Lahore & A ; Islamabad Stock Exchanges and its portions are presently the highest quoted from among the new private sector Bankss in Pakistan.

Askari bank has expanded into a countrywide presence of 150 subdivisions, and an offshore banking Unit in Bahrain. In the success narrative of ASKARI BANK, one of the most of import factors, apart from its dynamic direction and prudent attack, is the Quality of its Services, which gives it a great border over its rivals. ASKARI BANK has ever strived to ease its clients by presenting assorted high quality hi-tech services for the first clip in Pakistan which finally cut down the counter clip of clients.

Askari bank has besides achieved another milepost with the launch of Askari bank Zari Credit Card. This is the of all time first recognition card offered to the husbandmans in Pakistan with complete merchandise characteristics and service benefits. It aims to run into husbandman ‘s production and development demands and to supplement hard currency flows, whenever required. It is besides a affair of satisfaction that ASKARI BANK has been the first bank to present PTCL and WAPDA public-service corporation measures payment electronically through ATM and Internet on an Online-Real-Time Basis. For the first clip in Pakistan, they have introduced Mobile ATMs to supply banking installations at the doorsills of their clients. Phone Banking and Internet Banking Facility allows the clients, to entree their histories from anyplace in the universe, and consequence minutess. Bank has established its Data Warehouse and Customer Care Centre, a dedicated client call centre to supply one window service to their valued clients in footings of their telephonic enquires.


To be the Bank of First Choice in the part


To be the

Leading private sector bank in Pakistan

With an international presence,

Delivering quality services

Through advanced engineering

And effectual human resource direction

In a modern and progressive organisation

Culture of meritocracy, keeping

High ethical and professional criterions,

While supplying enhanced value to all our stake-holders,

and lending to society.

Core Valuess

The intrinsic values, which are corner rock ‘s of Askari corporate behaviour, are:

aˆ? Committedness

aˆ? Integrity

aˆ? Fairness

aˆ? Team-work

aˆ? Service


To accomplish sustained growing and profitableness in all countries of concern.

To construct and prolong a high public presentation civilization, with a uninterrupted betterment focal point.

To develop a customer-service orientated civilization with particular accent on client attention and convenience.

To construct an enabling environment, where employees are motivated to lend to their full potency.

Askari is committed to its individuality of “ security & A ; trust ” and will digest to continue this image at all the times.

To maximise usage of engineering to guarantee cost-efficient operations, efficient direction information system, enhanced bringing capableness and high service criterions.

To pull off the Bank ‘s portfolio of concerns to accomplish strong and sustainable stockholder returns and to continuously construct stockholder value.

To present timely solutions that best meets the clients ‘ fiscal demands.

To research new avenues for growing and profitableness.

Products & A ; Servicess

Current History

Askari Investment Certificate

Askari Deposit Histories

Askari Quality Deposit

Askari Halal Certificates of Aasaan Monthly Mudarabah

Askari Wakalah- tul- Istismar.

Uncluttering Cheques.

Demand Drafts, Pay Orders.

Cabinets installation.

Utility Bills Collection.

Askari Ijarah Bi Sayyarah.

Askari Home Musharakah.

Practical survey of the organisation with regard to publish


Corporate & A ; Investment Banking

Personal Banking

Mortgage Finance

Car Finance

Business Finance

Travelers Checks

Net income / Markup Rates on Retail Merchandises

Askari Commercial Bank provides two types of loan that are:

1. Fund Based Loan

2. Non Fund Based Loan

1. Fund Based Loan

In this type of finance, bank really deploys its financess and grade up is charged

on it. ACBL provide the undermentioned types of fund-based loan

Runing Finance

It is besides called “ over bill of exchange ” because ba nk provides an excess recognition bound to client bing current history. Runing finance is a secured loan because bank provides excess recognition bound against some indirect security or hypothecation security. Hypothecation is premier security. The client can avail this recognition bound at any clip of the adulthood clip period ; which is usually one twelvemonth. But if the behavior of client is satisfactory and client can avail this installation to the drawn-out period, so this bound is roll over to following twelvemonth.

The check book is issued and client is flexible to pull with in the pulling power. The client is allowed to retreat the defined excess recognition bound or a part of it. The client has free will to debit or recognition his history once more and once more up to specified clip period of adulthood, so it is called running finance. Rate of grade up varies in every instance. Mark up is calculated at day-to-day footing. The grade up is non charged on the full sum of recognition bound and non for whole period. But it is charged on the drawing sum and merely for that twenty-four hours the client holds this drawing sum. So running finance is non a regular beginning of income for the bank.

I. Cash Finance

Cash finance is like a running finance but it is extended against the sworn security like stock list or stock and 25 % hard currency border is besides charged. The sworn stock is besides insured from any insurance company and the client besides pays all the insurance and any other security disbursals. The checkbook is non issued so the client has no fee will to debit or recognition the sum. But if client wants to pull stock so he will lodge sum equal to the stock and bank will publish bringing order in favour of client. Mark up is charged over the full loan sum and for whole clip period of adulthood.

( two ) Term Finance

In the finance, replacing agenda of loan is mentioned along with loan sum, clip period and tag up rate. Term finance has maximal clip bound of 5 twelvemonth. Mark up rate varies harmonizing to nature of offered security and clip period but now a twenty-four hours it exists between 7 to 10 % . Replacement agenda contains monthly installment in which sum of markup and rule ( subtracting adjusted sum of rule from the existent rule sum ) term finance is profitable for the bank because it generates regular income for bank.

ACBL issue two types of Term Finance

a. Clean term finance

B. Secured term finance

Clean Term Finance

These loans are extended without keeping any security by the bank. ACBL extend clean finance merely to Army forces against their salary history and after the blessing of their dominating officer. Every commissioned officer of Army can take loan. Rate of grade up is 12 % . If client applies for Rs.25, 000 so subdivision recognition can widen this loan but if the sum is greater so it is approved by the high degree.

Secured Term Finance

Secured term finance is for concern entities. These fundss are extended against security like stock or stock list. Cash security border is received the major part of security is pledge and staying is hypothecation or mortgaged so sworn security is the premier security. The concern entities can avail this installation for the undermentioned three intents.

Askari Mortgage Finance offers you to acquire Home Loan Financing with five fluctuations:

Construct a Home ( Tranche Loans )

Buy a HomeA

Buy a secret plan and Concept


Balance Transfer Facility

Construct a Home: This type of loan is extended to clients who already have a piece of land and necessitate financess to run into cost of building belongings on that land. The expense of this loan is made in four or less tranches during the building stage depending upon the measures of measure ( BOQ ) submitted by the client and the measure and quality of building done.

Buy a Home: As the name suggests, this type of loan is meant for the purchase of an already constructed belongings.

Buy a Plot and Concept: This loan type is extended for the clients who want to purchase a secret plan and build a belongings on that secret plan. The expense of this loan is made in ball amount for the purchase of secret plan and so in four or less tranches during the building stage depending upon the measures of measure ( BOQ ) submitted by the client and the measure and quality of building done. The bifurcation of bound for purchase of secret plan and building will be applicable as per predominating SBP prudential regulations.A A

Renovation: This loan is offered to clients who already posses a house and necessitate financess for renovation/ betterment. Disbursal will be made merely after client has provided BOQ and an project for use of this installation for the intent of renovation/ betterment.

Balance transportation installation: This sort of loan is offered to bing borrowers of other establishments, who may desire to exchange over to Askari Bank Limited because of service, pricing or relationship grounds. The loan with the other fiscal institute should hold been paid in conformity with bank ‘s recognition history and debt load demands. Balance transportation installation is purely non allowed for the belongingss that are still under building.

SWOT Analysis


The Pakistan ground forces is back uping to Askari Commercial Bank. It builds trust of client on Bank. Bing a bank of Pakistan Army, Askari bank has competitory border on its rivals.

Holds a sound reputation in the fiscal circle

ASKARI BANK has immense sum of sedimentations due to their attractive returns.

ASKARI BANK generates positive operating hard currency flow which provides return to the debt and equity holders.

ASKARI BANK maintains Dividend Equalization Reserve to payoff dividend even when a bank face diminution in net income.

M/S PACRA has awarded the Bank with the recognition evaluation AA Strengths for Long term and A1+ for Short term.

ACBL has launched its Mobile ATM Bus Service, which is the Pakistan ‘s First Mobile ATM Bus Service. No other bank has taken enterprise of nomadic ATM Bus yet.

The Askari bank has a big web of subdivisions. There are 155 subdivisions all over the Pakistan.

Personalized services of the staff to the employees

All the minutess and information regarded the client ‘s sedimentations has been computerized. Currently, Unibank System is being practiced for this intent. Now Askari Bank is decided to alter the Unibank System

Askari ‘s direction is rather prepared to follow the latest promotions in engineering ensuing in revolution in the banking operations such as cheque glade procedure, computing machine based Teller equipment, automatic Teller machines, and electronic financess transportations among the others.

Keeping the healthy letter writer relationships with foreign Bankss


ASKARI BANK is non so good to cover its net markup disbursals.

More than 90 % of its entire assets are financed through debt which increases hazard of the bank.

ASKARI BANK has no optimum capital construction to pull their possible investor.

Inefficiency of recognition section to look into debitor ‘s credibleness.

ASKARI BANK fiscal statements does non demo stable relationship between operating hard currency flow and net income so accordingly it fails to bespeak “ Choice net incomes ” .

It is going clear that the true permanent competitory advantage comes through human resources and how they are managed. ASKARI BANK seems to non concentrating on this extremely critical issue as the occupation satisfaction degree of the employees working at ASKARI BANK, was rather low.

Since, ASKARI Banks ‘ major rivals are Union Bank Limited and Bank Alfalah has started big media run, so maintaining in position these menaces, Askari bank should stress more on its advertizement.

Division of work and description of occupation is non decently defined to each and every staff member.


As economic system is turning, there is more investing demand in Pakistan. Banks have chance to heighten their concern. So, there is a strong potency for growing.

All the chances of the twenty-first century are to be availed in the information engineering. Information engineering is the hereafter. Therefore ASKARI BANK should stress much on IT,

Crisp addition in Imports and exports of the state.

With the menace of WTO, SMEs require more financess to heighten their substructure to better the quality. Banks are the beginning of these support.

ASKARI BANK should stress on E – Banking. In which Bank can plan a cosmopolitan history like other foreign Bankss, to heighten online installations.

Emerging involvement towards Islamic Banking.


The Askari bank has major GOVT. sedimentations. With alteration of authorities policies it may impact the bank.

Entrance of foreign bank in competition with local bank is great menace for The Askari bank.

ASKARI BANK should heighten its Branch Network, in order to capture the market of different countries.

ASKARI BANK should heighten the Pay Packages given to the employees, because it has been noticed that the rivals of the ASKARI BANK are giving more suited wage bundle to their employees.

Askari bank is confronting a strong competition by its major rivals ; Union Bank and Bank Alfalah. Business of these Bankss is besides turning with really high gait. So in order to accomplish the sustainable growing in a market, ASKARI BANK has to stay argus-eyed about the of all time altering environment and the rivals.

The State Bank of Pakistan frequently imposes assorted limitations on Bankss. Therefore, none of Bankss is independent in policy devising and can establish any merchandise without the permission of the State Bank of Pakistan.

Government statute laws about banking sector.


After making work in ACBL, I am in a place to reason that the services provided by the bank to the clients are decently screened and checked and there are about 0 % opportunities of mistake or ambiguity. The working environment of the bank is besides really much friendly and concerted. The bank has a alone position among other Bankss because of its low net income rates, security sedimentations and speedy processing methods for processing of applications. There is a good preparation system for the internees every bit good. The staff presently working in the bank is extremely concerted and experient.

I would besides wish to avail the chance to thank all employees of the bank who helped and guided me in such a nice manner, and besides to my institute who provided me this chance as a class demand to acquire a practical life exposure.