History of Union Bank Limited

Established in 1991 and backed by a major Middle Eastern Group, Union Bank today is

the preferred choice of thousands of satisfied customers throughout Pakistan. With 42

branches in 19 cities and a correspondent banking network of over 300 banks in 85

countries, Union Bank is rapidly gaining ground in the global financial market.

In year 2000, Union Bank acquired Bank of America's local operations in Pakistan.

Keeping on the same strategic run, in July 2001, Union Bank signed an Independent

Operator Agreement to issue, operate and market American Express Cards in Pakistan.

Later, in the year 2002, Union Bank acquired Emirates Bank International's local

operations. Subsequently, the bank started its foray in international banking through the

acquisition of Mashreq Bank operations in Sri Lanka. Union Bank acquired both the

domestic and off shore banking units of Mashreq Bank in Sri Lanka in year 2003.

With major investments in international brand acquisitions, branch network and

information technology including a state-of-the-art customer contact center, Union Bank

is well on its way to offer its customers innovative financial products with unmatched

service quality.

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Introduction of Union Bank

Directors and Chairman.

Mr. Mueen Afzal

Mr. Shaukat Tarin

Mr. Muneer Kamal

Dr. Abdullah Mohammad Abdullah Basodan

Mr. Munnawar Hamid

Mr. Qazi Mazharul Haque

Mrs. Lubna Majeed

Chief Operating Officer Pakistan Operations

Mr. Aziz Rajkotwala

Chief Operating Officer International Operations

Mr. Muneer Kamal

Secretary
Syed Liaquat Ali

Audit Committee of the Board

Mr. Qazi Mazharul Haque (Chairman)

Mr. Mueen Afzal (Member)

Mr. Muneer Kamal (Member)

Mr. Munnawar Hamid (Member)

2
Vision Statement

To be the premier financial institution in the Emerging Markets

Mission Statement

To be the premiere bank, responsive to the needs of our target market customers,

recognized for consistently superior service quality and innovative products, thereby

delivering superior value to our stakeholders

Core Values

Customer Focus:

Relentless focus on understanding and fulfilling customer needs through superior service.

Innovation:

Continually generate, validate and implement creative solutions to business challenges.

Meritocracy:

Ensure a fair recruitment process and closely link recognition and reward to performance

against goals, irrespective of personal relationships, gender, religion or ethnicity.

Integrity:

Uncompromising financial and intellectual honesty to the organization and oneself with

relationships based on mutual trust and openness.

Team-work:

Willingness to share the glory of achievements as well as responsibility for failure.

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Humility:

Display self-belief as well as modesty and be respectful to all customers, colleagues and

business partners

Union Bank's New Corporate Visual Identity

The new corporate identity, with bright colors yet simple outlook, is designed to reflect a

premiere, modern and technology oriented bank. The bright colors not only ensure

increased visibility but also create a fresh, energized and vibrant outlook. The simple font

portrays a unique appeal of elegance and modernity

Union Bank International

Union Bank's vision goes beyond local operation. The bank's aim is to become a

prominent Pakistani bank with substantial international presence. With a wide range of

products & services and management expertise in all functional areas of banking, Union

Bank finds itself best positioned to embark on international operations.

In order to establish an international network Union Bank has been evaluating several

emerging economies in Europe, Southern Africa and South Asia. The criteria for the

selection of the country include the level of economic activity, the demand for consumer

products and the trade and economic relations with Pakistan.

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Union Bank selected Sri Lanka as the first venue for commencing its international

business. The historically warm relationship between both the two countries provides

Union Bank a congenial platform to start its offshore operations. Sri Lanka is one of the

fastest growing economies in the region and the bilateral trade agreement between

Pakistan and Sri Lanka will not only help to boost trade but will further strengthen the

relationship between the two countries. With economic and cultural similarities between

the two Countries, Union Bank believes that it will be able to leverage its success in

Pakistan to Sri Lanka as well.

Product and Services

Union Bank has a vision to provide its customers with a complete range of banking

solutions. Over the course of last two years, Union Bank has launched various products

and services that cater to the financial needs of thousands of customers from across

Pakistan. Some of the key products and services that Union Bank boasts on its menu are

American Express Charge and Credit Cards, Ready Cash, Uni-car, My Home, Business

Power, Business Account, Mahana Izaafa as well as Union Bank Online.

Personal Accounts Include:

1. Mahana Izafa.

2. Business Accounts

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3. Munafa Max

4. Saving Account

5. Current Account.

Personal Finance includes

1. Ready Cash

2. Uni Car

3. My Home

4. Business Power.

Bank Advances include

1. Commercial Loans

A: Running Finance / Over Draft

B: Small Loans

C: Demand Finance or Loan

2. Non - Commercial loans

A: Project Loans

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Branches

Faisalabad Multan
Gujrat Peshawar
Gujranwala Quetta
Hyderabad Raiwind
Islamabad Rawalpindi
Jhelum Sahiwal
Karachi Sargodha
Lahore Sialkot
Mardan Swat
Mirpur (A. K.)

Departments

Administration Customer Service & Quality

Audit Financial Institutions

Branch Banking
Card Operations
Cash Management
Central Finance Division
Central Operation Division
Consumer Business
Corporate Banking Group
Credit Administration Dept.
Human Resource Division
Information Technology
Marketing
Merchant Acquisitions
Remote Banking
Small & Medium Entp.Group
Special Asset Management
Treasury Operation

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Organization Structure

Board of Directors

Chairman

Vice Chairman

President & Group C.E.O

Secretary

G.H Crd&Rm C.H S.M.E C.F.O G.H R.B G.H Con.B

G.H H.R.D C.H U.L C.H I. Audit Dir. S.Q H.IT & Op

8
9
Administration and Accounts

In the f-7 branch of Union Bank both the administration and Accounts is headed by one

person who is responsible for looking after the accounts of the branch and forming pay

orders for work or services which are used by the branch meaning a mixture of both

accounts and administration. He has to make sure at everyday that the branch is a

balance, in my days there; there was no one day that they had come across any problem

of an unbalance. The administration department deals with all sorts of things one of there

responsibilities is to make arrangements for Union bank personnel coming from other

cities, hotel booking and etc. They also deal with ensuring the smooth running of the

branch, that any problems of any kind occur even if it is as small as a person is not being

well or has a headache or someone wants a plant in their office it is all handled by the

head of administration and accounts

I had started my internship at very critical timing of the year, Union bank has two closing

of accounts one is on the 31 of December which is known as the year end closing and the

other is on the 30th June which is known as the half year closing. As I started my

internship they did not delay in providing me with complex work after a brief interview

about the accounting process and concepts which I had learned in the 1st and 2nd semester

of my BBA. I was given a task to calculate the depreciation of all the fixed assets which

the F-7 branch of union bank had. It was a very complex task since half of the dates and

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previous depreciation very faulty. To better understand this I needed stronger and more

advance concepts of accounting which I did not have. Dead line of 10 days was given to

me to accomplish my task which I had met by staying long hours at the office and also by

the guidance of Mr. Tanveer who is the head of accounts and administration.

In order to make my work simpler I broke it down into parts and sections. Due to a

change in the accounting system of Union bank the head office in Karachi had grossed up

all the provision of deprecation on September 30th and a new record of depreciation was

made. The reason for the bank to do this was that some branches even the head office had

been calculating depreciation on Assets for the whole month when the asset was

purchased after the 15th of the purchasing month and also some other reasons. So I had

divided my task in first calculating the depreciation of each asset that the F-7 branch had

before September and then calculating after September and separating the grossed up

amounts from a sum total into months of each asset for a whole year (June 03 to June 04).

Once completing this I had to then counter check that each amount which I had

calculated was correct by tallying it with the statement by the head office Karachi. After

accomplishing this task I was assigned to a new task of calculating the month’s telephone

bills and with holding tax. After the calculation I was asked to create a proper statement

which would be kept in the records.

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Every non contractual employee has a medical benefit. A married employee can with

withdraw up to Rs. 20,000 in a year for medical purposes and a unmarried employee can

take up to Rs. 10,000. For keeping a proper record of this the Bank maintains a register

and then that register is entered on excel sheets to have an updated record at all times.

This task of maintaining and creating excel sheets for this year was given to me.

Although it was a very simple task but had be dealt with extreme care since a wrong

entry in this would be problems for the employee who is withdrawing the medical fund

and the person who has entered the amounts. This was the only proper record of the

withdrawals and with faulty entries in it would be loss for the organization or for the

employee and in order to rectify it one would have to go through all the medical bills

which the employee has to had over in order to claim his money. I first entered all the

information on to the register and then from that register I made excel sheets of the same

information. The experience I was able to again in the department was on a higher scale

than compared to the other departments. The working hours here were extremely

demanding and long altogether is was a wonderful experience working here.

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Union Banks Policies for fixed Assets and Depreciation

Materiality

Individual items costing Rs.10, 000 or less will be classified as revenue expenditure

expect where the amount to a material total as part of any single project.

Bulk Purchase of assets

Asses purchased in bulk will be written off to revenue where the gross unit price is Rs.

10,000 or less. Where the gross unit price is in excess of Rs.10,000 the assets will be

capitalized under the appropriate category of fixed asset.

Accounting Policies for Fixed Assets

• Assets carrying a unit value greater than Rs.10, 000 shall be capitalized as fixed

assets in the books. Assets carrying unit value equal to or less than Rs. 10,000

shall not be capitalized.

• However, if any assets forming a component part of a main assets, despite having

unit cost equal or less than Rs. 10,000 shall be capitalized, provided that total cost

of such main asset is greater than Rs.10,000.

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• Assets which are not capitalized according to the rule just mentioned a Rs.1 token

value shall be booked under appropriate had while balance amount shall be

charged off to profit and loss account.

• Full month depreciation shall be charged for the assets booked before the 15th of

that month. Assets booked after the 15th depreciation shall commence from next

month. Deprecation rates and method of deprecation shall be in accordance with

the banks standard Accounting Policies.

• Monthly depreciation shall be accounted for by debiting related depreciation

expense account and crediting related provision for deprecation account. Written

off assets will be valued as Rs.1 which is known as the token value and shall be

carried till they are disposed off.

• At the time of disposal original cost of asset and its up to date provision for

depreciation shall be reversed against the sale proceeds and gain /(loss) shall be

booked accordingly.

• Assets booked as fixed assets should simultaneously be entered in fixed asset

register for physical monitoring.

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 • Asset transfer from one branch to another branch should be properly reversed and

booked in both branches with full cost & provision and also properly existed and

entered in both the fixed asset register.

Types of Fixed Assets & Depreciation Rates

Tangible Assets

Sr# Typed Of Asset Dep. Rate Tenure Of Asset

1. Land 0% Unlimited

2. Buildings 5% 20 years

3. Furniture & Fixtures 10% 10 years

4. Vehicles 20% 5 years

5. Computer and Peripherals 20% 5 years

6. Office Equipment 20% 5 Years

7. Lease Hold Improvements N/A 5 years

Land Includes

1. Land Freehold

2. Land Leasehold

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All expenditure incurred acquiring land and preparing it for use, including the cost of

demolishing existing buildings prior to redevelopment, will be considered as part of the

land cost to be capitalized.

Buildings Include.

1. Building Freehold

2. Leasehold Premises

Cost incurred on the construction of “freehold Buildings” shall include all costs incurred

for civil works, masonry work, basic electrifications, and sanitation and plumbing etc.

For Purchased premised the purchase consideration paid for building shall be capitalized

as “freehold premises”

Where substantial building and construction work is undertaken, all costs pertaining to

the project will be debited. Upon completion the building contractor or consultant will be

required to provide a detailed breakdown of expenditure to enable the balance on the

account to be appropriate categories of fixed asst accounts and revenue expenditure.

When land and building are purchased as a unit at a single lump sum price, the total cost

be apportioned between land, building and premises fixed equipment. Separate costs will

16
be assigned to the assets on the basis of their relative market value, which will be

determined by the cost of acquisition as stated in the purchase contract.

Furniture and Fixture Include

1. Furniture and fixture (Office)

2. Furniture and fixture ( Residence)

Vehicles Include

1. Owned Vehicle

Computer and Peripherals Include

1. Computer Hardware

2. Other Hardware Accessories Being Part of Computer.

Qualifying expenditure includes the initial purchase price of equipment, plus any related

establishment costs like carriage, installation etc. Expenditure incurred subsequently

during the life of an asset like related maintenance, insurance etc should be expensed.

Office Equipments Include

1. Machinery and equipment ( Office)

2. Machinery and equipment (Residence)

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 3. Telecommunications

4. Air conditioners

5. Generators

6. Other Equipments

Intangible Assets

Sr# Typed Of Asset Dep. Rate Tenure Of Asset

1. Software 25% 4 years

Software Include

1. Computer Software and software development

2. Software License

Cost of Buying in software and or software licenses should be capitalized. Expenditure

Attributable to projects will be capitalized. The expenditure should relate to the

development of an identifiable asset with an identifiable benefit to the business.

Development for this purpose is defined as all activities associated with buying, defining,

building, modifying, testing and implementing the software including project

management and training. The definition does not include application support and

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maintenance activities, nor activities associated with running the software in a production

environment once it has gone live.

Method for charging Depreciation

Straight line method is used for charging depreciation on fixed assets over the useful life

of these assets. The only asset which is not depreciated is land.

Depreciation Accounting

Depreciation expenses will be debited to the appropriate profit and loss deprecation

account, with the corresponding sum credited to a provision for depreciation.

Write-off Asset

Where an asset with a book value is written off ( i.e written down to nil), the remaining

book value of that asset should be charged to the profit and loss account as depreciation,

and included as a fully depreciated written off in the fixed asset schedules.

Fully Depreciated Assets

When an asset becomes fully depreciated no further depreciation will be calculated. The

asset will be reflecting at W.D.V Rs.1 in the books till its disposal.

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Disposal of an Asset

When an asset is sold it is necessary to provide a complete accounting record of the

transaction through profit and loss providing an overall net profit and loss.

Approval fro purchase of a Fixed Asset

Prior approval is required to purchase an asset above Rs. 10 million from the

Management Committee/ Board of Directors.

Asset/vehicle sale/Acquisition

Policy and procedures for Asset/vehicle sale/Acquisition have already been implemented

which covers all the aspects of purchase, sale and transfer of assets and also covers how

to maintain non-financial data in registers.

Audit

Internal Audit shall review and comment on the implementation of policy, Deviations if

any will be considered while deciding the audit rating.

Capitalization Policy for leasehold Improvements

• Cost incurred on branch renovations and developments aggregating cost more

than Rs 10,000 but not been part of fixed assets, should be booked as “leasehold

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 • improvements” and cost aggregating equal or less than Rs 10,000 should be

charged to the profit and loss

• Full month amortization shall be charged for the cost booked before 15th of that

particular month and cost booked after the 15th amortization will start next month

• Amortization rate and method of amortization shall be in accordance with banks

standard accounting policies.

• Amortization expenses should be debited to profit and loss account and credited

to lease hold improvement asset account on monthly basis. Amortization for the

last month shall indicate asset at zero value.

• Costs booked as lease hold improvements should be simultaneously be entered in

lease hold improvement register for memorandum record.

• No partial cost should be booked during renovation and development of branch.

All costs should be booked at the completion of work. Till that time all expenses

incurred relevant to particular project should be booked in job in progress.

Accounts:

The financial year of Union Bank is from the 1st of January to 31st December and even has

a half year closing which happens on the 30th of June. All the branches of Union bank

regardless of their locations they have to form the following reports and send it to the

head office in Karachi by the end of each month.

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 1. Balance Sheet

2. Schedule of all assets and liabilities

3. List of Debtors, creditors, advances and inventories

4. Retained earnings summary

5. Administration and general expenses statement

6. Marketing exp statement

7. Heat, light, power and fuel expense sheet

8. Payroll taxes and employee benefit statement

9. Repair and Maintenance.

Functions of the Accounts Department

1. Maintenance of all records related to the branch

2. Maintenance of fixed assets records

3. Accurate and timely payment of employee payroll funds

4. Maintenance of all expense

5. Creating pay orders ensuring timely payments for services or goods rendered

6. Ensuring that all accounts are balanced

7. Reconciliation of all bank accounts.

Union banks accounts are audited by Hameed Chaudhri and Co which is chartered

accounts firm. The bank has two types of auditors external and internal. Internal auditors

22
are sent to unrelated branches to create an audit report on them, teams are made of

internal auditors who are selected from branches in the given region. Once the internal

auditors have completed their task the external auditors come in one of which are

Hameed Chaudhri and Co and auditors from the State Bank of Pakistan.

Union bank is a traditional double entry system and thus forming the very famous

accounting equation Assets = Liabilities + Capital. Accounting entries are made on real

time basis. The journal entries are properly verified and posted to the ledger accounts and

trail balance. There are two types of vouchers which are made one is the payment and

other is receipts and both are recorded accordingly in them.

Responsibilities

As with functions the accounts department has some responsibilities as well which are

1. Purchase

2. Cost Control

3. Payments to Creditors

4. Employee Payroll

5. Income Audit

6. Main Accounts

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1. Purchase

Union Bank in all together does not have any purchase department which is otherwise

known as the procurement department. Every branch Accounts department is responsible

for this activity they have to act as a procurement department for their branch. Two stores

are maintained

1. General Store

a. Printing & stationery

b. Computer supplies

c. Electrical & Mechanical

d. Plumbing & heating

e. Air conditioning and Refrigeration

f. Light & Bulbs.

2. Food and Beverage Store

a. Kitchen Food

b. Laundry of lower staff

c. Tea

Union Bank maintains a proper computerized system of inventories as soon as any one

items is low the accounts officer will be receiving a warning. As the types of stores there

24
are two types of Procurement one is the whole year one which is done for

Goods/items/services which are required through out the whole year and other is the

selective which is done once in a while. In both the cases the contract is awarded to the

supplier who manages to bid a price lower than the rest of the bidders.

2. Cost Control

This is another responsibility of the accounts department and that is to reduce costs. In

my time there a very serious issue was raised by the head of accounts and Administration

about the high amounts of phone bills of each department including his own department,

he had come up with an idea of getting the non dialing phones placed with in his own

department on every extension and keeping one dialing phone which would be under his

strict supervision and that was what he had recommended to the other departments as

well saying that all extensions should be non dialing so that phones are not misused and

are kept under a strict check adding that it is not feasible for an organization paying

millions of rupees each year only in phone bills which can be controlled. The accounts

department is constantly on a struggle to reduce cost where ever possible for them to do

so. If we look at the phrase reduce cost or cost control is looks very simple and plain but

in actual it needs a lot of hard work and determination as a whole team of the people who

are concerned with the issue to join hands and make it happen otherwise the whole idea is

a complete waste of time and energy.

25
3. Payments to Creditors

These are the payments which are made to the suppliers, against services and contracts.

There is proper producer which is to followed before any payment is made by the

accounts department to the supplier or creditors.

a. Comparison of the purchase order with the supplier invoice to ensure that

item, amount and date and everything checks out perfect.

b. Generation of an expense voucher is made to ensure that entry is passed

on the books as well the system of Union Bank ensuring a balanced

account.

c. A creation of a pay order or cheque is done after deduction of tax from it

d. Once this is completed then the delegated authority in this is the head of

accounts verifies everything and gets it approved by the regional head.

e. After the approval by the regional head the pay order or cheque is given to

the supplier or creditor.

4. Employee Payroll

The Accounts Department has the responsibility of making salary payments to the

employees of Union Bank. Like any company there are two types of employees

permanent and contractual. The contractual employees do not get any benefits as the

permanent do. The biggest benefit that the permanent employee gets is job security and

26
medical allowance. The employee can withdraw amounts up to Rs.20, 000 in one year if

they are married and Rs.10, 000 for unmarried. Loans against provident funds are also

calculated and given from this department to employees, convince allowance and rental

allowances are given or can be reimbursed from here as well.

27
Credit Administration Department (C.A.D)

This department is also known as the Risk Asset Management (R.A.M) in various banks.

In a nut shell the purpose of this department is to approve the loans which are given by

the S.M.E (small and medium enterprise) and C.B.G (Corporate banking group). R.M`s

of both S.M.E and C.B.G find the clients to give loans to or other facilities and these are

then forwarded to C.A.D who then evaluate the value of the collaterals, verify credit

histories and get legal opinions and then approve what ever facility the client has applied

for.

I had interned in this department for a full week in which I was able to gain a lot of

knowledge which I could have not gained form any text book. It is all thanks to Mr. Bilal

Zaid who is a Risk Manager there that he explained to whole process in such a through

and proper manner.

While I was there I had checked many charge documents, title documents, evaluation

reports and insurance policy. All these things are properly described in the pages to come.

My time here was the most interesting and by far this was the department I was able to

gain the most knowledge in one week than compared to the other five weeks.

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Types of Financing

1. Direct Financing (Funded Facility): This type of financing is when actual cash

is given to customers or clients. Examples would be Current Finance

2. Contingent Financing (Non-Funded Facility): This type of lending does not

have any transfer of cash to customer in simple it is any liability that may or may

not arise. Examples would be Letter of Credit

Any type of loan which ranges from rupee 10,000 to rupee 500,000 is known as a clean

loan. This is because since no type of collateral is needed in order to get this loan there

examples are credit cards personal loans car finance and anything that is up to Rupees

500,000.

Any loan which is above Rupee 500,000 has to be approved by the Credit Administration

Department. For loans above rupee 500,000 some sort of collateral is needed to serve as a

guarantee in place of no return of the funds borrowed by the client.

29
Credit Approval Process.

Once a person comes to the bank to get a loan above rupee 500,000 the first thing that has

to be checked is if they fall in Branch Banking, SME, Retail or Corporate. A designated

Relationship Manager would first evaluate the client if the loan should be given to them

or not. Now the RM would get all the needed information from the client and hand it to

the C.A.D department. This is when the real working of the C.A.D starts they shall first

get a report from the Credit Information Bureau (C.I.B) which is located in Karachi and

is regulated by the State Bank of Pakistan. This is a proper Data base of all the people

who have ever taken a loan. It would have detailed information about there previous

loans and payments of the loan and installments.

If a client has a bad record his loan will not be approved until he provides 100% cash

collateral for the loan which will be taken. The Banks policy is to safe guard their money

first no matter what. Once the C.I.B checking is done a credit approval is made by the

Relationship Manager.

Types of securities

1. Property

2. Government Securities

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 3. Fixed Assets and Accounts Receivables.

It is the banks policy that only 70% to 90% will be lend out of the value of the security.

1. Property

In order to give your own personal property as a form of security, the first and foremost

thing that shall be required will be all the title documents a few of them are listed below

1. Sale deeds

2. Connivance Deeds

3. C.D.A Site Map

4. Transfer Letter

Once all of this is received all these title documents are photocopied and sent to lawyers

in the case of Union Bank the lawyers are Khan and Paracha who are the official firm

which deals with all legal work of Union Bank. When the documents are sent the firm

does all the checking of the documents and gives an O.K or can even ask for more

documents which should all so be a part of the title documents. If the lawyers say that this

document is required then the bank can not give out any loan with out having that

document.

Now the people who work in the bank are no experts in evaluating property so they have

proper evaluators who do this Job for them. Now a person can come up and give all his

31
documents and say that his property is worth Rupee 50 million which in reality is not

true. In order to protect themselves from this kind of Fraud the bank get the property

evaluated. Just to save themselves from any kind of other frauds which might arise in the

process of evaluation the property the Bank gets the property evaluated by two separate

firms just to make sure that no forms of bribery or other kinds of frauds haven’t taken

place between the client and Evaluator.

These Evaluators come up with four forms of prices

1. Market Value: This value is the value which one is able to get by selling the

house in no rush or hurry. When a seller waits for the best bidder to sell too.

2. Forced Sale Value: This is the value which a seller may get if the seller is in no a

rush and is not able to wait for the highest bidder of the property

3. Land Value: The value of the land

4. Building Value: Value of the construction on the plot.

The loan which is given out will be on the forced sale value of the property and only up

to 75% of the value of the forced sale value will be give out in the form of a loan. The

Bank make sure that they are covered in all way possible and that they will not have to

bear a loss.

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After the completion of the Evaluations the Bank shall ask the client to get the property

insured.

For the insure process the client must first show a Premium Payment Receipt (PPR)

which is the most essential document in the insurance process. After the receipt comes

the insurance policy deal. This is a document which states 5 things

1. Amount being Insured: The amount for which the insurance is done

2. What is being insured: What part of the asset is being insured, the land or

construction.

3. Favoring: Who is being insured, Union bank should be insured in all cases

4. Which Clause of insurance it covers: There are four clause of insurance A, B, C,

D. A covers the most kinds of damages, earthquakes, fire and so on, B covers less

and that’s the way it goes till D.

5. Time and date of policy becoming effective and expiry:

The insurance and the monthly payments are all paid by the client the bank shall not pay

a penny for the whole process. The interest rates are calculated on a Daily Product Basis

which is

Principal x Rate x Time

33
 36500

2. Government Securities

These securities are known as cash collaterals as well since they are very liquid assets

and can be very easily converted into cash. Examples of these securities are Defense

Savings certificates (D.S.C), Regular Income Certificates (R.I.C) and Special Savings

Certificates (S.S.C).

When this type of security is being done there are two main essential documents which

are needed.

1. Authority to Mark Lien.

2. Encashment Certificates.

With out these two certificates the bank can not give out the loan the Authority to Mark

Lien gives the right to the bank to hold legal possession over the documents and

encashment certificate allows the bank to convert the Bonds into cash incase the client

34
defaults. A client is able to get up to 90% of the value of his bonds as a loan from the

bank. This type of security is 100% cash collateral.

It is the most simple and quickest since very little paper work is needed to be done in this

and the bank feels at easy by this kind of security. All forms of agreements have to signed

on Charge Documents which is a paper with 2 rupee stamps on it this is extermily

essential since if there are no charge documents we can not claim anything from the

client if they ever default. All the papers which we might have of there’s will be useless

with out the charge documents, The Bank cant even go to court if the charge documents

are missing. Charge documents have to be signed for all kinds of loans clean or collateral

loans.

3. Fixed Assets and Account Receivables

The process and form of this type of security is the exact same of the Property.

35
Non-Funded/Contingent Facility

Two main things come into this

1. Letter of Credit

2. Letter of Grantee

1. Letter of Credit

A letter of credit is used by importers and exporters for example xyz a person comes to

bank and he wants to import goods from New York. He would have to use the services of

a bank to import the goods. In this case Union Bank will be the bank who will provide

the services. Union bank will be the Opening Bank. The Bank will open a LC thus

making Union Bank the bank of the importer. Like the importer the exporter will also

have a Bank and for example his Bank is Abn Amro in New York and that will make that

bank the negotiating bank.

The first thing that Union Bank would require would be a Performa Invoice. A Performa

Invoice is a document which states the prices and items which are to be imported by the

importer. This document shall be sent by the exporter’s bank. Now the LC is open and

the second step in this process is that the exporter gets the goods insured and does all the

other paper work which is needed. As soon as the goods sent to the importers country

which is Pakistan in this example the exporter will receive a document which is know as

36
the Bill of Lading (if sent by sea) or Airways Bill (if sent by air). The exporter will be

able to claim his money from his bank as soon as he hands over this document. Once the

bank gets this document they shall send this document to Union Bank. Almost every

bank has a Nostro account (Our account with them) and a Wastro account (their account

with us). A Nostro account is an account which holds a part of the Banks foreign

currencies. Union Bank has a Nostro account in New York. Some one has to pay Abn

Amro back since they have made the payment to the exporter, what Union bank will do is

that it will tell Abn to debit there Nostro account as soon as the receive the Bill of Lading

or Airway Bill.

By the whole process by now the exporter has been taken out of the equation and so has

been the Bank of the exporter, what left behind is the importer and Union Bank it self. As

soon as Union Bank receives the Bill of lading or Airway Bill they shall call the importer

and inform him that his document has reached. The importer will have about 5 to 7 days

to pay the money to the bank after the arrival of the Bill. If he fails to pay with in 7 days

21% interest will be charged per day until payment is made. Even in this case the bank is

fully covered from every where. The goods are in the possession of the Bank and they

can sell them and regain there money.

The example above talks about a Site LC, the most common of all the LCs is the Site LC

and then there is the Usance LC. The difference between the two is that in Usance the

37
provider of goods can give a credit to purchaser of goods. It could be 60 days, 90 days

depending on what the seller or provider wants to give.

2. Letter of Grantee

This is a grantee which is issued by the bank to another organization or person on behalf

of the banks client or clients that they will pay up and if they don’t pay the bank will pay

on there part. Recently PTCL was having problem with Chinese nationals living in

Islamabad, the problem was that these people used to get telephone connection and would

make international calls and go back to there home country with out making the payment

of there phone bills. So what PTCL did was that all foreign nationals had to get a bank

grantee in order to get international dialing open on there phone connections.

The minimum grantee was of rupees 50,000. The Banks policy was to take 100% margin

from them which meant that they had to deposit full 50,000 in order to get the grantee.

The main things in this agreement are

1. Amount: How much is the grantee for

2. Date of issue: When is the start date

3. Who it favors: In whose favor is it

4. Date of expiry: When the grantee finishes

5. Claim Lodgment Date: Once this date expires the company or person is not able

to claim anything from the bank.

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Credit Policy

Union Banks credit process is decentralized but guided by centrally established credit

policies, rules and guidelines continuing a close to the market approach to credit

initiations with corporate level direction.

Organization

Credit policy is a corporate entity that functions through the Credit Policy Committee

(CPC). The CPC is headed by a chairman and has three other members at present the

CPC is accountable to the board of directors of the bank.

Responsibilities

The CPC functions to oversee risk and to temper and shape the lending activities by

• Establishing credit policies and corporate standards that conform to local

regulations

• Maintaining a sound and effective and an effective Risk management architecture

• Participating the portfolio planning and credit loss forecasting

• Keep aggregate credit risk well within the banks risk taking capacity

• Appointing senior credit officers and grant credit approval authority to skilled

and adequately qualified officers.

39
 • Supervise Risk Asset Review (RAR) process and provide guidance, direction to

the line management to rectify portfolio and process anomalies.

The chairman, credit policy committee is responsible for periodic reports to the both,

Management committee and the Board through its sub-credit committee. Such reports

may include but not limited to

1. A summary of policy exceptions that represents significant policy reports

exceptions.

2. Portfolio reviews emphasizing quality assessment, risk profiles, tenors,

concentrations and any such excesses over limits.

3. Significant portfolio indicators and problem credits consistent with

Board’s guidelines and regulatory requirements.

In the execution of its various responsibilities, the CPC exercises its write through the

Country Risk Management Group, which for these functions directly reports to the

President and CEO.

Financial Institutions

With in the Union banks structure, Financial Institutions (Fis`) is a separate Business

Group set up to deal with matters relating purely to Fis` such as banks, development

Financial Institutions, leasing companies etc. These matters include setting up lines of

40
exposure that may comfortably be underwritten on Fis` establishing relations with foreign

as well as local correspondents and taking credit exposure on them.

Business Groups

It shall be the responsibility of each Business Group (C.B.G, S.M.E and Retail Banking

Unit) to identify its own target market and establish risk acceptance criteria. While doing

so the geographic location of the individual units, close proximity of specific

industries/business activities, desirable names, healthy financial state of affairs of

businesses, performance of a particular sector etc shall necessarily have to be taken into

consideration, it will thus follow that the target market of Location A may differ from the

location of B, location Bs from location C and so on. It also follows that target market

will be open to periodic reviews and revisions. It shall be up to each business group to fix

the frequency with which it wants review these target markets. The advantages of

periodic review are numerous.

Two of the very important ones are

1. Marketing efforts will be focused and more energy will be spent on marketing

more desirable names rather than vice versa

2. Less time will be wasted on adventures where internal approvals shall seldom be

forthcoming.

41
It shall be essential to obtain approval of these target markets form the country risk

manager before implementing them.

Corporate Banking Group (C.B.G)

Any borrower with aggregate borrowings in excess of Rs 50 million or with an annual

turnover of Rs 250 million plus, qualifies to be booked under the corporate banking

group umbrella. If any constituent of a group of borrowers falls into this category

regardless of whether the others do or do not, shall also qualify to be booked under the

corporate umbrella. However, where the exposure is 100% cash collateralized regardless

of the bottom limit and has been marketed by CBG, such exposure shall be retained by

them. Cases falling in the borderline areas but otherwise in the Small & Medium

Enterprise Group domain should the relationship niceties demands particular handling

shall be domiciled under the CBG.

Small and Medium Enterprise Group (S&MEG)

Borrowing relationships with aggregate borrowings of less than or equal to 50 million or

with an annual turnover of less than Rupees 250 million shall be domiciled at the

S&MEG. Should any constituent of a group of borrowers breach these limits, that entire

group shall be transferred to the CBG for specialized handling of the relationship

42
commensurate with their size and requirements. However cases falling in the borderline

areas but otherwise in the CBG domain, should the relationship niceties demand

particular handling, shall be domiciled under the S&MEG. Where the exposure is 100%

cash collateralized regardless of the upper limit and has been marked by the S&MEG,

such exposure shall be retained by them.

Consumer Banking Group

This business group is involved with underwriting more of a consumer oriented risk. This

may include credit cards, loan products to individual. Consumer finance, vehicle finance,

mortgage finance, etc. The consumer Banking group has formulated its own risk

acceptance criteria and have designed specific product programs for risk assets

acquisition. The competent authority of the bank shall approve shall programs.

Audit Division

Their sphere of activity and responsibility is to monitor the banks activities at the branch

level, credit included, to gauge the level of adherence to pre-set rules and policies of the

bank, and the rules and regulations that have been imposed and or maybe imposed by the

State Bank of Pakistan form time to time.

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Corporate Department
The corporate department is like the big brother of S.M.E. The market of corporate

customers is very small and most of the customers or otherwise known as the big players

have very strong relationships with other banks. The problem with Union bank is that the

interest rates which they charge are very high. Bank Alfalah which is in direct

competition with union bank has very low interest to offer and its not only them other

banks have low rates compared to Union Bank due to this Union Bank compared to other

banks has a very limited cliental. There are about 40 to 50 in total in Islamabad but in

other cities the cliental is lager.

I had spent a full week in the corporate department in which I was mostly doing reviews

of financial spreads of Fauji Foundation. My tasks were fairly simple and could have

been easily achieved with accounting knowledge about assets, liabilities, debtors and

capital. I had to write a report on the changes in the balance sheet of Fauji Kabarwalla,

Fauji Bin Qasim, Fauji Fertilizers and Fauji Foundation. I was able to complete a

company a day. Mostly it was the comparison of two years of financial data given to me,

once the comparisons were done I wrote detailed notes on the changes in all the items of

the balance sheet and profit and loss statements. These were then checked and then

discussed with my boss Ahsan Gaylania who is a Corporate Relationship Manager.

44
Since this data was very essential to him he wanted everything to be very detailed and

correct he gave me extra notes and reasons for decreases and increases in almost all the

items on the Balance Sheet and Profit and Loss statement, there were many reasons like

selling of shares, payback of long term loans, taking up of new loans, increases in sales

and better production methods. Once getting hold of the other data I formed reports on

MS Word and then attached them on to the respective files. While working in the

corporate department I learned how to fax.

OPI (Orient Petroleum Limited) one of the banks biggest client, had a cash management

(discussed later on in this department) they would send us faxes of transfer of funds

which then after being approved by boss had to faxed to the banks signature verification

personal who then made sure of the fund transfers were made.

Once a problem had occurred that OPI branch in Saudi Arabia had sent a fax of funds

transfers and the sign came out to be faulty no one could be 100% sure that if it was the

correct one or not so the fax was sent to the office in Islamabad and then it got O.K from

there and the transfer was made. One has to be extremely careful since these transfers of

funds are in millions and billions of rupees and a wrong transfer could cost the Client a

heavy loss thus leading to an unsatisfied client which would lead to the loss of the bank

as well. I was assigned to fax these documents of fund transfers, once approved by my

45
boss, to the concerned person in the bank and then maintaining an already made OPI file

for all types of fund transfers.

The Corporate Department of Union bank of Islamabad is very small they don’t even

have a team leader or a head; it is directly answerable to the authorities in Lahore where

the regional head sits. Recently they were having trouble in negotiating new loans and

other facilities which they have to offer and which were needed by Mobilink, even being

one of the oldest clients of Union Bank they were refusing to take any new loans from

them since the interest rates which were being offered by Union Bank are very high. The

biggest trouble that Union Bank faces is that its cost of fund of lending is very high

compared to other banks. Bank Alfalah had already made an offer to Mobilink of loans at

cheaper interest rates than Union Bank.

In my time in Union Bank Corporate Department I had also learned to how to do filing,

arranging files and even photocopying. Corporate Islamabad has Fauji Foundation, OPI,

PTC, PMCL, Kohinoor Textile Mills, Marriot, Best way Cements, Amsons, Kamran

Hamid, Karkurum Enterprises and PTCL as the major clients of the bank. Out of all of

these Fauji Foundation is the biggest in total the whole Fauji has about Rupees 1 billion

of Union funds with them in all forms of loans.

46
There are three types of clients

1. Active

2. Non Active

3. Depositors

Textile, sugar, leather, pharmaceutical, fertilizer, petrochemical, power, automotive,

telecommunications, oil and gas distribution, marketing and refining and fast moving

consumer goods industries. These are mainly the industries Union Bank works with in

other words they try to maintain these industries as there target market.

Union Bank offers a full range of financial services to support and meet all the needs of

its clients. Each solution is tailored to meet the specific business objectives. By

combining knowledge about the requirements with our own expertise in trade and your

industry, the bank ensures that the client receive a solution that directly addresses the

business objectives.

Services Provided

• Working Capital/Term Loan

• Loan Structure & Syndication

• Trade Services

47
 • Guarantees

• Cash Management

Working Capital / Term Loan

The corporate Relationship Manager work very closely with the client to better

understand the dynamics of the business so that the Relationship Manager is able to

anticipate and serve short-term and long-term funding needs in the most efficient manner,

drawing from the full range of the Banks resources and capabilities. To service the

financial needs and help the client to operate effectively and efficiently, Union Bank

offers a variety of working capital financing facilities. In addition to standard Running

Finance and Term Finance products Union Bank offers various types of short term loans

and facilities which are tailored by Relationship Manager to provide maximum value to

clients by meeting their needs and capabilities.

Structured Finance and Syndications

Union Bank is an active player in the syndicated loans business. There strength in loan

syndications stems from there ability to forge strong relationships not only with

borrowers but also with bank investors. Union Bank helps borrowers meet substantial

financing needs by enabling them to reach the banks most interested in lending to their

48
particular industry, geographic location and structure through syndicated debt offerings.

Trade Services

Union Bank offers a full range of documentary letter of credit services as well as

discounting and reimbursements to support any or every part of the trade transaction.

Experienced personnel use their specialized expertise to innovatively structure the trade

transactions and process, daily trade transactions, and have end-to-end responsibility for

the letters of credit, reimbursements, negotiation of documents, and inquiries. They also

handle export guarantee transactions and government donor flow intermediation. Union

Bank can provide clients with trade related facilities, for an appropriate period, in line

with the working capital cycle, to assist clients in financing their imports/exports.

Guarantees

Union Bank issues the following types of guarantees depending on the needs of the

customers:

• Tender Guarantees (Bid bonds)

• Performance Guarantees

• Advance Payment Guarantees

• Financial Guarantees

• Open ended Guarantees

• Back-to-Back Guarantees

49
Cash Management

With a branch network of 42 branches spread throughout the country, covering every

major city of Pakistan, Union Bank has undoubtedly become one of the most progressive

and well-networked banks in Pakistan. Union Bank has also invested heavily in

information technology resources, which has now allowed the Bank to develop one of the

most comprehensive and advanced systems available. With the help of this system, Union

Bank has now achieved an "online" status via real time facilities and features available

through our nation wide network. With a team of highly qualified professional, Union

Bank is able to use its real time system resources to provide customers with a

comprehensive account of their transactions on a daily basis. With the new improved

system, Union Bank is able to map all transactions and is able to provide all necessary

details to their cash management clients.

Cash Management Services

1. Cash Collection

The concept behind this product is to facilitate customers with a large network of sales

out lets/distributors in collection of cash sales proceeds and transfers of funds into a Main

Collection Account that will be maintained at Union Bank Limited. The customer has the

ability to choose from any branch they want to.

50
2. Collection of Cheques/receivables

Collection of sales proceeds in the form of cheques/pay order/demand drafts etc and same

will be cleared from the region where these instruments will be deposited. By using this

one is bale to save on time and money.

3. MIS reporting

Union Banks cash management program has the capability to generate customized MIS-

Reports as per the requirement of the customer and his given format. These reports can be

electronically communicated to the office of the customer on a daily basis and there is no

cost for doing this. The Bank has the capability to capture maximum data that will

facilitate the reconciliation of funds received from various network points.

4. Drafts/pay orders for payments, salary and other Operation Disbursements

This product envisages outward bulk transfer of funds processed through a set of

instructions via email or through a Diskette.

5. Salary Disbursements and Employee Benefits

By a company using this option employees of that company will have the option of

maintaining salary accounts with in the bank. In addition the following will be available

to the employees

1. American Express Credit Cards

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 2. Personal Loans

3. Other Bank Facilities

4. Home Loans

But this is subject to the prescribed qualification criteria for corporate group clients.

6. Intra-City Payments

This product gives the client/customer the flexibility to make payments (demand Drafts

and pay orders) at designated cities the same day upon receiving instructions from the

customer or client to the Cash Management Unit. These instructions may be

electronically communicated to Cash Management Unit for immediate execution at any

of the designated branches across Pakistan. Subject to the availability of Funds in the

account of the client.

7. Cheque Payments

Payments can be effected through, cheque i.e payable within our network through your

one account subject to availability of funds and or limits if any.

52
S.M.E

I was able to spend one day in the S.M.E department in which half of my day was on a

client visit with Syed Saad one of the S.M.E Relationship Managers. He took me along to

give me some out of office experience and to show me how client dealing is done. The

client who went to visit was Sun Foods, they are the sole importers and distributors of

Hagen Daz and of so many other very extremely quality products. My boss for the day

wanted to get some information on the client back ground, partnership and various other

information. Mr. also wanted to talk about the credit line enhancement which the client

was asking.

The S.M.E department is like any corporate department of any bank. The only difference

that S.M.E and corporate have is that corporate has a lending limit which is very high one

could say almost unlimited and S.M.E has a limit of Rs.50 million. According to State

Bank of Pakistan the bank can lend up to Rs 75 million but the Board of Directors of

Union Bank decided not to loan out more than Rs.50 million, increases in loans are made

on client basis if the client is an old client his needs shall be taken care off till the limit

assigned by the State Bank of Pakistan. The motto of both S.M.E department and

Corporate is “Our focus is simple and straightforward; we start by making your targets

as our business goals to form the strategic corner of our partnership”. ”Your business

problems are our business problems”.

53
Union Bank has handpicked a group of highly trained and professional individuals to

form an exclusive Small & Medium Enterprises (SME) Group for personalized service to

companies. SME Group strives to apply a unique blend of finance, industry and

technological expertise to keep pace with dynamic markets and translating insights into

solutions that meet the clients or prospects client’s diverse financial needs.

Each Regional Head is supported by a team of talented and well-trained Relationship

Managers who act as financial consultants to the SME customers to understand and offer

them a result oriented package to their financial needs. A typical SME customer would be

a proprietorship/ partnership/company.

Eligibility Criteria

In order to become a S.M.E client of Union Bank the client or customer should meet the

following requirements.

• Has an Annual Turnover of less than Rs. 250 Million.

• Requires financial assistance for Working Capital Lines, Term Loans, Bridge

Financing, Underwriting, Export Refinance, Bank Guarantees and full menu of

Import & Export related credit and processing facilities.

• Would like to place surplus liquidity, generated through its own sources, for

added income.

• Is interested in wealth management of savings of its Proprietor/Partners/Directors.

54
Currently the F-7 branch has 250 clients. The highest rate of interest on term loans which

is being charged is 18% and the lowest is 7%. The higher the risk that a client won’t pay

back the higher the rate of interest on them. If 100% cash collaterals are given as security

the interest rate is sure to come down to about 7%.

Lending

In S.M.E there are two types of lending. One is Funded lending and other is non-Funded.

Funded

1. Running Finance

2. Term Loans

Non-Funded

1. Letter of credit (L.C)

2. Letter of Guarantee (L.G)

Credit Package

When making a credit package the R.Ms (Relationship Managers) have to make sure that

the below mentioned 14 points, which are very essential documents must be completed.

1. Credit Approval (C.A)

55
2. ORR ( Obligor Risk Rating)

3. Basic Information Report (B.I.R)

4. Management Assessment Form

5. Financial Spreads

6. Financial Projections

7. Credit Memorandum

8. Target Market

9. Prudential Regulations Compliance Checklist

10. Credit Information Bureau (C.I.B)

11. Bank/Market Checking

12. Register Checking/ Search Reports

13. Covenants check list

14. Account Profitability/ Account Plan

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Conclusions

My six in Union Bank which started from the 14th of June and ended on the 26th of July

gave me proper experience of what banking is like and how the real world Job is like. It

was a most knowledgeable experience. From the Accounts department to any other

department where I interned I loved it. Every department had its own charm and its own

environment which I missed as I got rotated.

By my experience I think I joined and did the internship at the best time I had a complete

balance of knowledge and expertise which was needed to full fill the tasks which were

given to me. I think the only short fall I might I have was that I needed to stronger

concepts of accounting but I would not blame my self was wanting to have them due to

complex nature of the tasks which were given to me there.

Credit Administration department was all about gaining knowledge as mentioned by be

earlier in the C.A.D department no text book would have been able to help me in this.

After gaining the knowledge which I did I applied it properly and my bosses were happy

with my fast learning ability.

I spent a whole week in the audit department my work was not that hard there but simple

I was working directly under Tahir Gulzar Malik who is the regional head of Audit

department. I helped him compile and write a Audit report on the S.A.W.T branch about

57
which I did not mention anything cause I felt that it was purely confidential information

of the bank.

I really wanted to learn a bit more in the Corporate department but the level of work was

very complex and beyond my understanding and being only to people running the show

in this department both of them did not have enough time to teach me much. But still I

was able to get an idea about what it is all about.

In total it was a wonderful experience which I enjoyed a lot.

58
Reference

1. Adnan Haider: Country Head Priority Banking and Branch

Manager

2. Farooq Ahmed: Customer Relations Manager

3. Tanveer Iqbal: Head of Administration and Accounts

4. Ahsan Gaylani: Corporate Department Relationship Manager

5. Murtaza Qadir: Corporate Department Relationship Manager

6. Syed Saad: S.M.E Relationship Manager

7. Tahir Gulzar Malik: Regional Head Audit Department

8. Bilal Zadi: Risk Manager

9. Muhammad Hanif: Credit Administration Manager

10. Murtaza Qadira: Head Credit Administration Department

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APENDIX

60