emirates bank

8/6/2019 Emirates Bank

1/59

ACKNOWLEDGEMENT

All praises for Almighty Allah who is THE CREATOR of whole

of the universe and admires to our Holy Prophet Muhammad

(Peace

be Upon Him) Who taught us every thing of this life and the life

thereafter.

Now it is our responsibility to convey the WORDING OF

SUCCESS to whole of the Ummah. As it was indicated in the

last Address of our Holy Prophet (Peace be Upon Him). And the

graves of FELLOW BEINGS are the proof of the completion of

this responsibility.

I am very thankful to Mr. Liaqat Ali Khan (the branch manager

EBI Sialkot) who provided me an opportunity to do my

internship in one of the top international banks in Pakistan. I am

also very thankful to all the staff members of EBI Sialkot branch,who trained me with keen interest about their banking system. I

would like to thank Mr. Tabashar Zaki Malhi with whom

reference I were able to do my internship in EBI. I also

1


2/59

appreciate the working environment and the behavior of the

staff members.

EXECUTIVE SUMMARY

This is an internship report, which I did from Emirates Bank

International PJSC. Basically this report is based on my working in

the three departments of the bank i.e. Operation. Trade Services

and Credit. This report contains all that I have learnt from Emirates

Bank. It contains the history of EBI, the different types of accounts,

account opening documentation, different types of cheques,

remittances, international trade, documents needed for import and

export, kinds of letter of credits, procedure for collection of payment, different types of finances and securities against finances.

I have also mentioned the marketing activities of EBI in Sialkot.

2


3/59

TABLE OF CONTENTS

Introduction of Banks 04

Emirates Bank International 04Vision Statement 05Mission Statement 06Financial analysis 07Account opening 08Account opening documents 12

Types of Accounts 14Inactive and Dormant accounts 17Closing of account 19Remittances 20

Types of cheques 21Negotiable Instruments 23Solution Center 28Data Control 29

Trade 30 Trade of Companies 32

Foreign Exchange 34Documents of foreign trade 36Exports 43Import 44Parties in a trade deal 48Process of opening letter of credit 49Credit 52

3


4/59

Marketing 56

INTRODUCTION OF BANKS

Banks are the financial institutions. Some authors opine that the wordbank is derived from the words Bancus or Banque which means abench. The explanation on of this origin is attributed to the fact thatthe Jews in Lombardy transacted the business of money exchange onthe benches in the market place and when the business failed thebanco was destroyed by the people. Incidentally the word Bankruptis said to have been evolved from this practice. Other authorities holdthe opinion that the word Bank is derived from the German wordBack, which means joint stock fund. Later on when the Germansoccupied major part of Italy, the word Back was Italanized into Bank.

STATE BANK OF PAKISTAN

State bank of Pakistan operates as the controller of money market. It isthe central bank of the country and was established on July 1, 1948.

The state bank provides the policy guidelines and ensures that themoney market operates on sound professional basis.

EMIRATES BANK INTERNATIONAL PJSC

HISTORY

Emirate Bank International was incorporated in Dubai, United ArabEmirates, as a commercial bank with limited liability in March 1977.

The bank was registered as a Public Joint Stock Company (PJSC) in June1995.Emirates Bank International traces its origins back to 1977 in Pakistanwhen it began its operations as Union Bank of Middle East. It lateracquired Dubai Bank and in two decades the Bank has gone from

4


5/59

strength to strength, to become one of the largest and most profitableforeign owned banks in Pakistan.Emirates Bank International has its 10 branches located in 8 majorcities nationwide i.e. Karachi, Lahore, Islamabad, Rawalpindi,Faisalabad, Peshawar, Multan and Sialkot.Emirates Bank International is recognized as a Technological Leader inthe banking industry of Pakistan. Branches across the nation areconnected through

VSAT link on IBM AS400 platform. This connectivity is the key for bettercustomer service, since the customer can transfer funds to any of thebranches instantly. Moreover accounts can be operated from any of the 10 branches of the bank.Emirates Bank was also the first to introduce a network of online, real-time ATMs in Pakistan.

VISION STATEMENT

Emirates Bank Groups vision is to be the leader in the financialservices market in the region.Emirates Bank, Leadership means:

Being the preferred lead banker for customers Delivering increased earnings and increase in market value to

shareholders Being a fair employer and employees perceive the Bank as "a

great place to work". Being an active participant in community affairs and events Being at the forefront of industry involvement and be a catalyst

for change in industry standards, and Being the most innovative and technology-led bank.

In quantitative terms it means:

Be among the top three banks ranked by ROE in the region Be among the top three banks ranked by Total Assets in the UAE,

and Capital adequacy to exceed 30%

5


6/59

The region covers UAE, GCC, Islamic Republics, Pakistan, India,Malaysia and Singapore.

MISSION STATEMENT

EMIRATES BANK INTERNATIONAL, PAKISTAN provides bankingproducts and services to selected corporates, institutions and to theretail sector.

EMIRATES BANK INTERNATIONAL, PAKISTAN will be innovativeand adaptable to change to ensure the range of banking services andproducts offered are based on identified customer needs.

EMIRATES BANK INTERNATIONAL, PAKISTAN main strategic thrustwill be focused on clear identification of our risk appetite,implementation of cost controls and delivery of services a timely,professional manner.

EMIRATES BANK INTERNATIONAL, PAKISTAN will ensure growththrough delivery of quality customer service and care which will beprovided by all employees motivated through a planned training careerdevelopment program.

EMIRATES BANK INTERNATIONAL, PAKISTAN will project a soundand secure image, be pro-active to change and enhance stakeholders'value.

LOGO

The Emirates Banks logo links the world with the United ArabEmirates. The left side of the logo depicts the Seven Emirates Stateswhile the globe on the right portrays the world. The gold and black

6


7/59

colors represent abundance of natural resources namely gold andpetroleum.

Development of Sialkot Branch

The Sialkot branch was developed in 1997. Basically this branch wasplaned to be opened in Gujranwala but due to the excess of exports of sports goods in Sialkot it was opened in Sialkot. It is situated at ParisRoad on the first floor of Sialkot Chamber of Commerce and Industrybuilding. It has three departments i.e. Operation, Trade Services andCredit. Emirates Bank also has a marketing team. This branch is doinga good business in Sialkot. This branch has also started eveningbanking from 15 June 2001.

Financial Analysis of Pakistan Branches

December 31 2000 1999 (Million) (Million)

Advances 8,065,992 7,271,936

Investment 1,896,052 1,567,058

Total Assets 15,470,242 14,963,998

Total Deposits 11,464,526 11,200,361

Total Capital 1,161,9931,040,514

Profit Before Taxation 270,615 213,200

Profit After Taxation 229,615 305,200

7


8/59


9/59

Pardanashin women are competent to open a bank account. But if such women are illiterate, then the bankers generally avoid openingsuch an account.

Minor Accounts

If a person is below 18 years age, he/she is considered as minor. The minor accounts are opened on the request of the guardian whosigns the account opening form himself and gives his own specimensignatures for the operation of the account, but the title of theaccount remains in the name of both the minor and guardian.

2) Sole proprietorship:

In sole proprietorship there is only one account owner of thecompany, the owner operates the account.

3) Joint account:

Joint accounts are the accounts of two or more persons who areneither partners nor trustees. When such an account is opened, itis necessary that the banker should obtain clear directions as towhether one or more of them shall operate upon the account.However in the absence of such directions, the banker should allowthe operations under the signature of all the joint account holders.

4) Either or Survivorship account:

The authority to operate upon the account should also state as to

whom the balance is to be paid in the event of the death of one ormore of the joint account holders. Such instructions are notabsolutely necessary in ordinary joint accounts, because under thelaw of Devaluation, the survivor or survivors are generally entitledto the whole amount on the death of one or more of the jointaccount holders.

9


10/59

5) Partnership Firms account:

Partnership is the relation between persons who have agreed toshare the profits of the business carried on by all or any of themacting for all. There a partnership can be created by a writtenagreement. This agreement between partners is called partnershipdeed. This partnership deed is a best document for openingpartnership/firms account. Persons who have entered into thepartnership are individually called partners and their collectivegroup is called a firm.

Operation of firms account:

The account is to be operated according to instructions given at thetime of opening the account. Every partner has an impliedauthority to counter-

made payment of any checque drawn on the firms account andthe banker is bound to comply with the instructions issued by that

partner.

6) Private and public limited companies:

Company is an association of individuals for thepurpose of profit, possessing a common capital contributed bythe members constituting it, such capita being commonly dividedinto the shares, of which each posses one and more and whichare transferable by the owner.

a) Public limited companies:In public/private limited companies liabilities of shareholders are limited up to the extent of their share.

b) Private limited companies:A private limited company is a company where the right toshares of its members is restricted and public subscriptionin the shares of the company is prohibited under its article.

7) Associations, Clubs and Corporations:

10


11/59

There are non-trading companies and organizations andfirms for the promotion of culture, science, education,recreational activities and charitable purpose etc. The affairs of these institutions are administered by a body known asManaging/Executive committee, which draws its authority fromthe rules and regulations or bye-laws of the institutions.

8) Trust accounts:

A trust is an obligation annexed to the ownership of theproperty and advising out of a confidence proposed in andaccepted by him for the benefit for another or of another and theowner.

The account should be opened in the name of trust and allthe trustees should sign the account-opening opening form. If the account is

opened in the name of trustees, it should not be the ledgerand specimen signature card etc should be boldly markedsuitably to show that it is a trust account. The banker shouldexamine the instrument of trust very carefully, and copy of itshould be kept on record.

9) Account of local bodies:

These are the autonomous institutions instructions formedunder the local bodies act, such as Municipal Corporations orMunicipal Committees. Their own Managing Committeescomprising generally of elected members govern them. Thechairman of these local bodies may be elected by the membersor nominated by the government.

When an account of a local body is to be opened, the

banker must see that the request comes only from the personauthorized to do so in the controlling act. The authorized personwho should also mention clear instructions regarding theoperation on the account should sign account opening form, andspecimen signature should be taken from the person authorizedto operate the account.

11


12/59

Completion of Account Opening Documents:

Every account-opening document must contain Know Your Customer(KYC). In KYC all the status and the information of the customer iswritten.

Account Opening Documents for Individual/JointAccount Holders:

An account opening form.Specimen signature cards. (3)Copy of National Identity Card (NIC) or passport (duly originally

signed certified by a banks officer).

Account opening documents for sole proprietorship:

Account opening form.Specimen signature cards. (3)

12


13/59

Copy of NIC or passport (duly originally signed certified by abank officer).Letter/declaration of Sole proprietorship.NTN certificate.Certificate of commencement of business (Pvt. limitedcompanies limited).

Account Opening Documents for trusts:

Account opening forms and SS cards.Copies of NICs of all trustees.Copies of trust Deed.A certified true copy of the certificate of registration of the publictrust.Copy of Resolution Board of Trustees for opening and operationof the trust account with the bank.

Account Opening Documents for Association and ClubSocieties:

Account opening forms, SS cards and NIC copies of all officebearers/managing committee members.Certified true copy of bylaws/rules and regulations.Certified true copy of Resolution by association, club or society,authorizing opening and operation of the account.

Account Opening Documents for Local Authorities,Municipal Corporations:

Account opening forms, SS cards and NIC copies of all authorizedofficialsCertified true copy of the status under the body was created andgoverned.

13


14/59

Mandate authorizing designated persons who would operate theaccount.Permission from the concerned ministry, division or department.

Steps for a Proper Introduction of an Account:

Introducers full name and address is written on the accountopening form.Verification of Introducers signatures by and authorized officer.Authorized/verifying officers signatures, rubber stamp andpower of Attorney number.

Type of Accounts:

Emirates Bank offers the following product line.

1) Saving Account (PKR, US $, GBP, DM & TY):

Saving account is only for individuals not for companies.Emirates Bank deals in five currencies in saving accounts. Thisaccount is based on profit and loss share.

2) Current Account:

Current account is mostly for companies. It is also forindividuals. In this type of account interest or profit is not given.Minimum amount for opening of current account is Rs.10000.

14


15/59

3) Emirates Extra:

Emirates extra are a special saving account, whichcalculate profit on a daily basis and pays monthly. It has theconvenience of a current account plus advantages of a currentaccount.

It has following features.Profit paid monthlyNo limit on number of transactionsDeposits and withdrawal at any branch.No notice required for the withdrawal of funds atany branch.Instant transfer of funds from any of its 10

branches in 8 cities in Real Time through the mostadvanced computer system IBM AS400Minimum deposit requirement for an individualaccount holder is Rs.50000 and for a corporateaccount holder is Rs.1000000.Profit is paid on the basis of deposits

4) Term Deposit Account:

An Emirate Rupee Term deposit is with its exceptionallyhigher rate of return plus a choice of profit payoff tenors.

The deposit is from 7 days to 5 years. The higher the tenor morewill be the profit. Profit is paid monthly, quarterly, half yearly andyearly basis.

5) Emirates Pakistani:

Emirates Pakistani is a high yield Pak-rupee accountespecially designed for conversion of funds from foreign currencyaccounts DBEs, FCBs and FEBCs. This account gives a unique

15


16/59

advantage of a term deposit with all the benefits and flexibility of saving accounts.

It has following features.

The account can be opened with funds form foreigncurrency accounts DBCs, FCBCs and FEBCs.No minimum deposit requirement.It provides an exceptionally high return. It lets youdecide how much you earn on your investment inPakistani rupees.

Tenors Rate of Return

One month 11.5% p.a Two months 11.75% p.a Three months 12.50% p.aFour months 12.75% p.aSix months 13.50% p.aEight months 13.75% p.a/Eleven months 14.00% p.a

In case of premature encashment, return will beaccording to the last tenor completed.No penalty for premature or particle encashment.

No prior notice required for withdrawal.

Other Services:

Emirates Express:

This is the most beneficial cash-flow management system available inPakistan. The unique services are availed by many large Pakistani andmultinational

companies to speed up cash flow flexibility, resulting in reducedoverheads and less borrowing.Emirate ATM Card:

16


17/59

Emirates networks online, real time ATMs ensure that the customeraccess his funds 24 hours a day, 7 days a week at 10 locations in 8major cities throughout the Pakistan. Emirates ATM card is free of costwhile other banks charge for ATM. ATM is issued if you have a currentand/or a saving account with any of the branches.ATM gives the following services.

Cash withdrawal up to Rs.50000 per day.Balance inquiry.Mini statement issuance tells the record of last 10 transactionswith the latest balance.Account statement request.Cheque book request;

Global Accidental Protection Plan at Rs. 1 Per Day

Emirates Bank is offering global accidental protection plan inassociation with American International Group Inc.(AIG). In this planthe account holder of EBI are covered for two times their averagebalance, which they have maintained over the last six months, in caseof accidental death. Accidental death shall mean death during theperiod of insurance, caused solely and directly by violent, accidental,external and visible means within 365 days from the date of suchaccident.

If some one has Rs. 5000/- in his/ her account and the policy isinvoked, the minimum amount paid out is Rs. 250,000/- and if he/she

17


18/59

has 250,000/- in his /her account then the minimum amount paid out isRs.500,000/- the insurance amount can go upto a maximum of Rs.5,000,000/-

Inactive and Dormant Accounts:

Current Account:

In current account, if no transaction takes place for six months, theaccount becomes inactive. The account is activated after the requestof account holder. If the account is not activated then after one year itbecomes dormant and the amount is sent to the state bank of Pakistan.

Saving Account:

18


19/59


20/59

For fixed deposits an application form is filled upon which customername, NIC number, mode of deposits, terms and conditions of profitare written. This application form is also called a deal. Then anotherfrom is filled out which is similar to the format feed into the computersystem. Then all the data is also entered into the computer system.

Steps Involved In Account Opening:

1. Filling of account opening form and SS cards.2. Allotments of account number.3. Entry of new account into the computer system.4. One of the SS card is send to the cash counter and the other is

send to the head office for scanning and entering into thecomputer system which is sent back is sent back and is attachedwith the account opening form.

5. Sending of Letter of thanks to the account holder. A copy of letter of thanks, NIC, SS and mail slip is attached with theaccount opening form.

6. Cheque Book receipt is given to the person responsible forissuing cheque book.

Amendments:

If a person wants to change any thing say wants to change his address,phone number or signature then a request form is taken from the

customer and check list is filled in which the conditions are activated ordisactivated according to the situation. This condition is also enteredinto the computer system.

Closing of Account:

Whenever an account is closed, a request form is taken fromaccount holder. His outstanding balance is checked, SS card is takenfrom the cash counter and then account-closing checklist is attachedwith the account opening form. All these documents are stamped asclosed account and then put into the file of closed accounts. Thecheque book and ATM card are being destroyed. The account closingcondition is also entered into the computer system.

20


21/59

Remittances:

Remittance means transfer of funds from one place to another.

Modes:

The different modes of remittances are:

1. Demand Draft:

21


22/59

Demand draft is a cheque issued by a bank. It is also calledmanagers cheque. (MC)

2. Mail Transfer:

i. Electronic fund transfer. (EFT)ii. Telegraphic Transfer.

Cheque:

A cheque is a bill of exchange drawn on a specific and no expressed tobe payable otherwise than on demand.

Parties to a Cheque: There are three parties to a cheque.

a) Drawer: drawer is the person who is the maker of a cheque. Hemust be account holder.

b) Beneficiary or payee: payee is the person named in thecheque to whom or to whose order the payment is to be made.

c) Drawee : drawee is the bank on which cheque is drawn.

Types of cheques:

There are two types of cheques.

I. Open cheques:

Open cheques are payable in cash at the counters of abanker in accordance with the practice of the bankers.

II. Crossed cheques:

22


23/59

Crossed cheques are not payable in cash at counter of abank but can be collected by only the banker who would creditthe proceeds to his customers account after realization.

Crossed cheques are of two types.

i. General Crossed: when a cheque bears addition of the words or any abbreviation between two parallel transverselines is called general crossed cheques.

ii. Special crossed: when a cheque bears addition of the name of a banker between two parallel transverse lines iscalled special type crossing.

Payment of Cheques: On Counter:

1) Cheque should be in proper from: Theformat should be clear and free from ambiguity. The bankermust see that the customer has not changed the form of thecheque according to his conditions.

2) Cheque should not be crossed: A crossedcheque cannot be honored over the counter over the counter toany person but a collecting banker.

3) Cheque should not be mutilated: When a cheque istorn, worn out or does not give sufficient evidence of thecustomers intention, it is called a mutilated cheque. The bankershould see that the cheque presented for encashment is notmutilated.

4) Funds must be sufficient and available: The banker should see that there are sufficient funds available incustomers account to permit the honoring of cheque presented.

Post-dated or stale cheques:

Post-Dated Cheques:

23


24/59

Post-dated cheques are those, which are presented for paymentbefore the due date.

Stale cheques:

Stale cheques are those, which are presented for payment afterthe due date. The validity of a cheque is six months. After months itwill be stale cheque.

Initial security for payment of cheques:

Drawn on that bank.Signed by the drawer.

Properly dated (it will not be post-dated or stale).Open or crossed.Bearer order.Amount in words and figures tallies.Alternation/addition authenticated.Stamps affixed/endorsement regular.Cheque series exist in system.Credit balance exists.Verification of drawees signatures.

Negotiable InstrumentsA document whose title can be transferred in others favor is callednegotiable instruments.

These are:ChequeBill of exchange

24


25/59

Bill of landingPromissory note.

1) Bill of exchange:

Bill of exchange is An instrument is an unconditionalorder, signed by a maker directing a certain person to payon demand or at a fined or determinable future time, acertain sum of money only to or to order of a certainperson or to the bearer of the instrument.

2) Bill of landing:

Bill of landing is an instrument in writing containing an

unconditional undertaking signed by the maker, to pay ondemand or at a fixed or determinable future time, a certainsum of money, to, or to the order of a certain person, or tothe bearer of the instrument.

Managers cheque issuanceFor the issuance of managers cheques MC form is filled on which theaccount number of the customer and the banks internal accountnumbers are being written. The amount of MC and the name of beneficiary are also being written. All these information is also enteredinto the computer. The bank also takes charges on the issuance of

25


26/59

managers cheques. Print out of the cheque is taken and sent to thebeneficiary or given to the customer and carbon copy is kept in the file.When MC is paid. This carbon copy is stamped as paid on the date of payment.

Entry:

When MC is made customers account is debited and banks MCaccount is credited. And when the MC is paid this entry is beingreversed.

NOSTRO, VOSTRO ACCOUNTS

Every bank does not have its branches in all countries, so they havetheir correspondents in the countries where they dont have theirbranch.

26


27/59

Nostro

Nostro means the banks account with the correspondent.

Vostro

Vostro means the correspondents account with the bank.

Types of clearing:

Outward clearing

When the bank receives cheques of other local branches of banks, acheque deposit slip is filled; the carbon copy is given to the chequedepositor after receiving, original slip is attached with the cheque. Theslip is stamped as clearance. Then the summary of total chequesreceived is made. At the day end the cheques are sorted bank wiseand the person who is responsible for clearing takes all the cheques tothe State Banks Clearing House. In Clearing House each bank havetheir accounts. The cheques of the certain bank are handed over tothem who credit the account of that bank in the State Bank, which

gives them cheques.Entry:Bank account is debited and customer account is credited when thecheque is being cleared.

Inward Clearing

When the bank receives its cheques from other local branches of bankthrough clearing house, it checks that whether the cheques are in aproper format and properly signed. Then thats banks account in thestate bank is credited and that of its own account is debited.

27


28/59

COLLECTION

Outward Collection(OCC)When the cheques of other cities are received then after filing the slipand giving an OCC number they are sent to the relative banks forcollection. A voucher is made in which bank liability is increased andthat of customer liability is decreased. When the payment is receivedthis entry is reversed and the bank account is debited and customeraccount is credited.

Inward Collection (ICC)

When the bank receives the cheques of its branch for collection, then itis given an ICC number and voucher is made in which that banksaccount is credited and that of bank own account is debited.

FOREIGN REMITTANCES

Foreign clearing (FCC)

When a foreign currency cheque is received then it is send to theNostro where it is cleared. Bank liability is increased and customerliability is decreased. After clearance, the Nostro credits the banksaccount. Then the bank will credit the customers account and debit itsinternal account. The bank will also decrease its liability and increasecustomers liability.

Travelers cheques (TC)

Travelers cheques are issued when someone has to go abroad. For theissuance of travelers cheques documentation is very important. Itneeds the following documents:

28


29/59

Copy of passportNational Identity CardCopy of VisaCopy of Return Ticket

A request application is taken from the customer. All the documentsalong with the application are kept in the TC file. The entry is made inthe TC register in which the number of visa, ticket and the amount of travelers cheques is being written.

SOLUTION CENTRE

In solution center, cheque books are issued and statements of accounts are delivered.

29


30/59

Issuance of cheque book

Along with account opening form a cheque book requisition slip isfilled. On which the account no, name of account holder is written.At the time of issuance of cheque book the serial no of cheque book iswritten on the cheque slip and record register. The signature of theaccount holder is also taken on the cheque book slip.

Then a voucher is made in which customer account is debited and thatof bank is credited. In this voucher the amount of cheque book, Govt.tax and that of banks charges are debited from customers account.After stamping the account number on each leaf of the cheque book itis given to the account holder. The serial number of cheque book isalso entered into the computer system.

Foreign Currency Cheque Book Issuance:When a cheque book of foreign currency is issued it deals with twocurrencies. The bank takes Govt. tax and its own charges in Pak rupeesfrom foreign currency account so the entry is passed on a deal onwhich the exchange rate of that day is being written. The entry is alsomade in the computer system.

Loose cheque:

A loose cheque is issued when a person is issued when a person gives

the request that he has misplaced cheque book.

DATA CONTROL

In data control all the vouchers are being posted. There is a specificcoding for each department and debit, credit, collection and clearing.All the vouchers are posted according to these specific coding, thevoucher are signed after posting and the copies of advices are givenback to the relative persons for record.

30


31/59

TRADE

Trade is buying and selling of commodities between two parties.

Trade is done by two means:

31


32/59

1. Barter system:

Barter is the exchange of goods with goods. There is no moneyinvolvement.

2.By involving financial transactions:

In this method money is involved. Commodities are being sold andmoney is received in return.

STEPS OF TRADE

Trade involves the following steps:

1. To find out different sellers:

If we are going to buy something then the first step is to find outdifferent sellers of the specific product, which we are going topurchase.

2. Selection of the product:

The second step is the selection of the product. This step involves whatfeatures we want in the product, the quality of the product , its size,weight etc.

3. Price

Is the price reasonable or not. Are we ready to pay the moneydemanded by the seller or not? In other words the settlement of theprice between buyers and sellers.

4. Agreement for buying and Selling:

This step includes whether the seller is going to supply the product orwe are going to take it by ourselves, the agreement upontransportation cost, damages etc.

This agreement includes the following points:

32


33/59

a) Specification of items

Specification of items means the features of the product e.g. If wewant to purchase a computer then the agreement will be upon its Ram,casing, company floppy and CD derive etc.

b)Mode of payment

Whether we are going to pay in advance or after receiving the product,whether the payment is in cash or by checque.

c) Delivery Terms

It means whether the seller is going to deliver it or buyer is going totake it by his own. Who will bear the transportation cost.

BOTH THE PARTIES SHOULD SIGN ALL THESE TERMS .

TRADE OF COMPANIES

For the company to involve in trade it will require the following things:

1) Registration:

33


34/59

The firm should be register in the chamber of commerce and then inExport Promotion Bureau (EPB). The company should also have itsNational Tax Number (NTN).

2) Course of Action:

After registration the company has to decide what product it wants toproduce? Whether it wants to involve in production or acquire theproduct and sells it?

3) Local Or International Sellers:

Then the company has to decide whether it will sell the product in thelocal or national market or international market.

4) Market survey:

Then the company will do a market survey in which it will find out itscompetitors, from where the competitors are acquiring their ranmaterial, what are strengths and weaknesses of competitor and whopotential buyers or end users of the product.

5) Sources of international trade

The following are the different ways to get customers

A. MagazinesB. DirectoriesC. Chambers of commerceD. Internet

6) Introduction of ourselves:

After getting the information about the customers, the next step is theintroduction of our product and services to the customer.

7) Negotiation over Rate, Quality and Quantity:

34


35/59

Then the next step is the negotiation over the price at which the selleris wanted to sell and buyer is ready to buy, what quality the buyer iswanting and what will be the quantity of that item.

8) Agreement or Contract:

An agreement is signed after the negotiation.

FOREIGN EXCHANGEH.E Evitt says the means and methods by which rights to wealthexpressed in terms of the currency of one country are converted intorights to wealth in terms of the currency of another country are knownas foreign exchangeOR

35


36/59

The system by which commercial nations discharge their debts toeach other

Procedure to become Importer/Exporter Formation of a company To obtain National Tax number (NTN) Opening of companies current account with a bank Registration with local chamber of commerce Obtaining license from EPB

Methods of international Trade

The following are the different methods of international trade:

Barter or Counter Trade

Barter means exchange of goods with goods. In barter or countertrade, it is not necessary to involve money. Mostly Govt. to Govt.transactions are done in this type of trade. It is a very useful deviceto conserve the foreign exchange.

Advance Payment Method

In this method payment of full value of goods is remitted by theimporter to the exporter in advance who ship the goods at somefuture time. This method is all in favor of seller as he obtainspayment in advance and ships the goods later. The buyer istherefore at risk of non-performance by the seller.

Open Account Method

In this method the exporter directly ships goods to the imported andimporter makes payment after receipts of goods at the time asspecified in sales contract. This method is all in favor buyers as hereceives the goods in advance directly from seller before making of

36


37/59

payment while the seller runs the risk of default by the buyer or hiscountry.

Documentary Collection Method

This method is a compromise between open account and advancepayment method. After the sales contract has been conducted andgoods have been shipped by the seller to the importer, the exporterdraws the bill of exchange on the importer and presents it to hisbank along with shipping documents to collect the money fromimporter through his bank.

The presentation of documents through bank gives some paymentsurety to the exporter while goods as contract surety to theimporter. However exporter still runs the risk of the buyers

unwillingness to pay and payment may also be blocked due tocountrys political and economical events.

DOCUMENTS OF FOREIGN TRADE

37


38/59

In international trade transactions the exporter has to tender thedocuments specified in the contract of sale. These documents arecalled documents foreign trade and they are used by negotiatingbanks in the settlement of claims. These documents are submittedin sets and are issued and signed by the designated authorities.

These documents falls into the following five broad categories:1. Commercial Documents2. Official Documents3. Insurance Documents4. Transportation Documents5. Financial and financing Documents

1.Commercial Documents

The following commercial documents are generally used in foreigntrade:

a) Invoices

An invoice evidences the contract of sale and purchase between thebuyer and seller.Invoices are of three types:

1) THE PROFORMA INVOICE

The Proforma invoice is the memorandum of the terms of a contractof sale wherein the seller gives the quotation to a potential buyer. If the buyer approves its terms he sends a definite order for supply.Such an invoice is marked with the words Proforma Invoiceotherwise it is just like customary commercial invoice.

2) Commercial Invoice

A commercial invoice is drawn up by the seller on his business letterhead and contain full details of the transaction including the full

name and address

of the consignee, quantity, quality, unit price and total price of thegoods, complete reference of the L/C number and import licensenumber.

38


39/59

3) Certified Invoice

A certified invoice is an ordinary signed commercial invoicecertifying that the goods are in accordance with the specificcontract of the proforma and that the goods are of specific countryof origin.

b) Certificate of origin

A certificate of origin is a statement evidencing the origin of thegoods. Certain countries have prescribed its forms in which theexporter has to provide certificate of origin issued by Chamber of Commerce or trade body or any other authority designated underL/C.

C) Weight Note

This is the document, which indicates the weight of the goods,which should tally with that shown on all the other documents.

d) Packing List and Specification

These documents set out the details of the packing of the goods butthey dont necessarily give details of the cost or price of the goods.

d)Quality or Inspection Certificate

This is a certificate declaring that the goods have been examinedand found to be in accordance with the contract of sale. This issigned by the manufacturer or supplier, but the contract of sale mayrequire to be issued by a recognized independent inspection body.

2) Official Documents

The official documents includes:

a) Legalized Invoice

39


40/59

Some countries require that the commercial invoice should becountersigned and stamped by the authorized officer in theirEmbassy.

b) Black-Listed Certificate

Due to strained political relations or any other reasons somecountries do not allow transactions with some particular countries.

These countries and the exporter there, are black listed and theimporters are required to ensure that the origin of the goods is notthat of a black listed country and the parties involved are also notblack listed. The seller provides the certificate that the origin of goods is not from a black-listed country.

c) Health, Veterinary and Sanitary Certificates

These certificates are generally needed in the purchase of foodstuff,hides and live stock and in the use of packing material. Thiscertificate is issued by the recognized health authorities in theexporters country.

3) Insurance Documents

The insurance documents generally includes the following:

a) Letter of Insurance

A letter of insurance is a certificate from the insurance broker thatinsurance has been approved but the policy is not issued yet, thusthe course of action in the event of claim is not against the insurerbut against the broker.

b) Insurance Certificate

It is a certificate issued by the insurance company confirming thatthe insurance cover has been provided to the consignment, detailsof which has been given in the certificate.

c) Insurance Policy

An insurance policy provides indemnity against losses incurred ordamages suffered by goods in transit. The policy must be signed byor on behalf of the insurer.

40


41/59

4) Transportation Documents

These are the documents which evidence that the goods have beendelivered to the named shippers, airline or transporter for carriageto a named port, airport or place of delivery.

The following transport documents are being used:

a) Airway Bill

It is a receipt evidencing the delivery of goods to an airline or itsagent for transportation by air to a named consignee, according tothe defined and agreed terms. this document is drawn in sets of multiple copies and three original parts, first of which is marked forthe Carrier and is delivered to the carrier with the goods forrecording and checking them.

b) Mates Receipt:

It is a document signed by the ships Chief Officer acknowledgingthe delivery of goods. Since it is merely a receipt for goods shippedon board and issued to the exporter, it is not a document of title,

yet it indicates any deficiency in the quantity of goods delivered, orany defects in their packing or condition.

c) Bills of Lading

It is a document issued by the shipping company confirming receiptof described goods from the consigner, for their shipment to anamed port of destination on specified terms and condition.It is a document of title to goods and is transferable byendorsement and delivery or by delivery alone, and the holder of the bill of lading is entitled to receive the goods to which it relates.

5) Financial and Financing Documents

These documents are used in payment by the buyer to the seller of goods, in the international trade transactions. Such documents asBill of Exchange, Promissory Notes and Warehouse Receipts arevery commonly used.

41


42/59

BILL OF EXCHANGE

An instrument containing an unconditional order in writing signedby maker directing a certain person to pay on demand or at fixedfuture time a certain some of money only to or to the order of acertain person or to bearer of the instrument.

Types of collections

SIGHT (D.P)

In sight collection importer is asked to pay value of bill of exchangeupon presentation .The importer is compelled to get delivery of documents only after making payment.

USANCE (D.A)

In usance collections Importer gives acceptance of bill of exchangefor payment at some future time.

Due date / maturity date:

The date on which Bill of Exchange falls due for payment.

DISHONOUR OF A BILL

Most of the bills are duly accepted when presented for acceptanceand duly paid when presented for payment. Occasionally however,acceptance or payment is refused and the bill is said to bedishonored by non-acceptance or non-payment as the case may be.

The negotiable instrument act allows 48 hours from presentation todrawee to accept or to refuse the acceptance/ payment.

42


43/59

NOTING AND PROTESTING

When the bill is dishonored by non-payment or non-acceptance, it issometimes necessary to obtain formal proof that it has been dulypresented and dishonored. The first step to this end is known asprotesting. The services of notary public are employed for thispurpose.

CONTENTS OF PROTEST

Copy of bill Name of person requesting for protest Place and date of protest Cause and reason of protest Sign of two witness Seal of notary

INCOTERMS:

Incoterms is a standard trade term, which explains howresponsibilities, costs and risks are divided between buyer and seller inconnection with movement of goods from seller place to buyer place.

This includes the agreement that who will arrange for carriage andinsurance from one point to another point and who will bear the risk of loss or damage to the goods.

There are four different categories:Group E: The term whereby the seller makes the goods available tobuyer at the sellers own premises.

Group F: The term whereby the seller is called upon to deliver thegoods to a carrier appointed by the buyer. It includes Free Carrier(FCA), Free On Board (FOB).

Group C: The whereby the seller has to contract for carriage butdoes assume the risks of loss or damages to the goods or additional

43


44/59

costs due to events occurring after shipment and dispatch. Itincludes Cost and Freight (CFR), Cost Insurance and Freight (CIF).

Group D: The term whereby the seller has to bear all costs andrisks needed to bring goods to the country of destination. It includesDelivered at Frontier (DAF), Delivered Duty Paid (DDP).

44


45/59

EXPORT

E FORMS

All exports from Pakistan are required to be declared on form Ewhich is in sets of four copies each. The exporter should submit the fullset of form E to the authorized dealer (bank) for certification. Whilecertifying form E authorized dealer should ensure that exporter givesonly one address in form E. After certification the form is submittedto the customs/ postal authorities at the time of shipment along withthe shipping bill. The custom authorities will detach the original copiesand after filling in the portion relating to them and affixing their sealand signature thereon forward it to the State Bank. The customsauthorities will return the duplicate, triplicate and quadruplicate copiesto the to the exporter or his authorized agent who will retain thequadruplicate for his record.

Submission of Export Documents to Authorized Dealer

All shipping documents covering goods exported and declared on form

E must be passed through the medium of an authorized dealer(bank) within 14 days from the date of shipment.When the exporter returns form E along with other documents likeinvoices, drafts, packing lists, airway bills etc, entry is made on thecomputer and the exporter is assigned an Outward DocumentaryCredit (ODC) number, and all the documents are stamped with theallotted ODC number, then a schedule is made and is attached withthe documents. All the documents are kept in an ODC file. Then avoucher is made in which bank liability is increased and exportersliability is decreased.

Payment of Exports When the payment of exports is received from the beneficiary, a dealis made on which tax and services charges are debited from theexporters account. In the other voucher the bank liability is decreasedand exporters liability is increased. The exporter is credited by theexchange rate of the day the payment is received after negotiatingwith the exporter.

45


46/59

IMPORT

INTERNATIONAL TRADE

International trade is done on two terms1) Letter of Credit (LC)2) Contract

1) Letter Of credit (LC):

LC is an undertaking by the issuing bank in the name of beneficiary(exporter to pay him certain amount subject to fulfillment of terms andconditions laid down in LC.A letter of credit is generally a very safe method of obtaining paymentprovided the exporter complies with the terms of the credit. While aletter of credit generally favors the exporter, the importer can alsoprotect his own position by stating documentation he requires and by

specifying shipping date.

Kinds of LC

1) A Revocable Credit :

A revocable credit is one, which may be amended or cancelled withoutthe prior notice to the beneficiary. The issuing bank retains the right torevoke such a credit, which may be exercised (1) upon a writtenrequest from the applicant for the credit or (2) on its own, because itconsiders that it would not be possible to obtain reimbursement fromits customer.An exporter of a revocable letter of credit runs a great risk because thecredit may be amended or cancelled while the goods are still in transitbefore presentation of the relative shipping document.Revocable letter of credit do have some advantages in that they arecheaper than other types of documentary credits and facilitate earlierpayment to the exporter.

46


47/59

2) Irrevocable Credit:

Irrevocable credit is one, which can be amended, modified or cancelledwith the permission of all the parties involved in LC.From the point of view of the seller, an irrevocable letter of creditaffords him a greater degree of protection than a revocable letter of credit.

3) Confirmed credit:

If the seller wishes to be sure that once he exports the goods he couldobtain payment therefore he can insist upon the buyer to have theletter of credit confirmed by a bank in the sellers country. In thissituation the issuing bank requests either its own branch in the sellerscountry to advise the beneficiary regarding the establishment of theletter of credit and adds its own confirmation to the letter of credit.

4) Unconfirmed Credit: There is no need of confirmation from confirming bank inunconfirmed credit.

5) Red clause Credit:

Red clause LC is mostly used for the import of big plants. A red clausecredit enables an importer not only to set forth-documentary terms ina letter of credit covering a shipment but also to provide for theexporter to draw upto a specified percentage of the amount stated in

the credit, which is up to 33%. This will be with the prior permission of state Bank of Pakistan. The clause inserted in letter of credit to permitcash advance facility is known as the Red Clause. The clauseregarding advance payment is typed in red color thats why it is calledred clause LC. Credits with Red Clause are used where there is a closebusiness relationship between the importer and the beneficiary.

6) Back to Back Credit:

47


48/59

In a Back to Back credit two separate letters of credit are involved. Theoriginal letter of credit is issued in favor of a supplier essentially actingas a middleman and who is unable to supply the goods himself. Hetherefore uses the original credit issued in his favor to back anotherletter of credit to be issued by his bank in favor of another supplierwho can supply the goods. A Back to Back credit is a

second credit issued by at the request and application of the originalbeneficiary in favor of another supplier.

Example:

If A is going to import something from B but B does not produce it byitself instead gets it from someone else say C. Then A will send LC to B and B will send it to C.

A B dealer /trader

LC

CIn this type of LC two LC`s are involved one is from A B and other isfromB C .Here B will serve as a middleman.

This type of L.c. is not allowed in Pakistan because Pakistan has notmaintained good relations with some countries like Israel, South Africa,

Taiwan and India. May be if Pakistan wants to import something from Japan and Japan buy it from Israel.That`s why it is forbidden inPakistan.

7) Transferable Credit:

In this type of LC the beneficiary can transfer LC to the third party.e.g. if A wants to purchase something say socks from B and n have nostock or capacity to fulfill the demand.B will transfer LC to CLC can be transferred once.

48


49/59

A B

C

The first beneficiary can transfer the credit only if there is an expressprovision for its transfer to the third party. Where the credit does notcontain a specific provision regarding the transferability of the credit,all credits are to be treated as non-transferable.

8) Revolving Credit:

A Revolving credit is designed to finance a series of dealings betweenbuyers and sellers. The word Revolving is used to describe a letter of credit that has a clause in it, which allows the value of the credit to berenewed over an extended period of time rather than establishindividual, credits for each shipment.

For e.g. if a company has only $20 Million with it & it wanted to open

&50 Million LC then LC will be labeled revolving & &20Million L.c. willbe opened. Suppose during first month $Million export is made then itwill be left with $15 million.In this case $5 Million will be added from $30 Million & again LC will beof $20 Million in the second months $15 Million transaction is dome,then $5 Million will be left, in this case $15Million will be added from$25 Million which were left from $30 Million and again $20 Million LCwill be made. This cycle will continue until the amount will be finished.Revolving credits can also revolve in time, i.e. they are available for afixed limit at fixed limit, say monthly until expiry.

49


50/59

PARTIES IN A TRADE DEAL

A- Seller (Applicant) The banks customer who requests the issue of the letter of credit i.e. the importer.

B- Buyer (Beneficiary) The person in whose favor the letter of credit is issued i.e. the exporter.

C- LC opening bank The bank that issues the letter of credit at therequest of its customer

D- LC advising bank A bank in the beneficiarys country throughwhich the issuing bank communicates thecredit to the beneficiary.

E- LC negotiating bank The bank which makes payment whenthe beneficiary presents the documents to

themF- Confirming bank A bank which adds its own independent

payment undertaking to that of the issuingbank.

50


51/59

THE PROCESS OF OPENING OF LETTER OFCREDIT

SHIPMENT

AGREEMENT GUARANTEEA B C

SHIPMENT

PAYMENT LC

LC LC PAYM

LC

LCF D

LCE

51


52/59

PAYMENT PAYMENT PAYMENT

OPENING AND TRANSMITTING LETTER OFCREDIT

Banks open letters of credit on behalf of their approved customers whorequest them to issue the credit in favor of beneficiary. The issuingbanks have prescribed a standard application form that contains therequired guideline, instructions and other relevant terms andconditions under which the credit is to be opened and claims from thebeneficiary are to be settled.

The applications generally contain the following;

2) Description of the goods, details of quantity, unit price, total priceand currency of credit.

3) Instructions about the advice of credit, whether it should be sent bymail, telecommunicated or electrically conveyed.

4) Form of credit: whether revocable or irrevocable, confirmed orunconfirmed.

5) The name and of beneficiary.6) Type of credit: whether transferable or revolving etc.7) Validity period of credit and last dates for shipment and negotiation.8) Port of shipment and port of destination and whether transshipment

and/or part shipment is allowed.9) Types and numbers of sets of documents required to be submitted

by the exporters.

52

NOSTRO


53/59

10) Terms for payment: type of D/A (documents against acceptance)orD/P (documents against payment) basis.

11) Shipping terms in the contract of sale, e.g., FOB, CIF.

The application form is a formal contract between the issuing bankand the applicant therefore, it should be signed by the customer, whoby going so under takes to abide by the terms and conditions of credit,usually mentioned in the application form.

TRANSMISSION OF LETTER OF CREDITS

Transmission of credits can be affected by post, telex orteletransmission method.When transmission is by post, the letter of credit is prepared in astandardized manifold set of advices consisting of usually five copies.

The credit must be issued under the signature of two authorizedofficers whose specimen signatures must have been sent to thecorrespondent banks so that

there is no ambiguity about the verification of the signatures on theadvice. When the credit or an amendment to a credit is teletransmittedthe standardized authenticated format is used by the issuing bank.

Discrepancies: The beneficiary is entitled to receive payment only if he presents thedocuments with the terms and conditions of the credit. If the payingbank finds that they do not meet this requirement, the documents arerejected and the beneficiary loses the security of the bank undertakingfor the credit. However in case of minor discrepancies in thedocuments, the amount of credit may be released to the beneficiaryagainst acceptable specific indemnity.

53


54/59

CREDIT

Industry requires financing in two categories:1) Financing of Fixed Assets

Financing of fixed assets means loans for the purchase of plant andmachinery, and land and building for new industrial units or formodernization and replacement of existing units. Since it requireslong term financing, commercial banks have not been able to domuch for it. Industrial Development Bank of Pakistan (IDBP) andPakistan Industrial Credit and Investment Corporation (PICIC) havecatered these requirements.

2) Financing of Working Capital

In order to meet running expenses and production costs theindustrial units need short-term finances, generally known asworking capital.

54


55/59

EXPORT FINANCES

The different types of exports finances given by Emirates Bank are:

CASH FINANCE/RUNNING FINANCE (CF)

This is working capital finance. In cash finance borrower is allowedto borrow money from the bank up to certain limit either at once oras and when required. This is secured by tangible securities e.g.Demand Promissory Note etc. the borrower prefers this form of lending due to the facility of paying markup charges only on theamount he actually utilizes.

OVERDRAFT (OD)

This is the most common form of bank lending. When a borrowerrequires a temporary accommodation, his banker allowswithdrawals on his account in excess of the balance, which theborrowing customer has in credit, and an overdraft thus occurs.

FINANCE AGAINST PACKING CREDIT PART ONE (FAPC-I)

This is pre-shipment export finance. This is allowed on receipt of confirmed irrevocable letter of credit opened by foreign importer.Markup is as per SBP tariff. In case of banks own resources markupdepends upon the market conditions.

FINANCE AGAINST PACKING CREDIT PART TWO (FAPC-II)

This is given by the state bank of Pakistan on the basis of 50% of previous years exports performance. Markup as per SBP tariff.Normally under Export Finance scheme of SBP. In case of banksown resources mark up depends upon the market conditions.

FOREIGN BILLS PURCHASED (FBP)

Post shipment finance against documents. No discrepantdocuments are allowed.

POST SHIPMENT LOAN UNDER EXPORT REFINANCE SCHEME(FBPR)

55


56/59

This is a post shipment loan under SBP refinance scheme. Shipmentwill be against contract or firm orders. The amount of loan did notexceed the value of bill.

POST SHIPMENT LOAN FROM OWN SOURCES

For post shipment loan from banks own sources additional securityis held for coverage. This loan is against firm order, contracts orLCs with major discrepancies. Markup depends upon marketconditions.

BANK GUARANTEE

In bank guarantee bank substitutes its own credit standing for thatof its customer. It is commission based. It should have specificexpiry date but may be issued open ended which command higherrisk. It should be for specific amount and clear.

Different Types of Securities Against Finances

Bankers in Pakistan lend money against tangible and marketablesecurities. The bankers prefer such securities, which do not run therisk of general depreciations due to market fluctuations. Commonsecurities for the bankers are as under.

Bankers Lien

Lien is the bankers right to with hold property until the claim onthe property is paid. The bankers look at their lien as a protectionagainst loss on credit facility.

Pledge

The bailment of goods as security for payment of debt orperformance of a promise is called pledge. Pledge occurs whengoods or documents of title thereto or the securities are deliveredby a customer to his banker to be held as security for therepayment of an advance. In a pledge the ownership remains with

56


57/59

the pledger, but the pledgee has the exclusive possession of property until the advance is repaid in full, while in case of defaultthe pledgee has the power of sale after giving due notice.

Hypothecation

When property in the goods is charged as security for a loan fromthe bank but the ownership and possession is left with the borrower,the goods are said to be hypothecated. Lending againsthypothecated goods is very risky.

Guarantees

Guarantee is a contract to perform the promise, or discharge theliability, of a third person, in case of his default. In other words athird person gives the guarantee of the borrower. Guarantor may bea single person, two or more persons or a firm.

Charge

When in a transaction both parties (bank and borrower) evince anintention that property, existing or future, shall be made availableas security for the payment of a debt and that the creditor shallhave a present right to have it made available, there is a charge.If the borrower has given a charge to a bank and he wants to getanother loan from another bank, then he can give second charge tothe second bank. But if the second bank says that it is going to takecharge on equal sharing then it is called Pari Pasu charge. Thisequal sharing is on the basis of amount credited.

57


58/59

Marketing

Each branch of Emirates Bank has a marketing team who visits themarket and makes the people aware of their products and services. Itis the efforts of the marketing team that the deposits of the customersare increasing. Moreover a keen customer care is given by all the staff members.

Advertisement

Emirates Bank did not advertise through media i.e. television.Whenever a new product or service is launched it is advertised throughnewspaper, brochures and banners. Emirates Bank also has its web

site; a lot of information is available on it. This year the second weak of August was celebrated as EBI weak. Inthis weak banners of different products of Emirates Bank was placedon the roads throughout Sialkot. The banners were very colorful andattractive. The marketing team put an effort in the placement of thesebanners. Moreover the brochures were also dropped in houses duringthis weak.

58


59/59

BIBLIOGRAPHY

Practice and Law of Banking in Pakistan By Israr Ahmed Siddiqee

Www.emiratesbank.com

www.emiratesbank.com.pk
http://www.emiratesbank.com/http://www.emiratesbank.com/