1.1 INTRODUCTION OF HBL

It is the prime Bank in country established in 1941 having a registered head office in Karachi. It was nationalized in 1974, but recently on 26 th February 2004 it has been privatized by Government of Pakistan and is taken over by Aga Khan Fund for Economic Development (AKFED). They acquired 51 percent of shares of HBL. It is one of the largest Banks of Pakistan with 1439 branches and having total assets of Rs. 434,931,930,000.

1.1.1 Brief History of HBL

HBL at its present state has a long and rich history of deeds and sacrifices. All this has been possible on the account of sustained efforts. The first branch of HBL started functioning on 30th August, 1941 at Muhammad Ali Road Bombay, where Quaid-e-Azam Muhammad Ali Jinnah first of all opened his personal account. Mohammad Ali Habib was a man of stern and persistent will. God. Almighty had bestowed him with extra ordinary capabilities. He was devoted to his Bank with a view to take his share in the uplift of the strife-torn and devastated Muslim community. At the time of its inception, the Bank's total paid up capital was Rs.2.5 million but it is evident from the following data that the Bank experienced a steep rise in the business in a few years. In 1942, on the desire of Quaid-e-Azam, Habib family migrated to Pakistan and later on shifted the Bank's Head Office from Bombay to Karachi on 7th August 1947 just one week prior to independence, to play its pivotal role in the development of this newly born country. At the time of independence, the areas, which now constitute Pakistan, were producing only agricultural products raw material for indo-Pak subcontinent. Partially no industries were there to process the raw material, therefore the raw material was exported from Pakistan. There were 19 non-Indian foreign Banks which were engaged in the export of crops from Pakistan with only two Pakistani Banks i.e. HBL and the Australia Bank. The circumstances were completely un-certain. The confidence of the people had been shaken by the un-friendly environment and till the time peace had not been restored, people would naturally have been interested in other things. The nation was quite young with extreme scarcity of resources and these definitely added to the difficulties of the govt., to run its own Banking system immediately. Following the announcement of the independence plan in June, 1947, the Hindus residing in the territories now comprising Pakistan started transferring their assets to India and vice versa. The Banks included those having their registered offices in Pakistan, transferred them to India in order to bring a total collapse of the new state. It had been decided that the Reserve Bank of India would continue to function in Pakistan so that the problem of demand and time liabilities, coinage, currencies, exchange rate etc be settled between India and Pakistan and the Indian Notes would continue to be legal tender in Pakistan till 30 th September, 1948. Again due to certain differences between Indian Pakistan, the Indian Govt., withheld Pakistan's share of Rs.75 core in forward and subscribed heavily to the Govt. of Pakistan to the tide over the crises, Payment was made to the Govt., by the Bank at a very nominal rate of interest, even before the actual issue of securities. At a time when this newly born country was at whirlwind of crises, it was HBL which fulfilled generously the financial

needs of all its sectors, paid salaries to the employees of all Govt. departments, helped in the establishment of State Bank of Pakistan, which the Quaid-e-Azam inaugurated on July 1st ,1948. HBL after partition opened its branches throughout Pakistan to provide finance and other facilities to the business community. In association with HBL, the Govt. sponsored Pakistan Finance Corporation Limited for financing of cotton. The Bank helped handsomely in the construction of WARSAK DAM PROJECT, WAPDA, & K.D.A. by provided finance and other facilities. Another innovation introduced by HBL is the evening Banking cash long after the crossing of normal Banking hours. It was also the first in making available such new facilities as Gift Cheques, Rupee Traveler’s Cheques, Credit Card System, short term and long term schemes for small businessmen.

1.1.2 MISSION

To be recognized as the leading financial institution of Pakistan and a dynamic international bank in the emerging markets, providing our customers with a premium set of innovative products and services, and granting superior value to our stakeholders – shareholders, customers and employees. OR Opening new horizons and fresh perspectives of trust, dependability and service through 1425 domestic branches and 112 overseas offices with a comprehensive range of financial products.

1.1.3 OBJECTIVES OF HBL

Following are some of the main objectives of HBL.

To earn profit for the Bank itself and for its shareholders. To promote and boost up business sector inside the country. To provide employment opportunities to people. To help in development and industrialization of the country. To provide loan and advances to help out in self employment schemes.

1.1.4 SYMBOL OF HBL

Symbol depicts

Bismillah ============Islamic Culture and Values

Sword ============== Power

Lion================ As a symbol of strength

1.1.5 CORE VALUES OF HBL

HBL is firmly grounded with a corporate philosophy that incorporates five solid values which each individual associated with the bank abides by.

1.1.5.1Humility

HBL encourages a culture of mutual respect and treats both their team members and customers with humility and care.

1.1.5.2 Integrity

For them, integrity means a synergic approach towards abiding their core values. United with the force of shared values and integrity, they form a network of a well-integrated team.1.1.5.3 Meritocracy

At every level, from selection to advancement, they have designed a consistent system of human resource practices, based on objective criteria throughout all the layers of the organization. HBL is therefore, able to achieve a specific level of performance at every layer of the organization.

1.1.5.4 Teamwork

Their team strives to become a cohesive and unified force, to offer the customer, a service beyond his expectations. This force is derived from participative and collective endeavors, a common set of goals and a spirit to share the glory and the strength to face failures together.

1.1.5.5 Culture of Innovation

Their aim is to be proactively responsive to new ideas, and to respect and reward the agents, leaders and creators of change

1.1.6 CORPORATE BANKING

Only local bank with special focus on Corporate Banking with a presence in all major locations through out the country, offering full range of Banking products / services and one window interface through designated Relationship Managers. Our large equity base allows us to take longer per party exposures to meet the needs of the largest corporate & our extensive local & foreign network allows us to imperiously service our clients. Corporate manages well-diversified portfolio, and include most of the top tier names of the market. Corporate Banking offers tailor made products / solutions as required by corporate customers which includes:

1.1.6.1 Key Features of Corporate Banking

Funded facilities, ranging from short to medium and long term lending Trade related financing. Foreign currency financing. All sorts of non-funded facilities / services which include Cash receipts /

payments, Remittances, Collections, guarantees, letter of credit etc. Customized products / solutions

2.1 Departments of HBL

There are few departments on which general or day-to-day banking of HBL composes. There details are as under: Deposit department Clearing Departments Inland Remittance Department Bills Departments Advances Departments Advances Departments Cash departments Department Foreign Exchange Department

2.1.1 FUNCTIONS OF DIFFERENT DEPARTMENTS OF HBL The basic functions of different departments HBL are as follows.

Accepting deposits

Making Loans and advance.

2.1.1.1 Accepting Deposits

The primary function of HBL is to accept and receive surplus money from the people, which they willingly deposit with the Bank. Like all other Banks, HBL also take incitation to attract as much depositor’s as it can. They offer different deposit schemes to its customers, which includes the following types. These schemes as follow.2.1.1.1.1 Current Deposits

This type of account is often maintained by the business Current deposits are those deposits on which Bank offers no interest but it allows the account holders to withdraw their money at any time they want without giving any prior notice to the community, which requires large sums of money very often for their business transaction.2.1.1.1.2 Profit and loss sharing account (Saving)

Saving deposits or PLS are those accounts on which Bank offers a lower rate of interest. After the Islamization of the Banking system in the country it has been given the name of PLS saving account. The Bank undertakes to repay deposits on demand up to a certain amount.2.1.1.1.3 Fixed deposits

Fixed deposits are those which can be withdrawn only after the maturity period. In this type of deposits the Bank allows high rates of interest depending on the time period of deposits. The shorter the period of deposits, the less will be the interest and vice versa.2.1.1.2 Making Loans and advances

The second most important function of HBL is to provide financing facility to its customers. These loans and advances are usually made against document of title to goods, marketable securities, and personal securities. HBL charges different interest rates

on these loans and advances depending on the terms and conditions settled with the customers. Following types of loans and advances are made available to the customers.2.1.1.2.1 Demand Finances

Demand finances are those finances which are given to the borrowers for specified period and can be called back without any prior notice. It is a single transaction finance. It can be long term, medium term and short term. Mark up is also charge. Here the amount can be withdrawn once at the time of disbursement. 2.1.1.2.2 Running Finance

HBL provides these finances against the security of current assets like shares, bond, cash crops like cotton and other cashable commodities. The borrower’s account is opened with the Bank with the amount of the total loan provided or allowed to the borrower. The borrower is allowed to withdraw any amount from his account within the specified limit and interest is charged only on the amount actually withdrawn.

2.1.1.2.3 Over Draft

This type of facility is usually given to very loyal clients. This allows them to withdraw over and above the amount held by them in their account, and interest is charged only on the amount, which is withdrawn in excess of the amount actually held in their account.

2.1.1.2.4 Discounting bills of exchange

Discounting bills of exchange can also be considered as a form of loan because it allows the holder to get the bill encased before the maturity period. A bill of exchange is usually issued by the importer of goods to the exporters, which allows them to be paid in their own currency after three months time. If the exporter needs the money before the maturity of the bill of exchange, he can get his money from the Bank by discounting the bill of exchange. The Bank utilizes their surplus funds by discounting the bills of exchange at their market worth i.e. Bank pay to the holders of the bill on amount equal to their face value after deducting interest at the current rate for the maturity period of the bill.Our stated objective of being a premier emerging market Bank.

2.1.2 PRODUCTS OFFERED BY HBL2.1.2.1 Tele-printer service

Introduced in 1952, this system helped the Bank to improve its services. 2.1.2.2 Rupee Traveler’s Cheques

It was introduced in 1957. Here the customers are provided the facility of encashment of their traveler’s cheques through any branch of the Bank.2.1.2.3 Small Factory Owner Scheme

In 1959 the Bank offered loans to small scale producers under the “small factory owner scheme” in order to boost the economy of Pakistan.

2.1.2.4 Foreign Tele printer Service

It was introduced in 1961. The idea behind this scheme was to provide quick and prompt Banking services to customers in foreign countries.2.1.2.5Gift cheques schemesIt was launched in 1962. Under this scheme, the Bank provided customers with pre-printed cheques of various denominations, which could be used to send gifts to their loved one on various occasions. 2.1.2.6School BankingThis scheme was introduced in 1962 to provide Banking services to children in a number of schools though out the country. 2.1.2.7“Drive in” Banking

HBL established “Drive in” branches in 1962 at various major cities of the country where the customers could avail Banking services without getting down from their vehicles2.1.2.8 Mobile Banking

It was introduced in 1962. The feature of this scheme is to provide Banking services to the customers residing in the rural areas. 2.1.2.9 Night safe scheme

In 1962 the Bank offered facility to their customers to deposit their valuables at night in specified branches of the Bank.2.1.2.10 Computer accounts

In 1962 the Bank introduced computer accounts through which most of the accounts in head office were computerized2.1.2.11 Computer Prize Bond

It was introduced in 1966. It is a scheme through which prize could be declared for prize bond scheme.2.1.2.12 Credit card scheme:

It was introduced in 1966 through which customers could get certain sum of money from specified branches. Many business organizations accepted payments through valid credit cards.2.1.2.13 Infant Saving Scheme

In 1968 the Bank offered infants to open saving accounts operated by their parents/ guardians.2.1.2.14 Courtesy Card

It was launched in 1968 through which the customer could be introduced to other branches in the country.2.1.2.15 Deposit growth certificate

This scheme was introduced in 1975 with increase rate of interest.2.1.2.16 Special five years deposit certificate

This scheme was introduced in 1975 where the major emphasis is on increased rate of interest.2.1.2.17 Dollar traveler cheques

Introduced in 1976, the scheme was more helpful and safe for the travelers than carrying foreign currency notes.2.1.2.18 Hajj accidental death scheme

Introduced in 1983, according to this insurance scheme, if a Haji who has submitted his Hajj application through HBL died while he was away for performing Hajj, his family was to be provided a certain sum of money.2.1.2.19 Auto Cash Teller Machine

Auto cash machines are installed in 1988 at various branches which allows customers to withdraw cash round the clock and on all days of the week.2.1.2.20 Transport Finance Scheme

In 1989 the Bank in order to decrease unemployment in the country introduced owner, driver taxi finance and scooter loans. According to this scheme they were provided loans on soft terms.It was introduced in 1966 through which customers could get certain sum of money from specified branches. Many business organizations accepted payments through valid credit cards.2.1.2.21 Gold card system

In 1991 HBL introduced the scheme with the features of offering card holders to get up to Rs. 10,000 at a time.2.1.2.22 Muhafiz Rupee Traveler Cheque

It was introduced in 1998. A cheques available in denomination of Rs. 10,000, 25,000, 50,000 and 100,000 with the advantage of 100% free purchase and encashment. 2.1.2.23 Distinct Properties Of Muhafiz

It can be issued from more than 700 branches all over Pakistan. Muhafiz provides the facility of payment in all branches of HBL.

There is no commission and fee charge for purchase of Muhafiz HBL keeps alive the tradition of “Serve you better” charges nothing for the purchase and sale of Muhafiz.

2.1.3 INNOVATIVE PRODUCTS2.1.3.1 House Finance

HBL provides the facility of house finance:

Financing available for:1.Purchase of house2.Home improvement and renovation3.Self-Construction

2.1.3.1 Some characteristics of House Finance of HBL Are:

Lowest marl-Ups leading to affordable monthly installments 5 years fixed Rates/ one year Floating Rate available. Lowest processing charges Financing tenures ranging from 3 to 20years. Financing limits of up to Rs. 7.5 million (Rs. 3.0 million for Home

Improvement/Renovation) Quick Processing

2.1.3.2 Auto Finance

Habib Bank Auto Finance, a lease product, designed to offer you an economical way for owing the car of your choice.

Some characteristics are: Lowest Down Payment Lowest monthly rentals Fixed repayment tenures of 36,48and 60 months. Lowest Processing charges Insurance premium rates as low as 3% World wide personal accidental insurance coverage of up to Rs. 200,000. All locally assembled new cars can be financed through this scheme

2.1.3.4 HBL Flexi Loan:

HBL had introduced a unique loan system for the middle income serving people in various public sectors. It is basically meant for those in service people who earn more than Rs. 5,000 per month. This loan meets the petty requirements of the salaried class. Since the introduction of this scheme Rs. 6 billion is advanced throughout the country. The maximum limit of this loan is Rs. 3,000,000.

2.1.3.5 Life StyleHabib Bank Lifestyle is an economical financing scheme for Household Appliances and consumer Electronics.Salient features of HBL LIFESTYLES:

Loans for salaried/ self Employed individuals or business persons Low Mark-ups leading to affordable monthly installments. Financing from Rs.10,000 to Rs.500,000 Fixed tenures of 6,12,18,24 and 36 months Low Processing charges Full credit Life Insurance Free Doorstep Delivery of items Available throughout Pakistan from over 330 designated Habib Bank Branches

2.1.3.6 HBL Rescue (Balance Transfer Facility)

HBL provides the facility to transfer your personal loan and credit card liabilities, at the lowest rates ever.

2.1.3.7 For Personal Loans Maximum loan up to Rs. 1,000,000 Choice of 12,24,36,48 and 60 months for payback Lowest Mark- up Quick processing Full Credit Life insurance Available from over 400 designated branches throughout Pakistan

2.1.3.8 For Credit Card Payments

Maximum loan up to Rs.1,000,000

Lowest mark-up-compared to any credit card

Choice of 12,24,36,48 and 60 months for payback

Quick processing

Full Credit Life insurance

Available from over 400 designated branches throughout Pakistan

2.1.3.9 Auto Cash (Debit/ ATM Card)

Habib BANK icard is used for dual purposes-a debit card and an ATM card and provides u the direct access to cash in your account.

2.1.3.10 Habib Bank icard as your Debit Card

When payment is made at any merchant location using the card , exact purchase amount is deducted from your account. Convenient, secure, quick and easy payment option Nationwide acceptability at various merchant locations displaying ORIX Network logo Free of charge debit card transactions

2.1.3.11 HBL iCard as your ATM Card

Offer a number of facilities such as cash withdrawal; Funds transfer between accounts, Balance Inquiry, Mini Statement, PIN Change etc. Accepted at all 1LINK and MNET ATMs across the Country.

2.1.3.12 HBL Easy Access-

Online access to banking services at over two hundred branches in Pakistan

2.1.3.13 HBL Fast Transfer

A unique solution for overseas Pakistanis to send money back home in a swift and convenient manner.

2.1.3.14 Haryali Agricultural Loans

It entails all kind of agricultural finance facility for the rural market.

2.1.3.15 HBL E-Bank

It provides services via a dedicated communication link on the internet. The E-Banking services provide “anytime, anywhere” banking to all 5 million customers. This service, designed to be user friendly, assures secured access and confidentiality.

2.1.3.16 SWIFT

The bank is a major SWIFT user in 70 domestic branches & 21 overseas countries / locations in the network. SWIFT services are being used for funds transfer, remittances and trade related transactions, resulting in major improvement in payment processing capability for enhanced customer service.

2.1.4 AGENCY SERVICES TO THE CUSTOMERS

HBL also provides agency services to its customers. Some of which are as follow:

2.1.4.1 Collection of cheques

HBL pays and collects cheques on behalf of their customers, and for this it receives commission form their account holders.2.1.4.2 Collection of dividends

The Bank provides a very useful service by acting as an agent for its customers. It arranges the collection of dividends on shares and securities held by its customers. The customer is simply to inform the issuer of the securities that the interest on the securities is to be credited to his account in the Bank. Bank charges commission for the collection of the dividends on behalf of account holders. 2.1.4.3 Purchase and sale of securities

HBL if authorized by the customers also makes purchase and sale of securities on the behalf of its customers. Bank charges commission for the purchase or sale made by its on behalf on the customers.

2.1.4.4 Execution of standing instruction

HBL also executes the standing in case if it is ordered by the customers of the Bank to do so. These instructions are usually given in writing to Bank. The Bank debits and credits the accounts of its customer for the transactions carried out by the individual or firm.

2.1.4.5 Transfer of Funds

HBL also transfers funds of the customers from one Bank to another Bank. If the transfer is within one station, they don’t charge any commission and even if they charge, they charge on reduced rates. 2.1.4.6 Acts as an agent

HBL also acts as an agent, correspondent or representative of its customers at home and abroad.

2.1.4.7 General utility services

HBL also performs a number of generally utility services to its customers, which are as follows:

2.1.4.8 Foreign exchange Business

HBL transacts foreign exchange business by discounting foreign bills of exchange and thus provides facilities for financing in foreign trade.

2.1.4.9 Acts as a referee

HBL provides useful services to its customers by acting as a referee for its credit worthiness. The information is supplied in utmost secrecy and is based on financial standing of the customers. 2.1.4.10 Issuance of traveler’s cheques

HBL also issues traveler’s cheques. These cheques can be issued to anyone whether an account holder or not and charges no commission on issuance of such cheques. HBL has recently introduced Muhafiz rupee traveler cheques with enhanced features.

2.1.4.11 Collection of Utility Bill

Electricity, telephone and other such bills can also be deposited with HBL.

2.1.4.12 Locker Facility

HBL also provides locker facility to its customers where valuables of customers can be kept.2.1.4.13 Acceptance of Bills of exchange

HBL also undertakes acceptance business connection with bills of exchange and thus enables its customers to obtain the desired credit.

2.1.5 Operational Policy

The operational policies of HBL deal with the method of provision of better services to its customer. Through the introduction of new schemes as means of satisfaction for their customers, the operational policy of HBL can be divided into two spears. Domestic operations. International operations.

2.1.5.1 Domestic Operations

HBL is quite successfully operating its domestic business. Facilities at the door step across the length and breadth of the country also in conformity with the government’s socio-economic objectives. The number of operating domestic branches total 1350.

2.1.5.2 International Operations

HBL’s overseas branches are continuously rendering satisfactory services and are also contributing to the channeling home remittances of Pakistan working abroad. HBL’s international network comprises of 60 offices in 26 countries, operating in USA, Europe, UK, Middle Ease, Asian Pacific Region and Africa. It is also the largest Banking in financial services provider in Pakistan. HBL concentrates on markets and business they understood. Through a global network, the Bank provide a comprehensive range of financial services, personal, commercial, trade services, cash management, treasury/ capital market services, and private Banking. HBL strives to provide high quality product through efficient delivery system and excellent customer services. In this way, HBL will grow and achieve

2.1.6 ORGANIZATION STRUCTURE

A well-developed and properly coordinate structure is an important requirement for the success of any organization. It provides the basic framework within which functions and procedures are performed. Any organization needs a structure, which provides a framework for successful operations. The operation of an organization involves a number of activities, which are related to decision-making, and communication of these decisions. These activities must be well coordinated so that the goals of the organization are achieved successfully.

2.1.6.1 STRUCTURE OF HBL

At present the Bank operates through one central and 23 Regional Offices and 1439 branches, all over Pakistan. The president and Executives Committee look after the affairs of the Bank. Each Regional Head Quarter is headed by a Chief Executive and assisted by General Manager Operations and General Manager Support Services. The Regional Head Quarter controls the branches in their area.

Overseas operations consist of 65 main branches, two affiliates, two representative offices and two subsidiaries. President, from Head Office at Karachi controls the officers of the Bank with the help of the senior management. Functional responsibilities of the Banks are broken into seven groups known as

1) International Operations Group2) Corporate Banking and Treasury Investment Group3) Retail Banking and Operation Group4) Finance, Audit and Administration Group5) Assets Remedial Management Group6) Credit Policy Group7) Corporate Bank, Financial Institutions and Project Finance Group.

In addition to the overall controlling authority, president also manages the International Operations Group individually. While the Senior Executive Vice Presidents supervise rest of the functional groups. Each Senior Executive Vice President is individually responsible for the group which is assigned to him.

At the level of provinces there are Regional Head Quarters headed by Regional Chief Executives (RCE). Each RCE is assisted by GM operations and GM Support Services. Branches are also controlled by the RCEs. Circle Offices of the past times have been removed to reduce Managerial Layers, which were working under the control of Zonal Offices. This happened as a result of policy of beginning new changes in the organizational structure.

2.1.6.2 Organizational Chart of HBL

A chart defines the line of authority in an organization and its departmentation. It is a sort of visual presentation of the organizational structure. It specifies the duties and responsibilities of the personnel of the organization. The Organizational chart of HBL is given below.

2.1.7ANALYSIS OF ORGANIZATIONAL STRUCTUREThe purpose of an organizational structure is to help in creating an environment for human performance. It is then, a management tool and not an end in its own. Although the structure must define the task to be done, the rules so established must also be designed in the light of abilities and motivation of the human recourse available. By analyzing the organizational structure of HBL presence of the following elements can be found in its structure.

2.1.7.1Centralized Decision Making

By looking at the organizational structure of HBL would be found that the structure at HBL is a critical one. All the decisions are made at the top management level and the subordinates have to obey these decisions. This trend in the decision making shows a pattern of rigidity in structure of HBL.

2.1.7.2Downward Communication

Communication is the process by which information is exchanged and understood by two or more people, usually with the interest to motivate or influence the behavior of others in the organization. Downward communication is the message and information sent from top management to subordinates in a downward direction. Managers can communicate downward to the employees through speeches, massages in company publications, information leaflets, tucked into pay envelops material on bulletin boards, policy and procedure mandates.The same pattern is followed at HBL. No doubt it’s a very traditional approach but it can create problems because it ignores the receiver of the communication because the issuer of policies and procedures does not ensure communication. In reality may the messages communicated downward are not understood perfectly.

2.1.7.3Chain of Command

The chain of command is an unbroken line of authority that links all persons in an organization and shows who reports to whom. By analyzing the organizational structure it can be found that there is a scalar principle followed with in the Bank because each and every person knows to whom can one report. The authority and responsibility for different tasks and duties are different, as well as every one knows the successive levels of management all the way to the top.

2.1.7.4Authority and Responsibility

The chain of command illustrates the authority structure of HBL. Authority is the formal and legitimate right of the manger to make decisions, issues orders and allocates resources to achieve organizational desired outcomes. By analyzing the chain of command of HBL, one can come to the conclusion that, as there is scalar pattern followed at the organizational setup of HBL therefore it is implied that everyone in his position knows that what is one’s authority and what is the responsibility and the authority it allocated.

2.1.7.5Delegation

Delegation is the process, which managers use to transfer the authority and responsibility to position below in the hierarchy. Most organizations today encourage managers to delegate authority to the lowest possible level to provide maximum flexibility to meet customer needs and adapts to the environment. But at HBL no such system prevails the managers try to keep as much of the authority as they can and if some authority is delegated it is sure that it will be misused.