:Consumer loan system of a commercial bank:

Submitted By:
Sadia Akram
(AD- 513934)

Supervised by:
Miss AAsia

DEPARTMENT OF BUSINESS ADMINISTRATION

ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
DEDICATED TO THOSE:

‘Who were truly

great…………..
Who in their lives
fought for life,
Who wore at their
hearts the fire’s centre.
Born of the sun, they
traveled a short while
Toward the sun,
And left the vivid air
signed with their honor’.

(Stephen Spender)

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
 Acknowledgement

I have no words to express my deepest sense of gratitude and thanks to the

Almighty Allah (The Compassionate & The Merciful) Who enabled me to
complete this report. I appreciate Soneri bank staff specially Mr. Nasim Shah
(Manager), Mr. Meherban (Assistant Manager) and Mr. Shah Jahan for their
valuable input and cooperation.

I am thankful to all employees of Soneri Bank who guided me during my report.

The behavior of all the department supervisors was appreciating and encouraging.
I am very thankful to my parents, their prayers and guidance gives me sense of
responsibility and strength to face the dynamics of practical life

TABLE OF CONTENTS

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
 Introduction

Background of study

Purpose of study

Scope of study

Methodology of study

Scheme of Report

SOT Analysis

Strengths of SBL

Weaknesses of SBL

Opportunities of SBL

Threats for SBL

Findings

Recommendations

Conclusion

Bibliography

Introduction
Consumer loan

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
Hide links within definitions Show links within definitions

Definition

Money loaned to individuals (usually on non-secured basis) for personal, family, or

household purposes; as opposed to business or commercial lending. Consumer loans are
monitored by government regulatory agencies for their compliance with consumer protection
regulations such as the 'truth in lending' law. Also called consumer credit or consumer
lending.

Explain the Characteristics

It is important to understand that different consumer loans have different
characteristics—there isn’t just one type of consumer loan. Some of the different
types of loans, which we will compare and discuss in the following paragraphs,
include single-payment and installment loans, secured and unsecured loans,
variable-rate and fixed-rate loans, and convertible loans. The following is a list of
different types of consumer loans and their characteristics:

Single-payment loans: Single-payment loans are known as balloon loans.

Normally, these loans are used for short-term lending of one year or less. They
may also be used to temporarily finance a purchase until permanent, long-term
financing can be arranged; this is why these loans are sometimes called bridge
loans or interim loans. This type of loan is repaid in one lump sum, including
interest, at the end of the specified term—for example, at the end of one year.

Installment loans: Installment loans are loans that are repaid at regular intervals
—for example, every month. Each payment includes part of the principal and
some interest. An installment loan amortizes over the length of the loan, which
means that with each monthly payment you make, more of your payment goes
toward paying off the principal and less goes toward paying for interest. The
amount of interest that you pay each month is calculated based on simple interest.
Installment loans are typically used to finance purchases of houses, cars,
appliances, and other expensive items.

Secured loans: Secured loans are loans that use one of your assets, such as a home
or a car, as collateral to guarantee that the lending institution will get the amount
of the loan back, even if you fail to make payments. Examples of secured loans
include home equity loans and car loans. Because these loans are backed by
collateral, they usually have lower interest rates.

Unsecured or signature loans: Unsecured or signature loans do not require

collateral and are generally offered only to borrowers with excellent credit
histories. Unsecured loans typically have higher interest rates, which may range
between 12 and 26 percent—sometimes even higher.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
Fixed-rate loans: The majority of consumer loans are fixed-rate loans. These
loans maintain the same interest rate for the duration of the loan. Normally,
lenders charge higher interest rates up front for fixed-rate loans than they do for
variable-rate loans. This is because lenders can lose money if market interest rates
increase and the loan rate remains lower than the current market interest rate.

Variable-rate loans: Variable-rate loans have an interest rate that is adjusted at

different intervals over the life of the loan; there is usually a maximum interest
rate that can be charged on the loan, or a cap, as well as a maximum that the
interest rate can increase each year. The interest rates on these loans may change
monthly, semiannually, or annually. The interest rate is adjusted based on an
index, such as the prime rate or the six-month Treasury bill, as well as on an
interest-rate spread. Lenders usually charge a lower interest rate up front for
variable-rate loans because the lender will not lose money if the overall market
interest rates increase.

Convertible loans: Convertible loans are loans in which the interest-rate structure
can change. For example, a convertible loan may start off having a variable
interest rate and then switch to having a fixed interest rate at some predetermined
time in the future; the opposite process may occur as well.

Special Types of Consumer Loans

There are a number of special types of consumer loans, loans that are different
from traditional consumer loans. These include home equity loans, student loans,
and automobile loans. These loans are discussed below.

Home Equity Loans: Home equity loans are also known as second mortgages. In
a second mortgage, you use the equity in your house (i.e., the difference between
what you paid for the house and what you could sell the house for today) to secure
your loan.

The benefits of a home equity loan are that you can usually borrow up to 80
percent of the equity in your home, and the interest payments may be tax
deductible. With this type of loan, you can also get a lower interest rate because
the house is secure—it can’t be moved. One disadvantage of this type of loan is
that it limits your future financial flexibility because you can have only one
outstanding home equity loan at a time. Moreover, a home equity loan puts your
home at risk; if you default on a home equity loan, you can lose not just your
credit score but your home as well.

Student Loans: Student loans have low, federally subsidized interest rates; these
loans are often used to pay for higher education. Examples of student loans that
are available to parents and students include federal-direct loans, plus-direct
loans, Stafford loans, and Stafford-plus loans.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
One benefit of student loans is that some have specific advantages, such as
subsidized interest payments and lower interest rates. Also, you can defer
payment of federal-direct loans and Stafford loans until six months after you
graduate or discontinue full-time enrollment. The disadvantages of these loans are
that there is a limit to how much you can borrow, and, like all debts, you must pay
these loans back.

Automobile Loans: An automobile loan is a consumer loan that is secured by the

automobile that the loan is paying for. This type of loan usually has a term of two
to six years.

Payday Loan: Payday loans are short-term loans of one or two weeks; these loans
are secured with a postdated check. The postdated check is held by the payday
lender and cashed on the day specified. These loans charge very high interest rates
—some payday loans charge more than 500 percent on an annual percentage rate
basis (APR). I recommend that you avoid using these loans completely

Credit Cards:

One of the most widely used forms of consumer loan; Credit cards have got such
a huge user base because of the convenience factor. People use it for shopping at
large retail stores, dining out in restaurants or at petrol pumps. Best thing about
these loans is that consumers can avoid the interest altogether by paying back
shortly after the transaction, otherwise a small percentage is added into the basic
amount on monthly basis as interest.

Introduction

Back Ground of Study:

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
Banking sector plays an important role in the economy of any country by
providing financial services to meet the growing demand of all sectors in the
economy.
Soneri bank limited which was established on September 28 1991, to cater to the
banking requirements of small & medium sized entrepreneurs by providing them
qualitative & competitive services with emphasis on encouraging exports in urban
and rural areas of the country. SBL has brought new products in market to cater
the needs of customers. Thus, it is playing key role in the development of
economy.

Purpose of Study:
The basic purpose of this report is consumer loan system of a commercial bank.
Scope of Study:
In a limited time an internee can not cover every aspect of an organization.
However this report covers study of different departments from financial
prospective and operations carried out in these departments. The main focus is the
credit facilities offered by Soneri bank.

Primary Data

The primary data is collected through following means

 Discussions with staff
 Through personal observation

Secondary Data

Secondary data is collected through following means:

 Through consulting documents.

 Annual reports.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
  Internet
 Books
 journals

History of Soneri Bank

Soneri Bank Limited is incorporated in Pakistan on September 28, 1991, as a

public limited company under the Companies Ordinance, 1984. Its shares are
quoted on the stock exchanges of Pakistan. The bank is engaged in banking
services as described in the Banking Companies Ordinance, 1962. The Rupali
Group is the sponsor of Soneri bank limited. This group is involved in the
processing and trading of polyester and fiber. Soneri bank is a schedule bank
under the license of State Bank of Pakistan.

The first Branch of Soneri Bank Limited formally opened doors for operations in
Lahore on April 16, 1992 followed by Karachi Branch on May 09, 1992. The
bank now operates with forty four branches spread all over Pakistan including
Northern Areas of Pakistan where no other private bank has ventured so far.
Expansion of branches is based on a policy of maintaining a balance between the
urban and rural areas with a view to offering services even in the remote areas of
Pakistan. Pleasant and sophisticated atmosphere has been provided in the
branches which are all fully air-conditioned and computerized.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
2.1 Objectives of SBL:
The essence of business philosophy is to cater the banking requirements of small
& medium sized entrepreneurs, providing them qualitative & competitive services
with emphasis on encouraging exports.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
Consumer Loan of SBL

Soneri Bank Limited offers a full range of corporate, treasury and retail banking
services with emphasis on trade-related activities.

Soneri Car Loan

With increasing demand for auto mobiles in Pakistan SBL has offered to its
customers, Soneri car finance at lowest markup rates to cater the crying need of
customers in year 2002.
 The maximum finance amount is Rs. One million for brand new
unregistered cars.
 Repayment period is one to five years in equal monthly installments
inclusive of markup.
Markup Rates
 Finance repayable with in one year 7.90% p.a
 Finance repayable in more than one year but with in five years 9% p. a.
Down payment is 15% of car price.

Soneri Ghar Loan Scheme:

SBL provides easy and affordable credit facility to those who desire to have an
own home or make repairs / renovation to home already owned through Ghar
financing scheme.
 Maximum individual finance amount Rs. 2.5 million for pre constructed
residential property, and repayment period for this facility is up to 20
years.
 Maximum individual finance amount Rs. 1.0 million or 1/3rd of the value
of the property whichever is lower for repairs / renovation. And the
repayment period is up to 5 years.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
Markup Rates
 Repayable with in 1 year 6% p.a
 Repayable in more than 1 year but within 3 years, 7% p.a
 Repayable in more than 3 years but within 20 years, 0.50% above
prevailing SBP discount rate and minimum 8% p.a .

Soneri Personal Loan:

To meet the expenses for medical, travel, education and advance rent SBL
offered easy and affordable credit facility to their customers through personal
finance scheme.
 Maximum individual finance amount Rs. 0.30 million or 3 times of
borrower’s gross salary, whichever is lower.
 Repayment period is up to 3 years.
Markup Rate
The maximum mark up for this facility is 13% p.a.

Soneri Debit card:

Soneri ATM Card held may be used in addition to Soneri ATM Service, for
making payments against purchases made from sales outlets and payments to
Petrol Pumps displaying acceptance of Soneri bank Who May Use Debit Card
Facility:
All Soneri ATM Card holders:
How to Pay For Purchases
Simply swipe Soneri ATM Card through Point of Sale (POS) Terminals available
at the outlets, enter the ATM (PIN) and amount of Purchase made and the account
linked to Soneri ATM Card shall be automatically debit with the amount of
purchases subject to availability of sufficient withdraw able funds in the account.
POS Terminal shall generate receipt for amount charged to account.
Per Day Limit For Purchases:
Subject to availability of sufficient withdraw able balance in account(s) linked to
Soneri ATM Card, will pay a maximum amount f Rs. 300,000/- per day for

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
purchase against Debit Card. What is more, the per day cash withdrawal existing
limit from ATMs may also be utilized.
Service Charge:
The convenience of using Soneri Debit Card is available at a negligible annual fee
of Rs. 500/ or the prevailing fee as published in schedule of Bank Charge.

Features of Soneri Bank Credit Policy:

Soneri bank limited undertakes the entire requisite care in terms of investigative
work, assessment of risk inherent in the financing and measures envisaged to
secure banks interest against a possible loss.
Following the essential steps that Soneri bank limited takes in this regard.
 All members of the bank staff involved in handling, marketing, managing,
proposing, recommending and sanctioning of credit facility according to
the rules prescribed by head office and the State Bank of Pakistan.
 All credit proposals from branches are to be signed by at least two officers
or approval by the relative regional finance committee (RFC) for review,
approval received directly from branches or through the relative regional
finance committee (RFC) with its recommendations.
 Irrespective of whether or not it is mentioned in a credit proposal the
branches should obtain personal guarantee of each of the directors of
private limited company availing credit facility.
 The State Bank of Pakistan minimum margin requirements must always be
stated in a credit proposal against the respective securities or facilities.
 All relaxations or modifications in the terms and conditions of existing
lines of credit should be mentioned clearly.
 Branches should ensure that all the requirements security documents etc
have been completed before the approved facilities are placed at the
subject parties’ disposal.
 Monthly statements of all credit proposals approved by executive finance
committee (EFC) and regional finance committees (RFCs) during the

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
 month duly signed respectively by president and the general manager are
submitted to the chairman of board of directors.

SWOT Analysis:

SWOT analysis gives a review of an organization, which is comprised of

organization’s strengths, weaknesses, opportunities and threats. On the basis of
SWOT analysis, one can analyze the present status and performance of an
organization and can make conclusions and recommendations.
Strengths of SBL
Strengths are the internal plus points that make an organization strong.
 Soneri bank has got a very good image in the society.
 Soneri bank mainly focuses on its customers.
 Soneri bank has got a very friendly staff.
 Because of the policies of Soneri bank employees are very much
motivated and devoted to their work.
 It has product innovation skills and resources.
 Its online banking facility to its customers has given Soneri bank a
competitive edge over its competitors, ensuring fast and reliable banking
transactions.
 Staff is young and rich in experience and working skills.
 It has got access to all parts of the world, thus also providing services to
outside Pakistanis.
 The environment of all branches is friendly.
 Computerized and reliable service of inland remittances.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
Weaknesses of SBL
Weaknesses are the internal weak points, which every organization has.
 The lower level management lacks clear direction and is not having
the managerial depth.
 Marketing skills of the bank are good but they have little presence at
different media.
 Physical setup of the branch is not impressive.
 Customers having accounts with small amount are not given the same
attention as compared to those with large amounts
 Most of the personnel are not qualified. .
Opportunities for SBL
An external situation, which an organization can benefit from, is called
opportunities for that organization.
 Soneri bank should take interest in the new market segments like IT
business and software business.
 Soneri bank should extend their branches network to other parts of
Northern Areas.
 Increasing credit facilities to lower income groups, thus reducing the risk
of loss improving the image of the bank.
 Increasing need and potential of leasing in Pakistan provides SBL an
opportunity to utilize its skills and efficiencies in leasing business as well.
Threats for SBL
An external situation posed to harm organization’s interest is regarded as threat to
that organization.
 Increasing number of private / foreign banks in the country.
 Global technology advancement.
 Political, economical situation of the country.
 Reducing the rates of savings in different segments of people.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
  Deteriorating confidence of people in bank uncertainties of the
investors.

Credit Department
Credit department is the most profitable area for any bank. It is seen that most of
employees in credit department are not well qualified in the field of finance
Credit Department
To make credit department more effective the bank should hire trained and
qualified graduates. And they should be posted at credit administration division,
relationship manager and credit risk management level.

Conclusion

Soneri bank limited is a well reputed bank in Pakistan. The bank is making
profitable business through out the country and is well ahead in providing the
banking facilities.
Keeping in view the expansion of commercial areas, the bank have to plan for
expanding its activities through out Northern Areas and should open branches in
Gahkuch, Yaseen, Gojal, Astore, Khaplu and Chilas .
The bank should focus on the development of human resources, as human
resources are the asset of any organization; they need to be properly trained. They
should be kept properly informed and updated about the recent changes that are
taking place in the financial sector through proper training.
Recruitment policy of the bank is not clear. The bank never advertised for
recruitment of new personnel, all the process is carried out internally and the bank
management normally employs candidates who are not fit for the required job. It
is suggested that the bank should have clear cut policy for recruitment.

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Internship Report on Soneri Bank Limited. (Gilgit Branch).
 Biblography

 Discussions with staff

• Nasim Sahah ( Manager)
• Maharani Ali ( Assit Manager)
• Shah Jahan (Credit Officer)
• Anwar Jan ( Cashier)
• Karim ( System Coordinator)

 Annual reports. (2003-04)

 Internet(www.soneribank.com)

 Books (Banking Management)

 journals ( Business Recorder)

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Internship Report on Soneri Bank Limited. (Gilgit Branch).