CHAPTER 01

1.1 Meaning of Bank

The word “bank” has been derived from the French word “banque” or bancus which means bench,
office or institution for the keeping, lending and exchanging of money. Some authorities have the
opinion that “Bank” is derived from the “Germen” word back which to the meaning of “joint stock
fund”. The bank is a financial institution that borrows money from one party and lends to the other
party (Government, individual, business) and the difference between borrowing and lending rate
of profit/Interest for the bank. Bank borrows and lends money on interest basis. Banks are
classified according to their sphere of activity; the main types of banks are as under.

• Commercial bank

• Industrial banks.

• Agricultural banks.

• Saving banks.

• Exchange banks.

• Cooperative banks

1.1.1 Commercial Bank

Commercial is engaged in performing the routine duties of banking business. Such bank collects
the money from the people (as borrowing) and extends the same money as a loan for development
purposes. Commercial bank plays a vital role in the economic development of a country by
performing the variety of function as given below:

1. Accepting of deposits (Current, saving and fixed account).

2. Making loans and advances (overdraft, cash credit, discounting bill).

3. Agency services to customers (Collection of cheques, dividends, electricity, water and gas
bills, and sale of securities, and acts as a trustee.

4. General utility services (Foreign business, Issue traveler cheques,

providing trade information).

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1.1.2 Industrial Bank

The bank meets the credit needs of the industries for short and long term. The funds are required
for purchase of raw material, payment of day-to-day expenses, machinery, building extension and
replacements.

1.1.3 Agricultural Bank

This bank provides loans to farmers for purchase of seeds, fertilizers, implements, fencing,
payment of land and improvement of land and equipment’s. The main purpose of the bank is to
develop agricultural sector.

1.1.4 Saving Bank

The bank collects saving of people having low income. The people can open account in saving
bank. They can take money back during working hours. A notice is necessary if the amount
exceeds a certain limit. The purpose of this bank is to develop saving habits among the people
with low earning.

1.1.5 Exchange Bank

The exchange banks have their head officers in foreign countries. Such banks deal in foreign
exchange. The banks offer finance to foreign traders import and export of goods.

1.1.6 Co-operative Bank

The bank is opened by persons of similar occupation living in same areas for providing banking
facilities. The bank is helpful to farmers and small producers. In Pakistan, the co-operative bank
is registered under the co-operative societies act.

1.2 Historical Development of Bank

History of bank is very old; the history of bank is traced to as early as 2000 B.C. The priest in
Greece used to keep money and valuable of the people in temples. Its origin is also traced to early
goldsmiths. They used to keep strong safe, for storing the money and other valuable of the people.
People with surplus money deposited with them. The first stage in the development of banking
was the acceptance of deposits from people.

Later on, goldsmiths began to issue receipts for the money deposited with them to settle
transactions. These receipts were used in payment of debt and acceptable to all. This was the
second stage towards the development of banking. When goldsmiths realized that they had surplus
2
money therefore they intended to lend some portion of money to he nearly traders and merchants
who constantly requested for loans This business was quite profitable and they instead of charging
interest from depositors began to give interest on the money deposited with them to attract more
people this was the third stage towards the development of banking.

They also planned to allow the customers to withdraw in excess of the amount deposited to meet
the customer’s needs. This facility is called overdraft and they used to keep some portion of money
for this purpose. After some time, there was then started too much confusion in the banking system
and they were not able to meet the demands of customers. This failure on the part of money lender
to return money caused distress among the people.

To overcome this problem people felt that there must be a bank which control the banking
activities of different lending organization. As a result of conference held in 1548 at Nuremberg.
The decision was taken in favor of establishing a bank that regulates the banking activities.

The first bank was found in Geneva in 1587. Later on, many other banks were established will the
same objective. We can conclude that commercial banking system actually developed in
nineteenth century. Now a day the banking activities has greatly increased commercial banks are
now multi serviced organizations and play an important role in financial markets and in the
economic development of the country.

1.3 Introduction of Bank of AJK

The Bank of Azad Jammu and Kashmir with a network of 52 branches clubbed in three zones is
actively engaged in resource mobilization through customized saving schemes and channelizing
the them in the shape of various loans schemes for productive use.

The bank is being transformed through the implementation of CORE Banking software which
provides facilities of online banking to its customers. The bank is investing in human capital for
their customer service orientation and providing business solutions to its customers.

As a state-owned bank, a number of initiatives have been taken in various fields which include
MOUs with AJK Government for undertaking financing activities in the fields of agriculture,
livestock, Small & Medium Enterprises (SMEs), microfinance. Besides, bank has tailored various
financing schemes for agriculture- both for production and development activities, commercial
activities and consumer finance. Uniqueness in providing banking services is streamlined
processing, lower markup rates and no hidden charges.

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The bank is actively engaged in promoting home remittances by active participation in Pakistan
Remittance Initiative (PRI) scheme of GOP, and making agency arrangements with one of the
leading exchange company “MONEYGRAM”. Under these arrangements a fast and convenient
payment system is in place for payment of inward home remittances in minutes time through the
bank also offers safe custody and safe deposit facilities on minimal rates. Efforts are being made
for acquiring scheduled bank status which will enable the bank to provide banking services. Good
corporate citizenship is an integral part of everything we do at BAJK. We place our
responsibilities as a good corporate citizen at the core of our corporate management. As we
contribute to the creation of a prosperous, comfortable and sustainable society, we are focusing
on wellbeing of people and socio-economic development of state, philanthropy and support in
fields of community development, youth activities, sports, education and health.

1.4 VALUES of Bank of AJK

Integrity

For us, integrity means a synergic approach towards abiding our core values. United with the force
of shared values and integrity, we form a network of a well-integrated team.

Meritocracy

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

Team Work

Our team strives to become a cohesive and unified force, to offer you, the customer, a level of
service beyond your 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.

Culture of Innovation

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

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1.5 GOALS OF Bank of AJK

1. To mobilize private savings and public funds for diverting the same into productive
channels and ensure their availability. To promote industrial agriculture and socioeconomic
process through the active participation of private and public sector in the state.

2. Help under developed areas and create employment opportunities, especially in the rural
areas of the state. Further, to guide and assist the people of Pakistan serving overseas to effectively
and profitably invest their foreign savings in the state as well as in other parts of Pakistan.

3. Create a diversified and sound portfolio for utilization of idle funds and their investment
in the existing and new ventures especially in the pioneering of high-techs agro-based export
oriented and engineering project to ensure maximum returns.

4. Participative and seek the share of the country in the capital market of Pakistan by way of
subscription through locally peopled resources in the leading stock exchange of the country and
eventually paving the way for establishing a stock market in the state.

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1.6 Organizational Structure of Bank of AJK

Members of Board of Directors

Ch. Latif Akbar, Chairman

Fazal-ur-Rehman, Managing Director,

Muhammad Sadiq Malik, Director

Sardar Naeem Ahmed Shiraz, Director

Farhat Ali Mir, Director

Sardar Muhammad Farooq Tabassam, Director

Ch. Muhammad Saeed, Director

Muhammad Ahmed Shaikh, Director

Ch. Javaid Iqbal, Director

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CHAPTER 02

OPERATIONS OF THE ORGANIZATION

2.1 Departments of BAJ&K

The departments of BAJK are as follow,

• Clearing Department

• Remittance Department

• Credit Department

• Account Department

• Internal Control Department

• Cash Department

2.1.1 Clearing Department

Collection of cheques receive from customers but drawn on other banks are called
Clearing. From the customers receiving the instruments deposited and posting the amount of
instrument in credit of customer’s account if a checkup returns from the concerned bank, the
customer account is debited. On receipt of the instrument the slip given to the customer and
crossing stamp is put on the instrument. As well as Clearing stamp and “payee account credited”
are put on the instrument and the voucher. This facility is provided by Clearing House. In one city
clearing house facilitates different banks, to get their cheque drawn upon other banks to be cleared.
Chaques lodged in clearing constitute. In Clearing Constitute Two Types of Clearing

• Outward Clearing

• Inward clearing

2.1.2 Remittance Department

From one place to another the Remittance department deals with the transfer of money. The one
of the key function of the bank all over the world is transfer of fund or remittance of fund. Through
banking channels Remittances save the time, less the cost and also reduce the risk which is
involved in physical transportation of money from one place to another BAJK transfer money in
the following ways.

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• Pay Order

• Demand Graft

• Mail Transfer

• Telegraphic Transfer

• Letter of credit

• Travelers Cheque

2.1.3 Account Department

Most important department of the BAJK Branch is the opening of the account as this is a contract
between the customer and banks. As per this contract all future transaction/operations are carried
out and any deviation may jeopardize the bank’s interest. By opening an account at a bank, a
person becomes a customer of the bank. The customer can open following accounts in BAJK.

• Current account (C A/C)

• Profit and loss sharing Account (PLS A/C)

• Fixed Deposit (FDR/TDR)

2.1.4 Credit Department

Profit seeking is the main motive of bank. It always attracts surplus balance from the customer at
low rate of interest and makes advances at a higher rate of interest to different individual and
business firms. The most sensitive and important department of the bank is credit department.
Through this department usually major portion of profit is earned. The job of this department is
to make proposal about the loans. The advance Department receives application from intending
borrowers. The advance departments further process the application and after analyzing they
decided whether to prove the loan or not.

2.1.5 Internal Control Department

The role of branch compliance department is to reconcile the prearranged frequencies, investigate
long pending reconciliation item to ensure correct treatment every half year. Different types of
activities as, plans, attitude, policies, and efforts of people are integrated by the internal control
and it provide reasonable assurance that the organization will achieve its objectives and mission.

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2.1.6 Cash Department

The following books are maintained in the cash department.

• Receiving cashier books

• Token Book

• Paying cashier Book

• Scroll Books

• Cash Balance Book

When cash is received in counter, it is entered in the Scroll book and cash receiving cashier book.
At the close of the day these are balanced with each other. When cheque or any negotiable
instrument is presented at counter for payment, it’s entered in the token book and token is issued
to the customer. The token and cashier make entry in the payment book and after that payment is
made to the payee. At the closing of the day, the token book and paying cashier book is balanced.

This is very important department because cash is the most liquid asset and mostly frauds are
made in this department, therefore, extra care sis taken in this department and nobody is allowed
to enter or leave the area freely. Mostly, cash area is grilled and its door is under the supervision
of the head of that department. Officer checks the books maintained in this department.

2.2 Products of BAJK

2.2.1 Current Account

• Free to Investors

• Individuals, corporations, organizations and government departments can open accounts

under the scheme.

• The Accounts may be opened singly in one name or jointly in two or more names.

• The Accounts shall be opened with an initial/minimum deposit of Rs. 500/-

• There is No Withdrawal Limit for customers.

• No Profit will be paid on Current Account.

• No Zakat will be deducted on Current Account.

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2.2.2 PLS Savings Accounts

• The Accounts shall be opened with an initial/minimum of Rs. 100/-.

• The Accounts may be opened singly in one name or jointly in two or more names.

• No withdrawal Limit.

• Profit will be paid on Six Monthly Basis.

• Withholding Tax will be deducted out of profits payable to the Account Holders.

• ZAKAT is not deducted on deposits if Zakat Exemption Certificate (Form CZ-50) is

provided.

2.2.3 Special Deposit Accounts (SDA)

• Free to Investors.

• No Withdrawal Limit.

• Individuals, corporations, organizations and government departments can open accounts

under the scheme.

• This is an operating account

• The accounts can be opened in individual or joint names.

• The deduction of Zakat and Withholding tax will be applicable as per law of the land.

• Profit is paid on daily product basis.

• Profit payable on half yearly basis.

2.2.4 Bemisal Mahana Bachat Account (BMBA)

The Bank of AJK has launched a New & Unique deposit Scheme with value added features. The
details of the new Scheme are as under

• Free to Investors

• Minimum Deposit Limit for profit is Rs. 25,000/-, however, the account can be opened
with Rs. 1,000/-

• Customer can conduct maximum of two debit transactions between 6th and last day of
month. However, withdrawal before 6th of month will not be treated as deviation.
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• Profit @ 5.50 % p.a. payable on monthly basis.

• Free lockers facility will be offered to clients having minimum balance of Rs. 1.00 M.

• Term Deposit Account (TDR)

• The Bank of AJK also offers Bemisal Term Deposits Scheme with salient features as
under: -

• Minimum deposit requirement (0.1M for Individuals & 1.0M for Corporate Customers)

• No profit to be paid in case of encashment before completion of 03 months.

• Short term financing would be available with 10% margin.

• The deduction of Zakat and Withholding tax will be applicable as per law of the land.

2.2.5 General Term Deposit Accounts

• The Bank of AJK also offers Term Deposit Accounts where deposits are accepted on
issuance basis with different maturities from 03 Months to 5 Years.

• The deduction of Zakat and Withholding tax will be applicable as per law of the land.

2.2.6 Running Finance

Facility by way of Running Finance is extended to meet the working capital requirements of the
customers. It may be of temporary nature or may be available as a regular credit line. A realistic
assessment of the customer’s requirements is made to determine the extent of the limit. The
purpose and consideration for the facility should be clearly spelled out. The advance should be
business-related. The credit worthiness of the customer should be undoubted. The facility may
be secured by one or more type of securities. It is essential that the security and charge
documentation formalities should be completed prior to disbursement of the facility.

2.2.7 Demand Finance

This facility is allowed for a specific purpose with a pre-determined date of final adjustment.
Repayment may be either through periodical installments or by way of lump sum adjustment. The
branches monitor the end use of funds to ensure that they are utilized for the purpose for which
they have been disbursed. E-CIB report must be clear. No any default/Write-off history should be
in this report. As in the case of all advances, meticulous attention is paid towards compliance with
the State Bank of Pakistan’s Prudential Regulations for banks. In this respect the banks per party

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lending limit, linkage of the borrower’s equity with their total facilities, obtaining financial
statements, adherence to financial ratios by the borrower etc. need to be particularly looked into
to ensure compliance with these regulations.

2.2.8 Advance Salary Program

The Bank of Azad Jammu and Kashmir offers "The Bank of Azad Jammu and Kashmir Advance

Salary Program” for Permanent Employee of the Government, Semi Government Departments
and Autonomous Corporations. In our Advance salary Program, an employee can take up to
fifteen (15) take home salaries in five years tenure. The average of last three months’ salary or the
current/last month salary slip/certificate amount, whichever is lower, will be taken as a base salary
to calculate the advance salary amount. If a person wants to avail the scheme for less than five-
year time period, the number of salaries will be decreased depending upon the time period and
debt burden. The tenure and number of salaries are as under.

Employer will provide undertaking that borrower’s Salary and end of service benefits will route
through his/her Salary A/C maintained at The Bank of Azad Jammu and Kashmir during the
tenure of the loan and his/her end of service benefits are more or at least equal to the amount of
Advance

Salary required. Bank reserves the right to reject any application without assigning reasons
thereof. The applicant will undertake to inform the Bank as and when there is a change in address
/ employment. The terms & conditions mentioned above are subject to modification from time to
time solely at Bank's discretion.

2.2.9 Bank of AJK Car Loan Scheme

The Bank of Azad Jammu and Kashmir offers you the most convenient and affordable Car
Finance

Scheme "The Bank of Azad Jammu and Kashmir Car Loan Scheme” empowers you to have your
dream car in a simple and quick manner.

Product Benefits & Features are as follow,

• Hassle-free processing

• Personalized service

• Low Down payment

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• Early Settlement Option without charges

• No hidden charges

• Lowest Mark-up rate.

• New Vehicles of any brand valuing up to Rs. 1,000,000 will be financed.

• The Flexible Financing period can be 24, 36, 48 or 60 months with our financing up to

85% of vehicle cost.

• Competitive Insurance rates. Insurance will be mandatory where first year's insurance will
be taken up front

• Processing fee will be 1% of finance amount.

2.2.10 BAJK Motor Cycle Loan Scheme

The Bank of Azad Jammu and Kashmir Motorcycle Loan Scheme is lease facility for purchasing
brand new locally manufactured/assembled Motorcycle for personal use.

Product Benefits & Features

• Hassle-free processing

• Low Down payment

• Early Settlement Option without charges

• No hidden charges

• Lowest Mark-up rate.

• The Flexible Financing period can be 12, 24, 36 months with our financing up to 90% of
motorcycle cost.

• Competitive Insurance rates. Insurance will be mandatory where first year's insurance will
be taken up front.

• Processing fee will be 1% of finance amount.

2.3 Services of BAJK

Services of BAJK are as follow,

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2.3.1 Demand Draft

Clients of the bank of AJK are also facilitated by issuance of Demand Drafts. If the client intends
to transfer funds with in the State, the same is done by issuing DD on BAJK branches where as
in case the funds are remitted outside the state, the same is done through UBL as the Bank of AJK
is having agency arrangements with United Bank Limited.

2.3.2 Mail Transfer

Within the State of AJK, remittances are also carried out through Mail Transfer between different
branches.

2.3.3 Payment Order

For payments with in the City, Payment Orders are also issued by all the branches.

2.3.4 Call Deposit Receipts

Call Deposit Receipts are also issued to the Customers of the Bank as well as general public. No
charges are recovered on issuance of CDRs from account holders.

2.3.5 Utility Bills

All the branches of the Bank are authorized to collect Water & Electricity Bills. Collection of

Telephone Bills will be started very soon.

2.3.6 Lockers

Lockers’ facility is available in main branches in three different sizes Small, Medium and Large
on annually fee with one time Security Deposit respectively to the size of locker. Locker holders
need to have an account in the Bank.

2.3.7 Services to Public Service Commission

Designated branches of the Bank collect Application fee of Public Service Commission from the
candidates and issue Application forms. These Branches are

• Main Branch Muzaffarabad.

• Main Branch Mirpur.

• Rawlakot Branch.

• Kotli Branch.
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• Athmuqam Branch.

• Bagh Branch.

2.3.8 Smart Card

The key that enables access to convenient banking services is BAJK Smart Card. For managing
account withdraw cash, transfer funds, pay utility and mobile bills recharge prepaid, Smart Cards
are used as well as also for register for mobile and internet banking service and much more.

2.3.9 Debit Card

BAJK provide a quick payment facility secure and convenient that enables to do purchasing by
using existing BAJK ATM/BAJK Smart Card as a Debit card.

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CHAPTER 03

ORGANIZATIONAL AND INDUSTRIAL ANALYSIS

3.1 Financial Ratio Analysis

Financial analysis is the process of evaluating businesses, projects, budgets and other finance
related entities to determine their performance and suitability. Typically, financial analysis is used
to analyze whether an entity is stable, solvent, liquid or profitable enough to warrant a monetary
investment. When looking at a specific company, a financial analyst conducts analysis by focusing
on the income statement, balance sheet and cash flow statement.

Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans
for business activity, and identify projects or companies for investment. This is done through the
synthesis of financial numbers and data.

One of the most common ways to analyze financial data is to calculate ratios from the data to
compare against those of other companies or against the company's own historical performance.
For example, return on assets (ROA) is a common ratio used to determine how efficient a
company is at using its assets and as a measure of profitability. This ratio could be calculated for
several similar companies and compared as part of a larger analysis.

The accounting ratio can help to analyze the effectiveness of the organization. By comparing ratio
of two similar nature business we can estimate how the business is progressing. Similarly, figures
are only comparable if they have been built up on a similar basis. The sales figures of company x
which treats items as sale only when cash is received cannot be properly compared with company
y which treats item as sales as soon they are invoice.

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3.1.1

THE BANK OF AZAD JAMMU AND KASHMIR

STATEMENT OF FINANCIAL POSITION

AS AT DECEMBER 2014
Note 2014 2013
ASSETS Rupees in ‘000’
Cash and balances with treasury banks 6 300,844 306,368
Balances with other banks 7 3,368,668 3,628,344
Lending to financial institution 8 --- ---
Investments 9 1,172,192 203,549
Advances 10 2,256,907 1,678,147
Operating fixed assets 11 111,354 97,983
Deferred tax assets ------ --------
Other assets 12 375,087 290,032
7,585,052 6,204,423
LIABILITIES
Bills payable 13 5,551 4,460
Borrowings ----- --------
Deposits and other accounts 14 6,642,949 5,367,895
Sub-ordinate loans ------ ---------
Liabilities against assets subject to finance lease ------- ----------
Deferred tax liabilities 15 488 3,280
Deferred Government grant 16 9 18
Other liabilities 17 110,822 86,248
6,759,819 5,461,901
NET ASSETS 825,233 742,522

REPRESENTED BY
Share Capital 18 654,981 654,981
Reserves ------ --------

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Unappropriated profit 155,350 75,347
810,331 730,328
Surplus on revaluation of assets-net 19 14,902 12,194
825,233 742,522
THE BANK OF AZAD JAMMU AND KASHMIR

STATEMENT OF PROFIT AND LOSS ACCOUNT

AS AT DECEMBER 31,2014
Notes 2014 2013
Rupees in ‘000’
Mark-up / return / interest earned 23 723,400 561,905
Mark-up / return / interest expensed 24 377,681 319,836
Net mark-up / interest income 345,719 242,069
Provision against non-performing loans and advances 10.6 57,511 26,174
Provision against lending to financial institution 8.1 (4,666) (8,000)
Provision for diminution in the value of investment 9.3 ------- -------
Bad debts written off directly ------- -------
52,845 18,174
Net mark-up / interest income after provisions 292,874 223,895
NON-MARK-UP / INTEREST INCOME
Fee, commission and brokerage income 19,605 15,078
Dividend income 4,433 6,810
Income from dealing in foreign currencies ------ ------
Gain on sale of securities – net 25 29,712 21,258
Unrealized gain / (loss) on revaluation of investments ------ -------
classified as held for trading ------- -------
Other income 26 2,745 2,217
Total non-markup / interest income 56,495 45,363
349,369 269,258
NON-MARK-UP / INTEREST EXPENSES
Administrative expenses 27 243,351 206,658
Other provisions / write offs ----- -------

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 Other charges ------ -------
Total non-markup / interest expenses 243,351 206,658
PROFIT BEFORE TAXATION 106,018 62,600
Taxation – current 29,108 16,501
Previous year ------ --------
deferred (3,093) (329)
28 26,015 16,172
PROFIT AFTER TAXATION 80,003 46,428
Basic/ diluted earnings per share – Rupees 29 1.22 0.72
Source: Annual Report 2014

3.1.3 Ratios Analysis

The accounting ratio can help to analyze the effectiveness of the organization. By comparing
ratio of two similar nature business we can estimate how the business is progressing. Similarly,
figures are only comparable if they have been built up on a similar basis. The sales figures of
company x which treats items as sale only when cash is received cannot be properly compared
with company y which treats item as sales as soon they are invoice.

Liquidity Ratios

1) Current Ratio = C.A / C.L

2014 2013

C.A 6101915 5051385

C.L 1358602 986713

C.R 7.46 5.11

Comments: Current ratio shows the liquidity position of an organization. The bank of Azad
Jammu Kashmir has 7.46 rupees to pay 01-rupee liability. And it’s a favorable situation.

19
2) Working Capital = current assets-current liabilities
2014 2013

Current assets 6101915 5051385

Current liabilities 1358602 986713

Working capital 4743313 4064672

Comments

This ratio shows how efficiently W.C be operating to generate sale.

Long term debt paying ability ratio

3). Debt Ratio=Total liabilities / total assets

2014 2013

Total Liabilities 6759819 5461901

Total Assets 7585052 6204423

0.89 0.88

Comments

Debt ratio shows the financial position of an organization. In 2013 is better than as compare
to2014 because in 2013 debt ratio is lower than as compare to 2014.

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4) Debt/equity Ratio: total liabilities / shareholder’s equity
2014 2013

Total liabilities 6759819 5461901

total
Shareholder’s equity 825233 742522

8.19 7.35

Profitability

5) Return on Investment (ROI) = EBIT / Average long-term liability owners’ equity

2014

EBIT 106018

Average long-term
liability owners’ equity 437203

0.24

Comments: If we invest 01 rupees in assets then our income is 24 paisa.

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6) Return on equity Ratio = EAIT / average owners’ equity
2014

Earning before dividend 80003

Average total equity 7838775

0.01

07) Return on Assets = EBIT / Average Total Assets

2014

EBIT 106018

Average total
assets
70447375

0.15

Comments: If we invest 01 rupees in assets our income is 15 paisa.

3.2 Porter’s Five Forces Model

This approach is widely used for competitive analysis. It is because of the high intensity of
competition among companies there five main competitive forces.

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3.2.1 Rivalry Among Competitive Firms

It is a very powerful force among the competitive forces the strategies pursued by one firm can
be successful only to extent that they provide competitive advantages over the competitor. These
competitive strategies may be lowering prices, best quality series. The AJK BANK offering very
low charges a demand draft, telegraphy transfer, mail transfer and give other additional services
to the customers and to the Nation.

3.2.2 Potential Entry of New Competitors

Whenever new firms can easily enter a particular industry, the competition increases. The gout
restriction, tariffs, patents etc. can stop new firm to enter into the business as per Banking industry
is concerned this market is already very situated in Pakistan and there are banks with quality
services and low charges. So, there is no threat to AJK BANK from potential entry.

3.2.3 Potential Development of Substitute Products

This is the third factor affecting the competitions. There may be some other product can be
substitute the product of that industry. For example, banks offering sawing schemes in Pakistan
and these schemes are also offered by GPOs in Pakistan so they must compete them in this field.
If they offer low rates than GPOs so people will go to deposit in GPOs. People concentration high
rates so that’s why sawing PLS accounts are more than current accounts. The next examples will
ATM, which substitute presenting cheques at counter and encash it. Luckily AJK BANK is
stronger in this field. It must further improve in this field to compete the competitors.

3.2.4 Bargaining Power of Suppliers

The bargaining power of supplier affects the intensity of competition, especially when there are a
large number of suppliers. In case of banks the suppliers are customers they supply the money to
banks. Now they must offer good services, quality, safety and Low charges etc. to customers. In
this field AJK Bank Limited is very good as it offers good quality services to customers. They
charge low charges on remittances. So that’s it is a competition to other banks.

3.2.5 Bargaining Power of Consumers

When customers are concentrated or large, or buy in volume, their bargaining power represents a
major force affecting intensity of competition. Now the number customers in Pakistan for banks
are very high. Banks offering variety of products and services to their customers. AJK BANK has

23
a large number of customs. Now it must offer good services and products to their customers to
attract them to come to AJK BANK.

3.3 SWOT Analysis

AJK BANK has very effectual net of branches all over the country. Each 10th Pakistani is account
holder of this bank. AJK BANK has made enormous savings in almost all the essential economic
sectors of Pakistan. AJK BANK not only has made investment in commerce but also in small
scale industry as well. AJK BANK has well-organized & a smaller amount of technical set up.
AJK Bank Ltd. has introduced monthly revenue plan that provides almost maximum interest rate.
ATM was introduced in Pakistan by AJK Bank Ltd. Master Card facilities are also accessible to
the customers. AJK BANK is measured to be a very sound bank in the financial circles. It is the
bank where the clientele can securely keep their money as long as they want.

In SWOT analysis the most excellent strategies accomplish in organization’s mission by

• Taking advantage of opportunities and strengths.

• Reducing the effect of its threats and

• Evading its weaknesses.

3.3.1 Strengths

• A proficiency or potential that facilitates AJK BANK to visualize and put into practice its
strategies.

• The representatives of AJK BANK are considered as one of the most competent
professionals in the banking world.

• I noticed that AJK BANK employees cooperate with their clients as if they are their
personal friends and talk about their problems as their own.

• AJK Bank Limited has acquired a consistent and easy to use internal computer system.
All information regarding the transactions in customers’ deposits has been automated.

• AJK BANK upholds its data appropriately.

• AJK BANK has very good quality security arrangement.

• AJK BANK is the bigger commercial bank in Pakistan with the system of 58 domestic
branches.

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• AJK Bank Ltd. spotlights on consumer banking by rewarding schemes, products and
services suiting best to the requirements and demands of the customers.

• AJK BANK has opened all its branches at marketable regions so that the customers face
no problems in reaching to the bank.

• The bank is all the time on the look to get better its services mutually to the domestic
customers.

• Human resources development and introduction of new technology towards contemporary

banking.

• Having prospective to meet the competitive environment in the market.

• Customer takes benefit from the services at the housing localities

3.3.2 Weaknesses

• Maximum number of branches carrying out the proper maintenance and complexity in
providing identical working atmosphere at every branch

• Inferior organization of revival of the system is a danger to bankruptcy.

• Be deficient in customer feedback.

• Little job contentment.

• Pitiable ATM’s Service

Irregularity in efficiency and working environment due to the largest of branches.

• Sense of uncertainty in the employees allocated at little money-making branches due to

the downsizing.

• Females feel nervous in an environment in the middle of the male workers.

• Prey of political, legal and socio-cultural stress

• Short of professionalism in the branch employees frequently.

3.3.3 Opportunities

• Huge available market prospective in consumer banking.

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• An opportunity exists, in shape of opening of ladies banking segment inside the branch
which is completely a new idea and it will pull customers towards bank.

• Chance for mounting value-added services combined with corporate banking

relationships, cash management services to large and medium sized corporate clients.

• Emergent strategy of government on business and commerce sector provide AJK BANK
opportunities to take return of these policies to meet professionally with the business people to
solve their problems with the instant cash and investment facilities.

• Government is taking very courageous steps to endorse Information Technology in

Pakistan. AJK BANK has an opportunity to recover its technology.

• Huge international net which mainly emphasizes on trade finance with Pakistan can be
operated to valve trade activities in other markets. In addition, services such as cross border /
offshore financing for corporate customers can be improved.

• Customer advice on diverse products and accounts has really improved the bank
performance and encouraged the ambiance for other potential policies.

AJK Bank Ltd. also has an opportunity to enlarge its new technological expansion like; tele-
banking and internet banking facilities in a way to serve the customer more competently.

• E-banking facility too is an innovative opportunity which is a prosperous business in

foreign countries and can also be here, if AJK BANK takes the step ahead.

• Due to well-organized and expert management group, AJK BANK can also develop

and enlarge its foreign business productively.

• AJK Bank Limited provides opportunity to make use of its abilities and efficiencies in
leasing business.

3.3.4 Threats

• Consolidation in the banking segment ensuing in increased rivalry.

• Scarcity of qualified and focused personnel at minor managerial and officer stage.

26
• The danger of irregularity and government policy concerning about business and
economics sectors, especially political and regional situation which makes the environment
doubtful.

• Increasing global technological progression.

• Firm regulation by government over credit conveniences to the customers as poorly as to

meet the prudential.

• Loss of assurance of out of the country customers due to freezing of accounts.

• Facing more opposition by overseas banks in the mark.

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CHAPTER 04

MY INTERNSHIP RESPONSIBILITY

4.1 Introduction to the branch

The AJK Bank Khuiratta Branch has following departments

• Account Department

• Remittance Department

• Cash Department

• Finance/ Credit Department

• Admin Department

• Computer Department

Now I explain these departments separately and describe activities performed by me at these
departments;

4.2 Activities Performed by Me at the Bank

4.2.1 Account Departments

Deposits are important to the bank as a backbone is to the body of a man. They are the lifeblood
of the bank. AJK Bank and all other commercial banks perform the function of deposit accepting
from the general public by offering suit AJKs rates of interest on them, or on simply a promise to
repay on demand.

4.2.1.1 Opening of account by an individual

After entering into bank premises, the person goes through the following steps for opening an
account in the bank and for becoming a bank customer.

An Introduction

The first important step to take place in bank is to get satisfactory introduction of the person, who
wants to become bank’s customer. This introduction is made from the person /party who respect
AJK and honor AJK and have an account with the bank. In AJK (AJK Bank Khuiratta Branch)
the branch manager takes great care of this step and gets introduced with the person himself. His

28
main intention is to determine the prospective customer’s integrity, respectability, occupation, and
nature of business he is doing at the time of opening an account.

The person who wants to open account in AJK, first of all submitted copy of AJK identity card
because the bank verifies the data of his clients from National Data Base and Registration
Authority (NADRA). For this purpose, AJK operates the software of NADRA.

Account Opening Form and Specimen Signature Card

Now the person is provided with an application form known as Account Opening Form.

This form contains;

• Title of account

• Address

• Computerized Identity AJK Card number

• Telephone No. (Office and Residence)

• Introductory reference (all mentioned particulars of introducing him)

• Signatures of the applicant

• Amount deposited

• Check book series No.

The customer attaches a copy of his AJK Identity Card, also copy of two guarantors who already
have their accounts in the same branch, with the account opening form.

Specimen Signature Card

Specimen of signatures will be obtained from depositor at the time of opening his account. A
specially designed card is used for this purpose; the card must be countersigned by an official of
the bank not below the rank of an officer.

Account Opening Register

Now the name of the customer will be recorded in account opening register, and from here the
account no. of the customer will be written on (top most corners) account opening form and on
specimen signature card.

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Issuance of Cheque Book

The cheque book will ordinarily be issued to all customers desiring to have chequing facility.

Cheque book consists of 10, 28, 80, or 100 leaves depending upon customer requirement.
Customer can withdraw money by signing a cheque and writing the amount he wants to withdraw
from his account. A special cheque book register is kept entering the name of the person having
cheque book.

Issuance of Pass Book

Pass Book is another important type of book handed over to the customer as he opens the account
with the bank. The withdrawal and deposit of money is recorded date wise in this book.

Recording into General Ledger

The concerned officer records the name and amount deposited with the bank into general ledger.

Separate ledgers are maintained for different types of accounts e.g.

• Current Account Ledger

• Saving Account Ledger

• Fixed Deposit Account Ledger

• Call Deposit Account Ledger

As and when customer will deposit the money, amount will be credited in general ledger and the
withdrawal will be followed by a debit entry in the ledger.

4.2.1.2 Types of Accounts Maintained by AJK Bank Khuiratta Branch

AJK Bank maintain following types of accounts;

Current Account

This account is also known as running balance account. Simply we can say “A bank account
which may be used to lodge payments or to withdraw money on demand.”

Its main purpose is to serve the businessman. Form number F-83 is provided to the person to open
the account. It is a statutory requirement to maintain current account.

30
Features

• Minimum amount for opening this account is Rs.800

• Any person can open the account with the bank

• According to inter banks agreement interest is not paid on current account.

• Bank act as custodian of money

• Over draft facility is provided to the customers

• Customer can withdraw money through cheque supplied by bank

Profit and Loss Sharing Account

In general, it is also called saving account. To provide interest free banking facilities in Pakistan,
this type of account was introduced in January 1982 after the Islamization of banking.

Features

• Instead of having fixed return in the form of interest the deposited money will be shared
in profit and loss of the bank.

• One can open the account by depositing minimum Rs.100

• Withdrawal is allowed 8 times in the month total not exceeding Rs.18000.

• To withdraw a large amount a notice of 7 days to the bank is necessary.

• There is not any kind of interest is provided on money deposited.

• Rate of profit is declared at the close of each half-year.

• Number of depositors in PLS account in AJK Bank of Pakistan up to31-8-2001 were

4000 approximately.

Fixed Deposit Account

This account is the major source of funds for the banks. This account is best for people who have
surplus money and don’t need such funds in nearer future.

The money is deposited for a fixed period of time.

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Features

• Fixed amount is deposited for fixed period.

Amount of profit can be obtained after each six month.

Higher will be the time period, higher will be the rate of profit, and vice versa.

• A receipt is used for the amount deposited called fixed deposit receipt.

• Period of deposit can vary from 3 months to 8 years.

• The amount can be withdrawn before maturity after surrendering

4.2.2 Remittance Department

Money or something equivalent to money sent by any person to another on another station, either
in cash, money order, postal order, bill of exchange, cheque, bank draft etc is known as a
Remittance. Now I will explain the procedure and importance of Bank Draft: (DD) Bank draft
can be defined as; “An un-conditional instrument in writing drawn by a bank in favor of any
person on a branch of its own bank or any other bank to pay a certain sum of money to his order,
for value received.” From the definition, it is clear that the draft is paid to the beneficiary himself
or to his order. The beneficiary or payee has to prove his identification at the paying office of the
bank, which sometimes causes inconvenience to the public. Draft is the most popular and common
form of remitting funds from one place to another. Any person who may or may not happen to be
the bank’s customer against payment of bank charges can purchase drafts. It is considered to be a
source of income for the bank?

Procedure

In AJK Bank of Pakistan, the drafts are issued on submission of application form (always printed)
filled in and signed by the purchaser with his full name and address. The following particulars are
generally required in the application form;

• Date

• The Name of the Office on Which It Is Drawn

The name of the beneficiary

Amount in words and figures

• Bank exchange rates

32
• The signature and address of the applicant

The draft is issued after the applicant tenders the money. Two authorized signatories of the bank
always sign draft. A separate book “Draft issued register” is kept to record the particulars of the
draft issued. The drawing branch of the bank will give credit to the drawee branch on the same
date the draft is issued; through their account for settling inter branch transactions. Usually all the
banks insert special code number known as CHECK SIGNAL on the relative draft advices for all
the drafts for more than Rs.8000/-.

AJK bank of Pakistan does not pay the drafts before the receipt of relative advice. On receipt of
relative advice, the drawee branch will credit the amount into their “draft pay AJK account” and
each time a draft is paid this account will be debited with the amount of the draft paid.

In case the draft advice is not received, the draft will be paid “ex advice” duly entered in the
"exadvice register” and the entry in the said register will be marked off on receipt of the relative
advice.

4.2.3 Cash Department

Cash department of AJK is given the complete responsibility of handling all receipts
&disbursement of cash as a result of transactions in both local & foreign currencies &near cash
items such as traveler cheque etc. As a consequence, it is also responsible for the book-keeping
of those transactions & the safe custody of cash & near cash securities.

Functions of Cash Department

a. Cash Receipt.

The depositor uses cheque deposit slip for depositing the amount. There are two types of cash
deposit slip

• One for current account holders

• Other for saving account holders.

Both are in different colures for clear identification. There are two parts of cash deposit slips.

• Counter foil.

• Adjacent credit voucher.

33
Procedure

The cashier first verifies all the requirements of the cash deposit slip that whether these are
fulfilled or not & verifies the amount written in words & figures. After that he enters the detail of
the receipt in the ‘Inward Cash Register’. The deposit slip is stamped, cash is received & counter
foil is given to the depositor. The adjacent credit voucher is used for recording & posting purpose.

b. Encashment of Cheque

It includes the following

• Accepting of Cheque paid against

• The cash is cheque of the client. The following points are kept in mind while receiving the
cheque from the client.

• Cheque should be drawn on AJK.

• It should not be postdated.

• It should be a bearer cheque so the word bearer should not be crossed.

• Payment is not stopped by the drawer.

• Amount in words & figure should be same.

• Alteration in date/figure/word require drawer’s full signature, with signature on the

cheque.

• If signatures are not the same then it is returned back otherwise forwarded to computer
terminal.

c. Payment of Cash.

The cheque is cancelled after posting is returned to cashier. The cashier enters the cheque in Cash
Paid register. Pays against the second signature of the receiver on the back of the check.

Nearly every day in the morning time, cash comes from the state Bank of Pakistan through brinks.

This cash is required by the bank to meet the current needs of cash.

4.2.4 Finance/ Credit Department

AJK bank of Pakistan maintains a separate finance section. Its purpose is to grant loans to the
needy people, small & large business concerns, and to industries. Advances in the form of money
34
are the most remunerative use of bank resources. The management of the bank will be very careful
while granting the loans.

• The person/proprietor of the business will go through a long process of application,

documentation, securitization etc. while requesting for loan. After proper satisfaction from the
party concerned the bank will grant loan to the party. Under the Islamic modes of financing from.

1982 onwards, AJK bank of Pakistan gives loans on the basis of “Mark-up” instead of interest.
Mark-up rate is different depending upon the type loan.

4.2.4.1 Procedure for Granting of Loans

The following procedure is maintained by AJK bank while granting loan to any person;

a) Loan Application Form & Specimen Signature Card

The bank provides a prescribed application form to the borrower. The borrower will fill the form.
In that form, the borrower will tell about: -

• Type of the loan.

• Amount of the loan he needs.

• Period of time.

• Applicant will also be provided a specimen signature card, to be filed by him.

b) Declaration of Properties Form:

This form will provide the information about the business he is involved, and also provide the
information about his properties in Pakistan.

4.2.4.2 Granting of Loan

After detailed investigation, and documentation if the finance section finds the party well
satisfactory and feasible then they sanction the finance to the concerned party and the amount is
transferred in his personal account.

4.2.5 Computer Department

AJK Bank Khuiratta Branch its own computer department which is responsible to store the record
of all bank transactions. This department is supervised by an IT Specialist who is the administrator
of the computer department. This department performs the following duties;

35
4.2.5.1 Duties of Computer Department

• All the cheques, receipts and deposit slips are posted in the computer is the key
responsibility and duty of this department.

• This department is also responsible to look after the networking system of all the
computers and server.

• This department carried out the duties of installing software and Maintenance of all
computers and printers.

• This department is prints the Daily Day Book (Journal/ ledger) on daily basis and Bank

Book (Bank reconciliation Statement) when accounts holders required and demanded.

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CHAPTER 05

CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion

The main source of the economic development in every developed and developing country is the
commercial banks. Especially for the developing country like Pakistan, banks prove to be a
backbone of the economy. As for as AJK Bank Khuiratta Branch is concerned, its story is a part
of the struggle for economic development. At the time of independence, the Hindus controlled
our economy. After many stages of its evaluations and development the AJK Bank replaced
Imperial Bank of India in 1952 and at this time it is the one, largest bank for the economic
development in Pakistan.

The AJK Bank is the only nationalized bank in Azad Kashmir. This bank is also working as central
bank. All the other commercial banks have been privatized. For the smooth and continuous
running in its operational activities the AJK Bank has been divided into different departments and
during my internship program at the AJK Bank Khuiratta Branch. I got training practically in
following departments.

• Deposits Department

• Clearing Department

• Advance Department

• Remittance Department

• Cash Department

These departments are well organized and esteemed institutions. I am feeling pleasure because
these departments made my mental horizon and gave me practical insight and courage. There are
many challenges for the AJK Bank of Pakistan, like privatization, information technology, world

trade organization, corruption etc. There are so many other problems for the bank. But the bank’s
performance is brilliant in this regard and its growing trend of future will be the prosperity of the
country as well as the nation.

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5.2 Recommendation

During their internship period at AJK Bank I have come across certain aspects which need some
attention and improvement. I would like to give a few suggestions and recommendations which
might assist in the advancement and achievement of the bank.

Computerization in Banking

AJK Bank has computerized its accounts but it has computerized its daily counter services.

Computerization its accounts but it has not computerized its daily counter services.
Computerization of all the branches may be a difficult task, but it could result in a lot of saving
for the bank. AJK Bank has computerized its accounts but it has not computerized its daily counter
services. Computerization of all the branches may be a difficult task, but it could result in a lot of
saving for the bank.

Evening Bank

In big cities and especially the branches located in commercial areas should extend evening
banking services to its clients as safe keeping of money after close of business house not free of
danger.

Proper Safeguarding of Bank Branches

In these days, many branches of various banks have been looted. In order to avoid any such
incidence, proper safeguarding measures should be taken to protect the life and property.

Room for Improvement in Customer Services

Due to nationalization of banks the customer’s services of the bank are below than the standard.
Employees are not as active as they should have been, they have no concern about customer
service they only do their routine work. This is only possible when they around give incantation
to their employees. In some branches, there is shortage of staff and there is also over staffing in
some branches. With proper staffing improved services could be extended to the clients. In the
AJK

Bank there is a need for the introduction of new saving schemes for low and middle-income
people. Reward System & Timely Promotions

There is no inventive of reward for the performance and hardworking of employees, promotion is
only based on seniority. As a result, employees do not try to work hard. In order to increase the
38
productivity and performance of him employees Bank should raise reward system, so that can
accomplish their objects successfully and discharge their duties efficiently. In many cases officers
are drawing maximum of their, pay scale for year together. In such cases timely promotions should
be made to create enthusiasm amongst its employees.

Effective Chequing System

In Pakistan, an effective chequing system is not prevailing. People prefer to receive payment in
hard cash rather than in the form of a cheque. This is mainly due to the fact that in Pakistan
collection of cheques takes time. In addition, cheques are dishonored mainly due to the reason
there are insufficient fund in the drawer’s accounts. If the collection of cheque procedure is
speeded up and the account holders are made bound be bank to write cheques only when they
have funds in their accounts, an effective chequing system can be developed in our country.

Loans should be sanctioned on Merit

Unfortunately, most of the loans are being given on the basis of political background rather than
on merit. Cash loans are later written off politically resulting in a heavy amount of losses for the
bank. It is suggested that the loan sanctioning body of the bank must consist technical people.
There should be no pressure from the government regarding sanctioning and writing off of the
loans.

Professionalism

AJK Bank, there is a lack of professionalism at most of the levels. Employees feel overburdened
due to the shortage of staff. The bank should create jobs to have competent and professional
persons for various posts, so increase in the number of staff can raise the efficiency of the Bank.

Privatization

The bank’s performance under Nationalizations is through satisfactory to some extent yet if the
bank is de-controlled and privatized by the government, there are possibilities that it will improve
its present performance like other banks that are showing excellent performance after
privatization.

39
REFERENCES

Annual Report 2014. Retrieved from http://bankajk.com/downloads/annual_report_2014.pdf

Bank of AJK. Bankajk.com. Retrieved 24 October 2017, from http://bankajk.com/index.php

Chick, V. (1992). The evolution of the banking system and the theory of saving, investment and
interest. In On money, method and Keynes (pp. 193-205). Palgrave Macmillan UK.

Meenai, S. A. (2004). Money and banking in Pakistan. Oxford University Press, USA.

White, G. L., Sondh, A. C., & Fried, D. (2005). Analysis of Financial Statement. Analysis

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