soneri bank ltd

: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

Internship Report on Soneri Bank Limited. (Gilgit Branch).1

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)


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


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 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


http://personalfinance.byu.edu/?q=glossary/term/126







histories. Unsecured loans typically have higher interest rates, which may range between 12 and 26 percent—sometimes even higher.

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.

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:

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.

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.

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.


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.


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


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

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.

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.

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.


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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http://www.soneribank.com/

soneri bank ltd

Documents