FLEET FINANACING NEED& RISK ACCEPTANCE

CRITERIA (RAC)
By

Channel Finance - Retail Lending

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FLEET FINANCING

Fleet Finance is an auto lease facility designed to target commercial vehicle financing. Currently HBL is offering vehicle
financing under Auto lease and have booked portfolio of Rs.411.00 M in Retail Only. The purpose of the paper is to
highlight the opportunities in transport / logistics sector and offer standard facilities across all HBL regions. Considering
the potential in transport and logistics sector, we seek approval of risk acceptance criteria for commercial vehicle
facilities.

INDUSTRY ANALYSIS

Automobile industry in Pakistan is the second largest payer of indirect taxes after the Petroleum Sector that indicates
volume of industry‘s sales and rising demand of vehicles. Its shares in the GDP of the country via import duties, sales tax,
federal excise duties etc. This industry contributes 16% to the manufacturing sector in Pakistan‘s GDP which is predicted
to increase up to 25% in the next 7 years.

In present scenario, due to rapid industrialization, development of road infrastructure and steady rise in logistics,
distribution and public transportation encourages increasing demand of commercial vehicles. Government profound
interest towards improving infrastructure projects like Ring Roads, 9,574 km long National Highway and Motorway
network - which is 3.65 percent of the total road network - carries 80 percent of Pakistan's total traffic, encourage
transportation & Freight Services. Growth of automobile industry across the world depends heavily on economic growth
and availability of financing from financial institution at favorable terms.
(Source: Economic Survey & Financial times)

Following are some vehicle financing providers in the industry:

 Habib Bank Limited

 The Bank of Punjab
 Bank Alfalah
 Faysal Bank
 ORIX Leasing Pakistan Limited
 Standard Chartered Leasing Limited
 First Habib Bank Modarba

Fleet /Vehicle Financing Providers

Leasing Modarba Commercial

Companies Companies Banks

IMPORTANT FACTS

According to SMEDA, there are 195,000 on-road commercial vehicles operating in Pakistan. Every year five to ten percent
is added to the total number of fleet. The country accounts for 93.1% road cargo in terms of total tons-km transported

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within the country. Not only is trucking (prime movers) the main way for moving goods domestically but it is also an
essential link in the Pakistani export chain for goods shipped by sea and to a lesser extent by air. Truck loads account for
206,404 million tons-km of goods per year.

The logistics sector is not only important for private sector and economic development, but it is equally important in and
of itself as an economic sector with significant growth and investment potential. The export sector of Pakistan moves a
yearly estimated figure of $530.00 million through Logistics out of which the transport sector contributes $480.00 million.
Hence, road transport constitutes $447.00 million as per below mentioned ratio:
(Source: International Finance Corporation – Logistics industry in Pakistan)

Pakistan's Transport Market Share

100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Road Rail Air & Sea

Pakistan's Transport Market Share

Source: Small and Medium Enterprise Development Authority (Smeda)

IMPORTANCE OF THE LOGISTICS SECTOR

Logistics is the process of planning, implementing, and controlling the efficient, effective flow and storage of goods,
services, and related information from point of origin to point of consumption for the purpose of conforming to customer
requirements.

Pakistan’s logistics is an important economic sector with significant growth and investment potential. It is also a key
driver for private sector development, economic growth and overall development. There is a clear relationship between a
country’s logistics performance, lead times and its export performance.

After reviewing Pakistan’s logistics industry our assessment found that while all modes of transportation (road, rail, air,
and shipping) exist, Pakistan’s freight transport is dominated by road transportation. This is similar to most OECD
countries. Pakistan’s weak road transportation infrastructure and services were found to be the biggest challenge facing
the industry.

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SOME OF MAJOR LOGISTICS COMPANIES OPERATING IN PAKISTAN

LOGISTICS COMPANY ESTIMATED NO. OF FLEET

Al-Haj Transport and Logistics 1000
Abu Dawood Logistics Services 200
Agility Logistics (pvt) Ltd 300
BSL Logistics 800
PTN (pvt) Ltd 550
Raaziq Logistics 260
Crescent Logistics Pakistan (pvt) Ltd 250
E2E Logistics (pvt) Ltd. 200
Rahat Carriers 200
Capital Marketing Services 350
TAQ Logistics 200
Truck Burki & Company Pakistan 200

SECTOR WISE LOGISTICS SPENDING IN PAKISTAN

Every manufacturing company seeks logistics services. For this they have supply chain management looking after their
needs. Mostly, companies outsource this service to logistics companies because they do not possess a large number of
fleet of commercial vehicles. Let us now look at companies operating in different sectors of Pakistan and the amount of
distribution costs that they incurring. We have highlighted two companies from each sector to make a reasonable
comparison and to assess the need of logistics accordingly.

ANNUAL
TOTAL
SALES
EXPENDITURE ON PERCENTAGE
SECTOR COMPANIES YR-2014
LOGISTICS IN YR- % OF SALE
(in
2014 (in billion)
billion)
Nestle’ Pakistan Limited 96.457 2.621 2.72%
FMCG
Unilever Pakistan Limited 65.705 1.864 2.83%
GSK Pakistan Ltd 27.882 0.450 1.61%
PHARMACEUTICAL
Abbott Laboratories Pakistan Ltd 19.692 0.375 1.53%
D.G Khan Cement Company Ltd 26.543 1.311 4.94%
CEMENT
Lucky Cement Limited 43.083 2.977 6.19%
Shell Pakistan Ltd 291.362 5.806 1.99%
FUEL
Pakistan State Oil 1187.639 17.574 1.48%
Nishat Mills Ltd 54.444 1.333 2.44%
TEXTILE
Saphire Textile Mills Ltd 25.411 0.382 1.50%
Fatima Fertilizers Co. Pvt Ltd 33.496 0.788 2.35%
AGRICULTURE
Fauji Fertilizers Co. Pvt Ltd 81.240 3.970 4.88%

If we average out the total expenditure on logistics that the companies are incurring in different sectors, the total
percentage comes out to be 2.87%. This means that on an average a company of any size in any sector spends around
2.87% of its total Sales on Logistics. From the above table, it is evident that the need for logistics is necessary in every
sector. Since the fleet number keeps on increasing year by year, the need for financing in these sector creates a window
of opportunity for HBL. Every logistics company adds five to ten percent of new heavy weight vehicles in their fleet
annually to cope up with the demand of the companies of different sectors.

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PRIME MOVER MANUFACTURERS / ASSEMBLERS

Ghandhara Industries Limited (ISUZU), HinoPak Motors Limited and Master Motors Corporation Ltd are three main local
assemblers of Prime Movers (medium and heavy duty) LCVs, Busses and Trucks in Pakistan which provide their services to
all major logistics companies of Pakistan. Vehicles like Hino trucks, Isuzu trucks, Mazda, Shehzore, and Master Canter etc.
are locally assembled and manufactured.
Apart from these, there are Chinese companies operating in Pakistan also providing prime movers on the same
specifications and lesser prices. Some of the known companies are Al-Haj Faw, Sino Truck China and China Futan.
Below is a list of units sold by the manufacturer/assembler in year:

Company Production No. of Units Sold (2014-15)

HinoPak Hino Chassis 1714
Buss & Other Bodies 1517
Hilux Frame 4496
Ghandhara Nissan Produced and Supplied 1527
CBU – imported 87
CKD – locally assembled 856
Ghandhara Isuzu Units sold of UD Trucks 380
Ghandhara Dongfeng CBU – imported 52
UD Trucks (uniflow diesel) 380
Buses & Trucks 1246
Al-Haj Faw Prime mover & Rigids 700

KEY HIGHLIGHTS

FAW is penetrating the commercial vehicle market by providing solid and low priced prime movers. Its rigid truck
category is very high in demand in the market. The demand for locally assembled prime movers of HinoPak, Master and
Ghandhara is relatively low, as they are charging higher prices than the Chinese assembled models. Furthermore, the
logistics companies are also improvising by adding Chinese assembled prime movers into their fleet. The competition
amongst these giants is very tough and is constantly increasing, which from a bank’s point of view is a positive sign to
initiate a product like Fleet Financing.

TYPES OF WHEERLER AND FABRICATIONS

There are five types of wheelers currently operating in Pakistan which include the following:

 22 wheeler
 18 wheeler
 14 wheeler
 10 wheeler
 06 wheeler

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These wheelers, after fabrication are transformed into Oil Tankers, Containers, Open Bed, Half Body, Milk Tankers, Water
Bowsers and Cold Chain. While financing we will be focusing on prime movers only, fabrications will vary on case to case
basis.

Oil Tankers and Bowsers: These are mainly used in Oil Sector. Companies like PSO, Shell, and Total Parco etc. use these
tankers for oil delivery to fuel pumps, industries and power plants. These Large tank trucks are also used to transport a
wide variety of liquid goods such as liquid sugar, molasses, and industrial chemicals and gases.

Mostly used on main routes and majority of these tankers operators provide services under contract carriage with OMC
(Oil Marketing Companies), fuel resellers, industrial chemical and gas manufacturers.

Containers: These are used in almost every sector. Easily fabricated with a container attached on the prime mover, it is
readily available in the market. These vehicles are used to transport containers and carry all kinds of products mainly
connected to import and export goods movement

Full &Half Body: These carriers yield high profits and are used in both main and off routes. Carry all types of products.

Cold Chain Carriage: A cold chain is a temperature-controlled supply chain and its transport falls under highly specialized
logistics. These services are mainly provided under contract carriage. It is a continuous and unbroken cold chain process
or series of storage and distribution activities which maintain a given temperature range. It is used to help extend and
ensure the shelf life of products such as fresh agricultural produce, seafood, frozen food, chemicals, and pharmaceutical
drugs.

Open Bed: These kinds of prime movers carry low risk products and yield low profits. They require minimal fabrication and
are converted into open beds to carry various products.

Milk Tankers and Water Bowsers :Yield low profit earning and carry high risk product.

MAIN ROUTES AND OFF ROUTES

Logistics are divided into two categories, main routes and off routes. Main routes are long journeys for which long
vehicles are used (14, 18 and 22 wheelers). Some famous routes that logistics use are Karachi to Lahore, Lahore to
Karachi, Lahore to Peshawar, Peshawar to Lahore, Lahore to Rawalpindi, Karachi to Peshawar and many more. Rates of
these routes vary accordingly. For e.g. a vehicle travelling from South to North will yield double earning as opposed to a
vehicle travelling from North to South. Maximum rent from Lahore to Karachi is Rs. 140,000/- whereas minimum rent is
Rs. 85,000/- This is doubled if the route is from Karachi to Lahore.

Simultaneously, off routes are detours of main routes. These routes include intercity travelling. Routes to remote areas
where factories and industries are located. Generally, off route rates are 60% lower than main route rates. This is
because running of vehicles in terms of kilometers is very low compared to longer routes. The vehicles used on such
routes are normally 6 and 10 wheelers. Earnings per kilometer in such routes are approximately Rs. 7/- per kilometer.

PROMOTION STRATEGY

In order to strengthen HBL’s policy in fleet financing it is proposed that seminars shall be offered to large
corporates/MNCs for their Logistics services providers. The scope of seminar will cover safety standards, fuel/energy
management, weight management, route management etc. The seminars shall be arranged jointly with companies at HBL
Learning and Development premises at Lahore, Karachi and Islamabad. This will provide an opportunity to HBL to solicit
contract carriage associated with corporates.

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ELIGIBILITY CRITERIA

CRITERIA CONTRACT CARRIAGE CARRIAGE OPERATOR VEHICLES FOR

(SUB-CONTRACTORS) COMPANY USE
Legal Business All type of legal entities other All type of legal entities All type of legal entities
than individuals. other than individuals. other than individuals.
Maximum ORR 8 8 8
No. of years in Operation 3 years 3 years 3 years
New Entities Proof of affiliation required. Not Allowed Proof of affiliation
required.
Proof of existing orders Proof of contract, purchase Payment Not applicable / as per
order, payment evidence or evidence/cheque / the need of the
any other document to validate Invoice / Quotation / customer.
the contract. proof of sub-contractor
agreement etc.
ECIB * Clean Clean Clean
Age of Sponsor/Resident 65 / Pakistani 65 / Pakistani 65 / Pakistani

 In case of any erroneous reporting of past dues in the ECIB, proper third party documentary evidence (clearance
letters / No-Dues Certificates from all banks/lenders of the borrower / credit card statements etc.) supporting
the customer’s claim must be obtained and mentioned in the credit proposal. Moreover, borrowers whose ECIB
report shows historical past dues of 90 DPD or more, shall not be eligible for financing without any plausible and
reliable justification.

RISK ACCEPTANCE CRITERIA – FLEET FINANCING (CONTRACT CARRIAGE)

1. Purpose Financing of Chassis/Prime Movers to logistics, distributions, third party logistics or transport
companies having contracts of Corporate Companies.
2. Facility Type Lease Finance(LF)
 To be offered for new and/or addition to existing fleet.
 Facilities of each customer shall be reviewed annually.
 Sale and Lease Back Allowed.
 Unutilized loan shall exhaust on expiry and fresh projection to be evaluated for further
consideration by CMOs and RM.
 Disbursement shall be made as following: (refer to Annexure A)
New Vehicles P.O. to be issued in favor of Manufacturer/Dealer
Imported New and Used P.O. to be issued in favor of Importer/Seller/Dealer
Unregistered Vehicles
Used Domestic Registered Vehicles P.O. to be issued in favor of Owner/Seller
3. Portfolio Limit Cap PKR 5.00 billion
4. Equity  Minimum Equity for New Commercial Vehicle 20% (If company opts for fabrication, equity
calculation should include the amount of fabrication)
 Minimum Equity for Imported (New & Used) Commercial Vehicle 30% (No fresh fabrication
financing shall be allowed for used vehicles, however, the total value of used vehicle
including fabrication shall be considered for the purpose of equity calculation and financing
thereof)
5. Financing for Fabrication Pay Order in logistics company’s name to be issued for fabrication once the vehicle is re-insured.
Company will provide quotation of fabrication on their letterhead.
Type 06 – 10 Wheeler 14 – 18 Wheeler 22 Wheeler
Bank Maximum Payout 0.5 mln 2.5 mln 3.0 mln
6. Pricing Min - 1 Year KIBOR + 200 bps (kibor will reset annually)
Process charges as per SOC or negotiations of approving authority
Deviation Approving Authority
Reduction in spread by 50 BPS Head Retail/Commercial
Reduction in spread by more than 50 BPS Head Branch Banking
7. Vehicle Type  06 to 22 Wheelers, Vans and Carriers.
 Age of vehicle should not be more than ten years old from manufacturing date at the time

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 of expiry of limit.
8. Financing Tenor 1 to 5 years
9. Business History Minimum 3 years in the field of logistics.
10. Finance Limit PKR 5.00 Million to PKR 500 Million per borrower
11. Financial Tolerance Financing eligible subject to the following:
 Adjusted Leverage: Maximum 2.5 times (net off surplus on re-evaluation of assets) during
the life of loan.
 NOCG: Projected Net Operating Cash Generation for the lease tenor should be positive.
 DSCR: Minimum 1.5 times (Existing and Projected).
 Besides projected NOCG cash flows, 50% repayment should be covered through existing
cash flows of the company.
12. Valuation Valuation of old/imported vehicles to be conducted through CAD
13. Insurance/Tracker Comprehensive insurance along with Car Tracker from following insurance companies:
 Askari General Insurance Co. Ltd
 Adamjee Insurance Company Ltd
 EFU General Insurance Ltd
 Jubilee General Insurance Company Ltd
14. Source of Repayments  Primary source of repayments is companies’ cash flows.
 No grace period allowed. However, under justifiable circumstances SCO will provide
approval.
 Monthly Installments shall be debited from companies given account number or postdated
cheques shall be deposited for payments.
 Secondary repayment is repossession of vehicle.
15. Collateral Coverage  Vehicle ownership (booking/registration) and Insurance in the name of HBL.
 HBL standard control document for assignment of receivables along with notice of
assignment.
 Original excise file to be kept under lock and key by CAD along with copy of registration
book. In case of Capital city Islamabad, where ETO keeps original excise file, CAD to keep
copy of registration book. (Refer to Annexure A).
 Duplicate key under CAD possession.
 Equity shall be paid in advance. (not applicable in lease back arrangements)
 Comprehensive Insurance along with premium paid receipts to be provided to CAD.
16. Deferral for Submission of After Issuance of Delivery Order Seven days allowed to submit ETO slip
Registration Book to CAD Submission of Registration Book Thirty days
If not received within stipulated time, the deferral for additional 30 days shall be allowed for
submitting original registration book to CAD in the name of HBL from date of vehicle delivery.
17. Deviations/other Covenants Deviation to be allowed by obtaining approval from respective approving authority.

RISK ACCEPTANCE CRITERIA – FLEET FINANCING (CARRIAGE OPERATOR SUB-CONTRACTERS)

1. Purpose Financing of Chassis/Prime Movers to logistics, distributions, third party logistics or transport
companies without contracts.
2. Facility Type Lease Finance(LF)
 To be offered for new and/or addition to existing fleet.
 Facilities of each customer shall be reviewed annually.
 Sale and Lease Back Allowed.
 Unutilized loan shall exhaust on expiry and fresh projection to be evaluated for further
consideration by CMOs and RM.
 Disbursement shall be made as following: (refer to Annexure A)
New Vehicles P.O. to be issued in favor of Manufacturer/Dealer
Imported New and Used P.O. to be issued in favor of Importer/Seller/Dealer
Unregistered Vehicles
Used Domestic Registered Vehicles P.O. to be issued in favor of Owner/Seller
3. Portfolio Limit Cap (PKR 1.00 billion) Sub Limit
4. Equity  Minimum Equity for New Commercial Vehicle 20% (If company opts for fabrication, equity
calculation should include the amount of fabrication)
 Minimum Equity for Imported (New & Used) Commercial Vehicle 30% (No fresh fabrication
financing shall be allowed for used vehicles, however, the total value of used vehicle
including fabrication shall be considered for the purpose of equity calculation and financing
thereof)
5. Financing for Fabrication Pay Order in logistics company’s name to be issued for fabrication once the vehicle is re-insured.
Company will provide quotation of fabrication on their letterhead.
Type 06 – 10 Wheeler 14 – 18 Wheeler 22 Wheeler
Bank Maximum Payout 0.5 mln 2.5 mln 3.0 mln
6. Pricing Min - 1 Year KIBOR + 250 bps (kibor will reset annually)
Process charges as per SOC or negotiations of approving authority

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 Deviation Approving Authority
Reduction in spread by 100 BPS Head Retail/Commercial
Reduction in spread by more than 100 BPS Head Branch Banking
7. Vehicle Type  06 to 22 Wheelers, Vans and Carriers.
 Vehicles not be financed: Milk Tankers and Water Bowsers
 Age of vehicle should not be more than ten years old from manufacturing date at the time
of expiry of limit.
8. Financing Tenor 1 to 5 years
9. Business History Minimum 3 years in the field of logistics.
10. Finance Limit PKR 5.00 Million to PKR 200.00 Million per borrower (Exception to be approved by SCO)
11. Financial Tolerance Financing eligible subject to the following:
 Adjusted Leverage: Maximum 2.5 times (net off surplus on re-evaluation of assets) during
the life of loan.
 NOCG: Projected Net Operating Cash Generation for the lease tenor should be positive.
 DSCR: Minimum 1.5 times (Existing and Projected).
 Besides projected NOCG cash flows, 50% repayment should be covered through existing
cash flows of the company.
12. Valuation Valuation of old/imported vehicles to be conducted through CAD
13. Insurance/Tracker Comprehensive insurance along with Car Tracker from following insurance companies:
 Askari General Insurance Co. Ltd
 Adamjee Insurance Company Ltd
 EFU General Insurance Ltd
 Jubilee General Insurance Company Ltd
14. Source of Repayments  Primary source of repayments is companies’ cash flows.
 No grace period allowed. However, under justifiable circumstances SCO will provide
approval.
 Monthly Installments shall be debited from companies given account number or post-dated
cheques shall be deposited for payments.
 Secondary repayment is repossession of vehicle.
15. Collateral Coverage  Vehicle ownership (booking/registration) and Insurance in the name of HBL.
 HBL standard control document for assignment of receivables along with notice of
assignment.
 Original excise file to be kept under lock and key by CAD along with copy of registration
book. In case of Capital city Islamabad, where ETO keeps original excise file, CAD to keep
copy of registration book. (Refer to Annexure A).
 Duplicate key under CAD possession.
 Equity shall be paid in advance. (not applicable in lease back arrangements)
 Comprehensive Insurance along with premium paid receipts to be provided to CAD.
16. Deferral for Submission of After Issuance of Delivery Order Seven days allowed to submit ETO slip
Registration Book to CAD Submission of Registration Book Thirty days
If not received within stipulated time, the deferral for additional 30 days shall be allowed for
submitting original registration book to CAD in the name of HBL from date of vehicle delivery.
17. Deviations/other Covenants Deviation to be allowed by obtaining approval from respective approving authority.

RISK ACCEPTANCE CRITERIA – FLEET FINANCING (VEHICLES FOR COMPANY USE)

1. Purpose Financing for Local & Imported Buses, Prime Movers, Trucks, Vans and Cars to new and existing clients
for company use only.
2. Facility Type Lease Finance(LF)
 To be offered for new and/or addition to existing fleet.
 Facilities of each customer shall be reviewed annually.
 Sale and Lease Back Allowed.
 Unutilized loan shall exhaust on expiry and fresh projection to be evaluated for further
consideration by CMOs and RM.
 Disbursement shall be made as following: (refer to Annexure A)
New Vehicles P.O. to be issued in favor of Manufacturer/Dealer
Imported New and Used P.O. to be issued in favor of Importer/Dealer
Unregistered Vehicles
Used Domestic Registered Vehicles P.O. to be issued in favor of Owner/Seller
3. Portfolio Limit Cap (PKR 2.00 billion) Sub Limit
4. Equity  Minimum Equity for New Commercial Vehicle 20% (If company opts for fabrication, equity
calculation should include the amount of fabrication)
 Minimum Equity for Imported (New & Used) Commercial Vehicle 30% (No fresh fabrication
financing shall be allowed for used vehicles, however, the total value of used vehicle
including fabrication shall be considered for the purpose of equity calculation and financing
thereof)

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5. Financing for Fabrication Pay Order in logistics company’s name to be issued for fabrication once the vehicle is re-insured.
Company will provide quotation of fabrication on their letterhead.
Type 06 – 10 Wheeler 14 – 18 Wheeler 22 Wheeler
Bank Maximum Payout 0.5 mln 2.5 mln 3.0 mln
6. Pricing Min - 1 Year Kibor + 250 bps (Process charges as per SOC or negotiations of approving authority)
Deviation Approving Authority
Reduction in spread by 100 BPS Head Retail/Commercial
Reduction in spread by more than 100 BPS Head Branch Banking
7. Vehicle Type
Commercial Vehicles Non-Commercial Vehicles
New Local & Imported (Unregistered) New Local & Imported (Unregistered)
Trucks/ Prime Movers Cars/Vans
Local & Imported (Unregistered) Buses Imported Cars available with dealers
Imported Luxury Cars (case to case basis)
 Vehicles shipped from via Dubai are not allowed. For Non-Commercial Imported
(Unregistered) vehicles, copy of Export Certificate issued by the originated country and
related shipping documents also to be obtained.
 Age of vehicle should not be more than seven years old from manufacturing date at the
time of expiry of limit.
 Sales & Lease back in case of unregistered Vehicle only.
8. Financing Tenor 1 to 5 years
9. Business History Minimum 3 years of operation in existing field.
10. Finance Limit PKR 5.00 Million to PKR 50.00 Million per entity
11. Finance Tolerance Financing eligible subject to the following:
 Adjusted Leverage: Maximum 2.5 times (net off surplus on re-evaluation of assets) during
the life of loan.
 NOCG: Projected Net Operating Cash Generation for the lease tenor should be positive.
 DSCR: Minimum 1.5 times (Existing and Projected).
 Besides projected NOCG cash flows, 50% repayment should be covered through existing
cash flows of the company.
12. Valuation Valuation of old vehicles to be conducted through CAD
13. Insurance/Tracker Comprehensive insurance along with Car Tracker from following insurance companies:
 Askari General Insurance Co. Ltd
 Adamjee Insurance Company Ltd
 EFU General Insurance Ltd
 Jubilee General Insurance Company Ltd
14. Source of Repayments  Primary source of repayment is company’s Cash flow.
 No grace period allowed. However, under justifiable circumstances SCO will provide
approval.
 Monthly or quarterly Installments shall be debited from companies given account number
or post-dated cheques shall be deposited for payments
 Secondary repayment is repossession of vehicle.
15. Collateral Coverage  Vehicle ownership (booking/registration) and Insurance in the name of HBL.
 Original excise file to be kept under lock and key by CAD along with copy of registration
book. In case of Capital city Islamabad, where ETO keeps original excise file, CAD to keep
copy of registration book. (Refer to Annexure A).
 Duplicate key under CAD possession.
 Equity shall be paid in advance. (not applicable in lease back arrangements)
 Comprehensive Insurance along with premium paid receipts to be provided to CAD.
16. Deferral for Submission of After Issuance of Delivery Order Seven days allowed to submit ETO slip
Registration Book to CAD Submission of Registration Book Thirty days
If not received within stipulated time, the deferral for additional 30 days shall be allowed for
submitting original registration book to CAD in the name of HBL from date of vehicle delivery.
17. Deviations/other Covenants Deviation to be allowed by obtaining approval from respective approving authority.

ANNEXURE’S ENCLOSED

 Annexure A
 Annexure B
 Annexure C
 Annexure D
 Annexure E

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LIMIT PROCESSING REQUIREMENT

 Request on company’s letterhead.

 Board Resolution/Mandate.
 Price Quotation of the Vehicle from authorized dealer.
 Details of Vehicles.
 Copy of Master Contract between borrower and MNC’s or Local companies or addendum required.
 Bill/Invoice/Purchase Order to provide transportation services to MNCs, or Local companies or any record can
justify his relationship with suppliers.
 Loan application form.
 Projected Cash Flow for the lease tenor.

INSURANCE AND TRACKER

Bank will enter into agreement with the insurance companies that are mentioned in RACs. Retail lending product
development team will coordinate with Insurance companies to get standardized rates for its customers. Comprehensive
insurance along with car tracker is mandatory for every vehicle. The insurance companies will ensure that tracker is
installed in every vehicle. Insurance companies will also ensure the rights to access the tracker when required. The
charges and the above mentioned process will be approved by CCAD and Risk and will be borne by the customer.

SALE AND LEASE BACK

Standard procedure of financing will be followed. Bank will provide the required finance in line with the vehicle valuation
(Imported Cars/ Used Cars). Financing of premium is not allowed. Payment of vehicle will be made to dealer in the form
of pay-order favoring the dealer or payment can be made to the seller in the form of a pay-order favoring the seller after
registration of the vehicle has been made in Bank’s name. The following additional requirement will be required for Sale
& Lease Bank cases (compared to normal lease):

a) Receipt of copy of registration receipt favoring the bank

b) Sale Agreement on stamped paper to be signed by the customer
c) Sales invoice signed by the Seller along-with copy of Seller’s CNIC

PERFORMANCE MONITORING
 In case of NPL ratio reaches up to 5% of total portfolio size of Fleet Financing, a review shall be conducted by
Retail Lending in collaboration with Risk.
 Periodic reporting of PDO’s to be sent to all Regional Heads and Risk office from Fincon and Program Manager.
 Due diligence on each client including market checking shall be conducted by respective RMs/CMOs.
 The Deferral for 30 days shall be allowed for submitting original registration book to the CAD in the name of HBL
from date of vehicle delivery. However CAD shall ensure that vehicle should be registered in the name of HBL
with safekeeping of excise file along with insurance and premium paid receipt.
 Limit remained unutilized shall be exhausted on expiry and fresh projection to be evaluated for further
enhancement by CMOs or RM.

COLLECTION PROCEDURE
The lease finance Collection responsibility will reside jointly with the Credit Hubs and RCEs and their direct reports. The
collection process will involve certain action triggers on different bucket levels. All cases above 60 DPD bucket shall be
handed over to NPL Recovery Unit RL for further action.

Primary goal of the collection effort shall be to obtain prompt payments, avoid delinquency and minimize collection
expense and write-off costs while maintaining customer’s goodwill through high service standards. The aim would be to
minimize down-flow in collection buckets by proactively monitoring delinquencies so that accounts in “past due” stages
are brought to a “Current” status.

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Collection process will involve Dunning Letters and telephone and physical visits by Credit & Marketing Officers, Hub
Managers and Branch Managers.

However, cases where Branch and Hub Managers feel that the client has clearly defaulted and recovery of the past dues
through normal course / reminders / follow-up is not possible shall be coordinated with Legal department for further
action even before the 60 DPD benchmark.

No. of days Past

Collection Step Activity
Due

1 ~ 14 Telephone calls by Credit & Marketing Officer Friendly reminders given on phone

Telephone calls by Hub Manager & Branch Friendly reminders given on phone. 1st
15 ~ 29 Manager. Dunning Letter to be sent immediately
1st Dunning Letter if payment not received by 15th day

Find out reason for default and agree

Telephone calls & physical visit by Branch Manager on the date of payment (Obtain
30 ~ 60 Promise to Pay and record the date).
& Hub Manager.
2nd Dunning Letter to be sent
2nd Dunning Letter immediately if payment not received
by 30th day.

Account shall be downgraded by as 1-A

60 ~ 90 Telephone calls & physical visits by Branch
Manager, Area Manager/RGM Credit / RAH, Hub Follow-up on broken promises. Send
Manager and Credit & Marketing Officer. notices through Bank’s lawyer if
payment not received by 65th day

90 or more Legal for further action Initiate legal proceedings for recovery.

RECOVERY & REPOSSESSION OF VEHICLE (Post 90 days)

Considering the nature of business under contract logistics or third party logistics, it has been observed that our client
(Borrower) shall be transporting goods of third party corporate under their ownership. Any action or steps taken by HBL
to repossess the vehicles carrying such goods may lead to confrontation with corporate (owner of goods), further in case
of certain goods such as petroleum, gases and chemicals are restricted by regulators on specific routes making it difficult
to reroute the vehicle once repossessed.

Based on internal feedback with Legal (attached), following has been recommended

1. Immediately initiate law suit under Financial Institutions Ordinance 2001

2. Sought repossession of vehicle under the law suit

12
_________________________________ __________________________________________
Unit Head Channel Finance Product Head Products & Conventional Finance

_____________________________ ______________________________________
Head Retail Lending Head Risk Management - Retail & Commercial

______________________________ _____________________________________
Head Commercial Banking GM Risk Policy

______________________________ ______________________________________
Head Branch Banking Chief Risk Officer

13
ANNEXURE

14

DISBURSEMENT PROCEDURE
NEW VEHICLE
Disbursement:
 Customer request letter required.
 Price quotation from dealer required.
 Amortization Schedule to be signed and stamped by
customer and HBL Commercial RM/Credit Hub
Manager.
 Loan Creation Input Form (Annexure E) to be filled by
Branch/Credit Hub Manager/Commercial RM with
CAD.
 Complete set of documents to be sent to HBL Sales
Support Unit (SSU), Hasrat Mohani Road Karachi for
scrutiny.
 SSU to forward case to Centralized Bulk Processing
(CBP) for limit release.
 Loan to be disbursed in Non-Chequing Account.
 Banker cheque to be issued in name of Manufacturer
on account of HBL by branch.
 Purchase Order to be issued by Hub Managers Retail
and Team Leader Commercial after issuance of
banker cheque.
Annexure A
IMPORTED VEHICLE (USED & NEW UNREGISTERED)
Disbursement:
 Customer request letter required.
 Valuation of vehicle required by companies listed on
CAD panel.
 Amortization Schedule to be signed and stamped by
customer and HBL Commercial RM/Credit Hub
Manager Loan Creation Input Form (Annexure E) to be
filled by Branch/Credit Hub Manager/Commercial RM
with CAD.
 Complete set of documents to be sent to HBL Sales
Support Unit (SSU), Hasrat Mohani Road Karachi for
scrutiny.
 SSU to forward case to Centralized Bulk Processing
(CBP) for limit release.
 Loan to be disbursed in Non-Chequing Account.
 Banker Cheque to be issued in name of
Dealer/Importer on account of HBL by branch.
 Purchase Order to be issued by Hub Managers Retail
and Team Leader Commercial after issuance of banker
cheque.

Delivery of Vehicle: Delivery of Vehicle:

The delivery of vehicle shall be made on submission of
following documents:
 Authorized Dealer to submit original Sales Invoice,
paid Challan Form and spare key of vehicle to Credit
Hub Manager/Team Leader Commercial for onward
submission to CAD.
 Customer to arrange comprehensive Insurance along
with premium paid receipt.
 Upon receipt of above documents, delivery order to
be issued by RCE/RGM Credit/Business Head/Team
Leader Commercial.
 RGM/Team Leader to ensure that the delivery order
contains complete information of vehicle along with
delivery acceptance receipt.
 Delivery Acceptance Receipt to be returned within
one day (along with authorized signature and stamp
of customer and dealer).
The delivery of vehicle shall be made on submission of following
documents:
 Authorized Dealer to submit original Sales Invoice, paid
Challan Form and spare key of vehicle to Credit Hub
Manager/Team Leader Commercial for onward
submission to CAD.
 Customer to arrange comprehensive Insurance along
with premium paid receipt.
 Upon receipt of above documents, delivery order to be
issued by RCE/RGM Credit/Business Head/Team Leader
Commercial.
 RGM/Team Leader to ensure that the delivery order
contains complete information of vehicle along with
delivery acceptance receipt.
 Delivery Acceptance Receipt to be returned within one
day (along with authorized signature and stamp of
customer and dealer).

Process of Registration: Process of Registration:

The following documents are submitted for registration of The following documents are submitted for registration of
vehicle: vehicle:
 CAD to issue letter to excise and taxation office for  CAD to issue letter to excise and taxation office for
issuance of excise file / registration book. issuance of excise file / registration book.
 Original sales invoice/certificate. Original sales invoice/certificate.
DOMESTIC REGISTERED USED VEHICLE
 Valuation of vehicle required by companies listed on CAD panel.
 Financing of premium is not allowed.
 Receipt of copy of registration receipt favoring the bank.
 Sale Agreement on stamped paper to be signed by the customer.
 Sales invoice signed by the Seller along with copy of Seller’s CNIC.
 Banker cheque to be issued in favor of Seller/Dealer.
 Delivery Acceptance Receipt must be obtained upon issuance of banker cheque.

15
CUSTODY OF EXCISE FILE
NEW AND IMPORTED VEHICLE
 Original excise file to be submitted in CAD.
 CAD to keep original excise file along with copy of registration book under lock and key. Original registration book to be
handed over to the customer.
 60 days deferral shall be allowed for submission of original excise file in CAD.
 In capital city Islamabad, where excise & taxation office do not release original excise file, copy of registration book to be
submitted to CAD.

16
 Annexure B

Purchase Order
To: M/s Dated: 26.01.2016

Purchase Order No : __________________

Application No : __________________

Dealer’s Name : __________________

Customer’s Name : __________________
Customer’s Address : __________________
Customer’s Contact No : __________________
Customer’s CNIC No : __________________

We have approved the above mentioned customer’s HBL CarLoan Application for the
purchase of the below mentioned vehicle:

Make : __________________
Model : __________________

Upon our customer’s instructions, HBL will pay you through Pay Order number ________ for amount of Rs.
________ (mention amount in words here), as the price of one unit of ___________. This amount does not
include vehicle registration charges which will be paid by the customer directly to the Dealership.

On delivery of the vehicle from the manufacturer, the dealer will inform HBL, and the vehicle will ONLY be
delivered to the customer on issuance of Delivery Order (DO) from HBL.

The dealer will arrange the following documents upon delivery of the vehicle, for onward submission to HBL:

1. Delivery Acceptance Form.

a) Duly completed with Dealer Stamp and Authorized Signature.
b) Signed by the customer as acceptance for delivery of the motor vehicle.
2. Vehicle Registration ETO Slip / Book – in favor of HBL
3. Original Sales Invoice/Certificate
4. Spare Key of Motor Vehicle

This Purchase Order is valid for 45 (Forty Five) days from the date of issuance.

______________________ ______________________
HBL Authorized Signature HBL Authorized Signature

______________________
Dealer Acknowledgment

17
 Annexure C

To: M/s 26.01.2016

(City):

DELIVERY ORDER
Dear Sir;

This is with reference to HBL Car Loan Customer Application No _______, Purchase Order No_________ dated
______and subsequent your Booking Order _________________ for the following vehicle.

We authorize you to deliver as per the following details:

Customer (Lessee) ___________________

Make & Model ___________________
Registration Number ___________________
Engine Number ___________________
Chassis Number ___________________
Color ___________________

The above vehicle is to be delivered only to the above mentioned customer against presentation of his/ her original CNIC and
Authority to Drive issued by Habib Bank Limited.

Kindly provide us the following documents within 2 days of issuance of this Delivery Order;
1. Delivery Acceptance Receipt (appended below)
 Duly completed with Dealer Stamp and Authorized Signature
 Signed by the customer as acceptance for delivery of the motor vehicle
2. Spare key of Motor Vehicle

Also provide the following within 10 days of issuance of this Delivery Order
1. Original Registration Book of the vehicle
2. Original Sale Certificate
3. Original Sale Invoice

______________________ ______________________
Authorized Signatory Authorized Signatory
Habib Bank Limited Habib Bank Limited

DELIVERY ACCEPTANCE RECEIPT

I hereby accept and take physical possession of the below mentioned motor vehicle. I also confirm that the vehicle is received
in excellent working condition and that I am fully satisfied with the vehicle condition.

Customer (Lessee)
Make & Model
Registration Number
Engine Number
Chassis Number
Color
Dealer Name
Dealer Address
Date Received
Time Received

18

_______________________ _______________________
Customer Signature Dealer’s Signature & Stamp
 Annexure D
REPAYMENT SCHEDULE
Car price 1,000,000.00
Tenure 12
Installment PKR 69,735.08
Mark up 8.3900% 0.006991667 (3MK+2.0) Kibor as on ____________
Security Deposit 20% 200,000.00 2400000
Finance Amount 800,000.00
RV 0% - 1.058
Years Installment Mark up Principle Principle ALV
800,000.00
30-Dec-15 1 69735 5593 64142 735858 778538
30-Jan-16 2 69735 5145 64590 671268 710202
29-Feb-16 3 69735 4693 65042 606226 641387
30-Mar-16 4 69735 4239 65497 540730 572092
30-Apr-16 5 69735 3781 65954 474775 502312
30-May-16 6 69735 3319 66416 408360 432044
30-Jun-16 7 69735 2855 66880 341480 361285
30-Jul-16 8 69735 2388 67348 274132 290032
30-Aug-16 9 69735 1917 67818 206314 218280
30-Sep-16 10 69735 1442 68293 138021 146026
30-Oct-16 11 69735 965 68770 69251 73267
30-Nov-16 12 69735 484 69251 0 0
30-Dec-16 13 69735 0 69735 -69735 -73780
30-Jan-17 14 69735 -488 70223 -139958 -148075
28-Feb-17 15 69735 -979 70714 -210671 -222890
30-Mar-17 16 69735 -1473 71208 -281879 -298228
30-Apr-17 17 69735 -1971 71706 -353585 -374093
30-May-17 18 69735 -2472 72207 -425793 -450488
30-Jun-17 19 69735 -2977 72712 -498505 -527418
30-Jul-17 20 69735 -3485 73220 -571725 -604885
30-Aug-17 21 69735 -3997 73732 -645457 -682894
30-Sep-17 22 69735 -4513 74248 -719705 -761448
30-Oct-17 23 69735 -5032 74767 -794472 -840552
30-Nov-17 24 69735 -5555 75290 -869762 -920208
30-Dec-17 25 69735 -6081 75816 -945578 -1000422
30-Jan-18 26 69735 -6611 76346 -1021925 -1081196
28-Feb-18 27 69735 -7145 76880 -1098805 -1162535
30-Mar-18 28 69735 -7682 77418 -1176222 -1244443
30-Apr-18 29 69735 -8224 77959 -1254181 -1326924
30-May-18 30 69735 -8769 78504 -1332685 -1409981
30-Jun-18 31 69735 -9318 79053 -1411738 -1493618
30-Jul-18 32 69735 -9870 79605 -1491343 -1577841
30-Aug-18 33 69735 -10427 80162 -1571505 -1662653
30-Sep-18 34 69735 -10987 80723 -1652228 -1748057
30-Oct-18 35 69735 -11552 81287 -1733515 -1834059
30-Nov-18 36 69735 -12120 81855 -1815370 -1920661

19
 Annexure-E
(Revised)

Loan Creation Input Form

For Consumer Loans
(To be completed by the Branch)

Name of Region: .
Name Of Branch:
Branch Code: Branch Category MOBS Batch

Existing Customer: If yes, Existing Account Number (at any HBL Br) .
(In MISYS)
Branch Name: . Code .

Particulars Of Customer

Individual SME Corporate Commercial Salaried Self Employed

Customer Type: If Individual:
(Tick Appropriate Type)

Customer Full Name (Title of Account): .

Default A/C Short Name: .
Customer's Residential Address: .
Telephone Number (Res): ________________ Mobile: .

A B C D E G H
Customer's Category
(Tick Appropriate Type of Customer Category)

Father / Husband Name: Relation

. With A/c Holder .
Martial Status: Date
. of Birth: .
Sex Code: CNIC . / Passport: .
Profession: Job
. Position / Rank: .
Name of Institution/ Organization/ Employer: .
Employer / Office Address: .
Operational Instructions: .
Next of Kin: Relation
. with Next of Kin: .
Introductor's Name: Introductor's
. CNIC No: .
Introductor's Account No.: Branch:
. .
Introductor's Address: .

Analysis Code: .

Customer's Account No: . Current Saving Non-Chq.

(Funding/Repayment Account at Branch)
Type Of Account

Particulars of Loan

Nature Of Finance: Lifestyles Finance Auto Finance

Flexi Loan - BTF Personal Loan / BTF Credit Cards / Top-up
House Finance - Outright Purchase / Self-Construction / Renovation.
(Tick Appropriate Type of Finance)

Sales Channel: Branch Sales Direct Sales Telemarketing Sales

Dealership Sales Real Estate Agents Sales
(Tick Appropriate Type of sales channel)

Loan Amount: . Mark-up Rate: .

Monthly Installment Date of
(Without Insurance): . Repayment: .
No. of Installments: . Maturity (Expiry) Date: .

Insurance Details ( For Flexi & Lifestyles Finance Only )

Name Of Insurance Company: .

Credit life insurance Premium Received Credit life insurance Premium Payable to
from customer (upfront): Rs. insurance
. co. (upfront): Rs. .

Insurance Details (For Auto Finance only):

Name of Insurance Company: Borne by customer .

1st year's insurance recovered from customer (upfront): Rs. .
Constant monthly insurance premium due from customer: Rs. . .

(Branch Authorized Signature) (CAD Officer's Signature at RHQ/CPC

Confirming loan particulars are in accordance with
approval and updation of CIM for CIB purpose

FOR CONSUMER FINANCE PROCESSING UNIT (CFPU) USE ONLY

Customer No: .
Br. Code Customer No. Suffix
Misys Account No:

Br. Code Account No. TT

External Account No:

Receiving Amount Repayment Account

(Loan Proceeds): (Principal/
. Interest): .

SBP Code: SBP

. Classification Borrower/ Security: .

20
(CFPU Inputter's Signature) (CFPU Supervisor's Signature)
Date of Input:
21