BRIEF FRAMEWORK OF CONSUMER BANKINGCONSUMER BANKING : Means Banking that Targets the Individual CustomersLENDING MARKET : HORIZONTAL (Broad Market /Customer Base & Less Transactional Limits)Spectrum of Consumer Business within the Society FINANCIAL PURPOSE OF CONSUMER BANKING : Provision of Financial Services & Products to every level of Individual Customers in the society for their Personal Needs to propels the Financial GrowthECONOMIC PURPOSE OF CONSUMER BANKING : Increase Credit Development and Liability /Deposit Mobilization for all the levels of Individual Consumers that may propels the Economic GrowthGOVERNMENTAL PURPOSE OF CONSUMER BANKING : Leveraging Public Assistance by Financial Market Resources having multiplied Impacts on the Society to achieve Eeconomic TargetsDEVELOPERS & GENERATORS PURPOSE OF CONSUMER BANKING : Diversified Business Concentration, Diversified Market Segmentation, Diversified & Multiple Product Segmentation, Volume Based Profitability Revenue MechanismTYPES OF PRODUCT OFFERED : Deposit Products & Asset Products AREAS OF THE PROFIT : Liability/Deposit Generation & Credit Development REVENUE OF THE BANK FROM CONSUMER BANKING BUSINESS : SPREAD DIFFERENTIAL (Interest Charged on Asset Products – Interest Pay on Liability/Deposit Products) (On-Balance Sheet Item) + Other Fees &Charges according to the segment (Off-Balance Sheet Items)BUSINESS BOOK : Transaction will be record in the Banking BookKey Business Facilitation ApproachCOST ADVANTAGE FOR INDIVIDUAL DEPOSITORS : Low Monitoring Cost, High Liquidity Contract, Low Price RiskADVANTAGE FOR NDIVIDUAL ASSET USERS : Easy access to the Financial Products & Services

NATURE OF PRODUCTS: Secured product ( Back-up Loans ,which are Backed-up by any Eligible Collateral)

Unsecured Product (Clean loans, which are not Backed-up by any Collateral)

PRODUCTS & SERVICES THAT CAN BE OFFERED IN CONSUMER & RETAIL BANKING : Personal Loans, Credit Line-Revolving Credit (Running Finance , Demand Finance) , Mortgage Loans (Residential Property - Land/Building), Auto Loans, Durable Goods Loans, Multidimensional Deposit Products, Bancassurance Products (Life ,Retirement Plan, Health, Travel), Wealth Management (Advisory Services, Mutual Funds),Payment System Products e.g. Credit Card-Revolving Credit + Debit Card + ATM Card, Internet Banking, Mobile /SMS Banking

TARGET MARKET SELECTION FOR CONSUMER BUSINESS DEVELOPMENT : Target Market would be selected on the bases of the Product and Need Gap Analysis. 1) PRODUCT S OFFERED BY THE BANK 2) MARKET SEGMENTATION ACCORDING TO THE PRODUCT & SERVICES FEATURES 1) Geographical Segmentation a) Cities & Areas/Localities (Banks Reach Geographically) 2) Demographical Segmentation a) Salaried, Self-Employed Business & Professional,Corporate Clients (Banks Targeted Segment) HUMAN CAPITAL THAT CONTROLLS THE WORKFLOW OF THE CONSUMER BUSINESS 1) Distribution = Marketing Management & Relationship Management "Originators" (Direct Sales +In-House Sales) 2) Processors at different Level 3) Credit Underwriters - - -role they have to play should be immutable 4) Operations Controllers (Transaction & Account Maintenance) 5) Business Evaluators 6) Business Policy & Decision Makers

BUSINESS MODEL BASE1) Procedures2) Policies3) Systems (Technology)4) Strategic Risk Assignment5) Supply & Demand Trends CREDIT CYCLEDuration of the Credit Cycle is Interlinked/Pro-cyclical with the expected & unexpected Business & Economic Cycle 1) Sales & Target Market 2) Credit Underwriting 3) Collections 4) Recoveries 5) Write - offs

PLAYERS OF THE FUNDS CYCLE- - - -Business-Model Incubation1) Households (Net Savers) (Consumption Scale) (TaxPayers) (Demand Side) 2) Financial Institutions (Intermediating Funds) (Supply Side)3) Corporations (Net Investors) (Consumption Scale) (Demand Side)

INSTITUTIONAL DISPERSION / REGULATORY BODIES 1) LOCAL : STATE BANK OF PAKISTAN a) Prudential Regulation = Regulatory Rules/Guide Lines/Boundary of Lending /Provisioning Standards 2) INTERNATIONAL : BANK FOR INTERNATIONAL SETTLEMENT a) Basel Capital Accord Guide Lines = Buffer Capital Management according to the Product Lines/Integrated Risk Breakdown Structure /Enterprise Risk Management Structure for the Business Lines and Institution etc.

EXPECTED RISK BOUNDRIES IN THE CONSUMER BANKING 1) Pre-Disbursement Process a) Sales, Processing & Marketing Related Issues b) Product & Risk Issues c) Underwriting Standards 1) Customers Wealth Assessment a) Self Assessment & Credit Scores (Obligor Risk Rating + Facility Risk Rating) (Statistical Models) b) Structured Decision Filter = Documentation Criteria's in accordance with policies of Linked Departments (CREDIT S, FRMU & EAMVU) c) Underwriting Policies & Procedures 2) Decision Status a) Cancel or Refer for Deviation b) Reject c) Approve 3) Credit Operations Requirements & Checks

2) Post-Disbursement Process Portfolio Management Analytical Techniques, Synopsis & Modeling for Business Dynamics Revision - Preemptive Actions Account Management FRMU, EAMVU, Service Quality, Collection & Recovery Strategies for Risk & Relationship Management

PROPONENTS OF THE BUSINESS ENGINES Business & Risk Relation Business Group = Business Specific = Increase the Business as well as Secure the business Risk Group = Risk & Business Specific = Secure the Business as well as Increase the Business Priorities within these two Groups are proportionally Different for Constituencies & Dynamics BASE FOR PEER GROUP COMPERASION (Primary Rivals)1) Determine the Geography and Demographical Characteristics2) Institution within the Identified Geography with a Similar Deposit Market Share3) Institution with Similar Asset Size 4) Performance Ratios + Asset Quality Ratios + Capital Ratios + Market Ratios

CONSUMER & RETAIL BANKING STRATEGY1) A Customer Centric-Franchise/Branches/Approach a) Responsible to Improve Clients Experiences through Smart Customer Services b) Multiproduct Relationship with the Customers and Wallet Share2) Focus on Market where we have a Competitive Advantages & Develop Strong Footprint a) Where we built Multi Business Segmentation & Product Segmentation b) Where we develop Strong Geographical Footprint c) Where we get Controlled Legal, Regulatory, Financial, Economic and Operating Environment (balanced environment)3) Investing for Organic Growth a) Effective Distribution Management for Cross Subsidization & Marketability to take Benefits of Social Mix b) Efficient Human Capital Management c) Insurgence in Financial Instruments would be Prolong 4) Leveraging & Depositing uniquely that Expands Our Reach a) Products & Services Based on New Ideas b) Bring Culture into the Product c) Increase “Financial” -- “Economic” -- “Social” Values5) Earn with Success- - - -Pre-crisis environment was only planned for More Earnings For Prolong Profitability a) Right Assessment b) Right Time c) Right Decision

CORE BUSINESS ISSUES & REPORTING STANDARDS1) Operational 2) Policies 3) Legal & Regulatory

BUSINESS MODEL SPECTRUM- - - Also useful for Composite Products for Catastrophic Effect1) Distribution Sales Team for (Asset + Deposits) & Delivery Channels Marketing Team & Strategy2) Credit Initiation3) Credit Policy4) Product Development5) Risk Management6) Service Quality7) Credit Operations8) External Verification Unit9) Fraud & Risk Management Unit10) Collections & Recovery

IMPORTANT QUESTIONS FOR RISK MANAGEMEN 1) How to Assess the Risk (Which Risk to Retain & which Risk to Lay off ) 2) How to Measure the Risk 3) How to Maneuver & Manage the Risk

ASPECTS FOR RISK-BASE ANALYSIS OF THE BANKING BUSINESSOff-Site Surveillance & On-Site Examination

TYPES OF COLLATERAL LIMITED TO BE USE IN CONSUMER BANKING - - -Banks Profitability1) Mortgage - Residential Property-Land/Building2) Guarantees - Corporate/Personal3) Pledge - Over Assets4) Hypothecation - Over Household Goods/Over Vehicle /Current & Fixed Assets/Stocks etc

PILLERS OF CREDIT POLICY1) Terms of Sales a) The conditions under which a bank sell its Asset Products- - - Target-Market Assessment & Economic Conditions2) Credit Analysis b) The process of determining the probability that Customer will not Pay- - -Scenario Based3) Collection & Recovery c) The procedure followed by a bank in collecting delinquent accounts

RISK THROUGHBusiness Line & ModelProducts & ServicesPoliciesSystems & ProceduresHuman CapitalRisk Indicators (Internal & External)

CUSTOMER AT DIFFERENT PHASES FOR THE BANK (For Treatment)Customer is an Object for the Bank who Changes its Subject Matter in different Processing & Relationship Phases1) At the Time of Distribution (Asset +Deposit) = Smart Customer Services Orientation 2) At the Time of Asset Processing & Underwriting = Eagle Eye3) At the Time of Deposit Processing = Cat Eye4) During the Time of Asset & Deposit Holding = Cat Eye + Focus to Built Long-term Multiproduct Relationship5) During the Time of Misconduct = Eagle Eye + Maintain Long-term Multiproduct Relationship6) At the Time of any Fraud Conduction from Asset & Deposit Holder = Lions Eye

FACTORS FOR INDIVIDUAL CREDIT UNDERWRITING (LENDING NORMS) 1) Customers Business Segment 2) Customers Industrial Segment 3) Customers Employment Segment & Status 4) Customers Employment Proof (Salaried, Business & Ownership) 5) Customers Employment Tenure (Salaried & Self Employed) 6) Customer Primary & Secondary Income & Source of Income 7) Customers Age & Tenure of Loan 8) Customers Debt Burden Ratio s & Loan Amount 9) Percentage of Force Sales Value & Debt to Equity10) Percentage of Margin on Collateral 1 1) Value -Type - Nature of Collaterals /Guarantees and its Prudent Assessment12) Type – Nature of Product13) Applicable Mark-up Rate 14) Customers Facility & Obligor Risk Rating 15) Customers Underwriting Documentations according to the Specific Product & Customers Segment 16) Customers Underwriting Operational Requirement within the Credit Cycle 17) Customers Required Internal & External Verifications /Checks (AML/KYC/CDD) 18) Customers Repayment History with the Bank and with the Market & Write-off s Position 19) Customers Predefined Transactional Limit 20) Prime Customer & Moderate Debt Burden Criteria to Entertain them21) Deviation Criteria's & Approval Layers 22) Prudential Regulation Requirements with respect to the Product & External Regulatory Requirements23) Banks Credit Policy Requirement with respect to the Specific Product & Customers Segment24) OTHER FACTORS = Numbers of Dependents, Residence location & Status, Marital Status, Insurance Options, Sensitivity & Viability of the Proposal for Fact-Based Decision, Reference s , Education. IMPORTANT FACTOR = DATA SEQUENCING(INTENSITY + RELIABILITY + RESPONSIBILITY )+VALUE STREAM MAPPING

CONSUMER BUSINESS PROFILE OF THE PRODUCT SENTIMENTS - - -For portfolio Treatment Bank’s Consumer Business Product Range within Secured & Unsecured Cluster: 1)Term Finance 2) Demand /Revolving Finance Consumer Business Specific: Personal Finance ,Mortgage Finance, Auto Finance ,Durable-Goods Finance , Education Finance SNAP–SHORT OF THE BUSINESS All the Tenures of the Business Line are not equally Progressive in terms of Activities to it put in the business incubator actively

FACTS OF THE BUSINESS Business dimension (Business Model -- Specific Target Market -- Peak Receivable) Business Approach (Focus towards the Existing & Untapped Market Opportunities , Reverse Engineering of Products & Services for MM) Business & Operational Standards (Unplanned Lending -- Facing Operational Risk-Credit Risk -Market Risk )

ANALYSIS OF THE BUSINESS Incremental NPLs & Cash Recovery- - - -All Commercial Banks Business –Lline Share = % of the Revenue Portfolio Share = % of the Concentration Composition of Revenue & Concentration = behavior for the proportion of Revenue % & Concentration% Total Portfolio Size = Amount------- , Accounts ------- Product Segregation = Amounts -------, Accounts ------- Aggregate NPLs = Aggregate Potential Problem Loans = Contribution in the Total Advances = Geographical Segmentation = Demographical Segmentation = Delivery Channels = Business Growth Rate Per Annum = Current Business CAGR =

AT A GLANCE1)Credit Allocation Mechanism - - - For Concentration Management Credit Creation within the Multiple Lines of Assets for Prolong & Stable Profitability2)Policy Pigments - - - To entertain the Customers according to their Profiles Bring the Customers into the Risk Boundries3)Risk Boundries- - -For Scenario Based Lending Categorization of Risk with the Correlativeness 4)Business Engines Through- - - Sector Vise, Industry Vise, Business-Line Vise, Business Segments in the Business Line, Scenarios in the Business Line 5)Analytical Tools - - - For Portfolio Management6)Customers Acquasition & Retention Strategy- - - For Customer Relationship Management7)Process Flow Mechanism - - - For prudent Underwriting & Decission Making8)Level-Playing Field Mechanism - - -For Branch Network 9)Concentration Risk From Micro & Macro Prospective Risk Emergence from Single Name Concentration & Scetorial Concentration and their Interdependencies countered through granularity adjustmentsfor efficient Portfolio Management with Prolong Returns10)Volume-Oriented Strategy can foster Credit Concentration - - The emergence of the concentration risk is closely linked to the Business Strategy orientation of the Bank - - Business Policyhas developed from a purely volume maximisation stance into an earnings and Value-Oriented Business Strategy - - Value-Oriented Business Strategy attractively considerable to develop assumptions for the diversification in the Concentration Model Exposure to Single Group - - -Multi Business- - -Multi Product - - -Multi Terms & Conditions

Concentration Risk From Micro & Macro Prospective Risk Emergence from Single Name Concentration & Scetorial Concentration and their Interdependencies for efficient Portfolio Management with Prolong ReturnsVolume-Oriented Strategy can foster Credit Concentration - - The emergence of the concentration risk is closely linked to the Business Strategy orientation of the Bank - - Business Policyhas developed from a purely volume maximisation stance into an earnings and Value-Oriented Business Strategy - - Value-Oriented Business Strategy attractively considerable to develop assumptions for the diversification in the Concentration Model OBJECTIVE--Primary gole is to designe a suitable approach for each bank given their own circumstances , areas of concerns or growth, data availability, among other factors.--Structure the data for the Bench marking for Risk Solution.--Multiple improvements on traditional Risk Mechanism for Customers Subsidization--Rating System that can be consider when originating new Facilities.

BENEFITS - -Driving Structure & Operating System for Fact-Based Decission 1) Facility Related 2) Customer Related --Volume-Based Risk Factors for Volume -Based Profitability