intern ship report of nbp (juniad barki)

8/4/2019 Intern Ship Report of Nbp (Juniad Barki)

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NATIONAL BANK OF PAKISTAN

MAIN BRANCH DERA ISMIAL KHAN

Internship Report of NBP

Submitted by:

Junaid Ahmed BarkiExam Roll No: 568

Submitted to:

Sir Inam UllahDEPARTMETN OF COMMERCE GOMAL UNIVERSITY

DERA ISMAIL KHAN


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DEDICATION

This Piece of work is dedicated to my revered parents,

Who groomed my personality and provided

Me all the facilities to complete my educational career.Their devotion, sincerity and love generated

Me a positive approach towards humanity.

I owe this achievement of my life to my parents

Whose prayers always with me.

I pray for their long life and prosperity.


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PREFACE

It is the requirement of the M.COM program of GomalUniversity of D.I.KHAN that all students of M.COM have to

spend Six Week in diffrent organization to get practical

exposure and to get familiarized with the ways to live in the

organizational environment which is dramatically different

from the educational environment. That six week period called

Internship period, if spent properly and sincerely,enables the

students to be more confident, more knowledgeable, more

responsible and more committed to its work in the practical

field. I have also been assigned to do internship of six weeks

period in National Bank of Pakistan Main Branch. It has

enabled me to understand the practical scenario and sharpen

our decision making power and utilizing the resources in an

effective manner, so that our resources generate maximum

profit. In preparing this report, I have put all of my best efforts

and tried my level best to give maximum knowledge. Despite of

my all the coherent efforts, I do believe that there will always be

a room for improvement in the efforts of learner like me.


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ACKNOWLEDGEMENT

All praises are for Almighty ALLAH who guides us through

the darkness of unknown. All respects for Holy Prophet

(PBUH) who enables us to recognize our creator and whose

spiritual teachings guide us in every matter of life. I am

also highly thankful to my honorable teachers for theirs

guidance.And after thatSpecial thanks to MR. ARSHAD

ABBAS Manager of National Bank of Pakistan main

Branch D.I.Khan, and all other employees of the branch for

their cooperation. I cannot forget the kindness and

cooperation of Mr. IMTIAZ and Mr. KABIR BARKI who

are very honest to their work and organization. They

provide me a lot of information and practical knowledge,

many regards to them. I am also thank full to Mr. Arif

Khattak and Mr. Touqeer for their cooperation.

JUNAID AHMED BARKI


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TABLES OF CONTENTS NO. OF PAGES

INTRODUBTION OF STUDY 01 Of 02

EVOLUTION OF BANKS IN PAKISTAN 03 of 07

NATIONALIZATION OF BANKS (1974) 08 of 13

SERVICES OF NBP 14 of 18

DEPARTMENTALIZATION 19 of 31

SWOT ANALYSIS 32 of 35

FINANTIAL ANALYSIS 36 of 44

GENERAL OBSERVATION 45 of 48

GENERAL SUGGETION 49 of 53

BIBLIOGRAPHY 54


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CHAPTER 1

INTRODUCTION OF STUDY

1.1 Background of Studies

As part of the academic requirement for completing M.Com of the students are required to undergo two months of internship with an organization. The internship is to serve the purpose of

acquainting the students with the practice of knowledge of the discipline of banking

administration.This report is about National Bank Pakistan. NBP was established in 1949 and since then, it has

expended its network, becoming the largest commercial Bank of the country. It offers different

products of services to its customers.

1.2 Purpose of the StudiesThe main of the study in hand is together relevant information to compile internship report on

National Bank of Pakistan.

To observe, analyze and interpret the relevant data competently and in a useful manner. To work practically in an organization. To develop interpersonal communication.

1.3 Scope of StudiesAs an internee in National Bank of Pakistan the main focus of my study research was on general

banking procedures in one of the branches of NBP. These operations include remittances,

deposits, advances and foreign exchange.

Similarly different aspects of overall of NBP are also covered in this report.

1.4 Research Methodology

The report is based on my two months internship program in National Bank of Pakistan. Themethodology reported for collection of data is primary as well as secondary data. The biggest

source of information is my personal observation while working with staff and having discussion

with them. Formally arranged interviews and discussions also helped me in this regards.

Primary data:Personal observation

Interviews of staff

Secondary data:Manuals

JournalsMagazine

Annual reportsInternet


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1.5 Scheme of StudySECTION 1Chapter 1:An introductory chapter that discuss the introduction of study of report, its Background, Purpose,

Scope, Methodology, limitations and Scheme of the report.

SECTION 2

Chapter2This chapter concludes brief history of banking in general, evolution of banking, banking inPakistan..

Chapter3:This chapter consist Nationalization of banking in Pakistan, History of NBP, mission statement,its objectives and functions of National Bank of Pakistan.

Chapter4:In this chapter the services of NBP were discussed.

SECTION III

Chapoter5:In this chapter the in this section the departmentation of NBP is explained, and also NBP Mainbranch.

SECTION IV

Chapter6:It tells about Strengths, Weaknesses, Opportunities and Threats of i.e. SWOT analysis of NBP.

Chapter 7:It consists of comprehensive performance of NBP through past several years. Ratio analysis and

those parties, which are interested in financial performance of Bank.

Chapter 8:It covers the critical analysis of the bank. This chapter has been divided into four parts i.e.

Problems at the Branch, Functional analysis, Administrative analysis, and Personal Management

Analysis.

SECTION V

Chapter 9:

In this chapter recommendation for improvement on all aspects of the Bank are given.

Chapter 10:Two implementation plans are given in this chapter. Mare Gare Car Financing Scheme andNeed for Telephone Operator.


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CHAPTER # 2

EVOLUTION OF BANKS IN PAKISTAN

There are different opinions that how the word Bank originated. Some of the authors opinionthat this word is derived from the word Bancus or Banque, which means a bench. Theexplanation of this origin is attributed to the fact that the Jews in Lombard transacted the

business of money exchange on benches in the market place; and when the business failed, the

people destroyed the bench. Incidentally the word Bankrupts said to have evolved from thispractice.

Some of the authors are of opinion that the word Bank is derived from the German word back,

which means joint stock fund. Later on when the German occupied major part of the Italy the

word Back was italicized into Back.In fact human left the need of bank when it begins to realize the importance of money as a

medium of exchange. Perhaps it where the Babylonian who developed banking system as early

as 2000 BC. At that time temples were used as banks because of their prevalent respect. Duringthe rule of king Hamurabi (1788 1686 BC) the founder of Babylonians Empire, loans were

started being granted for interest. The borrower has to provide guarantee or he had to pledge his

goods or valuables. King Hamurabi drew up a code wherein he laid down standards rules forprocedures for banking operations by temples and great landowners. Also in Greece, the temples

were used as banks, where the people deposited their money and other valuables for safe custody

and security. In Europe with the revival of civilization (Renaissance) in the middle of twelve

century, trade and commerce started expanding and this development compelled the businesscommunity to borrow the money from the Hebrew money lenders on high rates of interest and

usury. Seeing the great demand, these moneylenders started organizing themselves and bank

started up at the principle seaports of southern Europe. Soon Venice and Geneva became the

most important money markets of the time and banking though different from its present form,flourished. What we know as modern banking originated in the 14th century in Barcelona.

2.1 Definitions of Bank

Bank"A financial institution, which deals with money and credit. It acceptsDeposits from individuals, firms and companies at a lower rate of

Interest and gives at higher rate of interest to those who need them.

A financial establishment which uses money deposited by customers for investment, pays it out

when required, makes loan at interest, exchanges currency, etc.

J.W Gilbert in his principles and practice banking defines a banker in these words:

A banker is dealer in capital or more properly, a dealer in money. He is intermediate party

between the borrower and the lender. He borrows of one and lends to another.Sir John Paget defines banker in these terms:

That no person or body, corporate or otherwise, can be a banker who does not

Take deposits accounts. Take current accounts, Issue and pay Cheques and Collect Cheques crossed and uncrossed for his customers4 (The law of Banking by

Sir John Paged, page 51).


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The American defined the term banker in a very broad sense as under:

By banking, we mean the business of dealing in credits and by a Bank we includeevery person, firm or company having a place of business where credits are opened by deposits

of collection of money or currency. Subjects to be paid or remitted on Cheques or order, money

is advanced or loaned on stocks, bonds, bullion, bill of exchange, promissory notes are received

for discount or sale.

2.2 Evolution of Banking in Pakistan

The first phase in evolution of banking in Pakistan sees very hard days for the whole banking

sector. Starting virtually from scratch in 1947, the country today possesses a full range of

banking and financial institutions to cope with various needs of the economy.The area now constituting Pakistan was, relatively speaking, fairly well provided with banking

facilities in undivided India, in March 1947 there were 3496 offices of Indian scheduled banks

out of which as many as 487 were situated in territories now constituting Pakistan.

The Reserve bank of India was the central banking authority in India. At the time of partition it

was decided that in the interest of smooth transition it should continue to function in newlyemerging state of Pakistan, until 30th

Sep.1948. In 1947 due to uncertainty and unsuitability the

banking sector suffer heavy losses.This resulted in a negative effect on baking service in Pakistan. The banks, which had their

registered offices in Pakistan, transferred them to India. In an effort to bring about the collapse of

the new state by pushing a deliberate policy of withdrawals the Indian bank offices closedquickly. Those banks, which stayed, operated only in name pending the winding up of their

business. The number of scheduled banks thus declined form 487 branches before independence

to only 195 branches by 30th

June1948.

2.3 Banking Growth during (1948-1970)

In this tense situation, a committee was immediately setup to formulate a scheme of central

banking legislation for Pakistan. Many specialists were of the opinion that in view of the acuteshortage of trained staff, any idea of establishing a central bank was I impractical and the best

that could be attempted was the setting up of a currency board until such times as sufficient staff

could be organize to operate a central bank.The questions as to whether the institution should be only a currency board or a full-fledged

central bank had exercised the mind of the Pakistan government since independence. Through, it

was realized that the shortage of trained personal to run the central bank would present seriousdifficulty in view of the tangible advantages that a central bank enjoyed over currency board, the

government ultimately decided to take the bold step of setting up a full fledged central banking

authority. Among other factors, which led to this decision, there was the fact the banking

facilities in the country had been totally disrupted and there was an urgent need for theirrehabilitation, which a central ban alone could meet. As there was hardly any time to pass as Act,

an order was drafted, known as the state bank of Pakistan order, which was promulgated by the

government of Pakistan on 12th

may 1948. The state bank declared open on July 1,1948 by the

father of the nation.


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One of the first tasks of the state bank was to arrange for the replacement of the Reserve bank of

India notes, which had continued to circulate in Pakistan during the transitional period, byPakistan currency.

The first Pakistan notes were issued in October 1948 in the denominations of Rs. 5, 10 & 100.

An equally urgent task, which the new central bank had to address itself, was the creation of a

national banking system. To this end, while extending every help and encouragement to HabibBank to expand its organization, the state bank recommended the setting up of a new banking

institution to serve both as an agent to the state bank recommended the setting up of a new

banking institution to serve both as an agent of the state bank as well as the spearhead of itscredit polices.

Accordingly the NATIONAL BANK OF PAKITSN was setup under an ordinance in November

1949. It started with two offices in the former East Pakistan. In view of the special role assignedto the new institution, contrary to traditional practices the Governor of the state bank was

appointed to head its board of Director in 1950. Under the fostering care of the state bank and the

support of the government, the new institution developed rapidly. By using its special powers,

the state bank made liberal advances to the new bank to help it expand credit facilities in the

country. By 1952, the National bank of India. Shortly, afterwards, in November 1952, thegovernor of the state bank ceased to function as the president of National bank of Pakistan.

With a view to broadening the institutional framework of the financial system, the state bank alsosponsored the establishment of specialized credit institutions in the filed of agriculture and

industry. Banking companies (control) act was passed in December 1948 specifically

empowering the state bank to control the operations of banking companies in Pakistan.Moreover realizing that the most serious limitation on the expansion of banking services in

Pakistan was the lack of trained personal, the state bank sponsored a banking training scheme,

which was repeated after year and turned out a large number of bankers.

As the Commercial Banking facilities continued to expand, a new Pakistani bank, the NationalCommercial Bank was established and registered as a scheduled bank. In the filed of industrial

finance a new institution known as the industrial credit and investment cooperation was set up.

The year 1958 marked the completion of the first decade of the working of the State Bank of

Pakistan. When it was established there were only 195 bank offices in existence. At the end ofJune 1958 their number had increased to 307, of which Pakistani banks accounted for 232

against 25 in mid 1948. Moreover at the end of June 1958. Pakistani banks held 60% of the total

banks deposits, and were responsible for 65 of total bank credit.When the Ayub Government took over in 1958, the banking and monetary scene was

significantly affected by Developments such as the liberalization of imports, transfer of business

in food grains to the private sector, and the firming up of commodity markets. The demand offunds picked up and there was a substantial expansion of bank credit to the private sector. The

pace of expansion in the institutional frame work of the countrys banking system quickened anda new Pakistani, bank, namely the United Bank Limited was established.

Owning the five years 1960-65, the credit structure in Pakistan made rapid progress. The bankextended its network by opening two new offices located at Chitagong, Peshawar, Quetta,

Khulna, Layallpur and Rawalpindi. The number of scheduled bank offices rose from 430 at the

end of June 1960 to 1591 in June 1965. Several new banks were added to the list of scheduledbanks.

Two principal additions were the commerce bank, and the standard bank. The number of

scheduled banks, which stood at 29 in June 1960 rose to 36 by June 1965.


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Under the impact of economic growth and dear scope of private enterprises, bank credit to the

private sector rose from Rs. 1,458 millions to Rs. 5759 million. Thus the total expansion in bankcredit to the private sector during this period amounted to Rs. 4300 million, which gave a annual

expansion of Rs. 860 million compared to the annual average increase of Rs. 144 million over

the preceding five years. Banks deposits increased from Rs. 2,493 million to Rs. 6883 million

during the five years period ended June 1965 compared to Rs. 231 million in the proceeding fiveyears. Time deposits during this period increased from Rs. 946 million to Rs. 3228 million,

where demand deposits rose from Rs. 1997 million to Rs 3655 million. The increase in time

deposits was particularly rapid. The ratio of time deposits to total deposits in June 1965 stood at49.6 percent age as against 32.01 percent age five years earlier. Another salient feature of

banking development during this period was that since the rate of increase in bank deposits

lagged behind the rate of expansion in bank credit, the banked has to depend increasingly oncentral bank finance. They borrowing from the state bank rose from Rs. 11 million in June 1960

to Rs. 1688 million in June 1965. Owing keen demand for bank credit, banks investments couldnot increase as rapidly as their advances. Their investments totaled to Rs. 1,874 million at the

end of June 1965 compared to Rs. 1,231 million in June 1960. Investments which were almost

equal to their advances in June 1960 were only about one third of the advances in June 1965.The third plane period witnessed a further expansion of banking facilities in the country the total

number of scheduled banked offices increased from 1,591 at the end of June 1965 to 3133 at theclose of June 1970. During the same bank credit to the private sector rose from Rs. 5,789 million

to Rs. 9492 million. There was also a substantial growth in the bank deposits, which increased

from Rs. 6883 million June 1965 to Rs. 13147 million at the end of June 1970. A remarkablechange occurred during this period related to the composition of deposits. Time deposit becomes

greater than demand deposits forming about 54 percent age of the total deposits. As oppose to

what happened in the previous period, banks were able to finance a mush higher level of credit

expansion without having to increase their borrowings from the central bank.

2.4 Banking Reforms 1972

After the assumption of office by a new government in 1971, may 1972 different reforms were

introduced to make the banks more responsive to the requirements of economics growth with

social justice. The reforms aimed at bringing about a more purposeful and equitable distributionof bank credit, improving the soundness and efficiency of the banks, and securing greater social

accountability of the banking system as a whole.

The role of the banking system had been truly spectacular in mobilizing savings of thecommunity and meeting the credit needs of the economy. But at the same time, the banks had

generally neglected their role in promoting social justice and had failed to play an effective role

in ensuring a wider and more equitable dispersal of the benefits of economic growth. In

particular the inter locking of ownership with commercial and industrial interests had led to themisuse of bank resources. There was a heavy concentration of credit in big accounts and in urban

area. Credit facilities for agriculture, small business, newly emerging exports and housing had

remained obviously inadequate while the banks indulged in capital financing in few selectedbusiness sectors and issued guarantees on behalf of favored clients, term clients, term financing

facilities for industry were wholly absent.

Under the banking reforms introduced in May 1972 the state bank of Pakistan was accordedwider powers. It was authorized to remove directors or managerial personnel, if necessary and


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supersede the board of directors of a banking company and appoint administrators during the

period of such super session. It was also empowered to nominate directors on the board of everybank. As regard bank directors, it was provided that anyone defaulting in meeting his obligations

to bank would forfeit his directorship. Moreover, it was laid down that no person could serve as

director of a bank for more than two years continuously. Each bank was required to have a paid

up capital of not less than 5 percent age of its deposits to be progressively build up to 10 percentage over a period of time. The banks were also required to transfer 10 percentage of their profit

their reserves every years after the reserve became equal to the paid up capital. With a view to

diversity the ownership of the banks, the banks were required to raise new capital from themarket. Unsecured loans to directors, their families or firms and companies, were totally

prohibited.

The bank reforms also brought about the establishment of new institutions to achieve newobjectives.

A national credit consultative was setup under the supervise of the state bank with representation

form the government and the private sector. It was assigned the task of determining of

economys annual credit needs within the safe limits of monetary and credit expansion with

reference to the annual development plan. Such a credit plan was to cover the public and privatesectors. Alongside the National credit council and Agricultural Advisory Committee was formed

to allocate agriculture credit for various purposes, to coordinate the operation or the agriculturecredit agencies and to oversee the flow of credit to the designated targets. A standing committee

on exports in general and the new emerging exports in particular, was also established. With a

view to encourage the banks to extend credit to small borrowers, a credit guarantee scheme wasintroduced under which the state bank under took to share any bonfire losses incurred by the

commercial banks in case of small loans of advances to agriculture.

At the same time two financing institutions were established. The peoples Finance Corporation

was designed to provide finance to people of small means while the National DevelopmentFinance Corporation was setup of finance public sector owned and managed industries and

enterprises.


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CAHAPTER # 3

NATIONALIZATION OF BANKS (1974)

The banking reforms turned to be transitional and interim step and when they were hardly

eighteen months old the government nationalized the banking systems, with the following mainobjectives.

To enable the government to use the capital concentrated in the hands of a few rich bankers for

the rapid economic development of the country and the more urgent social welfare objectives.

To distribute equitably credit too different classes sectors and regions.

To coordinate the banking policies in various area of feasible joint activity without eliminating

healthy competition among banks.

The act passed for the nationalization of banks is known as the banks Nationalization Act 1974.

Thus under this act the state bank of Pakistan and all the commercial banks incorporated in

Pakistan and carrying business in or outside the country were brought under governmentownership with effect from Jan 1, 1974. The ownership, management and control of all Pakistani

banks stood transferred to and vested in the Federal government. The shareholders were provided

compensation in the form of federal government bonds redeemable at par anytime within theperiod of fifteen years. Under the Nationalization act, the Chairman, Directors and Executives of

various banks, other than those appointed by federal government were removed from their

offices and the central boards of the banks and all local bodies were dissolved. Pakistan banking

council was established to coordinate the activities of the Nationalized Commercial banks. At thetime of Nationalization on December31, 1973 there were following 14 Pakistani commercial

banks with 3323 offices allover Pakistan and 74 offices in foreign countries:

National banks of Pakistan

Habib bank limited

Habib bank (overseas) limitedUnited bank limited

Muslim commercial bank limited

Commerce bank limitedStandard bank limited

Australia bank limited

Bank of Bahawalpur limited

Premium bank limitedPak Bank limited

Sarhad bank limited

Lahore commercial limitedPunjab provincial co-operative bank limited

The Pakistan banking council prepared a scheme for the recognition of banks. The bank

(amalgamation) scheme 1974 was notified in April, providing for the amalgamation of the

smaller banks with bigger ones and following the five units in there phases:


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National bank limited

Habib bank limitedUnited bank limited

Muslim commercial bank limited

Allied bank of Pakistan limited

The first phase was completed on 30th June. 1974. When the bank Bahawalpur was merged with

the National Bank of Pakistan. The premier Bank Limited with Muslim Commercial Bank

limited and Sarhad Bank Limited and Pak bank limited and renamed as Allied Bank of Pakistanlimited.

The second phase was completed on 31st Dec.1974, when the commerce bank limited merged

with the United Bank limited.

The third and the final phase were completed on 30th June, 1975 when the standard bank limited

was merged with Habib Bank limited.

The nationalization was very smooth and gave very positive results.

The number of branches, which stood at 3397 on Dec31, 1973, reached on 7661 by end June

1992. The bank deposits which stood at Rs. 1925 corers at the end 1973 reached the highest

mark about 323 corers.

3.1 Islamization of Banking

Another major development in the history of Pakistan Banking System was the introduced of

interest free banking in selected Commercial Banks with effect form Jan1, 1981. This followed

the effort to eliminated interest from the operation of Nation investment trust, the House

Building Finance Corporation of Pakistan. Certain amendments were made in banking and otherlaws with the object of ushering in a new system of banking, which would confirm of Sharia. A

new law Modaraba Companies Ordinance 1980 was promulgated. Separate interest free countersbegan to operate in all the nationalized commercial banks free counters began to operate in all

the nationalized commercial banks. The state bank provides finance against participation term

certificate and also against promissory notes supported by Modaraba certificate.

In order to cover interest free transactions certain banking definitions such as creditors, debtor,

and advances credits and deposits were revised. Stipulations concerning form of business inwhich banking companies may engage may also have been modified schemes were introduced to

provide interest free loans to formers and deserving students.

A private Limited Company named as Bankers Equity limited was incorporated in 1979 to

provide financial assistance to the industrial sector primarily on interest free basis.

A scheme to extend interest free productive loans to farmers and fisherman has also been

introduced. Instead of interest, a system based on mark-up in price, exchange rate differential,and profit and loss sharing accounts were introduced.

Different financial schemes introduced in the Islamization process are:


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Musharika Financing. Hire Purchase Financing. Modaraba Financing. Specific Purpose Modaraba.3.2 Dis-Investment and Deregulation of Banking1991

When it was realized that the role of public sector in the economy is over extended and the

banking sector has more earning potential in the private sector the process of privatization

banking sector restarted in 1991 by the Muslim League Government. Muslim Commercial Bank

was Dis-invested in to two phases while ABL was sold to its employees. Since then allot ofinvestment is being made in the banking sector and several new banks were established and still

the process is going on. Now only NBP is government bank other than SBP. The performance of

this bank will be analyzed and judged in the following chapters.

3.3 INTEREST FREE BANKING

A new concept of interest free banking was introduced in 1981 and by now it has been

established on sound footing and new trends and techniques are being implemented to make thissystem result oriented. New products and their systematic consumption are making Pakistani

banking comparable to their several modern counterparts anywhere in the developed world.

3.4 HISTORY OF NBP:

The NBP was established vide NBP Ordinance No. XIX of November 9. 1949.

British Govt. devalued its currency in September 1949, India devalued its rupees but Pakistandid not. It led to a crisis in trading between the two countries and India refused to lift thePakistan Jute. To solve this problem i.e. to export jute NBP was established through an

Ordinance of GOP.National Bank of Pakistan maintains its position as Pakistan's premier bankdetermined to set higher standards of achievements. It is the major business partner for theGovernment of Pakistan with special emphasis on fostering Pakistan's economic growth through

aggressive and balanced lending policies, technologically oriented products andservicesoffered

through itslarge network of brancheslocally, internationally and representative offices.

The Bank in 1950 had one subsidiary The Bank of Bahawalpur on December4, 1947 by the

former Bahawalpur State.

NBP was undertaking Treasury Operations and Managing Currency Chests or Sub Chests at 57

of its offices where the turnover of the business under the head amounted to Rs.2460 million.

i) Deposits held by NBP constituted about 3.1% of total deposits of allPakistani Banks in 1949, which rose to 38% in 1952.
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ii) Growth in Deposits was accompanied by increase in Bank portfolio in advances. NBP

lent out to Textile, Yarn, Iron and Steel and played a pioneer role in support of agriculture andcommerce.

iii)NBP advances reached Rs.554.4 million by December 1959, which was one third of thetotal schedule bank credit.3

3.4.1 MISSION STATEMENT

To make the Bank complete and competitive with all international Standard in performing,

quality of, operations, staff, financial strength. And products and services To develop a cultureof excellence in every spare of activity of the bank

.

3.4.2 GOALS AND OBJICTIVES

An organizational objective is the intended goal that prescribes definite scope and suggests

direction to the panning efforts of a organization.

3.4.3 GOALS AND OBJICTIVES NBP

To be the pre-eminent financial institution in Pakistan and achieve market recognition both in

the quality and delivery of service as well as the range of product offerings.

3.5Net Work of Branches:NBP have wide range of branches inside the country and outside the country.

In Pakistan it has 29 regional offices, 1189 Branches and 4 Subsidiaries.

In overseas it has 16 overseas branches, 6 other branches.10

3.6 Objectives of NBPNational bank of Pakistan is also a commercial organization and its main objective is profit

maximization. This is achieved in two ways:1. By increasing deposits.

2. By charging interest on loans provided to the private sector and business community.

These are explained as:

3.6.1 Increase in deposits:Competition in banking is intense and every bank whether it is Pakistani, foreign, private or

nationalized tries to increase its deposits by providing better facilities to its customers. Byincreasing its deposits a bank can extend greater amount of loan and hence achieves higher

profit. NBP is also improving its facilities and services to attract customers with higher volumeof deposits. There are two main factors involved in increasing the deposits. These factors are

improving the services and courtesy. NBP is continuously working on these two factors toincrease its deposits.

3.6.2 Extension of loans:The profitability of a bank largely depends on the amount given to people as loan and the type ofpeople to whom credit is given i.e. the credit worthiness of the borrowers. This strategy has

worked quite well for NBP. Deposits are collected from the people and invested in different


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projects. NBP prefers to give loans to financially sound and reliable parties, after securing the

collators. NBP has an extremely well organized section. The staff is adequately trained, andeducated and competent. They carry out extensive financial analysis before deciding on the loan.

Interest charged on the loans potentially contributes to higher profits.

Some of the other objectives of NBP are:

i. Improve customer services.ii. Quick disposal of credit cases.

iii. Efficient operation of the branches.

iv. Better Public Relations.v. Operational and advisory services for foreign exchange accounts activities

3.7 Functions of NBPSince NBP is a commercial bank, it performs a variety of functions.

Like other commercial banks, NBP is engaged in financing international trade. Its other major

functions include receiving deposits, advancing loans and discounting of exchange. Thefunctions performed by NBP are:

3.7.1 Accepting DepositsThis function is important because banks largely depend on the funds deposited with them by itscustomers. Deposits are of many types:

i. Current depositsCurrent deposits are also called demand liability on current deposits. NBP pays practically no

interest on current deposits. Businessmen usually open current accounts. In NBP current account

can be opened with a minimum amount of Rs.500/-.

ii. PLS saving deposit

Profit and loss sharing deposits (PLS) are also called checking accounts. One can deposit anddraw money easily. Profit on PLS is calculated every month but paid after six months. PLSaccount can be opened with a minimum amount of Rs.500/-

iii PLS term depositsFixed term deposits are deposits with the bank for certain fixed period before the expiry of which

they cannot be withdrawn unless giving due notice. In this case the rates of profit will be

different depending upon the time period.

3.7.2. Discounting bills of exchangeDiscounting of bill is practically speaking lending for exchange at their market rate i.e. it pays to

holder of the bill an amount equal to the face value after deducting interest at the current marketrate for the period. This bill has to be mature. This is the common way used for keeping a part of

assets of the bank in a liquid form.

3.7.3. Agency serviceNBP also provides best and unique service to its valued customers. NBP provide the following

agency services to the customers:

i. Collection of dividends


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As NBP deals with the purchase and sale of various types of securities, therefore NBP also

provide dividend or interest earned on share or bonds or invested money.

ii. Collection of ChequesIn the collection and payment of Cheques, bills and promissory notes etc. National bank of

Pakistan acts as an agent for its customers.

iii. Acting as an agentNBP also acts as an agent correspondent or representative for its customer at home or abroad.

iv. General utility services:Utilities provided by NBP are as follows:

a. Clearance of utility billsNBP provides the service of clearing the utility bills i.e. electricity, gas and telephone bills of its

customers. For this purpose it also provides evening banking services.

b. Lockers facilityNational bank of Pakistan also provides locker facilities to its customers to keep their valuable

assets in it. The charges of different size of lockers are different.

c. Acts as a referee

NBP provides useful services to its customers by acting as a referee to their credit worthiness.d. Supply of informationNBP provides operational and advisory service for foreign exchange accounts/activities.

3.8 Unmatched Banking Facilities Deposit security, Guaranteed by Government of Pakistan. Highest rates of return to attract the savings. Lowest rates on exports and other borrowings. Largest contribution towards Government and Semi-Government requirements. Agents of the SBP handling Treasury Functions, receipts of Taxes & other Revenues. Handling of salaries & pensions of federal/provincial/defense personnel. Utility Bills collections. Hajj arrangements. Sale and encashment of prize Bonds. Sale and encashment of Defense Savings and Special Savings Certificates. Safe Deposit Lockers for customers. Rational Human Resource Management.

The prestigious periodical The Banker UK recognized NBP as the best bank for 2001 -2002

and NBP is the bank of the year for 2003-2004 of Pakistan.

i. AAA rating awarded JCR-VIS Credit co. Ltd and affiliated of Japan Credit Rating

Agency for 2001.

ii. AAA+1 rating awarded JCR-VIS Credit Co.Ltd and affiliated of Japan Credit RatingAgency for 2002

3.9 NBP at the forefront of Pak-Afghan tradei. Booth at dry port Peshawar

ii. Booth at Pak Afghan border (Torkham) NWFPiii. Booth at Pak Afghan border (Chamman).Baluchistan.

iv. Establishing branch at Kabul in near Future.


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CHAPTER # 4

SERVICES OF NBP

Services are he outputs of the firm which are in intangible form.

NBP offers the following services to the people.

4.1DEMAND DRAFTSIf you are looking for a safe, speedy and reliable way to transfer money, you can now purchase

NBPs Demand Drafts at very reasonable rates. Any person whether an account holder of thebank or not, can purchase a Demand Draft from a bank branch.

4.2SWIFT SYSTEMThe SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been

introduced for speedy services in the area of home remittances. The system has built-in features

of computerized test keys, which eliminates the manual application of tests that often cause delay

in the payment of home remittances. The SWIFT Center is operational at National Bank ofPakistan with a universal access number NBP-APKKA. All NBP overseas branches and

overseas correspondents (over 450) are drawing remittances through SWIFT.Using the NBP network of branches, you can safely and speedily transfer money for our business

and personal needs.

4.3LETTERS OF CREDITNBP is committed to offering its business customers the widest range of options in the area of

money transfer. If you are a commercial enterprise then our Letter of Credit service is just what

you are looking for. With competitive rates, security, and ease of transaction, NBP Letters ofCredit are the best way to do your business transactions.

4.4TRAVELER'S CHEQUESTravelers cheques are negotiable instruments, and there is no restriction on the period of

validity of the cheques. Rupee travelers cheque is available at all 700 branches of NBP. This canbe encashed in all 400 branches of NBP. There is no limit on purchase of this cheque. It is one of

the safest ways for carrying money.

4.5PAY ORDERNBP provides another reason to transfer your money using our facilities. NBP pay orders are asecure and easy way to move your money from one place to another. And, as usual, NBP

charges for this service are extremely competitive. The charges of NBP are very low all over the

Pakistan. It charges Rs 50/- for NBP account holders on issuing one payment order. And charges

Rs 100/- for NBP non-account holders on issuing one payment order. It charges Rs 25/- forstudents on payment of fees of educational institutions. If some one want a duplicate of payment

order they charges Rs 100/- for NBP account holders and Rs 150/- for non account holders.


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4.6MAIL TRANSFERSMove your money safely and quickly using NBP Mail Transfer service. And NBP also offerthe most competitive rates in the market. They charges Rs 50/- exchange rate and RS 75/-

postage charges on issuing mail transfer.

4.7FOREIGN REMITTANCES:To facilitate its customers in the area of Home Remittances, National Bank of Pakistan has takena number of measures to:

Increase home remittances through the banking system Meet the SBP directives/instructions for timely and prompt delivery of remittances to the

beneficiaries

4.7.1 New Features:The existing system of home remittances has been revised/significantly improved and well-

trained field functionaries are posted to provide efficient and reliable home remittance services to

nonresident Pakistanis at 15 overseas branches of the Bank besides Pakistan International Bank

(UK) Ltd., and Bank Al-Jazira, Saudi Arabia. Zero Tariffs: NBP is providing home remittance services without any charges. Strict monitoring of the system is done to ensure the highest possible security. Special courier services are hired for expeditious delivery of home remittances to the

beneficiaries.

4.8SHORT TERM INVESTMENTSNBP now offers excellent rates of profit on all its short term investment accounts. Whether you

are looking to invest for 3 months or 1 year, NBPs rates of profit are extremely attractive, along

with the security and service only NBP can provide.

4.9National Income Daily Account (NIDA)The scheme was launched in December 1995 to attract corporate customers. It is a current

account scheme and is part of the profit and loss system of accounts in operation throughout thecountry.

4.9.1 Salient Features:

Rs 2-million is required to open an account and there is no maximum limit. Profit is paid on half yearly basis on monthly balances. The rates of profit vary according to the slabs of deposit. On Deposits of Rs.2 million to

2,000 million, the rate fluctuates from 1.4 to 1.75

It is a checking account and there is no limit of withdrawals.4.9.2 Rates on NIDA

From Rs 2/- million to Rs 50/- the rate is 1.4%. From Rs50/- million but less than Rs 500/-million, the rate is 1.5%. From Rs 500/- million but below Rs 1000/- the rate is 1.6%. From Rs 1000/- and above the rate is 1.75%.


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4.10 QUITY INVESTMENTS

NBP has accelerated its activities in the stock market to improve its economic base and restore

investor confidence. The bank is now regarded as the most active and dominant player in the

development of the stock market.

4.10.1 NBP is involved in the following:

Investment into the capital market Introduction of capital market accounts (under process)

NBPs involvement in capital markets is expected to increase its earnings, which would result in

better returns offered to account holders

4.11 COMMERCIAL FINANCENBP dedicated team of professionals truly understands the needs of professionals, agriculturists,

large and small business and other segments of the economy. They are the customers best

resource in making NBPs products and services work for them.

4.12 RADE FINANCE OTHER BUSINESS LOANSThere are two types of trade finance.

4.12.1 AGRICULTURAL FINANCENBP provides Agricultural Finance to solidify faith, commitment and pride of farmers who

produce some of the best agricultural products in the World.

4.12.1.1 Agricultural Finance Services:I Feed the World program, a new product, is introduced by NBP with the aim to help farmers

maximize the per acre production with minimum of required input. Select farms will be made

role models for other farms and farmers to follow, thus helping farmers across Pakistan to

increase production.

4.12.1.2 Agricultural Credit:The agricultural financing strategy of NBP is aimed at three main objectives:-

Providing reliable infrastructure for agricultural customers Help farmers utilize funds efficiently to further develop and achieve better production Provide farmers an integrated package of credit with supplies of essential inputs,

technical knowledge, and supervision of farming.

4.12.1.3 Agricultural Credit (Medium Term):

Production and development Watercourse improvement Wells Farm power Development loans for tea plantation Fencing Solar energy Equipment for sprinklers


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4.12.1.4 Farm Credit:NBP also provides the following subsidized with ranges of 3 months to 1 year on a renewal

basis.

Operating loans

Land improvement loans Equipment loans for purchase of tractors, farm implements or any other equipment4.12.1.5 Production Loans:

Production loans are meant for basic inputs of the farm and are short term in nature. Seeds,

fertilizers, sprayers, etc are all covered under this scheme.

If you require any further information, please do not hesitate to e-mail us.

4.12.2 CORPORATE FINANCE

4.12.2.1 Working Capital and Short Term Loans:

NBP specializes in providing Project Finance Export Refinance to exporters Pre-shipmentand Post-shipment financing to exporters Running financeCash FinanceSmall Finance

Discounting & Bills Purchased Export Bills Purchased / Pre-shipment / Post ShipmentAgricultural Production Loans

4.12.2.2 Medium term loans and Capital Expenditure Financing:NBP provides financing for its clients capital expenditure and other long-term investment

needs. By sharing the risk associated with such long-term investments, NBP expedites clients

attempt to upgrade and expand their operation thereby making possible the fulfillment of our

clients vision. This type of long term financing proves the banks belief in its client'scapabilities, and its commitment to the country.

4.12.2.3 Loan Structuring and Syndication:National Banks leadership in loan syndicating stems from ability to forge strong relationshipsnot only with borrowers but also with bank investors. Because we understand our syndicate

partners asset criteria, we help borrowers meet substantial financing needs by enabling them to

reach the banks most interested in lending to their particular industry, geographic location andstructure through syndicated debt offerings. Our syndication capabilities are complemented by

our own capital strength and by industry teams, who bring specialized knowledge to the structure

of a transaction.

4.12.3.4 Cash Management Services:With National Banks Cash Management Services (in process of being set up), the customers

sales collection will be channeled through vast network of NBP branched spread across thecountry. This will enable the customer to manage their companys total financial position rightfrom your desktop computer. They will also be able to take advantage of our outstanding range

of payment, ejection, liquidity and investment services. In fact, with NBP, youll be providedeverything, which takes to manage your cash flow more accurately

4.13 INTERNATIONAL BANKING


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National Bank of Pakistan is at the forefront of international banking in Pakistan which is proven

by the fact that NBP has its branches in all of the major financial capitals of the world.Additionally, we have recently set up the Financial Institution Wing, which is placed under the

Risk Management Group. The role of the Financial Institution Wing is:-

To effectively manage NBPs exposure to foreign and domestic correspondence

Manage the monetary aspect of NBPs relationship with the correspondents to supporttrade, treasury and other key business areas, thereby contributing to the banks

profitability

Generation of incremental trade-finance business and revenues4.13.1 NBP offers:

The lowest rates on exports and other international banking products Access to different local commercial banks in international banking

4.13 Cash and Gold Finance.Cash and Gold finance means that loan is given against the gold. The gold is mortgaged with

the bank and loan is taken. It is the area of consumer finance. And borrower can take loan forcommon use.

4.15 Advance salary loan:This loan is given to those people who are govt servants. They can get a loan up to the salary of

fifteen months.


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CHAPTER # 5DEPARTMENTALIZATION

Dividing an organization into different parts according to the functions is called departmentation.

So NBP Main branch is divided into two main parts.

A) DEPARTMENTATION

5.1 CASH DEPARTMENTCash department performs the following functions

5.1.1) ReceiptThe money, which either comes or goes out from the bank, its record should be kept. Cash

department performs this function. The deposits of all customers of the bank are controlled bymeans of ledger accounts. Every customer has its own ledger account and has separate ledger

cards.

5.1.2) PaymentsIt is a bankers primary contract to repay money received for this customers account usually byhonoring his cheques.

5.1.3) Cheques and their PaymentThe Negotiable Instruments. Act, 1881,

Cheque is a bill of exchange drawn on a specified banker and not expressed to be payableotherwise than on demand2.

Since a Cheque has been declared to be a bill of exchange, it must have all its characteristics asmentioned in Section 5 of the Negotiable Instruments Act, 1881. Therefore, one can say that a

Cheque can be defined as an:

An unconditional order in writing drawn on a specifiedbanker, signed by the drawer, requiring

the banker to pay on demand a sum certain in money to, or to the order of, a specified person or

to the bearer, and which does not order any act to be done in addition to the payment of

money3. (Law of Banking by Dr. Hart, p.327).

5.1.4) the Requisites of ChequeThere is no prescribed form of words or design of a Cheque, but in order to fulfill the

requirements mentioned in Section 6 above the Cheque must have the following.a) It should be in writingb) The unconditional orderc) Drawn on specific banker onlyd) Payment on Demande) Sum Certain in moneyf) Payable to a specific persong) Signed by the drawer

5.1.5) Parties to ChequeThe normal Cheque is one in which there is a drawer, a drawee banker and a payee, or no payee

but bearer.

a) The Drawerb) The Draweec) The Payee


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5.1.6) Types of ChequesBankers in Pakistan deal with three types of cheques

a) Bearer ChequesBearer cheques are cashable at the counter of the bank. These can also be collected through

clearing.

b) Order chequeThese types of cheques are also cashable on the counter but its holder must satisfy the bankerthat he is the proper man to collect the payment of the cheque and he has to show his

identification. It can also be collected through clearing.

c) Crossed ChequeThese cheques are not payable in cash at the counters of a banker. It can only be credited to the

payees account. If there are two persons having accounts at the same bank, one of the account

holder issues a cross-cheque in favour of the other account holder. Then the cheque will be

credited to the account of the person to whom the cheque was issued and debited from theaccount of the person who has actually issued the cheque.

5.1.7) Payment of ChequesIt is a bankers primary contract to repay money received for his customers account usually by

honouring his cheques. Payment of money deposited by the customer is one of the root functionsof banking. The acid test of banking is the receipt of money etc. from the depositors, and

repayment to them. This paying function is one, which is the distinguishing mark of a banker and

differentiates him from other institutions, which receive money from the public. However the

bankers legal protection is only when payment is in Due Course. The payment in due coursemeans payment in accordance with the apparent tenor of the instrument, in good faith and

without negligence to any person in possession thereof under circumstances, which do not afford

a reasonable ground of believing that he is not entitled to receive payment of the amount therein

mentioned. It is a contractual obligation of a banker to honor his customers cheques if thefollowing essentials are fulfilled.

a) Cheques should be in a proper form:b) Cheque should not be crossed:c) Cheque should be drawn on the particular bank:d) Cheque should not mutilated:e) Funds must be sufficient and available:f) The Cheque should not be post dated or stale:g) Cheque should be presented during banking hours:

5.2 CLEARANCE DEPARTMENTA clearinghouse is an association of commercial banks set up in given locality for the purpose of

interchange and settlement of credit claims. The function of clearinghouse is performed by the

central bank of a country by tradition or by law. In Pakistan, the clearing system is operated bythe SBP. If SBP has no office at a place, then NBP, as a representative of SBP act as a

clearinghouse.


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After the World War II, a rapid growth in banking institutions has taken place. The use of

cheques in making payments has also widely increased. The collection as settlement of mutualobligations in the form of cheques is now a big task for all the commercial bank. When Cheque

is drawn on one bank and the holder (payee) deposits the same in his account at the bank of the

drawer, the mutual obligation are settled by the internal bank administration and there arises no

inter bank debits from the use of cheques. The total assets and total liabilities of the bank remainunchanged.

In practice, the person receiving a Cheque as rarely a depositor of the cheque at the same bank as

the drawer. He deposits the cheque with his bank other than of payer for the collection of theamount. Now the bank in which the cheque has been deposited becomes a creditor of the

drawers bank. The depositor bank will pay his amount of the cheque by transferring it from cash

reserves if there are no offsetting transactions. The banks on which the cheques are drawnbecome in debt to the bank in which the cheques are deposited. At the same time, the credi torsbanks receive large amounts of cheques drawn on other banks giving claims of payment by them.

The easy, safe and most efficient way is to offset the reciprocal claims against the other and

receive only the net amount owned by them. This facility of net inter bank payment is provided

by the clearinghouse.The representatives of the local commercial banks meet at a fixed time on all the business days

of the week. The meeting is held in the office of the bank that officially performs the duties ofclearinghouse. The representatives of the commercial banks deliver the cheques payable at other

local banks and receive the cheques drawn on their bank. The cheques are then sorted according

to the bank on which they are drawn. A summary sheet is prepared which shows the names ofthe banks, the total number of cheques delivered and received by them. Totals are also made of

all the cheques presented by or to each bank. The difference between the total represents the

amount to be paid by a particular bank and the amount to be received by it. Each bank then

receives the net amount due to it or pays the net amount owed by it.

5.2.1) In-Word Clearing BooksThe bank uses this book for the purpose of recording all the cheques that are being received by

the bank in the first clearing. All details of the cheques are recorded in this book.

5.2.2) Out-Word Clearing Book:The bank uses outward clearing register for the purpose of recording all the details of thecheques that the bank has delivered to other banks.

5.3 ADVANCES DEPARTMENTAdvances department is one of the most sensitive and important departments of the bank. The

major portion of the profit is earned through this department. The job of this department is to

make proposals about the loans. The Credit Management Division of Head Office directly

controls all the advances. As we known bank is a profit seeking institution. It attracts surplusbalances from the customers at low rate of interest and makes advances at a higher rate of

interest to the individuals and business firms. Credit extensions are the most important activity of

all financial institutions, because it is the main source of earning. However, at the same time, it isa very risky task and the risk cannot be completely eliminated but could be minimized largely

with certain techniques.


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5.3.1) Name and address of the borrower.a) Existing financial position of a borrower at a particular branch.b) Accounts details of other banks (if any).c) Security against loan.d)

Exiting financial position of the company. (Balance Sheet & Income Statement).e) Signing a promissory note is also a requirement of lending, through this note borrowerpromise that he will be responsible to pay the certain amount of money with interest.

5.3.2) Principles of AdvancesThere are five principles, which must be duly observed while advancing money to the borrowers.

SafetyLiquidity

Dispersal

Remuneration

Suitability

a. SafetyBankers funds comprise mainly of money borrowed from numerous customers on variousaccounts such as Current Account, Savings Bank Account, Call Deposit Account, Special Notice

Account and Fixed Deposit Account. It indicates that whatever money the banker holds is that of

his customers who have entrusted the banker with it only because they have full confidence inthe expert handling of money by their banker. Therefore, the banker must be very careful and

ensure that his depositors money is advanced to safe hands where the risk of loss does not exist.

The elements of character, capacity and capital can help a banker in arriving at a conclusion

regarding the safety of advances allowed by him.

b. CharacterIt is the most important factor in determining the safety of advance, for there is no substitute for

character. A borrowers character can indicate his intention to repay the advance since hishonesty and integrity is of primary importance. If the past record of the borrower shows that his

integrity has been questionable, the banker should avoid him, especially when the securities

offered by him are inadequate in covering the full amount of advance.It is obligation on the banker to ensure that his borrower is a person of character and has capacity

enough to repay the money borrowed including the interest thereon.

c. CapacityThis is the management ability factor, which tells how successful a business has been in the past

and what the future possibilities are. A businessman may not have vast financial resources, but

with sound management abilities, including the insight into a specific business, he may make hisbusiness very profitable. On the other hand if a person has no insight into the particular business

for which he wants to borrow funds from the banker, there are more chances of loss to the

banker.


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d. CapitalThis is the monetary base because the money invested by the proprietors represents their faith inthe business and its future. The role of commercial banks is to provide short-term capital for

commerce and industry, yet some borrowers would insist that their bankers provide most of the

capital required. This makes the banker a partner. As such the banker must consider whether the

amount requested for is reasonable to the borrowers own resources or investment.

e. LiquidityLiquidity means the possibilities of recovering the advances in emergency, because all themoney borrowed by the customer is repayable in lump sum on demand. Generally the borrowers

repay their loans steadily, and the funds thus released can be used to allow fresh loans to other

borrowers. Nevertheless, the banker must ensure that the money he is lending is not blocked foran undue long time, and that the borrowers are in such a financial position as to pay back the

entire amount outstanding against them on a short notice. In such a situation, it is very important

for a banker to study his borrowers assets to liquidity, because he would prefer to lend only for a

short period in order to meet the shortfalls in the wording capital. If the borrower asks for an

advance for the purchase of fixed assets the banker should refuse because it shall not be possiblefor him to repay when the banker wants his customer to repay the amount. Hence, the baker must

adhere to the consideration of the principles of liquidity very careful.

f. DispersalThe dispersal of the amount of advance should be broadly based so that large number of

borrowing customer may benefit from the bankers funds. The banker must ensure that his fundsare not invested in specific sectors like textile industry, heavy engineering or agriculture. He

must see that from his available funds he advances them to a wide range of sector like

commerce, industry, farming, agriculture, small business, housing projects and various otherfinancial concerns in order of priorities.

Dispersal of advances is very necessary from the point of security as well, because it reduces the

risk of recovery when something goes wrong in one particular sector or in one field.

g. RemunerationA major portion of the bankers earnings comes form the interest charged on the money

borrowed by the customers. The banker needs sufficient earnings to meet the following:a) Interest payable to the money deposited with him.b) Salaries and fringe benefits payable to the staff members.c) Overhead expense and depreciation and maintenance of the fixed assets of the bank.d) An adequate sum to meet possible losses.e) Provisions for a reserve fund to meet unforeseen contingencies.f) Payment of dividends to the shareholders.

h. SuitabilityThe word suitability is not to be taken in its usual literary sense but in the broader sense of

purport. It means that advance should be allowed not only to the carefully selected and suitableborrowers but also in keeping with the overall national development plans chalked out by the

authorities concerned. Before accommodating a borrower the banker should ensure that the


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lending is for a purpose in conformity with the current national credit policy laid down by the

central bank of the country.

5.3.3 Forms of LoansIn addition to purchase and discounting of bills, bankers in Pakistan generally lend in the form of

cash finance, overdrafts and loans. NBP provides advances to different people in different waysas the case demand.

a) Cash FinanceThis is a very common form of borrowing by commercial and industrial concerns and is made

available either against pledge or hypothecation of goods, produce or merchandise. In cash

finance a borrower is allowed to borrow money from the banker up to a certain limit, either atonce or as and when required. The borrower prefers this form of lending due to the facility of

paying markup/services charges only on the amount he actually utilizes.

If the borrower does not utilize the full limit, the banker has to lose return on the un-utilized

amount. In order to offset this loss, the banker may provide for a suitable clause in the cash

finance agreement, according to which the borrower has to pay markup/service charges on atleast on self or one quarter of the amount of cash finance limit allowed to him even when he does

not utilize that amount.

b) Overdraft/Running FinanceThis is the most common form of bank lending. When a borrower requires temporaryaccommodation his banker allows withdrawals on his account in excess of the balance which the

borrowing customer has in credit, and an overdraft thus occurs. This accommodation is generally

allowed against collateral securities. When it is against collateral securities it is called Secured

Overdraft and when the borrowing customer cannot offer any collateral security except his

personal security, the accommodation is called a Clean Overdraft. The borrowing customer isin an advantageous position in an overdraft, because he has to pay service charges only on the

balance outstanding against him. The main difference between a cash finance and overdraft lies

in the fact that cash finance is a bank finance used for long term by commercial and industrialconcern on regular basis, while an overdraft is a temporary accommodation occasionally resorted

to.

c) Demand Financing/LoansWhen a customer borrows from a banker a fixed amount repayable either in periodic installments

or in lump sum at a fixed future time, it is called a loan. When bankers allow loans to theircustomers against collateral securities they are called secured loans and when no collateral

security is taken they are called clean loans.

The amount of loan is placed at the borrowers disposal in lump sum for the period agreed upon,

and the borrowing customer has to pay interest on the entire amount. Thus the borrower gets afixed amount of money for his use, while the banker feels satisfied in lending money in fixed

amounts for definite short periods against a satisfactory security


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5.4 REMITTANCE DEPARTMENTRemittance means a sum of money sent in payment for something. This department deals witheither the transfer of money from one bank to other bank or from one branch to another branch

for their customers. NBP offers the following forms of remittances.

a)

Demand Draftb) Telegraphic Transferc) Pay Orderd) Mail Transfer

5.4.1) Demand DraftDemand draft is a popular mode of transfer. The customer fills the application form. Application

form includes the beneficiary name, account number and a senders name. The customer deposits

the amount of DD in the branch. After the payment the DD is prepared and given to the

customer. NBP officials note the transaction in issuance register on the page of that branch of

NBP on which DD is drawn and will prepare the advice to send to that branch. The account of

the customer is credited when the DD advice from originating branch comes to the respondingbranch and the account is debited when DD comes for clearance. DD are of two types.

a) Open DD: Where direct payment is made.b) Cross DD: Where payment is made though account.NBP CHARGES FOR DD

I. Up to Rs. 50,000/- is Rs 50/- onlyII. Over Rs. 50,000/- is 0.1%5.4.2) Pay OrderPay order is made for local transfer of money. Pay order is the most convenient, simple and

secure way of transfer of money. NBP takes fixed commission of Rs. 25 per pay order from the

account holder and Rs. 100 from a non-account holder.

5.4.3) Telegraphic TransferTelegraphic transfer or cable transfer is the quickest method of making remittances. Telegraphic

transfer is an order by telegram to a bank to pay a specified sum of money to the specifiedperson. The customer for requesting TT fills an application form. Vouchers are prepared and sent

by ordinary mail to keep the record. TT charges are taken from the customer. No excise duty is

charged on TT. The TT charges are:Telegram/ Fax Charges on TT = Actual-minimum Rs.125.

Cable telegram transfer costs more as compared to other title of money. In cable transfer the

bank uses a secret system of private code, which is known to the person concerned with this

department and branch manager.

5.4.4) Mail TransferWhen the money is not required immediately, the remittances can also be made by mail transfer(MT). Here the selling office of the bank sends instructions in writing by mail to the paying bank

for the payment of a specified amount of money. Debiting to the buyers account at the selling

office and crediting to the recipients account at the paying bank make the payment under this


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transfer. NBP taxes mail charges from the applicant where no excise duty is charged. Postage

charges on mail transfer are actual minimum Rs. 40/- if sent by registered post locally Rs.40/- if

sent by registered post inland on partys request.

5.5 HUMAN RESOURCE MANAGEMENT

Human Resource plays a vital role in the success of every service organization. They interactbetween man and machine. Their attitude can win or loose the customer. The positive attitude

could only be created in a conducive environment, which can make the staff dedicated towards

the organization and its objectives. In reality the man is more important than machine as it is thehuman which could get maximum out of machine to keep a happy customer. However, most

organizations give little importance to this very important asset.

Various aspects related to human resource of National Bank of Pakistan are critically examinedin the following text:

5.5.1) Selection & RecruitmentAlthough the Bank believes in merit but in practice the selection of employees is not done on

merit. Most of the employees are low educated. This shows that candidates with some strongfamily background or political pressure are given preference in recruitment and qualified

candidates are sometimes left behind.

5.5.2) Job for LifeLike the employee of public sector organizations in Pakistan, the employees of NBP also enjoytheir job for life. Since there is no risk of early retirement or redundancy in rank, they do not

perform with their full potentials. This is one redundancy in rank, they do not perform with their

full potentials, and this is one of the reasons responsible for the low productivity of the

employees of the Bank.

5.5.3) Performance AppraisalThe performance of employees of the Bank are appraised though their annual confidential

reports at the end of each year. This has become an outdated method of performance appraisaland no longer used due to the following reasons:

1. The performance of employees is evaluated after quite a long time.2. Element of subjectivity is involved in this method.3. Employees participation is not ensured in the process of evaluation.4. Objectives of employees are not quantified.5.5.4) Inter Personal RelationshipModern management acknowledges human resources as one of the most important assets of anorganization. But by their very nature, human beings are also the most unpredictable. Where a

number of persons work together, interactions among them, of necessity, will lead to conflictsand NBP is no exception. Most interpersonal conflicts in NBP can be traced back to the

following major heads.

Lack of CommunicationLack of communication is for the biggest reason for conflicts. Not only it is due to the failure to

send a massage but to an interpretation given to the massage by the receiver is different from that

intended.


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5.5.5) Diversity in ValuesDiversity in values, perceptions, cultural background and life-style is another reason responsible

for inter personal conflicts in NBP. Different values and perceptions about the same issue, event

or personality hinder understanding. When things come to such a pavement, therefore,

interpersonal conflicts are generated.The dominant trend in all modern industrial societies of the world is merit and expertise, which

helps promote cohesion and reduce conflicts. But the feudalistic mindset is still very strong in

our set up and there is no tradition of tolerance for differing viewpoints. Hence, interpersonalconflicts are generated.

5.5.6) CorruptionOur social acceptance of corruption gives rise to corruption at every level of social and

organizational set up. Corruption involves financial embezzlement, favoritism, nepotism,

cronyism and other number of such practices. All these cause resentment that keep building up

and lead to conflict sooner or later.

In the past few years, some cases of frauds have happened in different branches. The reasons canbe linked with the employee dissatisfaction of NBP.

5.5.7) Discipline & AuthorityMaintaining discipline and implementation of authority (tables) in letter and spirit is the key to

success of any organization. In NBP, The authority tables are not strictly maintained. Linemanagers are not fully equipped with the authority with no vertical or horizontal interference.

5.6) DEPOSIT DEPARTMENT: -It controls the following activities:

a) A/C opening.

b) Issuance of cheque book.

c) Current a/cd) Saving a/ce) Cheque cancellationf) Cash5.6.1 Account openingThe opening of an account is the establishment of banker customer relationship. Before a banker

opens a new account, the banker should determine the prospective customers integrity,respectability, occupation and the nature of business by the introductory references given at the

time of account opening. Preliminary investigation is necessary because of the following reasons.

i. Avoiding fraudsii. Safe guard against unintended over draft.

iii. Negligence.iv. Inquiries about clients.

There are certain formalities, which are to be observed for opening an account with a bank.

Formal Application Introduction


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Specimen Signature Minimum Initial Deposit Operating the Account1. Pay-In-Slip Book2. Pass Book3. Issuing Cheque Booka) Qualification of CustomerThe relation of the banker and the customer is purely a contractual one, however, he must havethe following basic qualifications.

He must be of the age of majority. He must be of sound mind. Law must not disqualify him. The agreement should be made for lawful object, which create legal relationship Not expressly declared void.b) Types of Accounts

Following are the main types of accounts

1) Individual Account2) Joint Account3) Accounts of Special Types

Partnership account Joint stock company account Accounts of clubs, societies and associations Agents account Trust account Executors and administrators accounts Pak rupee non-resident accounts Foreign currency accounts1

5.6.2 Issuing of cheque book:This deptt issue cheque books to account holders.

Requirements for issuing cheque book

a) The account holder must sign the requisition slipb) Entry should be made in the cheque book issuing book

c) three rupees per cheque should be recovered from a/c holder if not then debit his/her account.

5.6.3 Current accountThese are payable to the customer whenever they are demanded. When a banker accepts a

demand deposit, he incurs the obligation of paying all cheques etc. drawn against him to the

extent of the balance in the account. Because of their nature, these deposits are treated as currentliabilities by the banks. Bankers in Pakistan do not allow any profit on these deposits, andcustomers are required to maintain a minimum balance, failing which incidental charges are


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deducted from such accounts. This is because the depositors may withdraw Current Account at

any time, and as such the bank is not entirely free to employ such deposits.Until a few decades back, the proportion of Current Deposits in relation to Fixed Deposits was

very small. In recent years, however, the position has changed remarkably. Now, the Current

Deposits have become more important; but still the proportion of Current Deposits and Fixed

Deposits varies from bank to bank, branch to branch, and from time to time.

5.6.4 Saving accountSavings Deposits account can be opened with very small amount of money, and the depositor isissued a cheque book for withdrawals. Profit is paid at a flexible rate calculated on two-month

basis under the Interest-Free Banking System. There is no restriction on the withdrawals from

the deposit accounts but the amount of money withdrawn is deleted from the amount to be takenfor calculation of products for assessment of profit to be paid to the account holder. It

discourages unnecessary withdrawals from the deposits.

In order to popularize this scheme the State Bank of Pakistan has allowed the Savings Scheme

for school and college students and industrial labor also. The purpose of these accounts is to

inculcate the habit of savings in the constituents. As such, the initial deposit required for openingthese accounts is very nominal.

5.6.5 Cheque cancellation:This deptt can cancel a cheque on the basis of;

a) Post dated chequeb) Stale chequec) Warn out chequed) Wrong sign etc

5.6.6 CashThis deptt also deals with cash. Payment of cheques, deposits of cheques etc.

5.7 FOREIGN EXCHANGE/DEPARTMENT:This deptt mainly deals with the foreign business. The main functions of this deptt are:

a) L/C dealing.b) Foreign currency accounts dealing.c) Foreign Remittance dealing.

5.7.1 L/C dealingNBP is committed to offering its business customers the widest range of options in the area of

money transfer. If you are a commercial enterprise then our Letter of Credit service is just what

you are looking for. With competitive rates, security, and ease of transaction, NBP Letters of

Credit are the best way to do your business transactions.

5.7.2 Foreign currency account dealing:This deptt deals with the foreign currency accounts which mainly include dollar account, euroaccount etc.


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5.7.3Foreign Remittance dealing.This is very important function of this deptt.

B) DEPARTMENTATION OF HAYAT ABAD TOWNSHIP BRANCH NBP.Dividing an organization into different parts according to the functions is called

departmentation. So NBP Main branch is divided into two main parts.1. Cash Department2. General Banking Department.

5.1Cash Department:Cash department mainly deals in cash. The Head of department is Mr. Imdad Khan and

two cashier Mehraban Shah and Faiq Shah the objective of cash department.

To facilitate people in the payments of their bills and taxes and repayments of cash

There are two main functions of cash department.

i. Payment ii. Receipts

i. Payments are the function that they pay their cheques and pay cash.ii.

Receipts mean collection of utilities bills, taxes etc.

5.2 General BankingIn this section of the bank the general banking function is performed. It is divided into

five departments.

i. Remittances Department.ii. Computer Department.iii. Advances Department.iv. Clearing Department.v. Establishment Department.

5.2.1 Remittances Department:To transfer the money of people from one place to another place in safe and comparable way

The main functions of this department are:i. Issuing of demand draft.ii. Issuing of Mail transfer.iii. Issuing of Telegraphic transfer.iv. Issuing of payment order.v. Issuing of call deposit.vi. Pension payments etc.vii. Closing and scrolling of government collections.

5.2.2 Advances department:Every bank has a department which advances money to borrowers. In NBP Main branch

the advances department is head by the Business Manager Sir Asim and Operation Manager Sir

Pervez. Both are very competent persons. The objective of Advances Department is

To facilitate people by giving short term and long term loans on easy terms and

conditions.

The main function of this Department is to take surplus money from the people at low

rates and lend this money to borrowers at high rates to earn profit.


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5.2.3 Clearing Department:A clearing house is an association of commercial banks set in State Bank of Pakistan for

the purpose of interchange and settlement of credit claims.

In NBP Main Branch this department is headed by Arif Khattak having experience of about

thirty years. The objective of this department is to

To facilitate customers for payment their Cheques of other banks.Two type of clearing books are maintained.

i. In word clearing books:The bank uses this book for the purpose of recording all the cheques that are being

received by the bank in the first clearing. All detail of the cheques are recorded in this book.

ii. Out word clearing book:The bank uses outward clearing register for the purpose of recording all the details of the

cheques that the banks have delivered to other banks.

5.2.5 Establishment Department:NBP Main Branch having an Establishment Department. This Department consists ofonly one person Haji Misri Kha very competent and experienced person. This department mainlydeals with the branch employees. The main objective of this department is to

To regulate bank business.

Main functions of this department are:

a) Keeps the record of attendance of employees.b) Employees salaries distribution.c) Employees bonuses etc.


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CHAPTER #6

SWOT ANALYSIS

SWOT analysis is an acronym that stands for strengths, weakness, opportunities, and threats

SWOT analysis is careful evaluation of an organizations internal strengths and weakness as well

as its environment opportunities and threats.SWOT analysis is a situational which includes strengths, weaknesses, opportunities and threats

that affect organizational performance.1

The overall evaluation of a company strengths, weaknesses, opportunities and threats is called

SWOT analysis.2

In SWOT analysis the best strategies accomplish an organizations mission by:1. Exploiting an organizations opportunities and strength.

2. Neutralizing it threats.

3. Avoiding or correcting its weakness.SWOT analysis is one of the most important steps in formulating strategy using the organization

mission as a context, managers assess internal strengths distinctive competencies and weakness

and external opportunities and threats. The goal is to then develop good strategies and exploitopportunities and strengths neutralize threats and avoid weaknesses.

6.1 STRENGTHS:6.1.1 OLDEST INSTITUTION:

NBP in one of the oldest bank of Pakistan and first nationalized bank Hence its customer base is

strength from this plus point as customers have more confidence in the bank. The additionalvalue services as the privilege for the bank.

6.1.2 ALTERNATE DUTIES IN SBP ABSENCEThe NBP performs additional services for its customers as well as the other bank customer in the

absence of SBP.

6.1.3 MORE DEPOSITS THAN OTHER BANKNBP has the relative competence in having more deposits than the other bank. This is because of

the confidence the customer have in the bank. The bank being the privileged and oldest bank in

banking sector of Pakistan enjoys this edge over all others, lacking it.

6.1.4 EMPLOYEE BENEFITSThe employers at NBP are offered reasonable monetary benefit. Normally two bonuses are given

Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional benefit and competency for the bank

and a source of motivation for the employees.

6.1.5 BROAD NETWORKThe bank has another competency i.e. it has broad-basses network of branches throughout thecountry also more than one branch in high productive cities. The customers are provided services

at their nearest possible place to confirm customer satisfied.


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6.1.6 STRICTLY FOLLOWED RULES &REGULATION:

The employees at NBP are strict followers of rule & regulation imposed by bank. The disciplinedenvironment at NBP bolsters its image and also enhances the over all out put of t

intern ship report of nbp (juniad barki)

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