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Chapter no 1

INTRODUCTION OF BANKING

1.1 WHAT IS BANK?A bank is an institution for the custody, loan or exchange of money for sanctioning

credit, for transferring funds by domestic and foreign bills of exchange. It is a pipeline

through which currency moves in to and out of circulation.

As it is clear from the definition of banking, the main activity or function of banking is

borrowing and lending of money with a margin of gain. However, as far as the present

day banking is concerned, there are a number of different banks, set up under specific

different objectives, performing various functions.

1.2 Definition of Bank

Bank is an institution for the keeping, lending and exchanges etc. of money.

Crowther,

The bankers business is to take the debts of other people to offer his own in exchange

and there by create money.

Grower

Bank is dealer in debts his own and of other people

Kent says,

That bank is an organization whose principle operations are concerned with the

accumulation of the money from public for the purpose of advancing to others for

expenditures.

Department of Business Administration

Faculty of Administrative Sciences Kotli1

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From the point of view of Sayers transferring of bank deposits from one person or

corporation to another giving the secured or unsecured promises of businessmen

repay is called bank

Banking infect is one primitive as human society. When human know the

importance of money as a medium of exchange, the necessity of a controlling

agency or regulating institution was felt naturally.

1.3 History of Banking

The history of banking is traced to as early as 2000BC by Babylonians. The priests in

Greece used to keep money and valuable of the people in temples. These priests act as

financial agents the origin of banking is also traced to earlier Goldsmith. They use to

keep strong safes for stoning the month.

Despite the classical origin, Banking in its modern form and structure started in Britain

in fourteenth century, from the Lombard merchants. Hen they came in England, they

were so powerful and resourceful that even the king also depends upon them for loans.

After this discovery of America gave modern banking a tremendous boost. In 1965 a

number of Goldsmith bankers formed themselves into a corporation known as the bank of

England. In 1700 Bank of England start to issuing the notes and conducting the accounts

for customers. This bank was only authorized, to issue bank notes. After a time the same

process was developed in London that withdrawn from joint stock banks and was referred

to private banks.

Joint stock companies take another step in 1854 and that was the era of corporations. In

1946 the labor govt. nationalized the bank of England. From 1955 the British Banks



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made a departure from traditional banking by undertaking the hire purchase finance by

buying industrial plants and machinery. Now the modern Banking was born.

1.3.1 Banking in Indo-Pak Sub Continent

The Hindustani society was quite familiar with banking quite from the beginning. During

the fifty century people were used Hindus as a credit instrument. Loans were given to the

people against personal and other securities such as ornaments goods and immovable

properties and banker and customer has a very cordial relation. They were charging very

high rate of interest per annum against their standing crops.

Agriculture sector plays a vital role in Indian society. Muslim rulers provide substantial

encouragement to the formers by giving them interest free loans and grants in cash on

one hand and allowing them to pay the land revenue in cash or king other hand. Muslims

of 12th have also mentioned some bankers known as mutani-a-scruffs who were acting as

agents to the Govt. to collect revenue as also to change money to Government.

Muhammad toughly was the first king to have introduced taken currency in India. Sher-

shah-sure and the Mughal emperors further streamlined this system. They did not

introduce banks but they revolutionized structure in India.

1.3.2 Emergence of Public Banks in India

In the 17th century when English traders came to India public banks are introduce in

India. The east India Company appointed their own agency houses for his purposes. But

Indian govt. did not take any step towards the establishment of the banks till 1809. After

this the bank of Bengal was introduce then bank of Bombay and in 1843 the bank of

Madras was establish.



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Then the

a. Joint stock Bank b. Exchange Bank

c. Imperial Bank of India d. Reserve Bank of India was established.

nation, Quaid-e-Azam inaugurated the state Bank of Pakistan or July 1st, 1948.

The first task which the S.B.P had to attend was the issue of currency notes in Pakistan

and that was issued in October, 1948in the denomination of RS. 1.4

1.3.3 Banking in Pakistan

When Pakistan came into being, the areas that constitute. Pakistan was producing only

food grains and agriculture raw material for indo- Pakistan subcontinent. Pakistan

inherited a weak-banking system at the time of independence 1947. Commercial facilities

are not also good. Only 487 officers received by Pakistan at the time of independence. To

regulate the growth of banking on sound bases government of Pakistan took all possible

measured to attract and dominate the enterprise in Pakistan. A committee was formed to

study the issue of banking system in Pakistan. In 1948 Pakistan decided to establish a

full- fledged central Bank in Pakistan. Consequently the Governor General and father of

the 5.10 and 100. In order to develop sound banking, the banking Companies Act was

also implemented in 1949.

The Korean War in 1950, provided a great boom for Pakistani experts, as a result the

demand for bank advances increased sharply. The separation of East Pakistan and its

results in the form of economic depression caused a lot of difficulties to the Banking

system in Pakistan. Besides this growth, specialized credit and financial institution have

also developed over the year. National Investment Trust (NIT). People finance



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corporations equally participating in funds and small business corporations are

contributing remarkable role in economic development of the country.

Banking sector as a economic factor in Pakistan In 1947 January 01, nationalization of

banks has opened a great era of development. Till then to now a day the banks are doing

a great job in economy of Pakistan.

The fact shows that the banking sector has made a tremendous progress and achieved a

phenomenal growth and played a vital role in mobilizing the saving of people in

countrys economy. State Bank of Pakistan established on July 01, 1948 stands at the

apex and is responsible for the operation of the banking system in Pakistan. The other

banks, which from the banking structure in Pakistan, are playing an active role in the

economic development of the country. Here is an effort to summaries the role of banking

in the economy of the country

Saving Mobilization

The three nationalized banks namely,

National Bank of Pakistan

Habib Bank of Pakistan

First Women Bank

And other privatized banks like,

United Bank Limited

Muslim Commercial Bank

Allied Bank limited

Have opened their branches in rural and urban areas to mobilize the saving of the people.



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Providing trade activities

The credit institutions collect the saving of the people and make them available for

facilitating the trade activities in both domestic as well as international level.

1.4 Role of State Bank of Pakistan

SBP as the Central Bank control and regulate the money and capital market in the best

interest of the country. It is also the chief instrument of the Government for

implementation of the monitory policies.

Less Reliance on Foreign Trade

A well-planned banking system can easily meet the capital development and

requirements in the country. Thus the company will rely less upon imports and make a

free and open environment for domestic investment projects.

Financing Development for capital Formation

The banks advance short, intermediate and long term loans for financing of public

development and other projects

Assisting in the Development

The commercial banks are the p0rofit generating and seeking enterprises. In order to

maximize the profits, they have the incentives to maximize the loans, and accelerate the

rate of growth and investment in the countries.



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1.4.1 The Central Bank

A bank which constitute the apex of monetary and banking structure of its country and

which performs as best as it can in the national economic interest

OR

A banking system in which a single bank has either complete

1.4.2 Functions of Central Bank

1. As the note issuing agency;

2. As the banker to the state;

3. As the bankers bank;

4. As the guardian of the money market, through control of credit;

5. As the lender of the last resort;

6. It undertakes to maintain the external value of the domestic currency;

7. It ensures the stability of the internal value of the currency;

8. It undertakes exchange control operations

9. It fights economic crises and fluctuations and ensures economic stability of the

country.

1.4.3 Changing Scenario for Banks Operating in Pakistan

The banking sector environment in Pakistan has been undergoing a phenomenal change

since 1990. These changes from the major plans of the ongoing economic reforms in

Pakistan. Financial reforms have been all encompassing institutional strengthening,

restructuring of the banks and development finance institutions and improvement in



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regulatory framework. Reforms were aimed to instill competition and switch over to

market based and relatively more efficient monetary and credit mechanism.

In the recent past (FY99-01), a tight monetary policy was pursued to contain price

increases and buttress exchange rates so to build exchange reserves.

It was only later, July 2001 that the State Bank of Pakistan began the process of easing of

monetary policy with a percentage point cut in discount rate. This was subsequently

followed by more such reductions, reducing the rate to 7.5% by November2002, a level

left unchanged since. It was for the first time under the market-based mechanism of

interest rate determination that discount rate was cut and interest rates lowered.

The year 2002 witnessed a change in the interest rate environment. Lending rates come

down significantly from 13.4% in December 01 to 10.3% in December02, while lending

spread was reduced to 6.7 %( 8.4%in December01). The rate plunged to 8.3% by end

March 2003 and to 7.09% by May same year. Meanwhile, the spread has come down to

4.68%. With in the banking sector, all banking groups made the cuts in lending rates.

Presently privatized banks average lending rates are the lowest (6.07%) followed by

nationalized banks (6.48%). The spread for both banks categories in also lower than that

of all groups.

In 2002, of their respective investment for the year investment in market treasury bills

were high. National Bank of Pakistan has invested 54%, Muslim Commercial Bank 61%,

Bank Al- Falah 485, Credit Agricole Indosuez 93%, Standard Chartered 88%, American

Express83%, Habib Bank AG Zurich 29%, Bolan Bank 45%, among others.

Along with decline in lending rates, return on Government securities and national saving

Schemes have fallen. Falling returns makes investment in government securities no more



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an attractive avenue for investment. This plus an abundance of liquidity with commercial

banks, plus decline in banking spreads is posing a serious challenge to the banking sector.

These developments are likely to affect the sectors profitability, unless the banks

diversify their lending their portfolio lower the stock of non-provisioned non-performing

loans and increase their non-interest income. This change in scenario, where banks are

teeming with liquidity and are faced with a significant decline in their interest income,

has led them to explore new avenue and launch new products.

Consumer finance has emerged `as one of the sectors where commercial banks move

into. This offers banks an opportunity to increase their non-fund income, do their job of

allocating capital in the economy and at the same time has ushered in a phase where

consumer financing would contribute to increase demand, promote production and

generate employment. It would give an impetus to the development of a wide range of

industries including, housing, automobiles, and varied household items.



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Chapter no 2

National Bank of Pakistan

2.1 Introduction to National Bank of Pakistan

The National Bank of Pakistan was established on 20th November 1949 under the

National Bank of Pakistan Ordinance No. X1X of 1949, promulgated on 8 th November

1949, describing it as a semi- commercial bank. The bank operates like any other

commercial bank in the country, seeking funds from the depositors and providing credits

for all sectors of the economy including agriculture, industry, trade etc.

2.2 history of national bank of pakistan

The National Bank of Pakistan was established on 20th November 1949 under the

National Bank of Pakistan Ordinance No. X1X of 1949, promulgated on 8 th November

1949, describing it as a semi- commercial bank. The bank operates like any other

commercial bank in the country, seeking funds from the depositors and providing credits

for all sectors of the economy including agriculture, industry, trade etc.

The National Bank has a distinction, in addition, to act as an agent of the Central Bank

and operates treasuries where the State Bank does not any branch. The bank was

nationalized in January 1974 when thebanks were taken over by the Government; the

Bank of Bahawalpur was subsequently merged in the National Bank. National Bank of

Pakistan has not released its annual report as yet. National Bank of Pakistan maintains its

position as Pakistanis premier Bank determined to set higher standards of achievements.



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It is the major business partner for the government of Pakistan with special emphasis on

fostering Pakistanis economic growth through aggressive and balanced lending policies

technologically oriented products and services offered through its large network of

branches.

2.3 Management

An Executive Board composed of six Senior Executives of the Bank and the President

who is also the Chief Executive supervises the affairs and business of the Bank.

Board of Directors

The supreme governing body of the National Bank of Pakistan is the Board of Directors.

Governments representatives, Pakistan Banking Council nominee, nominee of corporate

sector and three members from the National Bank of Pakistan are the summary of the

board. The members of the board are

1- Mr. S. Ali Raza Chairman& President

2- Dr. Waqar Masood Khan Director

3- Iftikhar Ali Malik Director

4- Syed Shafaqat Ali Shah Director

5 - Sikandar Hayat Jamali Director

6 - Mr..Zubair Motiwala Director

7 - Mr. Khalid Malik Director



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Senior Management of National Bank of Pakistan

1- Masood Karim Shaikh SEVP

2- Shahid Anwer Khan SEVP

3- Dr. Asif A. Brohi SEVP

4- Muhammad Sardar Khawaja SEVP

5- S.M Rafique SEVP

6- Imam Bakhsh Baloch SEVP

7- Ziaullah Khan SEVP

8. Imim Akhter EVP

9. Javed Mahmood EVP

10. M. Nusrat Vohra EVP

11- Nadeem A. Dogar EVP

12- Dr. Mirza Abrar Baig EVP

13- Mrs. Khurshid Maqsood Ali EVP

14- Tahir Yaqoob EVP

15- Mrs. Uzma Bashir Group Chief, Organization

Development and Training group

16- Syed Farhan Ahmed Financial Controller



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2. 4 Mission Statement of NBP

To be recognized in the market place by

Institutionalizing a merit & performance

culture, Creating a powerful & distinctive

brand identity, Achieving top-tier financial

performance, and Adopting & living out our

2.5 Function of the National Bank

National Bank of Pakistan maintains its position as Pakistan's premier bank determined

to set higher standards of achievements. It is the major business partner for the

Government of Pakistan with special emphasis on fostering Pakistan's economic growth

through aggressive and balanced lending policies, technologically oriented products and

services offered through its large network of branches locally, internationally and

representative offices.

NBP aim to be an organization that is founded on

Growth through creation of sustainable relationships with our customers.

Prudence to guide our business conduct.

A national presence with a history of contribution to communities.


http://www.nbp.com.pk/Services.htmhttp://www.nbp.com.pk/Branch_Nwt.htmhttp://www.nbp.com.pk/Services.htmhttp://www.nbp.com.pk/Branch_Nwt.htm

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NBP shall work to

Meet expectations through Market-based solutions and products.

Reward entrepreneurial efforts.

Create value for all stakeholders.

NBP aim to be people who

Care about relationships

Lead through the strength of our commitment and willingness to excel.

Practice integrity, honesty and hard work. We believe that these are measures of

true success.

NBP have confidence that tomorrow we will be

Leaders in our industry.

An organization maintaining the trust of stakeholders.

An innovative, creative and dynamic institution responding to the changing needs of

the internal.

2.6 Objectives of National Bank of Pakistan

Objectives are the means to reach some beneficial end. No one can achieve any target

before setting it firstly. So in the same way National bank has some objectives, which it is

trying to achieve. Following are some of them:

To maximize profit

To provide all sort of banking services.



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To serve the humanity in all parts of the world through its network of branches

throughout the world.

To satisfy customers beyond their expectations by providing personalized

effective & efficient services in best & possible manner.

To serve Pakistan better in order to give socio-economic uplift.

To provide the maximum profit to depositors by achieving sound profitable

growth.

To develop & enhance its system & technology.

To train its staff.

Providing information & advice to its customers.

Providing facilities of foreign currency accounts.

2.7 Services Provided By National Bank of Pakistan

National Bank of Pakistan provides following main services to its customers:

2.7.1 Demand Drafts

If 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 the bank or not, can purchase a Demand Draft from a bank branch.

Swift System

The 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



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operational at National Bank of Pakistan 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.

To View SWIFT Codes of NBP - Click here

Letters Of Credit

NBP 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 easy of

transaction, NBP Letters of Credit are the best way to do your business transactions.

Traveler's Cheques

Negotiability: Pak Rupees Travelers Cheques are a negotiable instrument

Validity: There is no restriction on the period of validity

Availability: At 700 branches of NBP all over the country

Encashment: At all 400 branches of NBP

Limitation: No limit on purchase

Safety: NBP Travelers Cheques are the safest way to carry our money

2.7.2 Pay Order

NBP provides another reason to transfer your money using our facilities. Our pay orders

are a secure and easy way to move your money from one place to another. And, as usual,

our charges for this service are extremely competitive.

a. Issuance of Pay order



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1. for NBP Account Holder Rs. 50/- (Flat)

2. for NBP Non-Account Holder Rs. 100/- (Flat)

Rs. 25/- (Flat) from student for payment of fee favoring educational institution

b. Issuance of duplicate Pay order

1. for NBP Account Holder Rs. 100/- (Flat)

2. for NBP Non-Account Holder Rs. 150/- (Flat)

2.7.3 Mail Transfers

Move your money safely and quickly using NBP Mail Transfer service. And NBP also

offer the most competitive rates in the market.

2.7.4 TELEGRAPHIC TRANSFER (TT)

Generally a mail transfer takes 3 to 4 days to reach its destination. T.T is the fastest mode

of transferring funds from one bank to another bank not in days but in hours or minutes.

In such cases transfer of funds message is passed on through a telegram, to the drawee

branch of the same bank.

When the urgency of situation demands that the payment is to be made immediately then

the message is conveyed to the drawee branch by telephone.

Payment to the beneficiary is effected directly by the drawee office upon identification or

through credit into beneficiary's bank account.

2.7.5 Foreign Remittances

To facilitate its customers in the area of Home Remittances, National Bank of Pakistan

has taken a number of measures to:

Increase home remittances through the banking system



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Meet the SBP directives/instructions for timely and prompt delivery of remittances to the

beneficiaries

2.7.6 Foreign Remittances

The existing system of home remittances has been revised/significantly improved and

NBPll-trained field functionaries are posted to provide efficient and reliable home

remittance services to nonresident Pakistanis at 18overseas 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.

Short Term Investments

NBP 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.

2.8 NBP- Relief Fund for Earthquake Victims 2005

The National Bank of Pakistan (NBP) has announced a relief package for the earthquake

victims. The Bank has donated Rs. 35 Million to Presidents Relief fund for earthquake

victims-2005. The employees of the Bank have also voluntary donated one-days basic

salary to the fund. NBP has initiated he process of formulation to special teams at local

level for providing on the spot financial and other aid in earth quake affected areas.



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Special arrangements have made for collection of donations at all domestic and overseer

branches.

An Emergency Relief Committee has been formed which is empowered to provide

immediate reliefs in terms of blankets / tents /food / medicines for the NBP employees

and their dependents affected by the earthquake.

Arrangement for collection of donations.

For providing relief to the people in the wake of recent earthquake in Pakistan and to

mobilize resources and proactively rendering a helping hand and the relief efforts to the

people affected by the earth quake, all branches of NBP have opened account of

Presidents Relief fund for earthquake victims 2005 and payments into the aforesaid fund

are accepted by issuing receipts duly signed by Brach officials.



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transfer will ensure that the remittances reach the mainstream of national economy and

are able to contribute to its growth. This will also assist in reaching the Governments

goal in revitalizing the economic sector, attaining self-reliance and achieving

transparency.

3.3 National Bank of Pakistan and Saibaan

Is set to make your dreams come true

National Bank of Pakistan has announced the launch of a housing scheme to cover

sections of the society with monthly income starting from as low as Rs. 5000/- per month

Branded as NBP Saibaan (Housing for all), the scheme offers a maximum loan of Rs. 10

million in accordance with the debt burden criterion. Loans are available for home

construction, home purchase and home improvement. For home improvement loans the

maximum amount is Rs. 2.00 million. Home construction and home purchase loans can

be repaid over a period of 20 years, whereas the repayment period for home improvement

loan is 15 years.

The scheme was launched at a function in Karachi presided over by Mr. Shoukat Aziz

Pakistans Finance Minister.

Introduction to NBP Saibaan

NBP Saibaan is the most affordable with easy installments house financing

scheme.

Customers can avail now and repay over a 3 to 20 years period.



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Home purchase loans up to million.

Home reconstruction loans up to million.

It has flexible mark-up choices and grace period option.

It is convenient structured and programmed with minimum approval and

disbursement timing.

The rules and regulations and documents and other requirements can be had from the

application form of Saibaan that is attached at the end of he report.

3.4 Hierarchical Structure Of Regional Office Kotli



ChiefManager

Operational

Manage

Administration

Manage

Compliance

Offi

Foreign Ex.

H

Pension Dept. Accounts

Dept.Advances

De t.

Remittance Dept. Clearing

Dept.

Officers dealingExports

tant

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3.5 Branches of National Bank of Pakistan

3.5.1Overseas Branches

Total branches

18

Representative offices04

Subsidiary01

Joint venture01

3.5.2 Regional Branches

Total branches 1208

Representative offices 29

Subsidiary 04



Clerical Staff ers Officers Dealing

wi

Officers Dealing

wi

ers

Clerical Staff Postage Officer

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Chapter no 4

Departments of NBP4.1 Accounts Department

In almost all the banks have their opening and closing departments and this is the

especially function of A/C department. Firstly all types of Accounts which can be opened

in NBP has been described:

Categories of Accounts

Current account

Saving account

Fixed account.

Current Accounts

This type of account is basically used to meet the daily transactions. Current account

provides safety to the customer's money, gives the advantage of paying debts by the

convenient and safe means of sending cheques through the post thus avoiding the trouble

and loss that units in PKR, US$, GBP and DM.

Saving Account

This is the profit-oriented category of the accounts. There is a time limit for drawing

cash; customer cannot draw money before a certain time.

In NBP saving a/c is used as current a/c, & there is no main difference between current &

saving account except profit.



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This account can be opened by limited company, Partnership Company, club societies &

associations, joint & sole proprietorship.

Fixed account

These deposits are fixed for particular period. Commercial Banks also pay an interest on

these accounts.

4.2 Cash Dealing Department

Cash department of NBP is given the complete responsibility of handling all receipts &

disbursement of cash, as a result of transaction in both local & foreign currencies & near

cash items such as traveler cheque etc (when they are issued against cash).

As a consequence it is also responsible for the bookkeeping of these transactions & the

safe custody of cash & near cash securities. Following are the major functions of the cash

dealing department of NBP:

Cash receipts (or receive deposits)

Encashment of cheque

Cash department of NBP is a separate close part covered with glasses. No one other than

cash department's employee is allowed to enter into that area.

Cash Receipt

The depositor uses cheque deposit slip (or cash deposit slip) for depositing the amount.

There are two types of cash deposit slip:

One for current account-holders



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Other for saving account holders.

Both are in different colours for clear identification. There are two parts of cash

deposit slips:

Counter foil

Adjacent credit voucher

Procedure

The cashier first verifies all the requirements of the cash deposit slip that whether these

are fulfilled or not & verifies the amount written in words & figures. After that he enters

the detail of the receipt in the "Inward Cash Register".

The deposit slip is stamped, cash is received & counter foil is given to the depositor. The

adjacent credit voucher is used for recording & posting purposes.

Encashment of Cheque

Cheque encashment involves following four main steps. These steps are:

Accepting of cheques

Affirmation of signatures

Computer terminal process

Payment of cash

Requirements to Encash a Cheque

Following requirements are essential to encash a cheque.

No Stop Payment Instruction

No stop payment instruction is presented for the account.

Instrument in Writing



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It must be in writing. However, there is no bar on writing material but the cheque written

with lead pencil is not honored by the bank in practice because unauthorized alternations

can also easily be made are difficult to detect so a cheque should be either typed or pen

written or printed.

Cheque must not be crossed

The cheque which could be presented to the drawee bank for encashment over the

counter should not be crossed whereas crossed cheques are deposited into account.

The sum of money must be certain

A cheque must contain an order to pay a certain sum of money only amount in figures

and words must be same.

Drawer's Signature

The document in order to be validly called a cheque must bear the drawer's (account

holder) signature or that of his authorized person. At the time of opening an account a

customer provides a banker with a specimen of his signatures, so the signature on the

cheque must tally with that.

Sufficient Balance

Sufficient balance should be present in the customer's (drawer's) account to encash

cheque.

Stop Payment Instructions

If a customer lost his chequebook he would make stop payment instruction to cash

department of NBP. Stop payment instructions can be made in two ways.



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Verbal

Written

The customer could inform the cash department on telephone or face to face meeting to

stop payment, but later a written instruction must be made on a prescribed form.

If customer make stop payment instruction to the bank and bank make payment to some

one else after lodgment of stop payment instruction in the computer, Bank would become

liable for this fault.

Acceptance of Cheque

The cash is paid against the cheque of the client. The following points are kept in mind

while receiving the cheque from the client.

Cheque should be drawn on NBP.

It should not be post dated.

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

Payment is not stopped by the drawer.

Amount in words & figure should be same.

Alternation in date/figure/word require drawer's full signature, with signature on the

cheque.

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

terminal.

Affirmation of Signatures



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After receiving the cheque the officer verifies the signature of the account-holder with the

signature on the cheque. If signatures are not the same then it is returned back otherwise

forwarded to computer terminal.

Computer Terminal Process

The cheque is received in computer terminal, where the computer operator checks the

balance of the account holder. The operator also sees whether the stop payment

instructions are received from account holder or not. After considering these two points

computer operator posts the cheque in account holder ledger & returns the cheque back to

the officer.

Payment of Cash

The cheque is cancelled after posting & is returned to cashier. The cashier enters the

cheque in "cash paid register" & pays against the second signature of the receiver on the

back of the cheque.

Nearly everyday in the morning time, cash comes from State Bank of Pakistan through

Brinks (which provide safe cash delivery services). This cash is required by the bank to

meet the current needs of cash.

This cash is received from the Brinks in the presence of an authorized officer & cashier

of bank, with full satisfaction.

4.3 Clearing Department

Almost all commercial banks engage to furnish a wide variety of services to their

customers. Clearing service is one of more significance and important activity of all

commercial banks. The elementary function of clearing department is to facilitate the

customers to with regard to collection of their cheques pertain to other banks, regardless



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related with inside or outside the city. The customer can amass money in his account at

NBP from the cheques issued on another bank. First of all, bank accepts the cheque in the

clearing department & afterward on collects these cheque from the bank on which it is

issued through the clearinghouse i.e. SBP.

For instance, an account holder of NBP presents a cheque, which is not issued on NBP

but the, but the person has an account in NBP, in this situation bank accepts this Cheque

in clearing department & subsequent to collecting the amount from that bank on which

cheque is issued, NBP credits the account of customer. This task is called clearing

function.

Clearing

It can be demonstrated as shift of funds from one branch of bank to the other branch of

the identical bank or the dissimilar bank on which the instrument is issued, without

linking cash through State Bank's clearing house or in other words cheques which can not

be cashed at the cash counter of the bank.

Clearing House

This services is directly related with central bank i.e., SBP to the other commercial banks.

SBP is considering a single provider clearing house facility. Many commercial banks are

the members of the clearinghouse. All banks represent their bank in the clearinghouse.

More specifically it can be explained in the following way. A clearinghouse is an

association of commercial banks set up in a given locality for the purpose of interchange

& settlement of credit claims.

As mentioned earlier a representative of each bank represents his bank in the

clearinghouse and represents its cheques on behalf of its banks account holder cheques,



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which are not issued on their own bank in the clearinghouse. Clearing house hand over

these cheques to the respective banks on which these cheques are drawn & receives

cheques from other banks, if any. The SBP maintains the accounts of the NBP like other

scheduled banks and debits the account of the drawee bank and credits the presented bank

which is NBP in that case.

Types of Cheque

The NBP Main Branch Kotli deals with such type of cheques. These can be demonstrated

in the following way.

Local cheque

Out standing cheque

In house cheque

Local Cheque

It can be explained in the following way as collection of cheques from the banks which

are the members of the clearinghouse and which are placed within the city.

Out Stading Cheque

It means collection of cheque from the banks, which are positioned outside the city and

presenter bank and the bank on which the cheque is issued are not placed in the same

city.

In House Cheque



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It indicates that the house cheques, which are issued on one branch of NBP and presented

to another branch of NBP such cheques, are marked with transfer stamp.

Types of Clearing

Now I would like to explain the dealing of clearance department. Actually it deals with

the two type of the clearance.

Inward clearance

Outward clearance

Inward Clearance

It means cheque issued on NBP and offered to other Banks or handed over to NBP agent

in clearing house. It is an inward clearance for NBP and causes outflow of money to

collecting banks dropping the balance in the clearing account.

Outward Clearance

It is the reciprocal of inward clearance. It reveals cheque which is issued on other, bank

and presented to NBP are known as outward clearance for NBP and causes inflow of

money from paying bank into the clearing account maintained with the clearing house,

rising the balance in the clearing account.

However outward clearing may be due to:

Local clearing

Outstation clearing

As mentioned earlier surplus of outward clearing over inward clearing delivers a net

increment in the clearing account balance. Surplus of inward clearing over outward

Clearing delivers a net decrease in the clearing account balance. The first situation is



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considered as favorable clearing & the second situation is consider as unfavorable

clearing. The balance of incoming & outgoing clearing should be nil (zero).

Probable Instruments at Clearing Department

I found the following instruments which are exploited in the clearing department:

Cheques

Demand drafts

Pay orders

Collection of Cheques

First of all the Pay-in-slip is verified then treated as inward collection or outward

collection. Subsequent to making the entry the counter foil is reverted to the client.

Inward Bills for Collection (IBC)

It indicates that the cheque received & drawn on NBP for payment. Inward bills for

collection depicts those cheques received from another branch for clearing. First of all,

these cheques are cleared and then departed to the account of branch account e.g. cheque

deposited in Kotli branch for UBL, Kotli branch, will receive in Kotli branch at first then

issued for clearing in UBL.

Outward Bills for Collection: (OBC)

It is the reciprocal of inward bills for collection. It indicates that outward collection

means the cheque of other banks that is drawn on bank & deposited in other bank.



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For instance, Z, who is in Hajira and payment? Now seller will deposit, the cheque

deposit slip in his bank, UBL Hajira. UBL will prepare a draft & letter & send it to NBP

Main branch, Kotli. NBP Main Branch; Kotli will debit his customer Z's a/c & credit

clearing. This draft will be then return back to Hajira through clearing where credit will

be given to customer & debit to clearing house. Within 3 days payment should be

received otherwise evoke will be send to the payer to pay amount either through courier

service or TCS etc. If payment is not received within 15 days then evoke should be send

after 8 days of 15 days limit.

Stamping

Now I would like to spotlight the following stamps, which are exploited for IBC &

OBC functions.

Stamp of OBC (or IBC) whichever is the case.

Crossing stamp.

Payee's a/c will be credited.

First two stamps are plotted on front side of cheque whereas the 3rd stamp is plotted on

the backside of the cheque.

Treatment is enrolled in the register of OBC (or IBC) and from the register the no. Of

OBC (or IBC) is given on the cheque.

Procedure of Clearing the Cheques

Pay in Slip

This pay slip that is filled by the customer. It is identical with deposit slip. It includes

cheque number, date, amount, & account number.



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Stamping and Scrutinizing

When the officer receives the pay slip then he will stamp it with Cheque Received and

furnishes a fraction of slip to customer and the rest fraction is close with the creative

cheque. The creative cheque will manifest with two stamps:

NBP

Clearing Stamp

Remember before 12:30 P.M all cheques are counted and then secused in bank wise and

communicate to clearing house.

Stamping Of The Instruments

The related officer who conducts secused of the instruments receives the stamped

instrument at the counter of the bank. If no mistakes are noted then the officer should

sign the pay-in-slip and its counter foil.

The counter-foil & the pay-in-slip should then be stamped in the following manner.

The clearing stamp bearing the date of the next working day should be affixed

on the face of the cheques.

Special crossing stamp containing "the name & branch name of bank" should

also be affixed on the face of the cheques.

The third necessary stamp indicates the paying bank to "credit payee's account".

It is the conformation of outward clearing.

If "payee's account only" is mentioned on the cheque, the payee should sign on

the back of cheque for endorsement of cheque to another person.

Forms Of Clearing



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Local clearing

Collection

Local Clearing

It means mean collection of cheques from the banks, which are member of clearinghouse

within the city. Banks take responsibility by endorsing these cheques. Explore out these

cheques bank wise; prepare the settlement sheet bearing the name of the bank and

number of cheques with total amounts.

Now I would like to explain the time for presenting the cheques in clearinghouse. If

before that time cheques are not sent to clearing house. Then they will be postponed for

next day. Because on the specific time gate of clearing house has been shutdown and no

one can insert into it and next Islamabad t day bank presents cheques in clearing house.

However, cheque sent to clearing department must be debited to SBP and credited to

customer account, and when bank receive back these cheques then debits customer and

credits SBP.

Collection

It is a kind cheque clearing facility enjoyed by those banks that are not the member-

clearing house. The bank present or receives cheques through collection.

Items to Be Checked On Clearing Cheques

It indicates that when cheques are received from the clearing demands that following

items should be checked instantly:

Cross stamp

Clearing stamp



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Date (which should be current)

Endorsement stamp on backside

Amount in figures and words should be matched

Cheque Returned

As name indicate that when the bank returns cheque when it is received from clearing.

This may be due to or more than one reasons. These reasons are mentioned on the slip,

which is then affiliated with the returned cheque by marking (x) against that reason for

which cheque is return.

This slip is called "cheque returned slip" and contains following items:

Cheque no.,

Amount of cheque,

Name of a person who has drawn it and

Date

This cheque return slip contains the list of following reasons:

Refer to drawer

Not arranged for

Payment stopped by drawer

Exceeds arrangement

Amount in words and figures differs

Drawer's signature incomplete/required

Drawer's signature differs



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Bank discharge irregular

Cheque is mutilated

Cheque post dated/out of date

Alteration in date/words/figures requires signature

Goods not yet received please present again

Payees endorsement required

Payees endorsement irregular

Endorsement requires Bank's guarantee/confirmation

Clearing bank's endorsement required

Clearing stamp required

Payee's discharge on revenue stamp required

Advice not received

Crossed cheque must be presented through a bank

Account closed

Effects not cleared please present again

4.4 Remittance Department

Remittance is the monitory transfer from one place to another place or from one country

to another country to fulfill the requirements of the customers by the order of the

customer.

Category of Remittance

1. Local Remittance



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2. Foreign Remittance

Local Remittance

Local remittance section deals with remittance (incoming and outgoing but only in local

i.e. Pakistan rupee and within Pakistan.

Local remittance include the following eight functions in NBP:

a) Transfer through pay order

b) Transfer through demand draft

c) Telegraphic transfer

d) Issuing of SBP cheques

e) Mail transfer

f) Local/internal transfer

g) Preparation of balance certificates

a) Transfer through Pay Order

Pay order is also called as cashier order, manager's cheque, & banker's cheque, & cheque

on services.

Pay order is an instrument through which payment can be made from one bank to another

bank within city.

In case of NBP, pay orders are also used, instead of demand drafts; outside the city where

NBP does not has its branch. So, we can say except Karachi for all other cities pay orders

are issued by NBP.

B) Transfer through Demand Draft



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It has been defined as an unconditional order in writing addressed by one person to

another, signed by the person giving it (the drawer), and requiring the person to whom it

is addressed (the drawee) to pay on demand or at a fixed or determinable future time a

certain sum of money to or to the order of, a specified person (the payee) or to the bearer.

Demand Draft (DD)

Demand draft is an instrument which is payable on demand, & through which funds are

transferred outside the city or country, where NBP has its branch.

Main Purpose

The main & important purpose of issuing the demand draft from the bank is that

environment of our country is not too good to carry cash from one place to another. So

demand draft helps us to overcome this situation to some extent because it avoids

carrying cash amount with us.

C) Telegraphic transfer (TT)

Generally a mail transfer takes 3 to 4 days to reach its destination. T.T is the fastest mode

of transferring funds from one bank to another bank not in days but in hours or minutes.

In such cases transfer of funds message is passed on through a telegram, to the drawee

branch of the same bank.

When the urgency of situation demands that the payment is to be made immediately then

the message is conveyed to the drawee branch by telephone.

Payment to the beneficiary is effected directly by the drawee office upon identification or

through credit into beneficiary's bank account.

d) SBP Cheques



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In this country where law and order situation is getting worse and worse every day, SBP

cheque is another way to ensure safety in carrying the amount from one place to other.

SBP cheques are issued on the request of clients of bank who do not want to carry cash.

On the written request of the account holder, account officer is asked to issue SBP

cheque.

SBP cheques are issued in favour of individuals and beneficiary. Bank receives the

cheque on the day of issuance. SBP cheques are allowed within city or clearinghouse.

e) Mail Transfer (MT)

This is an order to pay money, drawn by one branch of a bank upon another branch of the

same bank or Mail transfer is the transfer of funds from one branch to another branch of

the same bank within Pakistan.

If such balance is transferred by means of mail, it is described as mail transfer remittance.

f) Local/Internal Transfer (LT)

Local or Internal transfer is the transfer of funds from one account to another account

within the same branch i.e., Main branch, Lahore.

g) Preparation of Balance Certificates

It is also the duty of remittance department to prepare the balance certificates of their

clients. These certificates are prepared on monthly basis. These certificates show the

balance (or amount) of the clients in their account, & can also be prepared on the request

of the client when he needs it as early as possible.



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These certificates of balance are then sent to the clients on the address of their offices or

on residence address. So that they remain aware of the position of their accounts in the

bank.

Foreign Remittances

Foreign Remittances section deals with remittances (incoming and outgoing) but in

foreign currency and outside Pakistan.

Funds are transferred into four types of currencies by Remittance department.

i. USD ii. GBP iii. JPY iv. DEM

This section of foreign remittance is divided into two parts:

1. Outgoing FCY Remittance

2. Incoming FCY Remittance

These terms outgoing & incoming remittance means sale & purchase of foreign exchange

in the above four currencies.

4.5 Foreign Exchange Department

Foreign exchange department of NBP deals in four currencies namely;

1) US$ (U.S. Dollar),

2) GBP (Great Britain Pounds)

3) DEM (German Mark)

4) YEN (Japanese YEN)

As fluctuations in PAK. Rupees are very frequent so accounts in foreign currency are

profitable for customers.

Functions

This department performs the following functions:



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1. Spot sell 2. Spot purchase 3. Forward sell

4. Forward purchase 5. Deposit 6. Clearing

1. Spot sell

Sale of Dollars on daily basis is called a spot sell.

2. Spot purchase

When dollars are purchase for fulfilling the daily needs of the payment, this process is

called a spot purchase.

3. Forward sell

If the payment is received in advance then these dollars will be sold at current rate, this is

called forward sell.

4. Forward purchase

When dollars are required in future, then these are purchase at current rate for future

purposes. This is called a forward purchase.

5. Deposit

In this case, $100,000 comes in any customers account of NBP, the bank is not allowed

to keep extra dollar amount (or foreign currency) with them but to sell them to SBP.

So these dollars (or any foreign currency) will be sold and forward booking will be made

for that customer, in case he demands for his money. So whenever the customer demands

his money it will be given to him at current rate (if need in Pak rupee).

6. Clearing



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Foreign exchange department also performs this function. We can define clearing that

transfer of funds from one branch of bank to the other branch of same bank or the other

bank on which the instrument is drawn without involving cash, through the State Bank of

Pakistanis clearing house.

Whenever there is need of sale or purchase of dollars e.g. in import, export, credit, cash,

or remittance department they are reported under foreign exchange department & its

commission is given to the credit department. Banks are not allowed to keep dollars with

them but sell them. So purchase the dollars only, when they are needed.

Head office is responsible for sale or purchase of currencies, in the market at market rate.

4.6 Export Department

There is no single country in the world, which is self-sufficient. In order to survive in the

international market and fulfill its needs a country needs foreign exchange. Export is a

major source of earning foreign exchange. Contrary to imports, every country wants to

increase its exports because the foreign exchange earned through exports can help in

meeting the other need of the country.

As exports play a major role in the economic development of a country, governments

take major steps to boost the export of the country. If country has more exports than

imports, then the balance of payments is favorable or surplus. On the other hand if the

exports are less than imports then the balance of payment is unfavorable or deficit.

Conditions for Exporter

For export purpose following requirements are necessary.

* Export registration fee is Rs.1500



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* Exporter has to fill E-Form and to attach invoice with it.

* Realization Certificate for rebate purpose.

* Test Agrees: This stamp should be on L/C which is received by exporter'sbank

otherwise L/c will not be accepted by NBP as Negotiating/Remitting Bank.

The bank hands over the L/C to the exporter after receiving the L/C from the L/C

advising bank. The exporter prepares the goods according to the instructions of the L/C.

When the shipment is ready then the documents are prepared according to the

instructions as mentioned in the L/C.

The main documents L/C are:

1. Bill of exchange 2. Airway bill/bill of lading

3. Invoice performs 4. E-Form

5. Form of country of origin 6. Packing list

7. Insurance (if any)

4.7 Credit Department

In NBP the credit activities are played under a separate department. So the main activities

of this department are:

a) To give credit to customers

b) Closely monitor the development in different accounts

c) Reporting to SBP & head office.

What is credit?



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"Credit means any arrangement, however named or described, whereby a bank (the

issuing Bank) acting at the request and on the instructions of a customer (the applicant),

or on its own behalf".

i) It is to make a payment to or to the order of a third party (the beneficiary) or is to

accept and pay bills of exchange (drafts) drawn by the beneficiary.

ii) A authorizes another bank to effect such payment, or to accept and pay such bills

of exchange (draft).

Types of Credit Facilities

The types of credit facilities offered to customer are of two basic kinds.

1. Funded facilities/cash credit

2. Non funded facilities/Non cash credits

1. Cash Credits

Cash credits are those where the bank actually advances money against further

repayment. These are also known as funded facilities.

2. Non-Cash Credits

Non-cash credit are those where the bank substitutes its own credit for that of its

customer e.g.

* Opening import letters

* Issuance of bank guarantee

1. CASH CREDITS

Cash credits or funded facilities are of the following types.



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a) Running finance/overdraft

b) Demand finance

c) Term finance

d) Discount/purchase export bills

a) Running Finance / Over Draft

Running finance is a credit facility established usually in local currency for a specified

period of time at fluctuating rates of mark up (interest) whereby the customer is allowed

to overdraw his account to an agreed amount.

Mark up is charged on the outstanding balance.

b) Demand Finance

Demand finance is a credit facility, which is different from running finance in the sense

that a fixed amount is credited to the customers account, which can be drawn by

customer at any time at lump sum. Interest or mark up is charged on the full amount

whether it is utilized or not.

c) Term Finance

Terms loan is provided for a fixed period of time. Time period for term finance is more

than one year and mark up rate depends upon the period-involved customer credit

worthiness and SBP regulation.

d) Discount / Purchase of Export Bills

Lahore Main branch of NBP provides loan against export documents by purchasing or

discounting them for its customers.

The Bank charges mark up on the credit amount till it is reimbursed by importer's bank.

2. Non Cash Credits



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Non-cash credit or non-funded facilities are described below:

a) Letter of credit (L/C)

b) Guarantees

a) Letter of Credits (L/C)

From the lending or risk point of view, L/Cs are the facilities involving the substitution of

the bank's credit for that of the customer whereby they takes on the commitment to pay a

third party subject only to the terms and conditions of the L/Cs can be divided into two

categories.

Sight L/Cs

.Usance L/Cs

Chapter no 5

Activities performed By Me at the Bank

What so ever I was to perform at the bank is given as follows?

5.1 Accounts Department

In this department, I gain the practical knowledge about opening account. This

department deals with opening current and saving account for its customers and all



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matters regarding thereof. The customers opening current/saving accounts can be

categorized as following:

Individual, Firm, Company, Trust, Staff, &Others

5.2 Opening an Account

In order to open an account, first of all the customer has to fill a form prescribed by the

bank. The person is required to bring some reference or introduction for opening the

account. Introducer may be the person who has any account with NBP.

Some important information regarding introducer e.g. the name and account number of

the introducer is written on the space provided on the specimen signature card. Then in

order to find out whether he is a true introducer or not, a letter is sent to him thanking him

for this introduction so that anything wrong may come into notice.

There are different requirements for different types of accounts and accountholders.

5.3 Deposits

The procedure undertaken upon receiving deposits from the customer is as follows:

i) Examining the deposit slip to ensure that the name and the account numbers are

clearly indicated.

ii)Counting the cash/cheques and agree the total with the amount on the deposit slip.

iii) After that the payin slip is validated for cash transaction / transfer / clearing

transfer as appropriate before the counterfoil is handed over to the customer.

iv) Cheques signed by directors, partners or employees of a company, drawn in

favour of themselves and credited in their account in the bank are to be scrutinized.

5.4 Withdrawals



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Amount can be withdrawn by cheques. The withdrawals can be made only at the branch

where the account is maintained.

All cash withdrawals are authorized by the officer under his full signature. No third party

withdrawal is permitted.

In current account, the bank does not offer any interest. We can deposit or withdraw any

amount during banking hours.

5.5 Issuance of Cheque Book

The account older requests for the new chequebook by presenting the requisition slip

along with the authority letter to the concerned office. His signatures are verified before

giving him a new chequebook. The presence of the account older is compulsory to get a

new chequebook. But if he sends a third person to get his chequebook then the procedure

is as follows:

i) An authority letter is given to the third party by the account holder.

ii)The account holder verifies the signature of the third person on that authority letter.

iii) The bank officer gets the signature of that third person to confirm whether

he is the same to whom the accountholder has sent.

iv) The bank issues the new chequebook and authority letter is kept by the bank.

5.6 Clearing Department

In this department, I have worked for two weeks. Main branch receives the cheques from

all of its branches and makes the lots of these cheques again. Main branch send these

cheques to the State Bank of Pakistan where a clearinghouse exists. In this clearing house

the representatives receive their cheques and go back to their bank's main branch. Then



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main branch sends these cheques to their relevant branches where the validity of these

cheques are verified and the accounts of the relevant clients are affected.

The statement of clearing was submitted before 1.00 P.M. daily. The whole procedure of

clearing is completed within 2 days.

5.7 Remittances Department

I worked in this department for one week. This department deals in transfer of money

from one place to another or country by:

1. Demand Drafts

2. Mail transfer

3. Telegraphic Transfer

In this department internees are advised only to observe the working of transfer of money

from one place to another place or country by the above modes of transferring money.

During my stay in this department I observed that how demands draft was issued. The

procedure is as follow.

First the bank receives a written request from the customer to issue a bank draft. The

written request is either in banks standard form or separate paper signed by the applicant

enclosed with cash or cheque covering the amount of the draft and other charges of the

bank.

While issuing a bank draft it is necessary that the draft should be free from alternations.

All the details must be written clearly in ink. After issuance a demand draft it is handed

over to the applicant and its advice containing the particulars of the draft is sent to drawer

branch with its necessary information and payment of the draft is made on its

presentation.



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5.8 Bills Collection Department

I spent one week of my training in bills collection department. Here I collected utility

bills like electricity, water and telephone etc.

Chapter no 6

Financial performance

6.1 Balance Sheet

BALANCE SHEET

As on September 30th, 2008



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6.2 Profit and Loss Statement

PROFITAND LOSS STATEMENT

For the year ended September 30th, 2008


Faculty of Administrative Sciences Kotli

Rs. In000s

Rs. In000s

Assets 2007 2008Cash and balance with other banks 71,196,956 78,625,227

Balances with other banks 31,019,330 40,641,679Lending to financial institutions 16,282,942 23,012,732Investments 156,985,378 139,946,995Advances 268,838,779 316,110,406Other assets 23,941,056 27,113,698Operating fixed assets 9,454,365 9,681,974Deferred tax assets - -

Total assets 577,718,806

635,132,711

LiabilitiesBills payable 1,741,156 10,605,663Borrowing from financial institutions 8,756,847 11,704,079

Deposits and other accounts 463,426,602 501,872,243Liabilities against assets 16,629 13,235Other liabilities 23,496,910 26,596,300Deferred tax liabilities 4,462,718 2,387,073Total liabilities 501,900,86

2553,178,59

3

Net assets 758,167,944

81,954,118

Share capital 12,178,495 7,090,712Reserves 12,354,256 13,879,260Unappropriated profit 19,372,523 32,074,677

Total 37,635,706 53,044,649Surplus on revaluation of assets 38,182,238 28,909,469Total 75,817,944 81,954,118

53

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Particular Rs. In000s

Rs. In000s

2008 2007Net markup /interest income 30,153,716 23,370,897

Net non-markup /interestincome

12,162,892 9,392,351

Total income 42,316,608 32,763,248

Operating expense

Administrative expense 13,433,441 11,221,789

Other provisions (17,283) 198,298

Other charges 208,327 63,206

Total operating expense 13,634,485 11,483,293

Profit before tax 9,008,708 12,025,158

Net taxes payable 4,810,605 5,782,229

Profit after tax 4,19,103 6,242,929

Profit available forappropriation

36,394,869 23,594,628

Basic Earning per share 24.01 17.92

Diluted Earning per share 24.01 17.92

6.3 Horizontal Analysis of Profit & Loss Statement



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HORIZONTAL ANALYSIS

PROFIT & LOSS STATEMENT

FORTHE SEP 30TH, 2008

Income & Expenditure 2008(Rs.000)

2007(Rs.000)

Increase/Decrease

%agechange

Markup/Interest earned 43,788,628 33,692,665 10,095,963

30.0

Fee Commission andBrokerage income

6,144,628 4,926,604 1,218,024 24.76

Dividend income 2,891,755 1,718,478 1,173,277 68.2Income from Dealings 1,333,840 1,205,638 128,202 252Other income 627,618 177,839 449,779 31.31

TOTAL 54,786,469

41,721,224

1,306,524

100

OPERATING EXPENDITUREInterest Expense 13,634,912 10,321,768 3,313,144 32Provision For diminution inthe value of investment

709,461 (245,881) (463,580) (188)

Profit against non-performing loans andadvances

3,075,723 2,446,739 628,984 25

Bad debts written offdirectly

5,284 23,069 (17,785) (77)

Administrative expenses 13,443,441 11,221,789 2,221,652 19

Other provisions (17,283) 198,298 (181,015) (91.2)Other charges 208,327 63,206 145,121 229Taxes 9,288,231 6,346,584 2,941,647 46

Total 39,829,174

30,375,572

8,588,168

28.27

6.4 Horizontal Analysis of Balance Sheet

HORIZONTAL ANALYSIS



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53

Total 81,954,118

75,817,944

6,135,814

8.09

Suggestions

The role of the banks is economic development of a country is very vital. Basically banks

remove the deficiency of capital by mobilizing savings and investment. A sound banking

system integrators the small and scattered savings of he community and makes them

available for productive purposes. National Bank of Pakistan. Is playing an important role

in mobilizing and allocating finances from and to different industrial and commercial

sectors. The bank is acting as a bridge between savers and he investors. Without a

commercial bank like National Bank, money saved would remain idle and the sectors

short of funds would remain unfed. This would stray the economic activities of life and

enthusiasm although in this report only important factions have been emphasized, the

agency and he utility services e provided the National Bank are also of significant

important. The main objection is to provide to their people, which will save their time

and money.



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Recommendations

During their internship period at National bank I have come across certain aspects, which

need some attention and improvement. I would like to give a few suggestions and

recommendations which might assist in the advancement and achievement of the bank.

Computerization in Banking.

National Bank has computerized its accounts but it has computerize its daily counter

services. Computerization its accounts but it has not computerize its daily counter

services. Computerization of all the branches may be a difficult task, but it could result in

a lot of saving for the bank. National Bank has computerized its accounts but it has not

computerized its daily counter services. Computerization of all the branches may be a

difficult task, but it could result in a lot of saving for the bank.

Evening Bank

In big cities and especially the branches located in commercial areas should extend

evening banking services to its clients as safe keeping of money after close of business

house not free of danger.

Proper Safeguarding of bank Branches



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In these days many branches of various banks have been looted. In order to avoid any

such incidence, proper safeguarding measures should be taken to protect the life and

property.

Room for Improvement In Customer Services

Due to nationalization of banks the customers services of the bank are below than the

standard. Employees are not as active as they should have been, they have no concern

about customer service they only do their routine work. This is only possible when they

around give incantation to their employees. In some branches there is shortage of staff

and there is also over staffing in some branches. With proper staffing improved services

could be extended to the clients. In the National Bank there is a need for the introduction

of new saving schemes for low and middle in come people.

Reward System & Timely Promotions

There is no inventive of reward for the performance and hard working of employees,

promotion is only based on seniority. As a result, employees do not try to work hard. In

order to increase the productivity and performance of he employees Bank should raise

reward system, so that can accomplish their objects successfully and discharge their

duties efficiently. In many cases officers are drawing maximum of their pay scale for

year together. In such cases timely promotions should be made to create enthusiasm

amongst its employees.

Effective Chequing System.

In Pakistan, an effective chequing system is not prevailing. People prefer to receive

payment in hard cash rather than in the form of a cheque. This is mainly due to the fact



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that in Pakistan collection of cheques takes time. In addition cheques are dishonored

mainly due to the reason there are insufficient fund in he drawers accounts. If the

collection of cheque procedure is speeded up and the account holders are made bound be

bank to write cheques only when they have funds in their accounts, an effective chequing

system can be developed in our country.

Loans Should be sanctioned on Merit

Unfortunately most of the loans are being given on the basis of political background

rather than on merit. Cash loans are later written off politically resulting in a heavy

amount of losses for the bank. It is suggested that the loan sanctioning body of the bank

must consist technical people. There should be no pressure from the government

regarding sanctioning and writing off of the loans.

Professionalism.

In National Bank, there is a lack of professionalism at most of the levels. Employees feel

overburdened due to the shortage of staff. The bank should create now jobs to have

competent and professional persons for various posts, so increase in the number of staff

can raise the efficiency of the Bank.



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Conclusion

National Bank of Pakistan, no doubt, doing well in the field of banking and it is aimed to

provide better services to its customers. It is specially performing its activities in the

customer advances.

It has a lot of potential to progress in future. The bank can do the good job of opening

branches in the rural areas that will, not only boost saving but also help the people to

raise their standard of living through these savings.

The staff in the bank is found to be very cooperative towards subordinates. I wish that the

bank may progress by leaps and bound, and keep on providing internship to students with

the same dedication.

Summing, I pay my deep gratitude to the bank for providing me with the opportunity of

having internship with it.



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Bibliography

1. Money Banking and Credit.

2. Branch Manager National Bank of Pakistan Super Market Branch Isl

3. Sunday Magazine (Dawn)

4. www.nbpl.Com

5. Informative Meeting with senior executives.

6. Personal Observations.
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