Internship NBP Main Branch MUzaffar Garh

National bank of Pakistan

PREFACE

In order to be able to cope with the changing environment it is necessary to have some

practical experience. As the students of Commerce we have to pass through a series of

various managerial techniques. During this practical course we are provided with an

opportunity to learn that how the theoretical knowledge can be implemented in practical

grounds.

I was selected to do my internship in National Bank of Pakistan MAIN Branch

Muzaffar Garh. I worked there for six months & it gave me a greater practical knowledge

about the operations of a bank. In the following pages I have narrated my experience,

observations & all the working activities which I observed during my six week internship

at NATIONAL BANK OF PAKISTAN MAIN BRANCH MUZAFFAR GARH.

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ACKNOWLEDGEMENT

I am highly grateful to almighty Allah who gave me the power to complete this report.

I am also highly thankful to my honorable teachers for theirs guidance.

I am indebted to all the employees of National Bank of Pakistan MAIN Branch Muzaffar

Garh. Special thanks to “MR. Ghulam Qasim” Manager operations, National Bank of

Pakistan main Branch Muzaffar Garh) and MR. Muhammad Irfan OG-1/MTO. And all

other employees of the branch for their cooperation.

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Table of contents

Topics page #

National bank of Pakistan 4Banking history 5History of NBP 8Branch network 9Mission statement 12Corporate philosophy 12Objectives 13

Organizational structure 15Organogram of NBP 16

Departments 18Departments in NBP 19Foreign exchange department 19Credit and advances department 28

General banking 42 Account section 42Remittance section 49Locker service 52Govt. receipt and payments 52Clearing department 53Computer section 54Consumer & retailing 56

Work done by me 60

SWOT analysis 66

Suggestion and recommendation 70

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BANKING HISTORY IN PAKISTAN

At the time of partition the total number of Commercial Banks in Pakistan were

38 .Out of these Pakistan had 2 banks, India had 29 and there were 7 exchange banks.

The total deposits of Pakistan banks stood at Rs. 880.0 millions where the advances were

Rs 198.0 million. Before the partition of Sub Continent the entire banking business was

almost controlled and managed by non-Muslims. The Muslims were deliberately kept cut

of banking profession by the wealthy Hindu community. When Hindu capitalists became

sure of the division of Sub Continent, they secretly began transferring their capital to the

safe places in India.

The funds and the other valuables were transferred at an accelerated pace to India

and there was a mass scale migration of non Muslims from West Pakistan to India which

also caused the drain on the bank deposits. The Hindus in order to ruin the economy of

the newly born State closed down most of the head offices and the branches of scheduled

and non-scheduled banks in Pakistan. The number of scheduled bank’s branches was

reduced from 619 to 213 in both the wings of the country after independence.

The non-scheduled banks also suffered a severe jolt and their number was reduced

from 411 to 106 over the same period. West Pakistan from where there was greater

exodus of non-Muslims to India suffered a great deal, as a number of branches fell down

(from 487 to 69).

In the east Pakistan though the number of branches were not closed in such a

great number as in west Pakistan, large portion of the deposits were with drawn from the

banks and transferred to India by the non Muslims. The mass scale closure of branches

and withdrawal of the deposits caused a dead lock in the banking business in Pakistan.

The government of Pakistan was quite aware of the serious banking situation

caused by the withdrawal of deposits and wholesale migration of banking staffs to India.

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It took up the challenge and started reorganizing the crippled banking immediately after

partition.

A moratorium of free months was also allowed to banks that had financial

difficulty due to sudden withdrawal of deposits.

In addition to above, the following arrangements were made for facilitating

Settlement of claims by the governments.

Each bank was to declare on to its offices both in India and Pakistan as

Clearing house for transfer of accounts.

Each bank was open at least one central office in Pakistan where it could consolidate

work of all its branches and start paying out to depositors.

The government took some effective measures for providing banking training

facilities to Muslims. There were some complaints that Hindu banks were not honoring

the cheques of Pakistani national and were also refusing to give securities kept in their

custody. The government issued an ordinance, which empowered it to investigate all such

complaints, and if satisfied of their bonafide, the payments should be realized. In case the

bank insisted on non-payments, the government should realize the assets of the banks,

which were sufficient to discharge such liabilities.

The government of Pakistan also allowed the removal of valuables kept in save

deposits vaults and lockers by submitting an application and getting necessary approval

from the custodian of evacuee property.

The government of Pakistan tried to provide all kinds of facilities with sincerity to

the known Muslim bankers for restoring normal banking facilities in the country but the

response was discouraging. An inter dominion agreement was reached between India and

Pakistan in April 1949. The main provisions of the agreement was as under:

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The inter dominion agreement could not be fully imported. India delayed the

transfer of Muslim deposits to Pakistan. The non-devaluations decision of Pakistan

government further led to the suspension of remittance facilities through normal banking

channels.

Due to panicky withdrawal of deposits; some banks went into liquidation and the

payments could not be made to the depositors.

In order to regulate both of the banking on sound footings, the following

measures were taken to develop the banking system in Pakistan.

The State Bank of Pakistan, which is the central bank of the country, was

established in July 1948.

The National Bank of Pakistan was established on 1949,to serve as an agent to the

SBP.

The Industrial Development Bank of Pakistan was set up on August 1, 1961 with

a Paid up Capital of Rs; five crore. The Agricultural Development Bank of

Pakistan (ADBP) was set up in 1961. it provides short , medium and long term

loans to the farmers. In Jan, 1974 the entire commercial banks were Nationalized.

The weaker commercial banks were merged with the stronger once and in all Five

major banking companies were formed. MCB and ABL have again been

privatized.

Pakistan banking council was set up for coordinating the activities of the nationalized

commercial banks. The banking council formulates the policies and guidelines for the

banks.

Interest has been eliminated from the banking transaction from July 1, 1985. The

banks are now accepting saving deposits on Profit and Loss Sharing bases.

Modaraba and Leasing Companies are also operating in Pakistan.

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The banks nationalized, due to weaknesses such as over staffing, deterioration in customer services, raising bad debts, loan on political bases etc, are being gradually denationalized. MCB was privatized in April 1991. The shares of ABL have also been sold to its 7500 workers. Permission to open ten banks in the private sector has also been given.

The permission to open an Investment bank has also been given. It will go a long way is providing capital for the industrial projects.

The government of Pakistan has also liberalized the exchange and payment procedure. The Pakistani firms and companies can now maintain Foreign Currency accounts in Pakistan on the same bases as known Pakistanis.

HISTORY OF NATIONAL BANK OF

PAKISTAN

The normal procedure of establishing a banking company under the Companies

Law was set aside and the Bank was established through the promulgation of an

Ordinance due to the crisis situation that had developed with regard to financing of jute

Trade. The Bank commenced its operations from November 20, 1949 at six important

jute centers in the then east Pakistan and directed its resources in financing of jute crop.

The Bank’s Karachi and Lahore offices were subsequently opened in December 1949.

State bank of Pakistan after its formation demanded from the Indian Reserve

Bank the assets against the Indian currency retired from Pakistan territory. Government

of India refused to hand over the assets worth about five hundred million rupees. The

dispute is still unsettled and these assets are still not delivered to Pakistan. Until June

1950, the Bank was engaged exclusively on jute operation. Thereafter, it was felt that it

could expand its business to include other commodities as well. Bank took a

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big stride in 1952, when it replaced the Imperial Bank of India, as an agent of State Bank

of Pakistan.

With the passage of time its functioning diversified as they take over the function

of different institution with the passage of time like in past they took over the function of

Imperial bank of India and now of NDFC (national development finance corporation)

It is working as the agent of the state bank of Pakistan and performs its functions

wherever state bank of Pakistan is not present.

The government floated its 10 % of the shares in the open market in past and the

ratio became 60: 40 and in future they trying to make it 55: 45.

In 1999 national bank celebrated its golden jubilee during the last fifty years bank

has made substantial strides in the financial services industry in Pakistan.

In 1999 its market share was around 22% and it remains the largest financial institution in

Pakistan.

Branch Network

With the geographical development of its branches, the Bank has been able to

extend its services to a much larger number of Pakistanis all over the country. Today it

has more than 8.5 million accounts. Bank maintains its presence in all the major financial

centers of the world through its 15 overseas branches and 5 representative offices. Of

these, three representative offices have recently been set up at Tashkent (Uzbekistan),

Baku (Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging

opportunities in CIS countries. Bank’s role globally is well assisted by its network of

correspondent banks located strategically in Asia, America, Europe and Africa.

Apart from having a vast branch network, Bank is at the forefront in the

acquisition and application of new technologies in every aspect of its banking facilities. It

has acquired leased telephone lines for on-line banking. The Bank has 12 Regional

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Computer Centers to cover various on-line and batch system requirements of branches

and controlling

Oversea Branches Domestic Branches

15 Overseas Branches4 Represative Offices

1 Subsidiary1 Joint Venture

29 Regional Offices1,189 Branches

4 Subsidairies

Branch Network: NBP has an extensive domestic branch network of over 1500 branches

located all over Pakistan. The Bank also has a presence in 24 international locations

including the USA, United Kingdom, Europe and the Far East.

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BRANCHES ALL OVER THE COUNTRY

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Mission statement of national bank of Pakistan

“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 values”

Corporate Philosophy at National Bank

We at NBP believe that our customers are our most important and 1st

responsibility, we must, therefore, serve our present customers and promise to

serve our potential customers to the best possible on-counter and behind-counter

services. We should try to provide a total and integrate package of services to

create satisfied clientele. Our braches, regional offices and head office should

regard the customer as their most priority, serving them with maximum possible

helpfulness and courtesy.

Our second most important responsibility is the employees who work for our

great institution. They must have their security , stability and fair treatment in

their jobs in recruitments and assignment, in training and development, in

promotion and placement . till separation. They should be treated with dignity and

should be made to rise to their highest potential working condition should be

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attended. Supervisor should be tough minded but fair in the pursuit of bank

objectives.

Our third most important responsibility is our executives and officers. They

should have talent, education, experience and ability with a premium, place on

commitment, knowledge, leadership and orientation towards action,

implementation, improvement and achievement of goals.

Our fourth responsibility is to the communities that r served by our great

institution. Our 1st community is the Pakistani nation whose service is the reason

for our existence.

Our 5th responsibly is to our owners and stockholders. We must make a sound

profit and protect our business by creating financial services.

Objectives of National Bank

Objectives are ends towards which an enterprise activity is aimed.

The purpose of business is production and marketing of economic goods and services but

to accomplish these objectives to a number of enterprise objectives may be necessary.

National bank of Pakistan has certain objectives. These objectives are

(1) Advancing loans

(2) Accept deposits

(3) Remitting of funds

(4) Sale of promissory notes

(5) Selling and realizing property of bank claims

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(6) Investment or underwriting of stocks

(1)Advancing loans:

one of the main objective of NBP is advancing loans to industrialists and traders against

security of stock, debentures or other securities

(2)Accept deposits:

Bank provides deposit facility to its customers. The types of deposits are

Profit and loss saving accounts

Fixed account

Current account

(3)Remitting of funds:

The bank provides the facility to its customers remitting large amounts of money in the

form of bank Drafts, Telegraphic Transfer, Mail Transfer to where ever the customers

want.

(4)Sale of promissory notes:

To sell and realize the proceeds of sale of any promissory notes, debentures, stock

receipts, bounds, shares etc.

(5)Selling and realizing property of bank claims:

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To manage sell and realize all property whether moveable or immoveable which may

come in any way of the bank in satisfaction of its claim.

(6)Investment or underwriting of stocks:

To invest the funds of the bank in or the underwriting of any of stocks, funds, shares

securities, debentures, bonds or scripts or other securities for money issued by any public

limited companies and to convert them into money when required.

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ORGANOGRAM OF NATIONAL BANK OF PKAISTAN

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PRESIDENT & CHAIRMAN

CHIEF REPRESENTATIVE PSO & SECRETARIAT

BOARD OF DIRECTOR SECRETARY

OPERATION COMMITTEE

CREDITCOMMITT

EE

ASSET & LIABILITY COM

OPERATIONS GROUP

REGIONAL

OPERATION

OFFICERSOPERATI

ON DEPARTM

IT OPERATIONS& SERVICES

REGIONAL COMPUTER CENTERS

SWIFT CENTERS

LOGISTICS SUPPORT

ENGINEERING

GENERAL SERVICESSECURITY

STAFF WELFARE

FINANCE GROUP

FINANCE & ACCOUNTS

DEPT

EMPLOYEE INSURANCEPENSIONRETIREME

NT BENEFIT

PROVIDEN

CORPORATE

INVESTMENT

BANKING GROUP


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FOUR OVERSEAS REGIONAL

FAR EAST

EUROPE & USA

CENTRAL ASIA

MIDDLE EAST

RISK MANAGEMENT GROUP

REGIONAL CREDIT CHIEF

CREDIT DEPT HEAD

RETAIL BANKING

ALL REGIONAL

CHIEF OFFICER

ALL RETAIL

BANKING

AUDIT GROUP

REGIONAL AUDIT OFFICE

HEAD OFFICE AUDIT

SPECIAL ASSET MANAGEMENT GROUP

IT PLANNING

DEVELOPMENT GROUP

IT SYSTEM DEVELOPMENT

NETWORKING

SOFTWARE DEVELOPMENT

ELECTRONIC PRODUCT AND

SERVICESDELIVERY TO OPERATIONS

GROUP

STRATEGIC PLANNING

AND ECONOMIC RESEARCH

GROUP

HR MANAGEME

NT DEPT

HRMANAGEMEN

TRECRUITMEN

T/PLACEMENTCOMPENSATION BENEFITPERSONAL

DATADISCIPLINE

ORGANIZATIONAL

DEVELOPMENT &

TRAINING


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PROMOTIONPERFORMANCE

APPRAISALGOAL SETTING

TRAINING

UNION AFFAIRS


Departments in National Bank Main Branch

Following departments are working in NBP main branch

Foreign Exchange Credit and Advances

Remittances and Deposits

Accounts

Computer

Government

Consumer retailing

FOREIGN EXCHANGE DEPARTMENT

Foreign exchange is an important department in bank system. In the foreign

exchange department all the operations of the bank are done in the same way as in all

other departments of the bank this department also involve in deposits, remittances

and advances but the difference with other department that the foreign exchange

department deals in foreign currency rather then in local currency. For opening of

account in foreign exchange the minimum balance required is $100.This department

is just like Cash Department in local currency. In this department, the dealing is

made in foreign currency.

In National Bank of Pakistan, four currency accounts are available:

US Dollar

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Pound Sterling

Japanese Yen

Euro

FUNCTIONS

The department performs the following functions:Account opening

Account closing

Inward/outward remittance

Issuance of traveler cheques

ACCOUNT OPENING

Terms and conditions:

Account opening requires two things

1) National id card of the customer and introducer

2) Introducer

CUSTOMER:

Customer is the person who comes with the purpose of opening the account

INTRODUCER:

Introducer is a person having the account in same branch and gives guarantee about

the customer. If the introducer is not proper than state bank charges RS 5000/- per

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head from that employee of the bank who has opened the account of the customer on

the request of the introducer.

Procedure of Account Opening and Depositing Foreign Exchange:

First of all, the customer is required to fill an application form. Then he attaches

the photocopy of his identity card and fills the signatory cards. Then he is allotted an

account number by entering in the account opening register. Now he fills the pay-in slip

and deposits money on the counter.

Following things are needed for opening of account:

Account opening form

Signature card

Letter of kinship

Letter of thanks

Issuances of cheque book

Account opening form:

Account opening form consist of

Category of account

Currency

Title of account

Account number

Customer information

Initial deposit

Authorized person in case of customer death

Signature card:

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The signature card included the name and specimen signature of the customer

Letter of kinship:

In the latter of kinship the customer authorized the bank to pay the proceedings of his/her

PLS/Current foreign currency account to the related person by describing the relationship

of the person with the customer after the death of the customer.

Letter of thanks:

Letter of thanks is the latter issued by the bank to the customer for two purposes

1) 1st purpose is to say thanks to the customer for opening the account in their

bank

2) 2nd purpose is to confirm the address provided by the customer while

opening the account.

Issuance of cheque book:

Cheque book is issued to the customer after sending the letter of thanks when the

customer comes with the latter of thanks and requests for the issuance of the cheque

book. A cheque book (usually having 25 leaves) is issued to the customer.

Closing of Account:

The customer can close the account. The customer is required to submit an

application for closing the account. The account is closed out and his balance is paid to

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him after deducting the closing charges, i.e. $ 20 and the application is filed in account

closing file.

There are many reasons for closing of account

Account holder Owen request

Death of account holder

Closing of account due to the bad manners of account holder

Inward/Outward Remittances

The remittances are of following types:

Foreign Telegraphic Transfer (FTT)

Foreign Demand Draft (FDD)

Foreign mail transfer(FMT)

SWIFT

Western union money transfer(WUMT)

Foreign Exchange Bearer Certificates (FEBC)

Special US Dollar Bond

Foreign Telegraphic Transfer:

This is telegraphic transfer just like ordinary local currency TT, but this is foreign

currency. Its charges are fixed, i.e., if payment is in cash, charges are Rs. 1500. If

payment is through account, Rs. 1200; if deposit is above Rs. 50,000 charges are Rs. 600.

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NBP has its correspondent bank in New York . NBP gives credit to main office Karachi,

which gives credit to NPB New York, which gives credit to NPB, which ultimately gives

credit to required destined bank and account number.

Mode of payment can be cash or by debiting the account. When FTT is received

from abroad, NBP debits Main Office Karachi account and gives credit to the account of

beneficiary.

Foreign Demand Draft:

Foreign Demand draft is also known as FDD. A person who wishes to remit

money to someone in another place may if he does not send his own cheque, obtain from

his bank a draft on demand payable to the person who is to be paid the money. It may be

drawn upon one of the banker’s own branches, or upon some other bank where exists for

draft to be drawn. Whenever a draft is drawn own advice is dispatches the same day.

Advising the bank or branch as the case may be, of the particular of the draft of that

banker on whom it is drawn may recognize the draft was it is presented.

When a person requires a draft, he should be asked to complete the prescribed

application form in which he should state the amount of the draft, the name of the payee

and the place of payment. The bank charges commission Rs. 500 flat, excise duty Rs. 8

or charges.

After receipt of money, the entry is passed in FDD register and a number is

allotted to FDD. Then FDD is prepared and given to the customer. After this, they give

credit to Main Office Karachi, and advice is also sent to Karachi.

Foreign Mail Transfer:

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These are also known as FMT. Transfer by mail of an account of currency to

another country. The Remitter sign auroras requesting the banker to transfer the amount

by mail, giving the name and address of the payee.

Foreign Bills for Collection:

Under this head, all foreign cheques are included whose payments are to be

received from abroad.

When a customer asks the bank for collection, the cheque is sent to the bank on

which is drawn. Then on the receipt of advice from abroad, the customer’s account is

credited in the bank and debit the Main Office Karachi account. The bank charges $10 or

the equivalent amount in rupees.

Foreign Exchange Bearer Certificates (FEBC):

Foreign Exchange Bearer Certificates can only be issued from Foreign Currency

Account and not from deposit of local currency. The maturity period of these certificates

are 5 years, 7 years and 9 years. It can be issued and enchased only in rupees. The

customer account is debited and state bank of Pakistan (SBP) is credited.

Special US Dollar Bond:

The bonds have the maturity period of 3 years, 5 years and 7 years. The bank gives the

interest at the rate of 5% + LIBOR, i.e. 2%, 3% and 4% respectively.

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Traveler Cheques

Issuance of Traveler Cheques

NBP issues the traveler cheques to those people who want to travel abroad. These

are not drawn on any specified bank or banks, but payable at practically all banks

throughout the world and guaranteed by some well-known institution. National bank

purchases the traveler cheques from American Express Bank and makes the payment

after selling it to the client.

Procedure

A customer is required to submit the following things:

Valid passport with visa

Return ticket

Currency to be deposited in Pak Rupees. Ticket is endorsed. It is converted on the

selling rate of that day. Traveler cheques are issued. Their limit is $50 per day for

private visit and maximum limit for the year is $2100.

Limit for businessman is $200 per day and maximum limit is $6000. But approval

from Chamber of Commerce & Industry is required and certificate of ticket issue for

which the payment must be made through cheque. Pak rupee currency account is

necessary, and he has to present cheque for the amount to the bank. Endorsement of

the ticket is very essential. Issuing ticket authority should endorse its stamp on the

passport.

SWIFT:

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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 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. In case of transfer of

funds the introduction of S.W.I.F.T., an acronym for Society for Worldwide Inter-bank

Financial Transactions, has made remittances faster and secure. The system works like

Internet communication processes. All the banks in the world are registered for the

service, which have the facility of online computers. Headquarter of S.W.I.F.T. is in

Belgium. The message sent through this way does not require any code tests to confirm

its authenticity. The sending process is more secure where two officers make the

transmission of the message, one types the content with his code word and the other

executes it with his password. There are different types of codes that are used for the

messages interchanged on the basis of the type of the transaction.Using the NBP network

of branches, you can safely and speedily transfer money for our business and personal

needs.

Swift is a soft wear .it is use for following purposes

Financial transactions

Non-financial transactions

Linking

Import export

Different codes are used in swift for different purposes

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Latter of credit code is 700

Remittance code is 100

Bank to bank transaction code is 202.etc.

Procedure

When any massage comes through swift 1st its received by head office then head

office authority send that massages to different banks via mail to main branches of

relative banks.

Western Union Money Transfer:

Western union money transfer is a fastest way to receive money worldwide. It is

working in almost 200 countries. Different Govt and private organization are dealing

with WUMT

Govt organization e.g banks

Private organizations e.g Zarco, Money changer, Dollar East, Master Currency

Main office of WUMT is situated in Dubai, it is a procedure of counter payment

Time required in only one hour and deduction on it is $50.

Procedure of payment

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WUMT just needed identification, no need of a/c, its an counter payment

Procedure of payment is that the customer came to specific person who is dealing

with WUMT tell him the

1) MTC NO

2) Receiver name

First name

Middle name

Last name

3) Sender name

First name

Middle name

Last name

4) Telephone no

5) Photo copy of ID card

6) Expected amount (10% margin is acceptable)

7) Test question

After if the that related officer feed MTC # (mail transfer control) , it is unique

number not less then 10 digits, receiver name , his/her 1st name and last name, and sender

name to check whether amount is come or not . When all these things are correct then

give a form to the receiver, he/she filled the specific form, after that office done his

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signature and give one copy to customer, other copy send to the cash counter for payment

and the last copy for put in file for the purpose of record. Payment is made only in Pak

rupees.

WUMT form

It form is divided into three sections

1st for receiver information, his name, address and telephone number

2nd section for sender, his name, address telephone number

3rd section is for expected amount, MTC number, test question, signature

There are three copies of form 1st for counter payment, 2nd for customer and 3rd for branch

record.

CREDIT AND ADVACNECS DEPARTMENT

Credit

It may be defined as

“ The sale of goods and services and money claims in the present in exchange for

a promise to pay in future. “

The most important activity of the bank is the granting of credit to the customers.

NBP provides short term long terms financing for domestic and international trade. The

policies made by central office of the cash can be amended on the basis of the rules and

regulation, economic risk of each country board of directors and committee of the NBP

made this type of decisions and informed about these decisions to the branch managers.

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Manager can grant the credit limit to each customer with in the declared limits

approved by the controlling offices i.e., co, GHQ, circle and zonal. Banks grant credit to

the customer for a certain period of time. The banks provided credit to the customers so

that they can purchase ahead of their liability. By giving these facility to the customer’s

large scale production of commodity can be achieved and economic growth rate can be

increased. The power to sanctioned loans had been delegated for controlling different

offices, according to amount of loan. This department is also called as risk management

group.

The following elements are used for credit selection.

Character

It is based on the borrower willingness to repay the obligation. The loan officer

sees the family background mode of living, business nature, habits, moral reputation and

etc. before giving the loan.

Capacity

The ability of borrower to repay the loan when due. The borrower ability to repay

the loan is assessed by the office so that he will be able to repay the loan in future.

Capital

The officer assesses the capital of the borrower. If assets held by the borrower are

liquid, they can be easily convertible in cash; but if non liquid is used then it is risky to

given loan.

Collateral

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It is collateral security. It may consists of stocks bonds , bill of exchange, bills of

lading, etc. the bank has protect him self from any discrepancy in the future. They

increase the ability of the borrower to obtain the funds from the bank.

Condition

The economic condition of the borrower is determined. The economic conditions

of the borrower in and out side the country effects the repayment of loan. If condition is

favorable then loan is given otherwise vice versa.

Functions

Credit department has performed following functions.

Advances

Advances provided by the bank are of the following two types.

Funded

Non-funded

Funded

In fund based bank contributes a large amount of the fund based on clarified as follows

TYPES OF ADVANCES

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Demand Finance

One time disbursement of the whole amount sanctioned, as the limit for the credit

allows. Any person, individual, group, company, firm and all others can achieve this

mode of financing. The mark-up or interest is calculated on the total amount disbursed

and requires to be paid before the date of final adjustment. Regarding the amount, limit

and period, it depends on the nature of the case in review.

Cash Finance

In this mode of financing the borrower is allowed to make withdrawals of funds

as he requires, but the total amount outstanding cannot exceed the limit sanctioned. The

mark-up/interest is calculated on the amount outstanding on his account. The calculation

of mark-up/interest is based on the number of days a specific amount is withdrawn. This

finance if normally borrowed by small traders or individuals for their petty matters

involving cash transactions up to rupees three hundred thousand maximum.

Running Finance

To assist a large-scale business operator to carry on his day to day requirements of

liquid funds, this account is opened is made operation in his favor. Running finance is

provided where the amount goes beyond rupees three hundred thousand. The

mark-up/interest is calculated the same way as in case of cash finance.

Security against running finance is that which is easily convertible in to cash and bank

kept 25% margins with it.

Non-Fund

Bank provide non fund advance in the following form:

Guarantee

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Imports

Guarantee

A guarantee is a promise between one person to another person or party to

answerable for the debt of a third party. Bank issues guarantee after 100%cash collaterals

are provided by the person i.e.50% in the form of the property.

Imports

Bank provides non-funded credit facility to the following basis.

Sight LC

Usance or DA LC.

Sight LC

In this type of L.C when payment is made documents are released. A cash margin

of 30% is relational by the bank.

Usance or DA L.C

The bank retains the payment after a period of days, which is given in the L.C a margin

of 30%.

types of loans

TYPES OF LOANS

The credit department of NBP has providing the following types of loans

1. Short term loans

2. Long term loans

3. Working capital loan

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4. Syndicate (project) loan

5. Monitoring

Documentation in short term financing

Demand promissory note

Mark up agreement

Letter of guarantee in personal capacity

Letter of authority

Letter of pledge

Memorandum of deposit of title deal

Status reports

A credit report is an assessment of borrower’s character and capacity from a

banker’s point of view. Credit reports on borrowers called Status Reports, financial

reports, banker’s opinion or confidential reports. All these terms carry more or less the

same meanings. The study of a borrower is a study of his character, capacity and capital,

and collateral often known as the 4Cs to consider his credit worthiness and eligibility for

the bank advance.

The purpose of compilation of credit report of the borrower is to assess their net

worth. It must contain information about borrower’s means, character, integrity, assets,

liabilities, business and experience. Besides, borrowers own investment, details of

properties, must be obtained. The borrower may be asked to give written clarification of

their existing liabilities.

In the case of Limited Companies, their borrowing powers to be verified from

their Memorandum & Articles of Association. Their certification of incorporation to be

36


examined, exiting borrowings, prior charge on their fixed assets, paid-up capital,

reserves, profit and loss position, detailed particulars of their directors and complete

analysis of balance sheet must be incorporated in the credit report. Independent inquiries

about the borrowers and opinions form their previous bankers must be made. As such a

comprehensive credit report is compiled which serves as a constant guide to the banker

about his borrower.

This report is prepared by the bank of the intending borrower with a view to

considering his Credit Worthiness and Eligibility for the Bank Finance. Besides other

things it contains the net worth of the borrower.

Net worth of borrower

Individuals

Net of the individual’s worth is the total investment or equity of the

sponsors/borrowers in the company through which they are asking for credit and in the

other sister concerns.

Firms

Total investment in Business + Properties – liabilities

Paid-up-capital + Reserves + Profits (Losses)

The Investigation process

1. Knowing the market place

2. Risks inherent in lending

Management risk

Market risk

Earnings fluctuations risk

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Default risk

Marketability risk

Criteria checked for loans

Major areas requiring focused attention of the analyst are:

1.Financial Condition

Which is reflected in the trends of:

Net sales

Gross sales

Operating profits

Net profits (at least for the last 3 years)

2.Structural Liquidity

It refers to the extent of liquidity usually available in the business, or which is the

routine requirement of the borrower based on the nature of his periodically maturing

liabilities.

3.Industry/Business Of Operation

The banker has to check that in which industry or segment of market the loan is

being given this is important because if there were a recession in that industry for

decades then it would not be feasible to invest in such a business.

Certain traditionally stable industries are in Pakistan in which NBP feels satisfied

while investing.

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For example in they feel satisfied by investing in ICI.

4.Debt Equity Management

Excessive reliance on debt, rather than plough back of profits or injection of fresh

equity, to maintain a healthy combination of debt and equity is thought with danger

because ultimately the debt servicing requirements place a heavy burden on its

liquidity thereby its survival.

5.Asesst Management

Asset management involves the analysis of how productively the assets of the

company are being used. Sales and profitability can be measured with this.

6.Borrower’s Credit Worthiness

In order to get a complete picture of the borrower’s credit worthiness, inquiries

will have to be made about:

His business.

Trade experience.

Assets and liabilities.

His account with bank or with other banks.

His financial statements and income tax returns.

An interview with him will be necessary to elucidate or supplement the

information that may have been collected.

7.Management

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Before giving loan NBP also checks whether the management have the depth,

skill and experience. If the management is aggressive and adoptive to the new

changes then it is most likely that the banker may receive the loan back on due date

8.Securities

In case the borrower is not in a position to meet his obligations, there must be

something else to call back upon. So bankers take securities to have a resource to

them to guard liquidity, that is, security is an insurance against calamities.

In case of cash finance the customer have to give the same amount of money to the

NBP as a security for which it takes loan.

Condition for security

The security must be liquid or radically convertible to cash with more then

adequate margin of safety fully under the banks control, having high value, which can

with stand volatile market condition.

Secured by acceptable immovable tangible collateral with necessary margin and fair

degree of marketability under the forced sale situation (should have buyer).

The types of securities may vary from a piece of land or building to commercial

papers or ornaments. Further, security has its own importance, not only as

constituting the ultimate source of recovery in the event of failure of the borrower or

his enterprise, but as providing a measure to the borrowers own stake in the enterprise

and also placing the limitation on his future borrowings.

However, though security serves as a cushion to fall bank upon in case of need,

but its adequacy alone should not form the sole consideration for judging the

40


suitability of the loan. So the choice of security is not made in isolation, but keeping

into consideration the customer and security offered together.

Guarantees

A grantee is defined as

“An undertaking by a person to responsible for the debt of another person.”

National bank of Pakistan issues guarantees to government agencies like atomic

energy, high way department, and customs arthritis. Sui northern gas and others. It also

issues guarantee to multinational organization like Siba gigay, Sandoz, PBS, and etc. for

the purchase of pesticide or insecticide from any fertilizer company.

Bank accepts only long other bank guarantee but in some cases personnel

guarantee is also accepted. The guarantee issued is treated as contingent liability.

According to local rules and regulation the policy for issuance of guarantee can be

changed. The expiry of the guarantee can be set by both bank and guarantor. The

minimum period is one year and the guarantee can be reissue for extra period with paying

charges.

The two officers whose signatures appears in the specimen signature book of bank

and also counter sign by the zonal chief must sign each guarantee. Both officers must also

sign any amendment. Am amendment in the guarantee can be made after giving written

application to issuing branch. If the value of the guarantee is reduced by the amendment

the liability amount will be reduced and if will value is increased additional liability

entries will be passed.

The bank provides following types of guarantees to the customers.

Bid bond

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Mobilization bond

Performance bond

Bid bond

The facility provided at the time of bed opening is called bid bond.

Mobilization bond

When the bid is accepted, the bank provides this type of facility to the customer.

Performance bond

When the project is completed, the contractor about the performance of the

project provides a performance certificate for one year. During one year, if there is any

mishap in the project the repair otherwise authorities claim the performance charges from

the bank.

Bank charges commission on issuance of guarantee as per their schedule of

charges. If the party did not pay the amount in the stipulated time period, bank puts this

case for recovery. If some amount is recovering then it is good otherwise bank deduct the

amount from its profit and starts the legal procedure against the property pledged by the

customer to bank.

Bank assesses the demand of the customer and then writes letters to other banks to

provide them confidential report of credibility about the customer this is one provided in

the shape of CIB (credit information bureau) report provided by the SBP. In this report

the credits of the customers with the bank operating in Pakistan are given. After checking

this report the bank issues the guarantee to the customer. In case of death of his heir as

given in the will be responsible for that guarantee.

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Security

It is an interest or right in the property gives to the creditor to convert it in cash in

case of debtor fails to meet the principal and interest.

The bank provides the following securities to the customers.

Mortgage

Transfer of interest in movable property for securing the payment of money lend on

existing or future liability. The bank provides the following two types of mortgage.

Registered mortgage

Equitable mortgage

Registered mortgage

Registered mortgage is provided on the residential property, commercial industrial

property, raw plot, etc. A party can get registered mortgage if they provide the following

documents to the bank.

Title deed

Non encumbrance (NEC)

pit form (in case a constructed hose)

Valuation certificate

Affidavit

Mortgage deed

Personnel guarantee of mortgagor

Power of attorney

Legal opinion.

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Banks examine all these reports, and if they are correct then issue the mortgage to

the party. The bank examines these reports to see that the property they want to mortgage

is registered and is not already pledged. The bank also calculates the value of the property

and the legal opinion of the customer in case of non-payment.

Equitable mortgage

Equitable mortgage is provided on the residential property, commercial industrial

property, raw plot, etc.

Title deed

Non encumbrance certificate (nec)

Pti form (in case a constructed house)

Valuation certificate

Affidavit

Memorandum of deposit of title deed

Personal guarantee of mortgagor

Power of attorney

Legal opinion

In this mortgage a charge form bound the customer for any legal action in case of

non-payment. In this type of mortgage hypothecation of stocks involves.

Pledge

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A pledge is an “a class security given to customers for stocks ware house, customs,

and etc. it is defined as actual delivery of movable property to lender as security for a

loan. When the customer makes the payment of the loan in full he can back his mortgage

property from the bank i.e. when full payment is made the stock is released.

Procedure of sanction of loan

In Credit department 1st step is to preparation of credit line proposal for the

preparation of credit report. For this following information required by the bank from the

party

Purpose of loan

Details of all firms or companies associated with business

Name of proprietor/ partner/directors

Accurate and up-to-date balance sheet and profit and loss statement of last two years

of business

Market report of the borrower repute

Report from the bank if borrower has maintain his account with the bank

CIB report

Full details of existing limit and actual liability against the business

Particular about the foreign exchange deposits and bills given by the borrower to the

bank

Memorandum and article of association in case of limited company

Audited report of balance sheet and income statement of last two years

After checking all the securities, customer verification the manager done the

following tasks

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1. Preparation of credit proposal

2. Prepare the about the customer

3. Sanction of loan

1) Preparation of credit proposal

After formal application for the credit the party submits approval. For

this purpose borrower can use coarse paper or the form provided by the bank. Along with

the application borrower also submits the documents required by the bank. The bank

manager evaluates the documents provided by the borrower. He gets the party’s

credibility report confidentially from the other commercial banks. He checks the balance

sheet and income against the assets in the company. He also measures the percentage of

owner’s equity. Then he doses the ratios analysis of the company. If the party is involved

in the export and import business then the data of the last three years of this business is

considered. The manager of the bank also examine the project violability, the securities

provided by the debtor to the bank are evaluated by measuring their worth. In the case of

pledge is assessed by the manager while in case of new party manger checks from where

the party is financing for their business

2) Prepare the Proposal about the customer

After preparing the proposal manger prepare the report about the customer. Report

contains the following information

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Name of the company

Date of establishment

Address

Nature of business

Branch office

Worth of business

Date

Banker’s opinion

Head cashier opinion

Branch manger opinion

In case of partnership business following information are included in the report

Partner, their share in capital, profit and loss

Deed of partnership

Partnership letter

Turn over

Net profit

Personal property of partners

Bank balance of partners

Advance payment of suppliers

Particular of machinery installed in the factory through financing

Incase of corporation/limited companies the following information are included

Incorporation and commencement of company

Sales offices

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Capital information

Directors and their contribution to capital

Balance sheet with explanation and evaluation

Net worth of the company

3) Sanction of loan

If the limit of the loan lies with in the power of manger then he sanction the loan

otherwise manger with the covering letter along with all necessary documents sends it to

the concerned sanctioning authority.

GENERAL BANKING

General banking area is also call the operations group. It consist on following section

ACCOUNTS SECTION

REMITTANCES

CLEARING SYSTEM

GOVERNMENT RECEIPTS

CONSUMER AND RETAIL BANKING

LOCKERS

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Accounts section

Accounts Department of the bank can be considered the most important

department. This department is basically concerned with processes and activities of

recovering, sorting, summarizing and reporting data resulting from the whole day

transactions of all the departments. Actually the process of this activity starts from the

preparation of all the required vouchers by different related departments. When these

vouchers are prepared, these are posted into respective computer terminals by the

relevant departments. Before merging, a batch list is printed out by Computer

Department and duly checked by the respective departments. After this, merging stage

comes, after which a proof list is printed out. This is the stage, where Accounts

Department starts performing its function. Proof list is checked by the Accounts

Department.

This section performs the following functions:

Opening of Accounts

Issuance of checque books

Closing of accounts

Payment of Cheques

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Types of accounts

Following types of accounts are open in NBP

Saving account

Current or demand account

Fixed account

Saving account (PLS)

This type of account is designed to encourage the saving habit of the customer

and lead to a long-term banking or investment relationship.

Bank saving accounts are in the nature of deposits accounts and are not normally

available for drawings. Rates of interest are typically ahead, by a small margin. Saving

accounts with the banking sector represent a very small proportion of total deposits.

Customer can make any withdrawals from type of account. The cash reserve ratio is

typically low them the current account because the withdrawals against this account is

very low. The minimum balance for this account is Rs.100 and interest rate is

Current or demand account

These are those deposits, which can be drawn by the depositor at my time by

presenting a cheque to the bank. People deposit their money in this account they gave a

ready command on their account in developed and under developed countries of the

world, a very significant part of money is kept under current or demand account. On this

type of account of interest transfer of cash or by cheque takes place at sight. The cash

50


reserve ratio for this account is very high. The operating cost for the handling of this type

of account is very high because withdrawals are very regular.

Fixed account

Fixed accounts are those, which are deposited for a fixed period of time and are

repayable after the expiry of stipulated time to the customers. Those people who have

surplus funds and want to have save investments deposit the amount in the fixed account.

The rate of interest given to depositor varies with the length of deposit, i.e. it is higher for

longer period and lowers for shorter period. The rates on this type of deposits are higher

than the saving bank accounts. The cash reserves against this deposit are very low

because there is no fear of withdrawal of a month before the stipulated of time. No

paying books or passes book or cheque book is issued to the customers against this

deposit to the depositors.

The authorities of national bank of Pakistan have the right to revise all these rates

of interest with out any notice to customers generally rates of interest are revised after six

months. The amount deposited for 7 and 30 days short term notice and accumulated for

the period exceeding the limit and the customers can get the interest of the extra days of

deposit but in the case of months and years the customer did not get any additional

interest for the exceeding period of deposit.

Procedure for Opening an Account

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First of all, the customer gets an application from the bank, which requires all

information necessary for opening account and also the documents required. An account

can be opened as:

1) An individual account

2) Joint account

3) Proprietorship account

4) Limited company account

5) Partnership

6) Club, society, association and trust

Information Required by the Bank

Name

Address

Telephone No.

Currency of Account

Nature of Business

Country of Residency

Special instructions regarding the account

Signatures

Documentation In case of limited company accounts:

Photocopy of National Identity Card of each director

Application form

Copy of company’s memorandum and articles of association

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List of directors

Copy of board resolution

Certificate of incorporation

Their signature cards

Certificate to commence business

Documentation In case of Partnership Account

Application form

A copy of partnership deed

Signature cards of partners

Registration certificate copy

A copy of National Identity Card of each partner

Documentation In case of Club, Society, Association or Trust

Application form

Copy of rules

Certified copy of resolution

Signature cards

When the concerned officer is satisfied then he opens the account and gives an

account number that will be used in all communications with the bank in regard to the

account and when making deposits and withdrawals.

Bank has the right not to open an account without assigning any reason or to close the

account if it is not operated in a satisfactory manner by the instructions of the head office.

Issuance of Cheque Book

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After opening the account, a cheque book is given to the customer to sign upon

which the number of cheque book issued and the name of the customer is written. Bank

issues a cheque book against requisition. A cheque book may be of 20 (PLS), 25, 50 or

100 leaves (current A/C). Rs. 4.50 per leaf as excise duty is charged to the customer.

A cheque book register is maintained by the office. In this register, the cheque book

inventory, cheque books issue are recorded.

Loose Cheques

If any customer forgets or leaves his cheque book at his home, which is far away from the

bank or whatever the case may be, the customer applies with the bank for the issuance of

loose cheque by the bank as he does not has his cheque book with him and the money is

urgently required, the this cheque is called the loose cheque.

Bank issues a loose cheque for Rs. 50 as charges for the issuance of the loose cheque plus

Rs. 4.50 as excise duty.

Payment of Cheques

It is bank’s primary function to repay the money required for its customer’s

account usually by honoring his cheques. It is a contractual obligation of a banker to

honor its customer’s cheque if the following essential are fulfilled

:

Cheque should be in a proper form

Cheque should not be mutilated

Cheque should be drawn in this particular branch

Cheque should not be damaged

No unauthorized material alterations

Funds must be sufficiently available

Cheque should not be post date or stale

Cheque should be presenting during the banking hours

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Procedure for Closing an Account

The customer can close the account. Customer is required to submit an application for closing

the account. Then the account is closed out and his balance is paid to him after deducting the closing

charges, i.e., Rs. 200 and the application is filed in Account Closing File. Remaining leaves of

cheques will also be collected from the customer.

The activities of Accounts Department can further be divided as:

Routing of expenses vouchers

Preparation of daily activity reports

Preparation of weekly and monthly statements

Preparation of statements for tax purpose.

Routing of Expenses

Vouchers of all expenses and material purchases are routed out through this

department. As far as the expenses are concerned, they include the heads of salaries paid

to confirmed employees of bank, wages paid to employees that are on contractual basis,

rent of the building, lease installment and insurance premium paid to insurance company

for the insurance of vehicles and cash in safe and counter. Expenses also include the

utility bill, which consists of courier, electricity, water and gas bills, medical expenses,

which are reimbursed.

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Preparation of Daily Activity Reports

As far as the daily activity reports of this department are concerned, these include

the following heads:

Voucher collecting of

Loan transactions

General ledger transactions

Foreign currency related transactions

Fixed deposit related transactions

The checking is on daily basis.

Preparation of Daily, Weekly Monthly and Annual Statements

Daily Statements

These statements are sent daily to Main Office Karachi. These are:

Daily Affair Statement, which is same as Balance Sheet

Statement of Income and Expenditure, which includes the details of income generated

and expenses incurred by the bank.

Weekly Statements

These statements are generated on weekly basis for the purpose of sending it to Head

Office. These also include:

Statement of affair

Deposit and advances position of the bank

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Monthly Statements

These statements are prepared on monthly basis and also sent to Head Office (Qatar).

These include:

Provisional statement of income and expenses. This statement adjusted for accruals

and pre-payments.

Monthly Balance Sheet and Income Statement

Comparative Statement

Statements for Tax Purpose

The department also prepares two statements for the purpose of paying tax on

monthly and annual basis. These statements are generated for the purpose of submitting

to Central Board of Revenue. These are:

Statement of deduction of income chargeable under the head salary under Section

53 (Tax deducted at source)

Withholding Tax from the payments made to vendors, suppliers and other parties

providing various services. The rate of withholding tax is as follows:

Suppliers 2.5%

For other parties 5%

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Remittances Section

Remittances can be made through:

Instrumental transfer

Electronic transfer

a. Instrumental Transfer

Instrumental transfers are following

Demand Draft

It is an instrument, which is payable on demand and it is only presentable in the

city/country. When any draft, i.e., an order to pay money, drawn by an office of bank

upon another office of the same bank for a sum of money payable to order on demand,

purports to be issued by or on behalf of the payee, the bank is discharged by the payment

in due course.

When a person requires a draft, he should be asked to complete the prescribed

application form in which he should state the amount of the draft, the name of the payee,

and the place of payment. The person to those persons, who have been duly authorized to

act on his behalf, should sign this application form. An advice is prepared and two copies

of this advice are sent to the Head Office. The bank charges 3% withholding tax and

commission according to the rate list (minimum is Rs. 200).

Pay Order

It is an instrument, which is payable in demand and only presentable in city.

58


Pay order is also called the banker’s cheque drawn upon the issuing bank itself. It is not

negotiable and therefore, bankers tend to cross the instrument “Payee’s account only” to

avoid the possibility of dealing with instruments with forged endorsement. The pay order

is issued favoring individuals, commercial concerns, government departments. On the

presentation of pay order, the bank is liable to pay the amount to the customer. Bank

charges excise duty of Rs. 4 and service charges of Rs. 100.

Pay Slip

It is an instrument, which is issued by bank and used for expenditure purposes,

i.e., electricity bills, maintenance bills, security bills, fixture and fitting, etc.

Call Deposit

Call deposit are not actual deposits of bank. It is in fact the liability of the bank.

Call deposit are ofently prepaid by the bank for contractors

PROCEDRE :**

Following steps are involved

1) Depositor fill the credit vouchers for call deposit. He writes the following

information

Name of company

Amount

Date

2) He deposits the cash along with filled voucher in the cash department

Encashment of CD

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For the encashment of call deposit needed

5 rupee stamp

two signature of customer on the back side of CD

token issued

accountant make entry in the CD register show that it has returned

b. Electronic Transfer

Electronic transfer is of following types

Telegraphic Transfer

It is the message, which is sent from one branch to another on the order of payer

to payee through wire. It is one of the quickest means to transfer fund through the use of

telex/fax/internet or cable. Payment to the beneficiary is affected directly by the drawee

office upon identification or through credit into beneficiary’s bank account. As such

remitting office is not required to issue any instrument payment to the remitter for

delivery to the beneficiary.

Issuance and Payment of Telegraphic Transfer Outgoing

Application form is filled by the client in which the name and account number of

the beneficiary, which is to be credited and name of customer is required. For telegraphic

transfer, the payment can be made in case or by cheque or by debiting the customer’s

account if he is the account holder. The amount of Telegraphic Transfer should be

written on the form. The amount is transferred to beneficiary’s account in the other bank.

An advice is given to the customer but application is filled in the record of the bank.

If the beneficiary is not the account holder of DBL, bank credits a Telegraphic Transfer

payable account and when payment is made to the beneficiary, TT payable account is

debited.

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Issuance and Payment of Telegraphic Transfer Incoming

When a TT is received then an entry is passed in TT incoming register after verifying

the test. When a person comes and wants to encash his TT, bank checks the statements

of that person. If the bank finds any account credited to the person’s account against TT,

bank prepares a voucher for this payment against that TT. The customer then presents

that certificate to the cash counter and collects money.

Mail Transfer

It is the same like TT, but in this type, the message is sent through mail

rather than telex. The procedure is same as TT, but the advice is sent through mail rather

than wired.

Travelers cheques (TC)

These are also called TC. Traveler’s cheques first came into use century ago.

Form of travel currency giving to the holder .the security of a letter of credit and

convenience of a local currency. In practice, they are acceptable in payments of accounts

on board ship, at hotels and in stories. They are in form of a draft. They should be so

signed immediately on issue and place is provided on the cheque for the signature of the

beneficiary on its

Lockers service

National bank of Pakistan also provides lockers facility in the country. The

lockers issued only to the depositors. No lockers are issued to any unknown person.

The dual control system is used for lockers. The officer has master key to

apply on the locker but he cannot open the locker of any person. The locker holder provides the

bank has specimen signature. Whenever the locker holders come to open the locker, his

61


signatures are verified by the officer and then will be able to open his locker. If the key of the

locker is lost company providing these lockers breaks the locker and new lock is fitted in its

locker and lock is destroyed in the presence of the locker holder and bank charges RS 1200 for

that. In case the locker holder dies, the court opens his locker in the presence of his heir as

mentioned in his will or and his belongings are given to them and the locker is closed.

Billing And Government Receipt/Payment

This department is performing following functions

Collection of utility bills

Collection of dues of education institution

Payment of salaries

Payment of zakat

Payment of pension

Clearing Department

The major function of Clearing Department is to receive the cheques, which are

drawn on some other bank. The customer can get the money in his account at NBP, from

the cheques drawn on another bank. The bank accepts these cheques and collects the

amount from that bank on which cheque is drawn through the Clearing House. Bank

charges some commission for this function.

62


Procedure for Clearing the Cheques

Pay-in Slip

The customer fills pay-in slip. This slip is just like deposit slip. The cheque number,

date, amount and account number must be written on this slip.

Stamping and Scrutinizing

The officer on receipt of cheques and pay-in slip will stamp the pay-in slip with

“cheque received” and give a portion of slip to customer and the remaining portion is

attached with the original cheque.

The original cheque will be marked with two stamps.


Clearing Stamp

At the end of day, all cheques are counted and then scrutinized in bank-wise and sent to

the Clearing House.

Computer Section

Through this department bank has make its way to enter in twenty

first century. This department is playing a very important role in making the banking

procedures faster and helping the bank for providing new services to its customers. This

division provided the bank with online branches, systems to make the whole procedure

foolproof.

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Types of Branches

There are three types of Branches in all over Pakistan of NBP

1. Online branches:

The branches, which are directly, link with central computer AS-400, through

wide area networking through fiber optics. These branches have dumb terminal directly

linked with central computer. Yet only forty-four branches all over Pakistan are online.

Of these forty-four, seventeen are located in Karachi, seven in Lahore, two in Islamabad

and two in Multan and two each in other regional head offices.

2. Batch Branches:

The branches where all transactions are carried out with the computer base system

but these branches are not connected to the central computer with wide area net working.

Batch branches are using three type of system, Branch Back Office (BBO) based on

FoxPro, Branch Automated System based (BAS) on UNIX, Branch Integrated System

(BIS) based on FoxPro in Karachi mostly branches are facing this problem. BAS was

establish in the beginning while BBO is currently implemented now efforts are under

way to convert all branches into Electronic Banking System (EBS) which is used by

online branches as this system does not require a person to remain sitting till the branch

closed its daily operation but the system automatically close it self when the branch

timing is over. The database in head office is also based on this system.

3. Manual Branches:

The branches where all transactions are carried out manually and records are

maintained on registers usually stored in big wardrobes.

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All branches in Pakistan report to there regional head office regarding there daily

transaction. In the RHO through On Line, terminal data goes to head office central

computer; Except for branches those are On Line as they transfer there daily data directly

through there own terminal. As day-to-day, activities of all branches are recorded in a

central computer.

Evening Data Receiving Center

Data form batch branches reach the main branch in floppy diskettes while form

manual branches it is in form of hard copy. Data comprises of transactions in profit loss

account, current account, advances etc termed as “Daily Transaction Report”. Clerk in

charge register all diskettes and manual in registers called “job booking register” one for

each of two type of data. These floppies and manual are bring in by riders. There are

fourteen riders in total who bring information form all branches located in Karachi

region.

Data Entry Department

The next task after receiving the data is to enter that data in to a computer. The floppy

disk is directly inserted in the computer. The program in used is based on “COBOL”

language. This program is designed in away that it demand “Hash Value” value before

opening the floppy for further action this value serve the purpose of password or pin code

send by the branch on entering that value the data enter in to the computer. This computer

is attached with the terminal of central computer. The operator of that terminal takes the

data from the computer and converted it in to a text file through that terminal the data

finally goes to the central computer.

Defects and Error Handling

65


Errors of different origin occur when the data goes to central computer. Sometime

retrieving data from the system (BAS, BBO, and BIS), other than used in HO (EBS) also

caused errors. Other errors include Unmatched (This error occurs when document no

matched with the previous one exists), no master (when opening of new account is not

mentioned), Date in Valid, duplicate cheques (this error occur when the last objection is

not removed). these and other such error are see by the person in charge.

In the end of day print out of the data enter in central computer is taken. Any

Incomplete information for any branch and any information require by that particular

branch is sent to that branch. More over material is used to make a WST which is sent to

State Bank of Pakistan.

Consumer and retail banking section

Consumer and retail banking department is offering two facilities to their customers

1) NBP Advance Salary

2) NBP Ghar Ghar Television

NBP Advance salary

NBP advance salary facility allows you to draw three months salary in one go.

NBP advance salary offers you

Take up to three months advance salary take home

Fastest processing and immediate disbursement

Easiest facility for 1 to 36 months

Minimum documentation

Eligibility

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This facility will be available to permanent employee of

Federal and provincial Govt.

Semi Govt, autonomous, semi autonomous, local bodies and Govt corporations

Other corporations and organizations approved by NBP

Those who qualify for thius scheme should have:

Three years of service age remaining

Salary account at NBP

Limit of Finance

Three net take home salary

Customer must have account with national bank which show last three months

salary in his/her account

Calculation of limit

Average of three months and minimum salary which ever is less

taken it as base and multiply it by three

Maximum duration of loan

Three years is max duration.

Requirements

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Requirements are

Three months salary certificate

NIC photocopy

Auto roll over form

Application form

IB-12

Three undated cheques

Annexure C

Annexure D

Account opening form

Procedure

After filling the application customer signed it with his salary-disbursing officer then

under taking is officer approving it. Open the account that is calls separate loan account,

which is once Debit and many time credit.

NBP Ghar Ghar Television

NBP offering the customer to get the television on lease base

Eligibility

Four categories are there

1) Lean of account

2) Lean of guarantor account

3) National saving certificates

4) Guarantor of NBP

lean of account

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Here the amount of customer account is pledge and customer can’t

DR it until the expiry of limit

Lean of guarantor account

The person who is taken the guarantee of that customer his account is

marked as lean and pledges it until the expiry of installments

National saving certificates

Three types of certificates

a) Defense saving certificates

b) Special saving certificaties

c) Regular saving certificates

Every certificate having their face value. The 75% of that valve is marked as lean.

Guarantor of NBP

The employee of national bank can give the guarantee of that

customer.The procedure is same his or her account is marked as lean

Duration of scheme

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Two types of duration

For one year

For two year

Product supply

Product is supply by L.G electronic at the customer address

Products

Different products are offered by L.G such as

Television

Monitors

Air conditioner

DVD

VCD

Documents

Documents required by the banks are

a) Application form

b) IB-12

c) NIC photocopy

d) Delivery order

e) Agreement

f) Letter of hypothecation

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g) Adamantly bound

h) Letter of acceptation and satisfaction

FOR NBP employees:

a) Authorization certificate

b) Guarantee

c) Salary certificate

This scheme is only for residential of Multan.

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WORK DONE BY ME

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The senior staff at the branch was very cooperative and they gave me full opportunities to

enhance my knowledge with practical approach. During my si x week internship I

performed the different tasks in the following departments.

Government receipt and payments

Western union

Gold advances

Pension

Advance salary

Foreign currency

Lockers

Credit and computer section

Account opening

Government receipt and payments

There are different types of vouchers being used by the NBP. These vouchers are as

follow,

1. Provincial vouchers

P-1

TVT (Traffic violation tax)

Excise

Provincial stamp

2. Central vouchers

Central

CVT (

Central stamp

Income tax

Sales tax

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3. District vouchers

Procedure for receipt and payment

In case of receipt, cashier receives the payment and stamps the all three copies of

appropriate voucher and pass on these vouchers to the next seat, in this stage these

vouchers are entered into the books of accounts maintained by the bank. From these three

copies, one is given back to the customer, one is sent to the Gvt’s account office and one

remains in the NBP’s record.

At the end of the day a summary of all transactions under this head is prepared and

finally the entries are made into the GVT receipt and payment register, which is then

signed by the incharge.

In case of payment, the above mentioned same procedure is adopted.

Western union

The NBP main branch muzaffar garh, is handling western union from all over the world

in all currencies.

Procedure

When a person comes to collect some pament send by any person from abroad,

through western union. The bank will ask him for trhe code send by that foreigner, which

is of ten digits known as MTCN Code. The bank also demands all the information about

the amount and that foreigner.

After these verifications, the bank checks receivers CNIC numbers and also takes one

copy of his CNIC for record. After this the bank makes the payment.

Gold advances

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The bank is advancing loans against Gold. For this purpose procedure adopted is as

follows,

When a customer comes to get this facility bank usually demands the following

documents,

CNIC and nadra verification

ECBI report

IB-12

IB-26

IB-6A

IB-29

ICIL report

The bank has their own Gold smith who verifies the originality of the gold and also

weights the gold. Now a days the bank is granting the amount of Rs.10,000 against ten

grams of gold. And now a day’s interest rate charged by the bank is 15.5% annually and

the recovery by the bank is made in lumsum.

Pension

The Gvt’s accounts office sends to the bank PPO (pension paper order). The bank records

these orders in the ledger book and allots ledger numbers to them.

By using these ledger numbers bank makes the payments monthly. The NBP Muzaffar

garh is maintaining the following types of pensions and funds,

1. Gvt Pension (P1)

2. Pakistan railway Pension

3. EOBI Benefits

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4. Benevolent Fund

Advance Salary

The NBP is giving the facility to the Gvt employees to withdraw their salaries in advance.

The necessary documents required for this purpose are as follows,

1) Copy of CNIC and nadra verification

2) Employer undertaking

3) Employees under taking

4) Salary slip

5) Salary certificate

6) Confidential opinions

7) ECIB report

8) ICIL report

9) Declaration

10) Two references (one from higher grade and one from the same grade)

11) Three blank checks

Foreign Currency

The bank is also offering foreign currency accounts in the following foreign currencies.

US dollar

Pound

EURO

YEN

Lockers

NBP is offering four types of lockers

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Category Rent Key deposit

Small lockers Rs.2400/year Rs. 4000

Medium lockers Rs. 6000/year Rs. 5000

Large lockers Rs. 12000/year Rs. 6000

Extra large lockers Rs. 16000/year Rs. 8000

The person who wants to take a locker in the bank should have his account in the same

branch. These lockers are in the lien of the bank.

Credit and Computer section

In case of credit, there are three main types of credit ,

1) Corporate

2) SME (small and medium enterprises)

Cash finance (against pledge)

Running finance (against hypothecation)

Demand finance (against collateral)

Small finance

3) Retail

Gold advance salary

Advance salary

Currently the NBP main branch muzaffar garh is advancing loans under two types SME

and Retail and the corporate financing is shifted to the main branch Multan.

SME financing is up to one hundred million and more than one million financing is in

corporate financing. Cash financing and running financing are up to one year and these

are mostly seasonal finance.

Demand finances are granted for five years and more than five years. for all types of

financing the necessary documents are as follows,

4) IB-12 (promissory note)

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5) IB_6 (agreement for finance)

6) IB-24 (memorandum of deposit of tytkle deeds)

7) IB-25 (letter of hypothecation)

8) IB-26 (letter of pledge)

9) IB-29 (personal gurantee)

10) Agreement of continuity of liability

11) CNICverification

12) ECIB report

13) ICI report

14) Genuineness certificate

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STRENGTHS WEAKNESSES OPPORTUNITIES

THREATS (SWOT) ANALYSIS

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STRENGTHS

NBP one of the largest financial institutions of Pakistan with eight million of

customer base NBP holds 24.6% share of time and demand deposits in the country.

Local currency deposits comprise 67% of bank's total deposits while foreign currency

deposits account for the rest.

NBP has an extensive domestic branch network of 1200 (according to the latest data)

branches located all over Pakistan. The Bank also has a presence in 19 international

locations including the USA, United Kingdom, Europe and the Far East.

NBP's total assets stood at Pak Rs.370 billion on December 2000. This included total

earning assets of about Pak Rs.268 billion with gross loan portfolio of Pak Rs.140

billion. The bank also has an investment portfolio of Pak Rs.91 billion, which

comprises treasury securities, corporate bonds, shares and other securities.

NBP cash provision as percentage of non performing loans equal to 60% this

coverage factor for the non performing loans is the highest amongst the nationalized

commercial bank.

NBP is working as right arm government of Pakistan as it is responsible for all claims

of government for recovery as well as payment. All depositor of NBP are in relief that

their money security is guaranteed by government of Pakistan.

It acts as an agent of the Central Bank wherever the State Bank does not have its own

Branch.

WEAKNESSES

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NBP staff especially at lower considers their work as burden. They usually waste time

in other task a part in performing their duty. Using government property for there

own need. They are reluctant to accept change brought by latest restructuring efforts.

The general out look and interior layout of branches are not as required according to

modern banking

NBP bearing up large burden in running those branches, which are not producing any

income but keep on adding expenditure.

NBP is relying on its traditional sources of income it has not taken benefit from

innovation in banking like introducing retail banking or consumer banking and using

any type of scheme to generate more deposits and producing more advances. Further,

more don’t even continue its credit card due mismanagement and lack of control.

NBP is far behind in offering modern banking facility like automated teller machines

then other commercial bank in Pakistan as only eighteen branches in all over country

have this facility.

NBP has only forty-four on line branches. While from remaining branches data

gathering is time consuming, and not fool proof. Quantum of settlement within

different branches is pending because of this updating daily record is becoming very

difficult.

Customers have to fallow long lengthy procedure for opening of account as well

applying for debt. Which discourage most of the people to invest in NBP.

In NBP, most of the time merit not has importance in hiring of employees. Such

practices are black spot on the face of bank and resulted big losses and fraudulent acts

by NBP own employees.

OPPORTUNITIES

Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow.

NBP current management has boarder vision. They have taken steps to improve customer

services, streamline internal procedure and creating a delectating climate for technology

initiative.

To achieve above mention objective they have created operation group

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Starting of the retail banking initial working.

Setting of target for of making at least 300 branches country wide on line.

Closing of all those branches, which are burden on NBP.

Management to offer specialized services to major corporate including advisory and

debt syndication introduces the concept of relationship manager.

Comprehensive training programs has been develop to up grade the core banking

skills of the existing staff as well as integrate high quality hiring.

To improve the motivation of staff a merit-based culture is being promoted. Through

overhauling the manpower recruitment preservation and performance appraisal

system.

These actions taken by current management provide a great opportunity for NBP for

making it future prosper and can make NBP not less than any modern commercialize

bank in Pakistan.

THREATS

Following are the major threats which national bank of Pakistan is facing:

Major threats NBP facing is from its competitor especially from denationalized

commercial bank. In which MCB is on the top of the list, The Bank provides 24 hour

banking convenience with the largest ATM network in Pakistan covering 15 cities

with over 100 ATM locations.

Retail banking and consumer banking resulting in the products such as credit cards,

housing finance and automobile finance lending to small individual consumers, and

purchases of automobiles, housing, and consumer goods are generally made on a cash

basis. These are causing another threat, if not counter will result in significance loss

of customers

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Recently banks and other financial institutions have introduced innovative schemes to

attract deposits, like gift checque scheme by MCB. These schemes offer prizes on

short and long term fixed deposits, through lucky draws.

Now banks are using technology which covers the distance no matter how far away

any one, through a satellite based, on-line real-time banking system and by offering

telephone banking, electronic funds transfer, E-Banking and other modern facilities.

SUGGESTIONS NBP major fault is that wasn’t keep its pace with on going changing in banking

industry unlike other bank. Now this bank combining all it power and trying to

approach other banks.

Latest reorganizing efforts are necessary to make it cost effective also making its

facility accordingly to modern banking. These must continue.

Bank management has to put its all effort to change the prevailing culture of the bank

and to put the foundation stone of business oriented culture. In which employees give

important to the bank and its customer.

To attract the customer in the future NBP have to make extensive effort to give

facilities of retail and consumer banking. Plus the technology in the banking which

will be necessary for future banking is another week area need to be stressed.

The outlook and interior lay out of the branches is another thing which needs to be

improved.

The procedure of taking services from the bank must be made easier and straight

forward not involving long difficult procedure for simple task.

To remain in the market bank need to be vigilant in the eyes of customer. One way is

through promotion efforts, so that people aware about he services of the banking and any

addition which the bank as made in the portfolio of its services.

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