The Bank of Punjab

HISTORY OF BANKING IN PAKISTAN

Pakistan came into being on 14th August, 1947; sufficient banking services

were available in the areas forming Pakistan. Out of the total branches of the nearly

3,500 in the undivided India, as many as about 1,500 branches were existing in these

areas.

It was agreed between the two countries that reserve bank of India shall

continue to function in the Pakistan territory until 30th September 1948 and that

Indian notes would continue to be legal tender at Pakistan until 30th September 1948.

Unfortunately, relationship between the two countries became most strained

immediately after independence; banking was mostly in the lands of Hindus who

immediately started transferring their offices and assets into India. As a result most of

the banks in Pakistan were closed down and even those which were open were not

doing any effective business.

The number of banking office in Pakistan came down to about 200 on 30th

June 1948. Branches of some European banks were also functioning in a limited

manner, financing in export of crops, and their number was limited to about 20.

It was only the Habib bank, which transferred its office from Bombay to

Karachi Austral Asia bank was another bank, which was in existence in the Pakistan

territory at the time of independence. Despite of best efforts on the part of government

of Pakistan, no heady way could be made on this behalf and reserve bank of India was

in no mood to help the new country. Imperial bank of India, agent of the reserve bank

of India also started closing down its branches in Pakistan.

Reserve bank also refused to advance money to Pakistan to make essential

payments such as salaries etc, also Pakistan’s share of Rs.75 billion in cash balance

was with held by bank, causing hardships to the newly born state. In view of these

hopeless state affairs it was agreed between the two countries that reserve bank would

serve as monetary authority in Pakistan only up to 30th June 1948.

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The Bank of Punjab

NATIONALIZATION OF BANKS

The principle of nationalization of banks is to stream line the operation of

commercial banks in such a way that it may be conductive to the development

activities in process in the country.

Since the commercial banks were owned controlled by big business groups of

the country it was feared that these banks would not maintain uniformity in their

operational and would be instrumental to inflationary pressure. However, the

considerations behind nationalization are

To form uniformity in the policy of the commercial banks so they may serve the

best national interest.

To make the operation of commercial banks highly sensitive and responsive to the

policy of the government relation to financial matters.

To make the credit policy of the commercial banks more purpose full and

effective especially in the development of economic sectors of the country. It acts

as an agent of the State Bank of Pakistan

To make the best use of the funds available at the disposal of these banks for the

economic development of the country.

To eliminate unhealthy and uneconomic competition among commercial banks.

To development strong money banks market in the country so that the value of

currency may be maintained at stable level both in national facilities to exporter

and agriculturists which have not been satisfactory in the past years.

Public Sector Commercial Banks

National BankNBP

First Women Bank Limited FWB

The Bank of Khyber KB

The Bank of Punjab BOP

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The Bank of Punjab

Local Private Banks

Askari Commercial Bank Limited

Bank Al-Falah Limited

Bank Al Habib Limited

Meezan Bank Limited

Faysal Bank Limited

Silk Bank Limited

Soneri Bank Limited

Union Bank Limited

Muslim Commercial Bank Limited

Allied Bank of Pakistan

Union Bank Limited

Foreign Banks

ABN Amro Bank

CITI Bank

Habib Bank A. G. Zurich

Mashreq Bank PJSC

Oman Bank

Barclays Bank

Standard Chartered Bank

Specialized Banks

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The Bank of Punjab

Zari Tarqiati Bank Ltd.

Industrial Development Bank of Pakistan

Punjab Provincial Cooperative Bank Limited

It has not so far been decided as to how the word ‘Bank’ originated. Some author’s

opinion is that, this word is derived from the word ‘Bancus’ or ‘Banque’, which

means a bench. Others authors hold the opinion that the word ‘Bank’ is derived from

the German word ‘Back’, which means joint stock fund. It is therefore so much

difficult to decide as to which opinion is correct.

Banking in fact is primitive as human society, forever since man came to

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

controlling or regulating agency or institution was naturally felt. Perhaps it was the

Babylonians who developed banking system as early as 2000bc. It is evident that the

temples of the Babylon were used as ‘Banks’ because of the prevalent respect and

confidence at the clergy.

At the time of independence there were 631 offices of the scheduled banks in

Pakistan, of which 487 were located in West Pakistan alone. As a new country with

resources it was very difficult for Pakistan to run its own banking system immediately.

Therefore the expert committee recommended that the Reserve Bank of India should

continue to function in Pakistan until 30, September 1948, so that problems of time and

demand liability, coinage currencies, exchange etc, could be settled between India and

Pakistan. The non Muslims started transferring their funds and accounts to India. By

the end of June 1948, the number of officers of scheduled banks in Pakistan declined

from 631 to 255. There were 19 foreign banks with the status of small branch offices

that were engaged solely in export crop from Pakistan, while there were only two

Pakistani institutions, Habib Bank, and Australasia Bank, the customers of the banks

are not satisfied with the uncertain condition of banking. Similarly the Reserve Bank of

India was not in the favor of Govt. of Pakistan. The Govt. of Pakistan decided to

establish a full-fledge central bank. Consequently the Governor General of Pakistan Internship Report - 4 -

The Bank of Punjab

Quaid-e-Azam inaugurated the State Bank of Pakistan on July 1,1948 Thus a landmark

was made in the history of banking when the State Bank of Pakistan assumed full

control of banking and currency in Pakistan.

THE BANK OF PUNJAB

VISION STATEMENT

“To be a customer focused bank with service excellence.”

MISSION STATEMENT

To exceed the expectations of our stakeholders by leveraging our relationship

with the Government of Punjab and delivering a complete range of professional

solutions with a focus on programmed driven products & services in the Agriculture

and Middle Tier Markets through a motivated team.

CORE VALUES

Our Customer As our first priority.

Profitability For the prosperity of our stakeholders that allows us to

constantly invest, improve and succeed.

Corporate Social Responsibility To Enrich the Lives of community where we

operate

Recognition and Reward For the talented and high performing employees

Excellence In every thing we do.

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The Bank of Punjab

Integrity In all our dealings.

Respect For our customers and each other.

HISTORY OF BOP

The Bank of Punjab was established in 1989 and was given the status of

scheduled bank in 1994. The Bank of Punjab is working as a scheduled commercial

bank with a network of almost 273 branches at all over major locations in the

Punjab. The Bank provides all types of banking services such as Deposits in Local

Currency and client foreign currency, remittances, and advances to business, trade,

industry and agriculture. The Bank of Punjab has indeed entered a new era of science

to the nation under experience and professional hands of its management. The Bank

of Punjab plays a vital role in the national economy through mobilization of hitherto

untapped local resources, promoting savings and providing funds for investments. The

bank offers attractive rates of profit on all deposits, opening of foreign currency

accounts and handling of foreign exchange business for example imports, exports and

remittances, financing, trade and industry for working capital requirements and

money market operations. The lending policy of bank is not only cautious and

constructive but also based on principles of prudent lending with maximum emphasis

on security.

The Bank provides alltypes of banking services such as Deposit in Local

Currency, Client Deposit in Foreign Currency, Remittances, Advances to Business,

Trade, Industry and Agriculture A wholly owned subsidiary of BOP First Punjab

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The Bank of Punjab

Modaraba (FPM) was established in 1992 and is being managed by Punjab Modaraba

Services (Pvt) Ltd , a wholly owed subsidiary of The Bank of Punjab.

Lending under Islamic mode of finance, main vehicles are Morabaha, Ijarah &

Musharika to encompass requirements of corporate, commercial and individual

customers.

Liability generation through COM’s (Certificate of Musharika ) offers

attractive returns to individuals and institutional depositors for fixed tenure

instruments. FPM is working to introduce new and innovative products to enhance its

range of services.

AWARDS AND ACHIEVEMENTS

Excellence Award by the Central Board of Revenue

The Central Board of Revenue presented "Excellence Award" to the Bank of Punjab

in recognition of the contribution made by the bank towards Government exchequer.

3rd Kissan Time Awards

In recognition of Bank's contribution in development and growth of agricultural

sector, the Bank honoured with "Top Bank for Agriculture Loans" and "Best Bank

Crop Insurance" under 3rd Kissan Time Awards year 2006.

Best Corporate Report Award

Annual Report of the Bank for the year 2005 won 5th position for "The Best

Corporate Report Award" for the Financial sector, adjudicated jointly by the Institute

of Chartered Accountants of Pakistan and the Institute of Cost and Management

Accountants of Pakistan.

16th Bolan Excellence Award

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The Bank of Punjab

The Bank was awarded Best Bank Award under 15th Bolan Excellence Awards

distributed in 2006.

Achievement Award

The Lahore Chamber of Commerce & Industry (LCCI) awarded the Bank "LCCI

Achievement Award" 2006.

MAJOR CUSTOMERS OF BOP

Some of the major customers of Bank of Punjab are:

Educational Institutes

Agriculturists

Pakistan Telecommunication Private Limited

WAPDA

Pharmaceutical Companies

WASA

MDA

PUNJAB GOVERNMENT SHOWS FAITH IN BOP

Punjab Government wishes to state that being the major stake holder in the

Bank of Punjab it has full faith in the new management and operations of the Bank.

The government further pledges its unequivocal support to the Bank and firmly

believes that the affairs of the Bank are sound and its financial health robust.

Finance Department Internship Report - 8 -

The Bank of Punjab

Government of the Punjab.

BRANCH NETWORK

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The Bank of Punjab

Lahore Region

Faisialabad Region

Gujranwala Region

Rawalpindi Region

Karachi/Queta Region

Multan Region

Gujrat Region

HEIRARHICAL FLOW

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The Bank of Punjab

BOARD OF DIRECTORS

Name Designation

Mr. Safdar Javaid Syed Chairman

Mr. Naeemuddin Khan President

Mr. Azhar Hameed Director

Mr. Haroon Khawaja Director

Mr. Farooq Ahmed Awan Director

Mr. Naveed Masud Director

Mr. Mujtaba Jamal Chaudhry Director

Mr. Shafqat Ellahi Director

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The Bank of Punjab

Mr. Shafqat Mahmood Director

Mr. Tariq Mahmood Pasha Director

Mr. Viqar Ahmed Khan Director

Mr. Raza Saeed Secretary To The Board

GENERAL BANKING OF THE BANK OF PUNJAB

DEPOSIT DEPARTMENT

In modern times very few business enterprises are carried out solely with the

capital of the owners. Borrowing funds from different sources has becomes an

essential feature of today business enterprise. But in the case of a entire banking

system is based on it. The borrowed capital of the bank is much greater then their own

capital. Banks borrowing is mostly in the form of deposits.

These deposits are lent out to different parties. The larger the difference

between the rate at which the deposits are borrowed and the rate at which they is lent

out the greater of the profit margin of the bank. Furthermore, the larger the deposit the

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The Bank of Punjab

larger will be the funds available for employment; larger the funds lent out the greater

will be the profit of the bank.

To receive the deposit is the basic function of all commercial banks. The bank

does not receive these deposits for save keeping purpose only, but they accept

deposits as debts. When banks receive deposit from a customer, the relationship of a

debtor and creditor is established where by the customer become the creditor and the

bank a debtor. When the bank receives amount of deposit as a debtor, it becomes the

owner of it. It may, therefore use it as deems appropriate. But there is an implicit

agreement that the amount owned would be paid back by the bank to the depositor

after a specified period.

NATURE OF DEPOSIT

Current or demand Deposits

Saving Deposit

Short Notice Term Deposit

Call Deposits

Fixed or Term Deposits

CURRENT DEPOSIT

Current deposit are those which are payable to bank whenever demand by the

customer. Bank doesn’t pay any profit on current deposits. There are of different

scheme of saving deposits, which are classified under different duration purpose and

rate of interest. Fixed deposits are those which are by the bank under the conditions

that will not be payable on demand but will be payable under fixed or determinate

future time date.

SAVING DEPOSIT

This type of accounts is one step towards the Islamization of banking system

in Pakistan. There are two types of PLS Accounts. Internship Report - 13 -

The Bank of Punjab

PLS Saving Account

PLS-TDR (Profit & Loss Sharing Term Deposit Receipts).

PLS saving accounts can be opened with the minimum sum of Rs. 100 and

PLS-TDR account can be opened for a sum of Rs. 1000 or above. Profit is paid on

both types of the PLS account on half yearly basis.

Under PLS saving account the depositor undertakes to share profit or loss on the

deposits earned or sustained by the bank. Secondly the bank is at the liberty to invest

the funds of the deposits in any avenue, it deems fit. The PLS deposits are invested in

non-interested channels.

SHORT NOTICE TERM DEPOSITS

This kind of deposit is for a short period. The depositor may withdraw his

deposit at any time by giving seven days notice to the bank. This type of deposit

facilitates the depositor to withdrawn his amount with interest of the deposited period.

CALL DEPOSIT

Call deposits are the sorts of deposits, which are deposited with the banker

against any tender. This is without interest deposit. This may be with interest provided

the depositor has agreed to keep this amount with the bank for some fixed period.

TERM DEPOSIT RECEIPTS

This type of deposit is same as the SNTD. The difference is that SNTD is for short

period (7- 30 days) while TDR is for long period (1 month up to 5 years).

ACCOUNT OPENING

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The Bank of Punjab

Account opening is the first step towards establishing a relationship between

the customer and the bank. The Bank of Punjab is offering basically two types of

account:

Current Deposit Account

Profit and Loss Sharing Account

The necessary condition for a customer, who wants to open an account with the bank,

is introduction, which is preferably by the bank officers or any account holder of the

bank. The different categories of accounts that are available are as under.

Individual Account

Joint Account

Partnership Account

Limited Company Account

Clubs, Society, Association, or Trust Account

SNTD

TDR

Foreign Currency Deposit

ACCOUNT OPENING PROCEDURE

The general banking department performs various functions among them the

first and most important function is Account Opening. The bank reserves the right to

open any account, which in its opinion is suitable as a customer. The process of

opening an account is very simple and any body that would like to open his account

could do it easily without any difficulty.

The person would like to open his account is required to meet with the manager

or second officer, who will give him an Application form specifically used for

account opening. Along with the form a card for specimen signature is also supplied

to the customer. Manager has every right not to accept this contract if he is not

satisfied with the details provided by the customer. But in case the contract is

acceptable to both, the next step is official account opening.

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The Bank of Punjab

This begins with the Account Opening Register which can be thought as a

customer’s master file. The manager records the necessary details into this register5

and allots an “Account Number” from this account opening register. This register is

maintained for each type of accounts and the account numbers are allotted serially.

After opening the account every applicant’s date is entered in the computer to

maintain the safe record and application form is also safely put off, so that it can be

available whenever it is needed. Checking officer is responsible to tally the manual

data with computerized account opening file. For fix deposit only the application

form is needed, which is prepared manually, because most of the procedures of fix

deposit is done manually. Signature specimen card contains three signatures of the

applicant, applicant account number, account type, branch code, and title of account.

It will be attached with the account opening form. Banker uses this card when he

receives the cheque, he compares signature on the cheque with the Specimen card, for

avoiding the frauds.

CLEARING DEPARTMENT

This department receives the cheque and other negotiable instruments drawn on

local branches of other banks. State bank of Pakistan has clearing house, in which

cheque, and other negotiable instruments are brought by each local bank

representatives and the mutual claims of each bank on other and offset and a

settlement is made by the payment of difference. Clearing system is help full for both

the customer and saving currency, time and labor.

Investments which are collected

Cheques

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The Bank of Punjab

Demand Drafts

Telegraphic transfers

Mail Transfers

Pay Order

Dividend Warrants

CLEARING

Any instruments which drawn on BOP branches and other banks in same city

that’s instruments are called clearing. A clearing and date stamp is a fixed on these

instruments these are two types of clearing!

Outward Clearing

Inward Clearing

Inward clearing means the cheque drawn on BOP and outward clearing means the

Cheques drawn on others

OUTWARD CLEARING

The instrument collected or stored bank wise and a schedules is prepared

separately for each bank mentioning the total number of instruments and the amount

of the instruments. Then these are recorded in a register called “OUTWARD

CLEARING REGISTER” then a main schedule is prepared showing the total number

of cheque and their aggregate amount being presented in the clearing.

The cheque/instruments are handed over the clearing branch. Central clearing branch

issue CREDIT ADVICE to the branch for passing credit to its customer immediately.

The branch on receiving credit advice debits the clearing account and credit the

respective customer accounts.

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The Bank of Punjab

INWARD CLEARING

On receiving cheque/instruments from central clearing branch, the in charge

checks the number and amount of cheque received in clearing must tally with the

main schedule received from central clearing branch.

These cheque/instrument are entered in “INWARD CLEARING REGISTER” for the

cheque/instrument passed in clearing is a credit advice for the aggregate amount of

cheque passed in clearing is prepared, drawn on central clearing branch.

RESERVES AT STATE BANK

Deposit held by bank at SBP serves as check clearing and collection balances.

Rather than physically transferring funds between banks, check clearing and

collection can be done by simply debiting or crediting a bank’s account at SBP.

REMITTANCE DEPARTMENT

Remittance is a major function of the bank. It is the transfer of money from

one place to another place. The need for remittance is commonly felt in commercial

life particularly and in everyday life generally.

By proving this service to the customers the Bank of Punjab earns a lot of income in

the form of service charges.

TYPES OF REMITTANCE

The Bank of Punjab deals with the following type of remittances

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The Bank of Punjab

Demand Draft (DD)

Mail Transfer (MT)

Telegraphic Transfer (TT)

Pay Order

Now we discuss all these in detail:

DEMAND DRAFT (DD):

Demand draft is a written order given by the one branch of a bank on behalf of

customer to another branch of the same bank to a certain amount to the certain person.

PROCEDURE

1) A draft voucher is filled which contains the following information

Name of the parties involved

Date

Amount to be sent

Account number (if DD is crossed)

2) A credit voucher is filled in order to get the excise duty and exchange

commission.

3) The sender deposits the total amount of the two vouchers i.e. the debit and credit

vouchers.

4) Then the cashier sends the cash receipt voucher to the accounts department and

the account records the amount paid in his cash scroll.

5) Accountant gives the DD leaf along with the DD voucher to his assistant who

records the sender’s name, amount and receiver’s name. After writing all the

information in the DD register he gives it to the officer along with the DD for

authentication.

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The Bank of Punjab

6) After authentication the DD is handed over to the sender and bank sends the

advice to the concerned branch. So when the party presents the DD in the

concerned branch its payment could be made.

PARTIES INVOLVED

The following parties are involved in demand draft;

1) Purchaser or Sender

The purchaser is the person who sends the money to a particular person payable at

a certain branch.

2) Issuing or Drawing Branch

The branch from where the demand draft is issued to another branch of the

same bank.

3) Drawer Branch

Branch in which the draft has drawn and called upon to pay the amount.

4) Payee

The person who is entitled to receive the amount after presenting the demand draft

in the drawer branch.

MAIL TRANSFER

It is the transfer of money from one branch to another branch of the same bank

through mail service. In mail transfer there is no need of advice as the amount is

directly credited to the receiver’s account.

PROCEDURE

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The Bank of Punjab

1) First a voucher is filled in whish the sender writes the amount to be sent, name,

account number of the receiving person with the branch name and date.

2) A credit voucher is filled in order to deduct exchange, postage charges according

to the amount of the mail transfer.

3) The sender deposits the total amount in the cash department.

4) The cash officer gives the vouchers to the officer after affixing received cash

stamp and writing the amount in red ink.

5) Then the officer writes the amount paid in the cash scroll and gives the MT to his

assistant.

6) MT leaf is filled according to the information provided in credit voucher. He also

writes the same information in the MT register. Then he gives the MT leaf and

MT register to the officer for authentication.

TELEGRAPHIC TRANSFER

This is the most urgent method of remitting the money from one place to

another place. This method is used when the sender desires to send urgently, in this

case the sender request the manager of the branch to issue TT.

PROCEDURE

For sending the TT the manager and officer apply a test. In the test the

manager and officer uses a coding technique. They write their own code numbers,

which is allotted, to them as the bank branch code. After making all the conformation

the concerned branch makes the payment to the receiver. If the sender wants to

convey the same message through telephone then he has to pay the charges of

telephone along with the TT charges. First the person deposit the TT amount along

with the charges through the credit voucher then his TT sent to the relevant branch.

PAY ORDER

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The Bank of Punjab

A pay order is a written order issued by the bank on its own branch, drawn

upon and payable by itself to pay a specified sum of money to the person. The

purpose of a pay order is to transfer the fund from one place to another. It is usually

not issued in favor of the parties of other cities. Usually the pay order is issued for the

local transfer of money from one person to another or from the person to any other

department. It is used for different purposes. The purpose may be the repairs of the

branch or renovation of the branch.

PROCEDURE

The procedure of a pay order varies with the nature of the purpose. If the work

is of huge amount then first the manager writes a letter to the Zonal Chief in order to

get sanction of the work. Then the advertisement of the work is given in the

newspaper in order to invite the contractors. But if the work is small then the branch

manager has discretionary power to select the party whose rate is lowest. After

finishing the work the contractor submits the bill of work on his stamp pad. Then the

bank issues a pay order, against the pay order the contactor gets the amount from the

issuing branch.

.ACCOUNT DEPARTMENT

Account department is the backbone of a bank. It plays a vital in performing

different functions of a bank. The account department of is computerized as well as

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The Bank of Punjab

manual. Accounting books of different departments are maintained under this

department and with the help of these, accountant prepare the monthly quarterly,

semiannually and yearly financial statement and order statement of the whole bank.

All the transaction taking place is recorded daily in the books of accounts and in

computerized ledgers.

For every transaction there is Voucher prepared and through these vouchers

contra entries are passed under different head. Good working of accounts mainly

depends on the voucher system. Accounts department is responsible for proper

handling and maintenance of vouchers of different department

.

MANUAL FUNCTIONS OF ACCOUNTS DEPARTMENT

Accountant prepares vouchers for all daily activities of different departments.

Checking officer checks and tallies these vouchers with their daily transactions and

posts their entries under proper heads.

TYPES OF VOUCHERS

Debit Voucher

Credit Voucher

These two types of vouchers are again classified under following types: -

Cash voucher

Transfer voucher

Clearing voucher

All the daily transaction in cash, transfer and clearing is done through these

vouchers. A sheet is prepared on which all the vouchers passed during one day are

consolidated and summarized. This sheet is called supplementary sheet. There are two

types of supplementary sheet.

Daily paid voucher sheet

Daily receipt voucher sheet

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The Bank of Punjab

Paid sheet is used for all debit vouchers and receipt sheet is used for all credit

vouchers.

CASH BOOK

Cash book is prepared daily to keep the record of daily paid vouchers. Cash

book contains the opening balance and the closing balance of a working day. Before

writing and balance the cash book firstly there is needed to properly arrange all the

vouchers of that day.

MAINTAINING & UPDATING LEDGERS

One of the functions of accounts department is to maintain and update the term

deposit ledgers and books manually. Term deposit receipt or TDR ledger is updated

after every month for estimating profit on customer’s accounts. Accountant prepares

different ledger for all schemes of term deposit. With the help of TDR ledger

accountant prepares “provisional ledger”. From this ledger accountant calculate the

monthly product of each account and estimate the profit for a half-year. The

semiannual profit on each account will be the expenses of branch.

COMPUTERIZED FUNCTIONS OF ACCOUNTS DEPARTMENT

Most of the daily working is done through ledgers. In BOP all the daily

transaction in deposit, cash, clearing, transfer, remittance and advance are performed

these daily ledgers; accounts department receives the following output of general

ledger.

Daily general ledger expense

Daily general ledger income

Daily general ledger assets

Daily general ledger liability

Daily general ledger circle expense

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The Bank of Punjab

Daily general ledger audit expense

The formats of all these ledgers are same. They contain the following head

account no. description, previous balance. Codes are assigned to all these items.

Income will be credited in the branch account and expenses will be debited I the

branch at the month end.

All the expenses of circle, regional, audit, inspection office is debited in the

head office account, because it is the responsibility of the head office to bear the

expenses of its offices. For all the heads of general ledger there is closing balance and

opening balance. These ledgers are helpful in preparing the daily, monthly,

semiannually and yearly statements. Some of these statements are prepare for the

purpose of record keeping of branches and some are prepared to send to the circle

office, head office and state bank of Pakistan.

Some of these statements are

Statement of provisional income

Statement of provisional expense

Statement of head office account

Summary of income and expense

Statement of profit and loss on PLS account

Statement of profit and loss PLS 365 account

Balance confirmation report

Statement of affairs

BILLS DEPARTMENT

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The Bank of Punjab

This department deals in bills for collection for all kinks such as cheque, draft,

and pay orders, call deposits etc. with outstation branches of BOP or with other banks.

It provides service to their customer to get payment from the nearer bank at nominal

charges. The four main heads of bill department is.

Outward Bill for Collection (OBC)

Inward Bills For Collection (IBC)

Outward Documentary Bills For Collection (ODBFC)

Inward Documentary Bills For Collection (IDBFC)

OUTWARD BILLS FOR COLLECTION

Bills department receive cheque or other of bills from its kinks client whose

account must be opened in that branch. The branch forwards the check with schedule

or covering letter to that branch on which bills is drawn. The checking officer of bills

department will cross the cheque with special bank stamp before forwarding the

cheque.

OBC register is also maintained for proper record keeping of outward bills.

This register is updated two times once at the time of receiving bill from clients and

the other when the confirmation advice of this cheque is received from the payable

branch. Bank gets a commission Rs. 25/- and courier charges Rs. 40/- on the service.

INWARD BILLS FOR COLLECTION

The branches which receive bill have to verify these bills for payment. The party

account must be opened in that branch. The responsibility of this branch is to verify

the bills for collection with in three days and send the advice to the originating

branch.

In case of verification of bills is approved, banks debit the account of the respective

account holder and send a debit advice to the originating branch and at the same time

credit the head office account for inward bills IBC register is maintaining for keeping

the proper record of the bills.

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The Bank of Punjab

OUTWARD DOCUMENTARY BILLS FOR COLLECTION

Originating branch receives the documentary bills from their clients and sent

them to out station branches of the same bank or other bank. Customer account must

be opened in that branch. The documentary bills are i.e. trust receipt, railway receipt,

sales invoice, receipts of courier service etc. bank gets as commission 0.35% plus

postage charges plus courier service charges of this service. Seller and producer both

can avail the facility of bank in case of selling and purchasing their product or goods.

INWARD DOCUMENTARY BILLS FOR COLLECTION

Bank receives the documentary bills from the other outstation branches of the

same banks or other banks for collection the amount from purchaser.

In this case back acts as a buyer’s bank, when bank receives the documentary bills

they send intimation to buyer about his arrival of goods. If the buyer is the account

holder then bank will debit his account otherwise purchaser deposits the amount of

the bills. Bank hand over these documents to purchase, on behalf of which buyer

receives the goods. Bank also charges commission

ADVANCES/CREDIT DEPARTMENT

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The Bank of Punjab

It is the loan function, which produces the major person of bank’s income, and

as such it is the major areas of professional banker’s concern and attention.

PRINCIPLES WHILE ADVANCING

Basically there are five principles that must be duly observed while advancing

money to borrowers.

Safety

Liquidity

Disposal

Remuneration

Suitability

FORMS OF LENDING

Many there are two types of advances:

Short-term (maturity within one year)

Long term (maturity with the period of more than one year)

However they are further classified as:

Running Finance

Demand Finance

Cash Finance

Letter of Guarantee

RUNNING FINANCE

This form of finance was previously known as “overdraft”. When a customer

requires the temporary accommodation, his bank allows withdrawal his account in

excess of credit balance, which the customer has in its account, a running finance

occurs. The accommodation is thus allowed collateral security. When it is against

collateral securities, it is called a “Secured Running Finance” and when the customer

cannot offer any collateral security except his personal security, accommodation is

Internship Report - 28 -

The Bank of Punjab

called a “Clean Running Finance.” The customer is in advantageous position in

running finance because he has to pay the mark-up only the balance outstanding

against him on daily product basis.

DEMAND FINANCE

This is common form of financing to commercial and industrial concerns and

is mad available either against pledge or hypothecation of goods produce or

merchandise. In Demand Finance the party is financed up to a certain limit either at

once or as and when required. The party due to facility of paying mark-up only on the

amount it actually utilizes prefers this form of financing

.

Ordinary Shares

Preferred Shares

It can be

Quoted or Unquoted

Registered

Bearer

Inscribed

ADVANCES AGAINST IMMOVABLE PROPERTY

A mortgage is the transfer of and interest in specific immovable property for the

purpose of securing the payment of the money, advanced or to be advanced. By way

of loan, and existing debts or the performances of the engagement this may rise the

pecuniary liability.

The transfer is called the ‘mortgager’ and the transferee the ‘mortgagee’ the principal

money and interest of which payment is secured for the time being and instrument by

which the transfer is effected, is called the letter of the mortgage deed.

Internship Report - 29 -

The Bank of Punjab

Availability of adequate flows of credit for industry and agriculture are a sine qua non

for the growth and development of an economy. This acquires added importance

when agriculture is the mainstay of the economy as also the sector where the bulk of

the poor are concentrated. Growth and productivity in Pakistan's agriculture has

slowed down in recent years and is, therefore, of serious concern given its importance

for the economic prosperity of the country. Apart from various other weaknesses in

the infrastructural support of the agricultural sector, inadequacy and lack of efficacy

of credit, flows to support agriculture related activities has been a major constraining

factor.

Agriculture is the largest sector of the economy. It contributes 25 percent to GDP,

provides raw materials to 80 percent of industry and employment to over 50 percent

of the population. This is a sector that has the shortest gestation period for

investments and, therefore, a remarkable capacity to bring about a turn around in the

economy. This important sector in Pakistan is suffering from a number of maladies

and is consequently witnessing stagnation in productivity.

  Due to policy and administrative exigencies, the savings in the agriculture sector

remain low and, therefore, the sector has perpetually remained capital starved. The

pricing of input and output in agriculture over the years has forced the majority of

farmers in Pakistan to plough back their incomes into agriculture and non-institutional

credit, and has more often than not served to sap their potential earnings. Needless to

say, that shortage of savings and lack of availability of capital is one of the major

reasons for poverty in the country. The agricultural and rural sectors in Pakistan in

general and in Punjab in particular are, therefore, suffering from severe under-

development. Under a desirable development model, Punjab can:

Increase agricultural production to meet the country's requirement of essential

foods items and industrial raw materials.

Develop agro-based industry in the rural sector for economic value addition;

Generate additional employment opportunities in rural as well as adjacent small

towns/cities

Internship Report - 30 -

The Bank of Punjab

Control massive migration to the urban centers that in turn is causing a number of

social, administrative (i.e. law and order) and economic problems for the urban

areas

Elevate poverty and improve the income generating capacity of the agri-based

population.

AGRICULTURE SCHEME

There are many agriculture promotion schemes provided by BOP.

Green Tractor Lease Finance Scheme

Agri Finance Branches

Agricultural Finance Scheme

Kissan Dost Tractor Scheme

Second Hand Tractor Lease Finance Scheme

Kissan Dost Aabiari Scheme

Kissan Dost Mechanization Support Scheme

Kissan Dost Farm Transport Scheme

Kissan Dost Eslah-E-Arazi Scheme

Kissan Dost Live Stock Development Scheme

Livestock Breed Improvement Trough VVW

Kissan Dost Commercial Agro Services

Kissan Dost Agri Mall Finance Scheme

Corporate Farming Finance Scheme

Commercial Lease Finance Tractor Scheme

Demand Finance-Sheds Construction and Civil Works

Lease Finance Facility for Milch Animals

Running Finance-Livestock/Poultry and Fish Farms

Kissan Dost Model Dairy Farms (PDDC)

Kissan Dost Model Milk Collection Center (PDDC)

Kissan Dost Green House Finance Facility

Kissan Dost Cold Storage Finance Facility

Scheme for Controlled Sheds

Internship Report - 31 -

The Bank of Punjab

Lease Finance Facility for Installation of Biogas Plant

Group Financing to Small Farmers

Clean Credit Facility through Syngenta Franchisees

Zarkaashat Drip Irrigation System

Markup of Schemes

BUSINESS PROMOTION SCHEME

BOP Quick Cash

BOP Car Loan

BOP House Loan

BOP SME Loan

BOP Assaish Loan

BOP House Loan For Federal Govt

SERVICES

Commercial Banking

Corporate & Investment

Cash Management Services

Utility Bills

Lockers

COMMERCIAL BANKING

The Commercial Banking Group has been formed to cater the needs of small &

medium size customers for increasing Bank’s business significantly with clear focus,

repositioning of resources and active marketing to improve Bank’s profitability.

Commercial Banking will deal with customers having sales turnover and aggregate

credit exposure as per benchmarks prescribed in the SBP’s Prudential Regulations.

Internship Report - 32 -

The Bank of Punjab

This Group’s emphasis will be to meet necessary business needs of customers which

are numerous as compared to CIB clients but their individual credit requirements are

relatively much smaller. In view of this peculiar nature of this business segment that

involves a higher turn over a much wider network is needed. The SME will

concentrate on rebuilding its set up which suits to its peculiar needs on all locations.

CORPORATE & INVESTMENT BANKING

Corporate Banking

The BOP Corporate Banking endeavors to market new clients and retain the existing

relationships and build market share by offering superior services, competitive pricing

and wide product range to valued corporate clients including Public Sector Entities

and Multi National Companies. BOP facilitates its customers for all sorts of their

banking needs including working capital, trade finance, BMR and project financing

etc. BOP has worked on some of the local markets’ largest and most complex

transactions and infrastructure projects.

The BOP Corporate Banking Group comprises of seasoned relationship management

team to meet the demanding service standards of large corporations. The group

delivers a full range of high quality advisory, financing and operational service

solutions tailored according to customers’ needs.

Investment Banking

The investment Banking Group is entrusted with the prime responsibility of

developing and executing investment banking strategy to enhance and maximize

shareholder value and customer confidence. IBG specializes in providing innovative

and unique advice to its clients to assist them in meeting challenges in an ever-

changing market. The team of qualified professionals operates under a strict risk

management framework, following best practices within their fields and continuously

striving for excellence.

Internship Report - 33 -

The Bank of Punjab

Investment Banking Unit offers full spectrum of services, which include TFCs,

Syndicated Finances, Structured Finances, Leveraged Buyouts, Project Finance,

Quasi-Equity Products, Independent Advice, Equity Placements, IPOs, Equity

Underwriting, Mergers, Corporate Restructuring, Acquisitions and other products.

IBU also works on and come up with providing Fund Management Facilities

CASH MANAGEMENT SERVICE

Cash Management is a process of collections & payments on behalf of the Customers

using the Bank Network.The objective is to faciliate organizations with multiple

collection points in gathering Cash / Funds and making them available in the

customer operating Account. Similarly it facilitates disbursement of frequent and or

Bulk payment to multiple locations.

This should be accomplished with minimal supervision by the customer, supported by

an automated system to provide timely and requisite MIS / Reconciliation under

agreed Service Levels

UTILITY SERVICE

Customers can pay their utility bills e.g. electricity, water gas, telephone, mobile, at

any of our 272 branches across Pakistan. For your convenience bills are collected on

all working days from 9:00 am to 5:00 pm (Monday to Friday) except lunch & prayer

breaks and from 9:00 am to 1:30 pm on Saturday.

You can also pay your bills by availing our drop box facility. Just drop your Cheque

along with bill at your branch and collect the receipt in the evening, avoid the hastle

of standing in queues and save your precious time

BOP LOCKER

Discover peace of mind, enjoy personalized service and operate your locker in a

friendly and pleasant environment at The Bank of Punjab.

Internship Report - 34 -

The Bank of Punjab

Locker Size Annual Fee

Small Rs.1,200

Medium Rs.1,800

Large Rs.3,000

Extra Large Rs.6,500

These are the other services provided by the BOP.

ATM Facility

On-Line Banking

Lockers Facility

Demand Drafts

Letter of Credit

Pay Order

Mail Transfer

Debit Card

Collection of Utility

AUTOMATED TELLER MACHINHE

Through the ATM’s Customers have access to the various services such as

withdrawal, balance enquiry and mini statement? Complete security is ensured

because access to the account is only possible by entering a four digit personal

identification number (PIN) known only to the account holder. Cash withdrawal limit

is up to Rs.20, 000 per day. Annual charges of ATM is Rs.250/- per card.

Internship Report - 35 -

The Bank of Punjab

ONLINE BANKING

BOP is currently offering window-based online banking to its customers,

which gives access to information on their accounts and the liability to act on the

latest information received over the net.

LOCKERS

It is one of the utility services that BOP provides to their customers for

keeping jewellery, important documents and other valuables.

DEMAND DRAFT

BOP provides safe, speedy and reliable way to transfer money at vary

reasonable rates. Any person whether an account holder of the bank or not, can

purchase a Demand Draft from a bank branch.

LETTER OF CREDIT

BOP is offering its business customers the widest range of option in the area

of money transfer. BOP’s letter of credit service is with competitive rates, security,

and ease of transaction, BOP Letter of credit is the best way to do the business

transactions.

PAY ORDER

BOP provides transfer of money using different facilities. Its pay orders are a

secure and easy way to move the money from one place to another. The charges for

this service are extremely competitive. Internship Report - 36 -

The Bank of Punjab

MAIL TRANSFER

Moves money safely and quickly from BOP Mail Transfer service. The rates

for this service is quiet impressive as compare to the market.

DEBIT CARD

BOP Apna Cash Card is an ATM plus Debit Card.

1. The front of the card will have the following matter on it:

Card Holder’s Name

International Bin Number (6 Digits - XXXXXX)

Magnetic Strip

Signature Panel

Conditions of Usage

M-Net and M-Net logo

LIMITATIONS

Any non-personal account i.e. Companies, Organizations, Trust Account,

Government account and Collection account etc.

Dormant, inoperative, blocked or restricted accounts.

Accounts with “NIL” balance.

Term Deposit Accounts.

NIDF Accounts. (Non Interest Demand Finance Accounts)

Accounts requiring thumb / photo for operation (illiterate accounts) · ATM/Debit

cards can only be issued on local currency accounts.

Internship Report - 37 -

The Bank of Punjab

FINANCIAL ANALYSIS

To analyse the financial position of BOP, different tools are use, which includes Ratio

Analysis, Common size Analysis of the last five years. Importance of Financial Analysis

IMPORTANCE OF FINANCIAL ANALYSIS

Financial analysis involves the use of various financial statements. These

statements do several things. First the balance sheet and the second is income

statement. The balance sheet summarizes the assets, liabilities, and owner’s equity of

a business at a point in time, while the income statement summarizes revenues and

expenses of a firm over a particular period of time. A conceptual framework for

financial analysis provides the analyst with an interlocking means for structuring the

analysis

Internship Report - 38 -

The Bank of Punjab

2008 2007 (Rupees in ‘000)

Assets

Cash and balances with treasury banks 10,685,057 14,210,302

Balances with other banks 2,178,455 1,927,662Lendings to financial institutions 633,333 2,450,000Investments 22,711,980 73,461,695Advances 131,731,158 133,893,585Operating fixed assets 3,471,838 3,252,759Deferred tax assets 8,388,162 -Other assets 6,109,137 5,805,097

185,909,120 235,001,100

Liabilities

Bills payable 1,219,801 937,647

Borrowings 12,278,773 17,842,915Deposits and other accounts 164,072,532 191,968,909Sub-ordinated loans - - -Liabilities against assets subject to finance lease 30,632 40,321Deferred tax liabilities - 2,205,530Other liabilities 4,564,257 3,009,984

182,165,995 216,005,306

Net Assets 3,743,125 18,995,794

Represented By

Share capital 5,287,974 4,230,379

Reserves 7,427,232 7,427,232

(Accumulated loss) / Un-appropriated profit(7,658,686)

3,452,842

5,056,520 15,110,453

(Deficit) / Surplus on revaluation of assets - net (1,313,395) 3,885,341

3,743,125 18,995,794

Contingencies and Commitments

BALANCE SHEET

Internship Report - 39 -

The Bank of Punjab

INCOME STATEMENT

2008

2007

(Rupees in ‘000)

Mark-up/return/interest earned 17,752,969 17,539,094Mark-up/return/interest expensed 16,614,000 13,939,377

Net mark-up/ interest income 1,138,969 3,599,717

Provision against non-performing loans and advances 18,863,580 1,616,421

Provision for diminution in the value of investments 366,387 24,479Bad debts written off directly - 246,869

19,229,967 1,887,769

Net mark-up/ interest income after provisions (18,090,998) 1,711,948

Non Mark-up/interest Income

Fee, commission and brokerage income 577,630 653,512

Dividend income 2,020,896 1,804,878Income from dealing in foreign currencies 324,328 377,233Gain on sale and redemption of securities 733,787 2,039,535Unrealized gain / (Loss) on revaluation of investments

- -

Other income 526,185 547,635

Total non-markup/interest income 4,182,826 5,422,793

(13,908,172) 7,134,741

Non Mark-up/interest ExpensesAdministrative expenses 2,799,933 2,250,777

Provision against other assets 10,101 -Provision against off balance sheet items - 292

Other charges 114,700 37,950

Total non-markup/interest expenses 2,924,734 2,289,019

(16,832,906) 4,845,722

Extra ordinary/unusual items - -(Loss) / Profit Before Taxation (16,832,906) 4,845,722

Taxation - Current 207,600 169,252

- Prior years 1,052,000 (19,921)

- Deferred (8,033,001) 250,772

(6,773,401) 400,103

(Loss) / Profit After Taxation (10,059,505) 4,445,619

Unappropriated profit brought forward 3,452,842 3,219,246

Transfer from surplus on revaluation of fixed assets - net 5,572 5,8663,458,414 3,225,112

(Accumulated loss) / profit available for appropriation (6,601,091) 7,670,731

Basic (loss) / earnings per share (after tax) - Rupees (19.02) 8.41

Internship Report - 40 -

The Bank of Punjab

Diluted (loss) / earnings per share (after tax) - Rupees (19.02) 8.41

FINANCIAL BUSINESS SUMMARY

    2004 2005 2006 2007 2008

Operating Results  

Markup/ return/ interest earned Rs in m 2,555 6,125 11,579 17,539 17,753

Markup/ return/ interest expenses Rs in m 719 2,669 7,509 13,939 16,614

Net markup income Rs in m 1,836 3,456 4,070 3,600 1,139

Non-markup based Income Rs in m 1,097 1,331 2,954 5,423 4,183

Non-markup based expenses Rs in m 1,150 1,291 1,882 2,289 2,925

Provision against NPLs Rs in m 47 331 374 1,888 18,864

Net profit before tax Rs in m 1,736 3,165 4,769 4,846 (16,833)

Net profit after tax Rs in m 1,368 2,353 3,804 4,446 (10,060)

   

Balance Sheet  

Total Assets Rs in m 66,320 111,154 164,855 234,974 185,909

Advances (net) Rs in m 39,439 63,624 101,320 133,894 131,731

Investments Rs in m 16,198 18,026 28,233 73,462 22,712

Shareholders Equity Rs in m 4,420 6,777 10,659 15,110 5,057

Revaluation Reserve Rs in m 3,419 6,893 5,467 3,885

Internship Report - 41 -

The Bank of Punjab

(1,313)

Deposits Rs in m 54,724 88,465 137,728 191,969 164,073

Borrowings from FIs Rs in m 2,832 6,791 6,989 17,843 12,279

RATIO ANALYSIS

Ratio analysis is used to calculate the profitability, liquidity/leverage etc. of

the firm. From ratio analysis it is possible to predict future variances.

Following ratios of BOP has been calculated:

Ratios   2004 2005 2006 2007 2008

Gross spread ratio % 72 56 35 21 6.42

Profit before tax to total income % 59.19 66.11 67.89 53.71 (316.29)

Markup/ Interest cover ratio times 5.08 2.79 1.94 1.65 1.32

Profit after tax to total income % 46.65 49.16 54.16 49.27 (189.03)

Total assets turnover times 0.06 0.07 0.09 0.1 0.12

Return on avg total assets (after

tax) % 2.49 2.65 2.76 2.22 (0.05)

Price earning ratio times 7.25 10.23 7.71 9.31 (0.60)

EPS (Non dilutive) Rs./share 9.08 10.01 13.14 10.51 (19.02)

Dividend per share Rs./share 4 5.2 3.25 3.5 -

Market value per share Rs./share 65.9 102.45 101.25 97.8 11.50

Capital adequacy Ratio % 12.83 12.78 10.09 9.69 1.92

Internship Report - 42 -

The Bank of Punjab

GROSS SPREAD RATIO

Gross spread ratio defines the total spread of interest between borrowing and

lending.Spread: Difference between funded revenue as a percentage of average

earning assets and the cost of funds as a percentage of average paying funds.

The higher the spread the higher will be the profit margin.

GSR= Rev/CGS

GSR= (Mark-up earned – Mark-up Expense)/Mark-up earned

GSR is 2nd highest all over the globe in Pakistan.

GSR of the bank is decreasing because of the decrease in margin, a SBP rise up the

interest rates on the deposits.

%

72

56

35

21

6.420

10

20

30

40

50

60

70

80

2004 2005 2006 2007 2008

%

PROFIT BEFORE TAX TO TOTAL INCOME

Operating income less operating cost (profit before tax).

This ratio tells what percent of total income is earned before paying all the taxes.

Internship Report - 43 -

The Bank of Punjab

BOP has a high value of profit before tax to total income and they are decreasing after

2006 because of increase in admin expenses and righting off the bad debts.

The main reasons for reduction in the profitability were additional provision against

NPL due to the elimination of benefit of FSV and downturn in consumer and

individual banking

%

59.19 66.11 67.89 53.71

-316.29-350

-300

-250

-200

-150

-100

-50

0

50

100

2004 2005 2006 2007 2008

%

INTEREST COVERAGE RATIO

MP/Interest cover ratio= EBIT/Mark-up

This ratio tells what percent of interest is covered from the total income of a firm or a

bank.It tells the ability of a bank to pay its mark-up to the depositors..

times

5.08

2.79

1.941.65

1.32

0

1

2

3

4

5

6

2004 2005 2006 2007 2008

times

Internship Report - 44 -

The Bank of Punjab

PROFIT AFTER TAX TO TOTAL INCOME

This ratio analysis tells profitability of a firm after paying all the taxes to total

income.

Profitability of BOP is increased because of decrease in the tax paid to the govt and of

high spread ratio.

BOP negotiated their taxes with the government and only paid 20% tax in 2006 and

only 8% in 2007 instead of 35%

%

46.65 49.16 54.16 49.27

-189.03

-250

-200

-150

-100

-50

0

50

100

2004 2005 2006 2007 2008

%

TOTAL ASSET TURNOVER

Asset turnover= Net Income/ Total assets

This ratio tells the turnover of the asset to generate income.

This ratio is increased during last few years which represent increase in the turnover

by assets.

Internship Report - 45 -

The Bank of Punjab

times

0.060.07

0.090.1

0.12

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

2004 2005 2006 2007 2008

times

RETURN ON TOTAL ASSET

This ratio gives an idea of returning net profit generated by the bank in

comparison with assets.

Return on assets= Profit after tax / Total Assets

This ratio is decreasing in the last year because of decrease in Profit as expenses

raised up.The decrease was mainly due to increased equity as a result of increase in

minimum capital requirements and additional provision due to withdrawal of benefit

of FSV for most types of advances.

%

2.492.65 2.76

2.22

-0.05

-0.5

0

0.5

1

1.5

2

2.5

3

2004 2005 2006 2007 2008

%

PRICE EARNING RATIO

Price Earning Ratio= Market price of a share/ EPS

From this ratio it is analyzed what % of EPS is the part of MPS. What percent earned

from a share equivalent to the worth of 1 RS MPS by the bank or a firm

Internship Report - 46 -

The Bank of Punjab

times

7.25

10.23

7.71

9.31

-0.6

-2

0

2

4

6

8

10

12

2004 2005 2006 2007 2008

times

EARNING PER SHARE

EPS = Net Income/ total shares

Through this ratio it can be analyzed what percent of 1RS share is earned.

9.08 10.01 13.14 10.51

-19.02

4 5.2 3.25 3.5 0

65.9

102.45 101.25 97.8

11.5

-40

-20

0

20

40

60

80

100

120

2004 2005 2006 2007 2008

EPS

DIVIDENT

VALUE

CAPITAL ADEQUACY RATIO

Capital adequacy ratio informs lending up to a certain ratio of equity.

This ratio is set by the State Bank of Pakistan.

Internship Report - 47 -

The Bank of Punjab

C.A

12.83 12.78

10.09 9.69

1.92

0

2

4

6

8

10

12

14

2004 2005 2006 2007 2008

C.A

ADVANCES & DEPOSITS

Internship Report - 48 -

The Bank of Punjab

SWOT ANALYSIS

SWOT analysis is an acronym that stands for strengths, weakness,

opportunities, and threats SWOT analysis is careful evaluation of an organization’s

internal strengths and weakness as well as its environment opportunities and threats.

“SWOT analysis is a situational which includes strengths, weaknesses, opportunities

and threats that affect organizational performance.”

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

is called SWOT analysis

In SWOT analysis the best strategies accomplish an organization’s mission by

:

Exploiting an organizations opportunities and strength.

Neutralizing it threats.

Avoiding or correcting its weakness.

SWOT analysis is one of the most important steps in formulating strategy using the

organization mission as a context; managers assess internal strengths distinctive

competencies and weakness and external opportunities and threats. The goal is to then

Internship Report - 49 -

The Bank of Punjab

develop good strategies and exploit opportunities and strengths neutralize threats and

avoid weaknesses.

STRENGTH

The Bank officers of BOP are considered as one of the most able professionals in

the banking world. However, they have added some local flavour in accordance

with their targeted segmented. In my observation that they interact with their

clients as if they are their personal friends and discuss about their problems as

their own.

As a result of the compassionate and personalized services of the officers, the

clients’ perception for BOP is very high. They have trust and feel themselves to be

secure while dealing with BOP.

BOP has opened all its branches at commercial areas so that the customers or

clients face no problems in reaching to the bank.

BOP has got a reliable and easy to use internal computer system.Every

information regarding the transactions in customers’ deposits has been

computerized. Data are properly maintained.

Good security system

Not excellent but good facilities are given to employees

WEAKNESSES

Lack of proper internal controls is one of the major weakness of BOP. It is also

pointed by the auditor in his review.

BOP has formulized a lot of products and services for its customers, even more

than other commercial banks, but any advertisement on electronic media has not

been seen.

I observed during my internship that some of the employees were burdened with

over work. So I think that the work should be distributed according to their post

and capabilities.

Biased selection of employees. Internship Report - 50 -

The Bank of Punjab

OPPORTUNITIES

Satisfy dynamic consumer needs, BOP has made significant in roads in its entire

service spectrum. A lot of products have been introduced especially in Retail

Banking (Agriculture side) and people are increasingly becoming loyal to the

bank and because of feasible transactions. Optimum pricing and branding

strategies of the bank are helping to make customer feel secure and convenient.

All the opportunities of the 21st century are to be availed in the information

technology. Information technology is the future of this dynamic world. Therefore

BOP should emphasize much on IT, especially on E-Banking. Bank can design a

universal account like other foreign banks, to enhance online facilities.

BOP has introduced a number of financial schemes including special ‘Deposit

Accounts’. These accounts have their unique features. During the last three years,

BOP deposits have been increasing @ 40%, which is a very healthy sign. Therefore,

with the commencement of new schemes there can even be a greater increase in its

deposits

THREATS

Despite the difficult circumstances that confronted the banking sector in particular

and the country in general, BOP has been still highly profitable. But, the facts

can’t be denied and there might be an adverse impact of such situation.

BOP is facing a strong competition by its competitors, Business of all these Banks

are growing at very high pace.

PEST ANALYSIS

PEST analysis of any industry investigates the important factors that affect the

industry and influence the companies operating in the sector. PEST stands for

Political, Economic, Social and Technological analysis. The PEST Analysis is a tool

Internship Report - 51 -

The Bank of Punjab

to analyze the forces that drive the industry and how those factors can influence the

industry.

POLITICAL

ECONOMICAL

SOCIO CULTURAL

TECHNOLOGICAL

Internship Report - 52 -

ECONOMICAL

GDP MONSOON INFLATION SAVINGS &

ACCOUNTS AGRICULTURE

CREDIT INTEREST RATES RAISING LIVING

STANDRED DISPOSABLE

INCOME

SOCIOCULTURAL

CHANGES IN LIFE STYLE

LITERACY RATE

DEMOGRAPHIC OF LARGE POPULATION

SHIFT TOWARDS THE NUCLEAR FAMILY

POLITICAL

GOVERNMENT POLICY & BUDGECT

BUDJECT MEASURES

MONATORY POLICY

FDI LIMIT

Organization Organization

The Bank of Punjab

POLITICAL FACTORS

Government policies affect the banking sector. Sometimes looking into the

political advantage of a particular party, the Government declares some measures to

their benefits like waiver of short-term agricultural loans, to attract the farmer’s votes.

By doing so the profits of the bank get affected. Various banks in the cooperative

sector are open and run by the politicians. They exploit these banks for their benefits.

Sometimes the government appoints various chairmen of the banks. Various policies

are framed by the SBP looking at the present situation of the country for better control

over the banks

FOCUS ON REGULATIONS OF GOVERNMENT

Government affects the performance of banking sector most by legislature and

framing policy .government through its budget affects the banking activities

securitization act has given more power to banking sector against defaulting

borrowers.

Internship Report - 53 -

TECHNICAL

TECHNOLOGY IN BANKS

CORE BANKING SOLUTIONS

ATM INTERNATE I.T SERVES AND

MOBILE BANKING

The Bank of Punjab

MONETARY POLICY

Bank Rate: The Bank Rate has been retained unchanged

Repo Rate It has been reduced under the Liquidity Adjustment Facility (LAF)

Reverse Repo Rate : It has been reduced under LAF by 25 basis points from 3.5% to

3.25% with immediate effect. RBI has retained the option to conduct overnight or

longer term repo/reverse repo under the LAF depending on market conditions and

other relevant factors.

FDI LIMIT

The move to increase Foreign Direct Investment FDI limits to 49 percent from

20 percent during the first quarter of this fiscal came as a welcome announcement to

foreign players wanting to get a foot hold in the Indian Markets by investing in

willing Indian partners who are starved of net

worth to meet CAR norms. Ceiling for FII investment in companies was also

increased from 24.0 percent to 49.0 percent and have been included within the ambit

of FDI investment

ECONOMIC FACTORS

Banking is as old as authentic history and the modern commercial banking are

traceable to ancient times., banking has existed in one form or the other from time to

time. Every year SBP declares its 6 monthly policy and accordingly the various

measures and rates are implemented which has an impact on the banking sector. Also

the Union budget affects the banking sector to boost the economy by giving certain

concessions or facilities. If in the Budget savings are encouraged, then more deposits

will be attracted towards the banks and in turn they can lend more money to the

agricultural sector and industrial sector, therefore, booming the economy. If the FDI

limits are relaxed, then more FDI are brought in India through banking channels

GROWING ECONOMY / GDP

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It is great news that today the service sector is contributing more than half of

the Indian GDP. It takes PAKISTAN one step closer to the developed economies of

the world. Earlier it was agriculture which mainly contributed to the GDP. The

Pakistani government is still looking up to improve the GDP of the country and so

several steps have been taken to boost the economy. Policies of FDI

LOW INTEREST RATES

SBP controls the Interest rate, which is based on several monetary policies.

Recently SBP has reduced the interest rate which stimulates the growth rate of

banking industry. Call money rates (borrowing & lending) were in the range of

1.50/3.47 per cent as compared with 5.25/11.00 per cent on the corresponding date of

last year

INFLATION RATES

Inflation represents a rise in general level of prices of goods and services over

a period of time. It leads to erosion in the purchasing power of money. Resultantly,

each unit of currency buys fewer goods and services

Different fiscal and monetary policies have curbed the Inflation rate. To fight against

the slowdown of the Economy, Government of Pakistan & SBP took many fiscal as

well as monetary actions. Clubbed with fiscal & monetary actions, decreasing

commodity prices, decreasing crude prices and lowering interest rate, we expect that

Indian Economy could again register a robust growth rate in the year 2009-10

SAVINGS AND ACCOUNTS

As stated earlier Pakistan continues to remain one of the high savings

economies among the emerging market economies. Gross Domestic Savings (GDS)

of the Pakistan economy constitutes savings of public, private corporate and

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household sectors. In the recent period the high growth performance of the Pakistan

economy is driven by rise in savings

AGRICULTURE CREDIT

Agriculture has been the mainstay of our economy with 70% of our population

deriving their sustenance from it.  In the recent past, the sector has recorded a growth

of about 4% per annum with substantial increase in plan allocations and capital

formation in the sector. The target for agriculture credit flow for the year 2009-10 is

being set at Rs.3,25,000 crore. To achieve this, I propose to continue the interest

subvention scheme for short term crop loans to farmers for loans upto Rs.3 lakh per

farmer at the interest rate of 7% per annum. For this year, the government shall pay an

additional subvention of 1% as an incentive to those farmers who repay their short

term crop loans on schedule

SOCIO CULTUREAL FACTORS

Socio culture factors also affect the business. They show in which people

behave in country. Socio-cultural factors like taboos, customs, traditions, tastes,

preferences, buying and consumption habit of people, their language, beliefs and

values affect the business. Banking industry is also operates under this social

environment and it is also affect by this factor.

These factor are changing continuously people’s life style, their behavior,

consumption pattern etc. is changing and also creating opportunities and threat for

banking industry. There are some socio-culture factors that affect banking in India

have been analyzed below.

SHIFT TOWARDS NUCLEAR FAMILY

Attitude of people of Pakistan is changing. Now, younger generation wants to

remain separate from their parents after they get married. Joint families are breaking

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up. There are many reasons behind that. But banking sector is positively affected by

this trend. A family need home consumer durables like freeze, washing machine,

television, bike, car, etc. so, they demand for these products and borrow from banks.

Recently there is boost in housing finance and vehicle loans. As they do not have

money they go for installments. So, banks satisfy nuclear families wants.

CHANGE IN LIFE STYLE

Life style of Pakistan is changing rapidly. They are demanding high class

products. They have become more advanced. People want everything car, mobile,

etc.. what their fore father had dreamed for. Now teenagers also have mobile and

vehicle. Even middle class people also want to have well furnished home, television,

mobile, vehicle and this has opened opportunities for banking secter to tap this

change. Every thing is available so it has become easy to purchase anything if you do

not have lump sum.

POPULATION

Increase in population is one of the important factor, which affect the private

sector banks. Banks would open their branches after looking into the population

demographics of the area. Percentage of deposit in any branches of banks depends

upon the population demographic of that area. About 70% of population is below 35

years of age. They are in the prime earning stage and this increase the earning of the

banks. Deposits showed a subdued growth during 2004-05.Income distributions also

affects the operations and overall business of private sector banks.

LITERACY RATE

Literacy rate in Pakistan is very low compared to developed countries.

Illiterate people hesitate to transact with banks. So, this impacts negatively on banks.

But there is positive side of this as well i.e. illiterate people trust more on banks to

deposit their money; they do not have market information. Opportunities in stocks or

mutual funds. So, they look bank as their sole and safe alternative

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TECHNOLOGICAL FACTORS

TECHNOLOGY IN BANKS

Technology plays a very important role in bank’s internal control mechanisms

as well as services offered by them. It has in fact given new dimensions to the banks

as well as services that they cater to and the banks are enthusiastically adopting new

technological innovations for devising new products and services.

ATM

The latest developments in terms of technology in computer and

telecommunication have encouraged the bankers to change the concept of branch

banking to anywhere banking. The use of ATM and Internet banking has allowed

‘anytime, anywhere banking’ facilities. Automatic voice recorders now answer simple

queries, currency accounting machines makes the job easier and self-service counters

are now encouraged.

Credit card facility has encouraged an era of cashless society. Today MasterCard and

Visa card are the two most popular cards used world over. The banks have now

started issuing smartcards or debit cards to be used for making payments. These are

also called as electronic purse. Some of the banks have also started home banking

through telecommunication facilities and computer technology by using terminals

installed at customers home and they can make the balance inquiry, get the statement

of accounts, give instructions for fund transfers, etc.

IT SERVICES & MOBILE BANKING

Today banks are also using SMS and Internet as major tool of promotions and

giving great utility to its customers. For example SMS functions through simple text

messages sent from your mobile. The messages are then recognized by the bank to

provide you with the required information. All these technological changes have

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forced the bankers to adopt customer-based approach instead of product-based

approach. Technology advancement has changed the face of traditional banking

systems. Technology advancement has offer 24X7 banking even giving faster and

secured service.

CORE BANKING SOLUTIONS

It is the buzzword today and every bank is trying to adopt it is the centralize

banking platform through which a bank can control its entire operation the adoption

of core banking solution will help bank to roll out new product and services.

SUGGESTIONS FOR REMOVING WEAKNESSES

INTERNAL CONTROL

To me the major and the most important flaw in the BOP is lack of internal

controls and inter communication between different branches of the bank. As far as

financial aspect is concerned there is no proper system is configured that’s why there

is always a risk of big frauds with in the bank. I during my internship also pointed out

that point but no one bothered. To me the bank should install some proper resource

planning and controlling systems like other banks do i.e., oracle financials etc.

PROFESSIONAL TRAINING

BOP staff lacks professionalism. They lack the necessary training to do the job

efficiently and properly. Although staff colleges are in all major cities of the Punjab

but they are not performing well. For this purpose these staff colleges should be

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reorganized and their syllabus should be made in such a way which can help the

employee understand the ever-changing global economic scenario.

Banking council of Pakistan should also initiate some programs to equip the staff with

much needed professional training.

DELEGATION OF AUTHORITY

Employees of the bank should be given a task and authority and they should

be asked for their responsibility. The sense responsibility in employees mind is one of

the most important factors in the success of any organization.

PERFORMANCE APPRAISAL

During Internship I felt that there is no or very less appraisal of any ones cool

performance. The manager should strictly monitor the performance of every staff

member. All of them should be awarded according to their performance and result in

the shape of bonuses to motivated and incite them to work more efficiently.

TRANSFERS

Transfer is not properly carried out. Some of the employees are continually

serving at the same post. They are simply rotated at the same branch. Therefore it is

recommended that evenly rotation of every employee should take place after every

three years in different braches of the bank.

NEED OF QUALIFIED STAFF

Required, qualified staff should be provided to branch in order to improve the

functioning of the branch. Especially a telephone operator should be appointed

CREDIT CARD FACILITY

BOP should start its operation in credit card. These cards are very helpful for

the ordinary customer in general and the business people in particular. To make it

mores secure and to eliminate the misuse of it, the management is required to keep

proper security against the card.

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DECREASING ADMINISTRATIVE EXPENSE

Bank should decrease their administrative expenses. This was Rs 2.25 billion

in the year 2007. That can be done by lying off the surplus pool of employee with

golden hand shakes scheme. The branches that are not much used could also be

closed. That will give positive results in the future

SHOULD BE AGGRESSIVE IN CREDIT POLICY

As mentioned earlier, BOP is very conservative in advances and loans policy.

It reduces the investment opportunities. Also loans should be given to the small

businessmen and the other businesses on large scale like in agriculture sector at the

low mark-up rate. It should adopt flexible credit policy while giving credit to the

agriculture sector.

TECHNOLOGICAL IMPROVEMENT

I would like to suggest that at least all the main branches of BOP should be

fully computerized in order to expedite the dealing process among bankers and their

customers. Every department should be provided a computer with adequate training

(especially Advances, Deposits and Foreign Exchange departments). Daily records

should be entered directly into these computers, (instead entering the overall daily

transactions after the banking hours). It will not only reduce transaction time, will

increase accuracy but will also be efficient as well.

Not only it will be economical but will also reduce the extra burden of work of the

bank. It will also help in reducing the use of excessive paper work.

STAFF RELATIOSHIP

Good relationship among staff member leads to the peak performances in any

organization. I observed that the staff relationship was normal other wise but some

time I noticed that there exists little conformity among the staff members. Another

syndrome from which the staff suffered was that all of them considered themselves

more important than others.

FAVOURITISM & NIPOTISM

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In the branch during my internship I saw that when some of the employees are

transfer to other places, due to their relation with influential people and with top

management they can cancel their transfer in few weeks, when they are unsatisfied at

that place.

So I suggest that in the organization there should be no favouritism, nepotism and

politics and their transfer and promotion should be made on merit and according to

the rules and regulations of the bank and provided favourable environment to the

employee to show their performances.

MARKETING POLICY

The branch should adopt various marketing strategy and promotion strategy to

promote the bank and its product.

The most important in my opinion is personal marketing; it is the most effective of all

when you think in term of branch level. But on the whole organization level, they

should arrange the seminar with in the bank and outside the bank. They should do

more advertising through newspaper and media and through channel of personal

contacts.

AVOIDING BAD DEBTS

Great care should be taking while extending the loan. Loans should be

awarded against reasonable securities, where market value should be equal to the loan

granted. Policies should be crafted in a way to ensure that no loan is extended on

political pressure. SBP regulation for loan approval should be strictly followed.

According to which the current ration of borrower’s business must be 1:1 and the debt

to equity ratio should be 60:40, means the liquidity position of business should be

healthy.

RECOMMENDATIONS FOR STUDENTS

In this section some recommendations for those students who are planning for

an internship at BOP particularly and in any other bank generally. The most important

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of all is the difference between what we learn from the books i.e. the theory and what

actually is done i.e. in practice. This difference is described in detail below:

WORKING IN DIFFERENT DEPARTMENTS

During my internship I observed that other internees in the bank use to stick

with one department only. An internee with specialization in Finance was of the view

that he should be in Finance department same was the case with other specialized

Internees. But I would suggest that one must work in every department for some time

to gain a hand on experience of all the departments. As in real working environment

employee have to coordinate with other departments, so he/she must know what the

other departments operations are and how they work.

RELATIONSHIP BETWEEN THEORY & PRACTISE

This part of report is the essence of the internship, as this will help other

students to better understand the working environment of the bank by finding the

relationship between what is written in the books and what is actually going on in

fields. The theory written in the books in cases is not implemented as it is. In some

cases theory is implemented with a little modification but in other cases theory has

nothing to do with practice. In accounting, banks don’t prepare worksheet, but part of

worksheet is prepared like trial balance, but little differences, theory and practice has

substantial relationship. The securities for the loans are handled in the same way as

theory says like mortgage, pledge, hypothecation, advances against insurance policies

or liquidation procedure is the same. The difference is there in the case of loans.

Theory talks about four or five terms of loans that is cash finance, overdraft, loans

etc., but in practice there are some more terms used like running finance, demand

finance etc. All other concepts of remittances, bills, foreign exchange deposits, letters

of credit are in accordance with theory almost. So for a internee it is more important

to learn new things which he/she has never heard about in his/her course book.

To me, Theory gives you the direction to understand the processes and the

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covering each and every aspect of possible business scenarios. On the contrary

practical life is specific, enclosed in a jar. In practical professionalism and firm’s

environment is each and every thing. Professional life only builds on the knowledge

based on books even though it may only use 1% of the theoretical knowledge.

CONCLUSIONS

By analyzing the financial statements of the bank, I came across to know that

it is one of the most growing bank in the subcontinent. Now they should carry on with

the present management which too k it from one of the ordinary bank to this level. No

doubt professionalism and internal controls of the bank are one of the major issues

which may results some major losses to the bank. Bias in hirings and between

colleagues should be removed.

REFERANCES

MR. TARIQ QURESHI MANAGER

MR. ATTA HUSSAIN OPERATION MANAGER

MR. ASGHAR ALI AGRICULTURE OFFICER

MR. NAEEM CASHIER

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