Internship_Report on NBP by Jehanzeb Memon IMSA BBA 18

8/8/2019 Internship_Report on NBP by Jehanzeb Memon IMSA BBA 18

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CHAPTER # 1

INTRODUCTION OF STUDY

1.1 Introduction

As part of the academic requirement for completing MBA (Marketing) Master of

Business Administration. The students are required to under go for two (2) months of

internship with an organization. The internship is to serve the purpose of acquainting the

students with the practice of knowledge of the discipline of banking administration.

This report is about National Bank of Pakistan. NBP was established in 1949 and since

then, it has expended its network, becoming the largest commercial Bank of the country.

It offers different products of services to its customers.

Purpose of the Study

The main purpose of the study in hand is together relevant information to compile

internship report on National Bank of Pakistan.

To observe, analyze and interpret the relevant data competently and in a useful manner.

To work practically in an organization.

To develop interpersonal communication.

Scope of Study

As an internee in National Bank of Pakistan the main focus of my study research was on

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

remittances, deposits, advances and foreign exchange.

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

Internship Report on NBP, Fatima Jinnah Road Branch Hyderabad

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1.4 Objectivesof the Study

Discuss thorough study of National Bank of Pakistan.

To understand the various operations and to equip with practical knowledge of the

National bank of Pakistan.

1.5 Limitation of The Study

Some thing is better than nothing. No matter how efficiently a study is conducted, it

cannot be perfect in all respects. This study was conducted in accordance with the

objectives of the study. The study may not include broad explanations of facts and figures

due to the nature of the study. Secondly, the limitation, which affects the study, is the

restriction on mentioning every fact of the bank due to the problem of secrecy of the

bank. In addition, the availability of required data was a problem as all the documents

and files are kept strictly under lock and key due to their strictly confidential nature.

Thirdly, the problem of short time period also makes the analysis restricted as one cannot

properly understand and thus analyze all the operations of a bank just a very short time of

eight weeks.

1.6 Benefit of The Study

The study done will benefit the finance students in particular and banking students in

general because the financial analysis section of this report comprehensively

encompasses all respects of financial analysis. Furthermore, NBP Balakot Branch,

Balakot may also benefit from the recommendations made at the end of the report.

1.7 Research Methodology

The report is based on my two months internship program in National Bank of Pakistan.

The methodology reported for collection of data is primary as well as secondary data.

The biggest source of information is my personal observation while working with staff

and having discussion with them. Formally arranged interviews and discussions also

helped me in this regards.


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Primary data:

Primary data include, Personal observation and Interviews of The Staff Members

Secondary data:

Secondary data consist of Manuals, Journals, magazines, Annual Reports and Internet

1.8 Scheme of Study

SECTION 1

Chapter 1:

An introductory chapter that discuss the introduction of study of report, its Background,

Purpose, Scope, Methodology, limitations and Scheme of the report.

SECTION 11

Chapter2:

This chapter concludes brief history of banking in general, evolution of banking,

Nationalization of banking in Pakistan, History of NBP, mission statement, and its

objectives, functions of National Bank of Pakistan.

Chapter3:In this chapter the services of NBP were discussed and the departmentation of

NBP is explained as well as NBP Balakot Branch

SECTION III

Chapoter4:

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

NBP


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Chapter5:

It consists of comprehensive performance of NBP through past several years. Ratio

analysis and those parties that are interested in financial performance of Bank.

SECTION IV

Chapter 6:

It covers the critical analysis of the bank. This chapter has been divided into four parts

i.e. Problems at the Branch, Functional analysis, Administrative analysis, and Personal

Management Analysis.

Chapter 7:

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

Chapter 8:

Two implementation plans are given in this chapter. Mare Gare Car Financing Scheme

and Need for Telephone Operator.


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CHAPTER # 2

EVOLUTION OF BANKS IN PAKISTAN

2.1 INTRODUCTION

There are different opinions that how the word Bank originated. Some of the authors

opinion that this word is derived from the word Bancus or Banque, which means a

bench. The explanation of this origin is attributed to the fact that the Jews in Lombard

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

business failed, the people destroyed the bench. Incidentally the word Bankrupts said

to have evolved from this practice.

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

word back, which means joint stock fund. Later on when the German occupied major

part of the Italy the word Back was italicized into Back.

In fact human left the need of bank when it begins to realize the importance of money as

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

as early as 2000 B.C. At that time temples were used as banks because of their prevalent

respect. During the rule of king Hamurabi (1788 1686 BC) the founder of BabyloniansEmpire, loans were started being granted for interest. The borrower has to provide

guarantee or he had to pledge his goods or valuables. King Hamurabi drew up a code

wherein he laid down standards rules for procedures for banking operations by temples

and great landowners. Also in Greece, the temples were used as banks, where the people

deposited their money and other valuables for safe custody and security. In Europe with

the revival of civilization (Renaissance) in the middle of twelve century, trade and

commerce started expanding and this development compelled the business community to

borrow the money from the Hebrew moneylenders on high rates of interest and usury.

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

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

the most important money markets of the time and banking though different from its


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present form, flourished. What we know as modern banking originated in the 14th

century in Barcelona.

2.2 Definitions of Bank

"A financial institution, which deals with money and credit. It accepts

Deposits from individuals, firms and companies at a lower rate of

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

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

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

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

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

party between the borrower and the lender. He borrows of one and lends to another.

Sir John Paged defines banker in these terms:

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

Take deposits accounts.

Take current accounts,

Issue and pay Cheques and

Collect Cheques crossed and uncrossed for his customers The American

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

By banking, we mean the business of dealing in credits and by a Bank we

include every person, firm or company having a place of business where credits are

opened by deposits of collection of money or currency. Subjects to be paid or remitted on

Cheques or order, money is advanced or loaned on stocks, bonds, bullion, bill of

exchange, promissory notes are received for discount or sale.


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2.3 Evolution of Banking in Pakistan

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

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

range of banking and financial institutions to cope with various needs of the economy.

The area now constituting Pakistan was, relatively speaking, fairly well provided with

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

scheduled banks out of which as many as 487 were situated in territories now constituting

Pakistan.

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

partition it was decided that in the interest of smooth transition it should continue tofunction in newly emerging state of Pakistan, until 30th Sep.1948.

In 1947 due to uncertainty and unsuitability the banking sector suffer heavy losses.

This resulted in a negative effect on baking service in Pakistan. The banks, which had

their registered offices in Pakistan, transferred them to India. In an effort to bring about

the collapse of the new state by pushing a deliberate policy of withdrawals the Indian

bank offices closed quickly. Those banks, which stayed, operated only in name pending

the winding up of their business. The number of scheduled banks thus declined form 487

branches before independence to only 195 branches by 30th June1948.

2.4 Banking Growth during (1948-1970)

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

central banking legislation for Pakistan. Many specialists were of the opinion that in view

of the acute shortage of trained staff, any idea of establishing a central bank was I

impractical and the best that could be attempted was the setting up of a currency board

until such times as sufficient staff could be organize to operate a central bank.

The questions as to whether the institution should be only a currency board or a full-

fledged central bank had exercised the mind of the Pakistan government since

independence. Through, it was realized that the shortage of trained personal to run the


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central bank would present serious difficulty in view of the tangible advantages that a

central bank enjoyed over currency board, the government ultimately decided to take the

bold step of setting up a full fledged central banking authority. Among other factors,

which led to this decision, there was the fact the banking facilities in the country had

been totally disrupted and there was an urgent need for their rehabilitation, which a

central bank alone could meet. As there was hardly any time to pass as Act, an order was

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

government of Pakistan on 12th may 1948. The state bank declared open on July 1, 1948

by the father of the nation.

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

bank of India notes, which had continued to circulate in Pakistan during the transitional

period, by Pakistan currency.

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

100.

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

of a national banking system. To this end, while extending every help and encouragement

to Habib Bank to expand its organization, the state bank recommended the setting up of a

new banking institution to serve both as an agent to the state bank recommended the

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

as the spearhead of its credit polices.

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

November 1949. It started with six offices in the former East Pakistan. In view of the

special role assigned to the new institution, contrary to traditional practices the Governor

of the state bank was appointed to head its Board of Director in 1950. Under the fostering

care of the state bank and the support of the government, the new institution developed

rapidly. By using its special powers, the state bank made liberal advances to the new

bank to help it expand credit facilities in the country. By 1952, the National bank of India

shortly, afterwards, in November 1952, the governor of the state bank ceased to function

as the president of National bank of Pakistan.


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With a view to broadening the institutional framework of the financial system, the state

bank also sponsored the establishment of specialized credit institutions in the filed of

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

specifically empowering the state bank to control the operations of banking companies in

Pakistan.

Moreover realizing that the most serious limitation on the expansion of banking services

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

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

As the Commercial Banking facilities continued to expand, a new Pakistani bank, the

National Commercial Bank was established and registered as a scheduled bank. In the

filed of industrial finance a new institution known as the industrial credit and investment

cooperation was set up.

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

of Pakistan. When it was established there were only 195 bank offices in existence. At

the end of June 1958 their number had increased to 307, of which Pakistani banks

accounted for 232 against 25 in mid 1948. Moreover at the end of June 1958, Pakistani

banks held 60% of the total banks deposits, and were responsible for 65 of total bank

credit.

When the Ayub Khan Government took over in 1958, the banking and monetary scene

was significantly affected by developments such as the liberalization of imports, transfer

of business in food grains to the private sector, and the firming up of commodity markets.

The demand of funds picked up and there was a substantial expansion of bank credit to

the private sector. The pace of expansion in the institutional frameworks of the countrys

banking system quickened and a new Pakistani, bank, namely the United Bank Limited

was established.

Owning the five years 1960-65, the credit structure in Pakistan made rapid progress. The

bank extended its network by opening six new offices located at Chitagong, Peshawar,

Quetta, Khulna, Layallpur and Rawalpindi. The number of scheduled bank offices rose


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from 430 at the end of June 1960 to 1591 in June 1965. Several new banks were added to

the list of scheduled banks.

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

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

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

to the private sector rose from Rs. 1,458 millions to Rs. 5759 million. Thus the total

expansion in bank credit to the private sector during this period amounted to Rs. 4300

million, which gave a annual expansion of Rs. 860 million compared to the annual

average increase of Rs. 144 million over the preceding five years. Banks deposits

increased from Rs. 2,493 million to Rs. 6883 million during the five years period ended

June 1965 compared to Rs. 231 million in the proceeding five years.

Time deposits during this period increased from Rs. 946 million to Rs. 3228 million,

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

time deposits was particularly rapid. The ratio of time deposits to total deposits in June

1965 stood at 49.6 percentage as against 32.01 percentage five years earlier. Another

salient feature of banking development during this period was that since the rate of

increase in bank deposits lagged behind the rate of expansion in bank credit, the banked

has to depend increasingly on central bank finance. They borrowing from the state bank

rose from Rs. 11 million in June 1960 to Rs. 1688 million in June 1965. Owing keen

demand for bank credit, banks investments could not increase as rapidly as their

advances. Their investments totaled to Rs. 1,874 million at the end of June 1965

compared to Rs. 1,231 million in June 1960. Investments, which were almost equal to

their advances in June 1960, were only about one third of the advances in June 1965.The

third plane period witnessed a further expansion of banking facilities in the country the

total number of scheduled banked offices increased from 1,591 at the end of June 1965 to

3133 at the close of June 1970. During the same bank credit to the private sector rose

from Rs. 5,789 million to Rs. 9492 million. There was also a substantial growth in the

bank deposits, which increased from Rs. 6883 million June 1965 to Rs. 13147 million at

the end of June 1970. A remarkable change occurred during this period related to the


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composition of deposits. Time deposit becomes greater than demand deposits forming

about 54 percent age of the total deposits. As oppose to what happened in the previous

period, banks were able to finance a mush higher level of credit expansion without

having to increase their borrowings from the central bank.

2.5 Banking Reforms 1972

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

were introduced to make the banks more responsive to the requirements of economics

growth with social justice. The reforms aimed at bringing about a more purposeful and

equitable distribution of bank credit, improving the soundness and efficiency of the

banks, and securing greater social accountability of the banking system as a whole.

The role of the banking system had been truly spectacular in mobilizing savings of the

community and meeting the credit needs of the economy. But at the same time, the banks

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

effective role in ensuring a wider and more equitable dispersal of the benefits of

economic growth. In particular

the inter locking of ownership with commercial and industrial interests had led to the

misuse of bank resources. There was a heavy concentration of credit in big accounts and

in urban area. Credit facilities for agriculture, small business, newly emerging exports

and housing had remained obviously inadequate while the banks indulged in capital

financing in few selected business sectors and issued guarantees on behalf of favored

clients, term clients, term financing facilities for industry were wholly absent.

Under the banking reforms introduced in May 1972 the state bank of Pakistan was

accorded wider powers. It was authorized to remove directors or managerial personnel, if

necessary and supersede the board of directors of a banking company and appoint

administrators during the period of such super session. It was also empowered to

nominate directors on the board of every bank. As regard bank directors, it was provided

that anyone defaulting in meeting his obligations to bank would forfeit his directorship.

Moreover, it was laid down that no person could serve as director of a bank for more than


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six years continuously. Each bank was required to have a paid up capital of not less than

5 percent age of its deposits to be progressively build up to 10 percent age over a period

of time. The banks were also required to transfer 10 percentage of their profit their

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

diversity the ownership of the banks, the banks were required to raise new capital from

the market. Unsecured loans to directors, their families or firms and companies, were

totally prohibited.

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

objectives.A national credit consultative was setup under the supervision of the state bank

with representation form the government and the private sector. It was assigned the task

of determining of economys annual credit needs within the safe limits of monetary and

credit expansion with reference to the annual development plan. Such a credit plan was to

cover the public and private sectors. Alongside the National credit council and

Agricultural Advisory Committee was formed to allocate agriculture credit for various

purposes, to coordinate the operation or the agriculture credit agencies and to oversee the

flow of credit to the designated targets. A standing committee on exports in general and

the new emerging exports in particular, was also established. With a view to encourage

the banks to extend credit to small borrowers, a credit guarantee scheme was introduced

under which the state bank under took to share any bonfire losses incurred by the

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

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

Corporation was designed to provide finance to people of small means while the National

Development Finance Corporation was set up of finance public sector owned and

managed industries and enterprises.

2.6 Nationalization of Banks (1974) In Pakistan

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

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

main objectives.


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

bankers for the rapid economic development of the country and the more urgent social

welfare objectives.

To distribute equitably credit too different classes sectors and regions.

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

eliminating healthy competition among banks.

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

1974.

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

in Pakistan and carrying business in or outside the country were brought under

government ownership with effect from Jan 1, 1974. The ownership, management and

control of all Pakistani banks stood transferred to and vested in the Federal government.

The shareholders were provided compensation in the form of federal government bonds

redeemable at par anytime within the period of fifteen years. Under the Nationalization

act, the Chairman, Directors and Executives of various banks, other than those appointed

by federal government were removed from their offices and the central boards of the

banks and all local bodies were dissolved. Pakistan banking council was established to

coordinate the activities of the Nationalized Commercial banks. At the time of

Nationalization on December31, 1973 there were following 14 Pakistani commercial

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

National banks of Pakistan

Habib bank limited

Habib bank (overseas) limited

United bank limited

Muslim commercial bank limited


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Commerce bank limited

Standard bank limited

Australia bank limited

Bank of Bahawalpur limited

Premium bank limited

Pak Bank limited

Sarhad bank limited

Lahore commercial limited

Punjab provincial co-operative bank limited

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

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

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

National bank limited

Habib bank limited

United bank limite

Muslim commercial bank limited

Allied bank of Pakistan limited

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

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

Commercial Bank limited and Sarhad Bank Limited and Pak bank limited and renamed

as Allied Bank of Pakistan limited.


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

introduced. Instead of interest, a system based on mark-up in price, exchange rate

differential, and profit and loss sharing accounts were introduced.

Different financial schemes introduced in the Islamization process are:

Musharika Financing.

Hire Purchase Financing.

Modaraba Financing.

Specific Purpose Modaraba.

2.6.2 Dis-investments and Deregulation of Banking 1991

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

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

privatization banking sector restarted in 1991 by the Muslim League Government.

Muslim Commercial Bank was Dis-invested in to two phases while ABL was sold to its

employees. Since then allot of investment is being made in the banking sector and several

new banks were established and still the process is going on. Now only NBP is

government bank other than SBP. The performance of this bank will be analyzed and

judged in the following chapters.

2.63 Interest Free Banking

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

established on sound footing and new trends and techniques are being implemented to

make this system result oriented. New products and their systematic consumption aremaking Pakistani banking comparable to their several modern counterparts anywhere in

the developed world.


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2.6.4 HISTORY OF NBP :

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

British Govt. devalued its currency in September 1949, India devalued its rupees but

Pakistan did not. It led to a crisis in trading between the two countries and India refused

to lift the Pakistan Jute. To solve this problem i.e. to export jute NBP was established

through an Ordinance of GOP. National Bank of Pakistan maintains its position as

Pakistan's premier bank determined to set higher standards of achievements. It is the

major business partner for the Government of Pakistan with special emphasis on fostering

Pakistan's economic growth through aggressive and balanced lending policies,

technologically oriented products and services offered through its large network of

branches locally, internationally and representative offices.

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

the former Bahawalpur State.

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

at 57 of its offices where the turnover of the business under the head amounted to

Rs.2460 million.

i) Deposits held by NBP constituted about 3.1% of total deposits of all

Pakistani Banks in 1949, which rose to 38% in 1952.

ii) Growth in Deposits was accompanied by increase in Bank portfolio in advances.

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

agriculture and commerce.

iii) NBP advances reached Rs.554.4 million by December 1959, which was one third

of the total schedule bank credit.


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MISSION STATEMEN

To make the Bank complete and competitive with all international

Standard in performing, quality of, operations, staff, financial strength. And

products and services To develop a culture of excellence in every spare of activity of

the bank.

2.6.4.2 GOALS AND OBJICTIVES

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

suggests direction to the panning efforts of a organization.

2.6.4.3 GOALS AND OBJICTIVES NBP

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

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

2.6.4.4 BOARD OF DIRECTORS

NBP, Board of Directors list consist the following members and their designation.

Table 1

NAME DISIGNATION

Ali Raza Chairman & President

Dr Waqar Masood Director

Ifthikhar Ali Malik Director

Syed Shafqat Ali Shah Jamoti Director

M Zubair Motiwala Director

Sikandar Hayat Jamali Director

M. Khalid Malik Director


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S.M. Rafique SEVP & Sectorary to BD

(Source Annual report 2004)

2.6.4


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BOARD OF DIRECTORS

Syed Ali Raza

(President)

Dr. Waqar Masood khan

(Director)

M.Arshad Chaudry

(Director)

Iftikhar Ali Malik

(Director)

Syed Shafaqat Ali Shah

(Director)

Skindar Hayat Jamali

(Director)

M.Zubair Motiwala

(Director)

Mohd Khalid Malik

(Secretary)

Source:Annual Report of NBP (2003)


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2.6.5 MANAGEMENT

Management is a distinct process consisting of activities of planning, organizing,

actuating and controlling performed to determine and accomplish stated objectives with

the use of human being and other resources.The management has two types.

1. Centralized.

2. Decentralized.

Centralized Management tends to concentrate decision making at the top of the

Organization.

Decentralized disperses decision-making and authority throughout and further down the

organizational hierarchy.

NBP have a centralized type of management because the top management takes all the

decisions.

2.6.5.1 SENIOR MANAGEMENT OF NBP .

Senior Management of NBP consists of following member and their respective

designation.

Table 2

Masood Karim Sheikh

SEVP & Group Chief, Corporate &

Investment Banking Group and Chief

Financial Officer

S. M. Rafique SEVP & Secretary Board of Directors

Derick CyprianSEVP & Group Chief, Special Assets &

Remedial Management Group

Imam Bakhsh Baloch SEVP & Group Chief, Compliance


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Group

Shahid Anwar KhanEVP & Group Chief, Commercial &

Retail Banking Group

Nadeem A. DogarEVP & Group Chief, Information

Technology Group

Muhammad Sardar KhawajaEVP & Group Chief, Audit &

Inspection Group

Dr. Asif A. Brohi EVP & Group Chief, Operations Group

Javed MehmoodEVP & Group Chief, Risk Management

Group

Muhammad Nusrat VohraEVP & Group Chief, Treasury

Management Group

Amim Akhtar EVP & PSO to the President

Dr. Mirza Abrar BaigGroup Chief, Human Resources

Management & Administration Group

Uzma Bashir Group Chief, Organization D&T Group

(Source www.nbp.com.pk)

2.6.6 Net Work of Branches:

NBP have wide range of branches inside the country and outside the country.

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

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

.2.6.7 Objectives of NBP

National bank of Pakistan is also a commercial organization and its main objective is

profit maximization. This is achieved in two ways:


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1. By increasing deposits.

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

community.

These are explained as:

2.6.7.1 Increase in deposits:

Competition in banking is intense and every bank whether it is Pakistani, foreign, private

or nationalized tries to increase its deposits by providing better facilities to its customers.

By increasing its deposits a bank can extend greater amount of loan and hence achieves

higher profit. NBP is also improving its facilities and services to attract customers with

higher volume of deposits. There are two main factors involved in increasing the

deposits. These factors are improving the services and courtesy. NBP is continuously

working on these two factors to increase its deposits.

2.6.7.2 Extension of loans:

The profitability of a bank largely depends on the amount given to people as loan and the

type of people to whom credit is given i.e. the credit worthiness of the borrowers. This

strategy has worked quite well for NBP. Deposits are collected from the people and

invested in different projects. NBP prefers to give loans to financially sound and reliable

parties, after securing the collators. NBP has an extremely well organized section. The

staff is adequately trained, and educated and competent. They carry out extensive

financial analysis before deciding on the loan. Interest charged on the loans potentially

contributes to higher profits.

Some of the other objectives of NBP are:

i. Improve customer services.

ii. Quick disposal of credit cases.

iii. Efficient operation of the branches.


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Discounting of bill is practically speaking lending for exchange at their market rate i.e. it

pays to holder of the bill an amount equal to the face value after deducting interest at the

current market rate for the period. This bill has to be mature. This is the common way

used for keeping a part of assets of the bank in a liquid form.

2.6.10 Agency service

NBP also provides best and unique service to its valued customers. NBP provide the

following agency services to the customers:

i. Collection of dividends

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

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

ii. Collection of Cheques

In the collection and payment of Cheques, bills and promissory notes etc. National bank

of Pakistan acts as an agent for its customers.

iii. Acting as an agent

NBP also acts as an agent correspondent or representative for its customer at home or

abroad.

iv. General utility services:

Utilities provided by NBP are as follows:

a. Clearance of utility bills

NBP provides the service of clearing the utility bills i.e. electricity, gas and telephone

bills of its customers. For this purpose it also provides evening banking services

b. Lockers facility


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National bank of Pakistan also provides locker facilities to its customers to keep their

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

c. Acts as a referee

NBP provides useful services to its customers by acting as a referee to their credit

worthiness.

d. Supply of information

NBP provides operational and advisory service for foreign exchange accounts/activities.

2.6.11 Unmatched Banking Facilities

Deposit security, Guaranteed by Government of Pakistan.

Highest rates of return to attract the savings.

Lowest rates on exports and other borrowings.

Largest contribution towards Government and Semi-Government

requirements.

Agents of the SBP handling Treasury Functions, receipts of Taxes & other

Revenues.

Handling of salaries & pensions of federal/provincial/defense personnel.

Utility Bills collections.

Hajj arrangements.

Sale and encashment of prize Bonds.

Sale and encashment of Defense Savings and Special Savings Certificates.

Safe Deposit Lockers for customers.


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Rational Human Resource Management.

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

2002 and NBP is the bank of the year for 2004-2004 of Pakistan.

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

Agency for 2001.

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

Rating Agency for 2002

2.6.12 NBP at the forefront of Pak-Afghan trade

i. Booth at dry port Peshawar

ii. Booth at Pak Afghan border (Torkham) NWFP

iii. Booth at Pak Afghan border (Chamman). Baluchistan.

iv. Establishing branch at Kabul.

2.6.13 Summation

We discussed in this chapter the evaluation of banking in Pakistan, banking reforms

1972, Nationalization of banks, History of NBP, Mission Statement of NBP. The next

and onward chapter we will discuss the general banking information and

departmentalization of NBP.

REFRENCES

1. Israr, Siddiqi H. (1998). Practice and Law of banking in Pakistan. Karachi:

Decent Print Enterprises. Page 15-17

2. Sir, Paged John. The law of Banking. The Law of Banking. McGraw Hill

Publication: page 51-58


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3. Nasir, Saeed H.(2001).Money and Banking. Pakistan, Kitab Markaz: Page.105-

106

4. www.nbp.com.pk

5. Bank Nationalization act 1974.

6. www.google.com.pk

CHAPTER # 3

INFORMATION & DEPARTMENTALIZATION OF NBP

3.1 INTRODUCTION

This chapter presents the services and departmentalization of NBP.


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Services are outputs of the firm, which are in intangible form. Which are the backbones

of any organization to earn profit. NBP offers the following services to the people.

3.2 DEMAND DRAFTS

If you are looking for a safe, speedy and reliable way to transfer money, you can now

purchase NBPs Demand Drafts at very reasonable rates. Any person whether an account

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

3.3 SWIFT SYSTEM

The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication)

has been introduced for speedy services in the area of home remittances. The system has

built-in features of computerized test keys, which eliminates the manual application of

tests that often cause delay in the payment of home remittances. The SWIFT Center is

operational at National Bank of Pakistan with a universal access numberNBP-APKKA.

All NBP overseas branches and overseas correspondents (over 450) are drawing

remittances through SWIFT.

Using the NBP network of branches, you can safely and speedily transfer money for our

business and personal needs.

3.4 LETTERS OF CREDIT *

NBP is committed to offering its business customers the widest range of options in the

area of money transfer. If you are a commercial enterprise then our Letter of Credit

service is just what

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

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

3.5 TRAVELER'S CHEQUES

Travelers cheques are negotiable instruments, and there is no restriction on the period of

validity of the cheques. Rupee travelers cheque is available at all 700 branches of NBP.


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remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides

Pakistan International Bank (UK) Ltd., and Bank Al-Jazira, Saudi Arabia.

Zero Tariffs: NBP is providing home remittance services without any charges.

Strict monitoring of the system is done to ensure the highest possible security.

Special courier services are hired for expeditious delivery of home remittances to

the beneficiaries.

3.9 SHORT TERM INVESTMENTS

NBP now offers excellent rates of profit on all its short-term investment accounts.

Whether you are looking to invest for 3 months or 1 year, NBPs rates of profit are

extremely attractive, along with the security and service only NBP can provide.

3.10 National Income Daily Account (NIDA)

The scheme was launched in December 1995 to attract corporate customers. It is a

current account scheme and is part of the profit and loss system of accounts in operation

throughout the country.

3.10.1 Salient Features:

Rs 2-million are required to open an account and there is no maximum limit.

Profit is paid on half yearly basis on monthly balances.

The rates of profit vary according to the slabs of deposit. On Deposits of Rs.2

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

It is a checking account and there is no limit of withdrawals.

3.10.2 Rates on NIDA

From Rs 2/- million to Rs 50/- the rate is 1.4%.


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From Rs50/- million but less than Rs 500/-million, the rate is 1.5%.

From Rs 500/- million but below Rs 1000/- the rate is 1.6%.

From Rs 1000/- and above the rate is 1.75%.

3.11 EQUITY INVESTMENTS

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

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

player in the development of the stock market.

3.11.1 NBP is involved in the following:

Investment into the capital market

Introduction of capital market accounts (under process)

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

result in better returns offered to account holders

3.12 COMMERCIAL FINANCE

NBP dedicated team of professionals truly understands the needs of professionals,

agriculturists, large and small business and other segments of the economy. They are the

customers best resource in making NBPs products and services work for them.

3.13 TRADE FINANCE OTHER BUSINESS LOANS

There are two types of trade finance.

3.13.1 AGRICULTURAL FINANCE

NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers

who produce some of the best agricultural products in the World.


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3.13.1.1 Agricultural Finance Services:

I Feed the World program, a new product, is introduced by NBP with the aim to help

farmers maximize the per acre production with minimum of required input. Select farms

will be made role models for other farms and farmers to follow, thus helping farmers

across Pakistan to increase production.

3.13.1.2 Agricultural Credit:

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

Providing reliable infrastructure for agricultural customers

Help farmers utilize funds efficiently to further develop and achieve better

production

Provide farmers an integrated package of credit with supplies of essential inputs,

technical knowledge, and supervision of farming.

3.13.1.3 Agricultural Credit (Medium Term):

Production and development

Watercourse improvement

Wells

Farm power

Development loans for tea plantation

Fencing

Solar energy

Equipment for sprinklers


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3.13.1.4 Farm Credit:

NBP also provides the following subsidized with ranges of 3 months to 1 year on a

renewal basis.

Operating loans

Land improvement loans

Equipment loans for purchase of tractors, farm implements or any other

equipment

Livestock loans for the purchase, care, and feeding of livestock.

3.13.1.5 Production Loans:

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

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

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

3.13.2 CORPORATE FINANCE

3.13.2.1 Working Capital and Short Term Loans:

NBP specializes in providing Project Finance Export Refinance to exporters Pre-

shipment and Post-shipment financing to exporters Running finance Cash Finance

Small Finance Discounting & Bills Purchased Export Bills Purchased / Pre-

shipment / Post Shipment Agricultural Production Loans

3.13.2.2 Medium term loans and Capital Expenditure Financing:

NBP provides financing for its clients capital expenditure and other long-term

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

expedites clients attempt to upgrade and expand their operation thereby making possible


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the fulfillment of our clients vision. This type of long term financing proves the banks

belief in its client's capabilities, and its commitment to the country.

3.13.2.3 Loan Structuring and Syndication:

National Banks leadership in loan syndicating stems from ability to forge strong

relationships not only with borrowers but also with bank investors. Because we

understand our syndicate partners asset criteria, we help borrowers meet substantial

financing needs by enabling them to reach the banks most interested in lending to their

particular industry, geographic location and structure through syndicated debt offerings.

Our syndication capabilities are complemented by our own capital strength and by

industry teams, who bring specialized knowledge to the structure of a transaction.

3.13.2.4 Cash Management Services:

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

customers sales collection will be channeled through vast network of NBP branched

spread across the country. This will enable the customer to manage their companys total

financial position right from your desktop computer. They will also be able to take

advantage of our outstanding range of payment, ejection, liquidity and investment

services. In fact, with NBP, youll be provided everything, which takes to manage your

cash flow more accurately

3.14 INTERNATIONAL BANKING

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

is proven by the fact that NBP has its branches in all of the major financial capitals of the

world. Additionally, NBP have recently set up the Financial Institution Wing, which is

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

-

To effectively manage NBPs exposure to foreign and domestic correspondence


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Manage the monetary aspect of NBPs relationship with the correspondents to

support trade, treasury and other key business areas, thereby contributing to the

banks profitability

Generation of incremental trade-finance business and revenues

3.14.1 NBP offers:

The lowest rates on exports and other international banking products

Access to different local commercial banks in international banking

3.15 Cash and Gold Finance.

Cash and Gold finance means that loan is given against the gold. The gold is

mortgaged with the bank and loan is taken. It is the area of consumer finance. And

borrower can take loan for common use.

3.16 Advance salary loan:

This loan is given to those people who are govt servants. They can get a loan up to the

salary of fifteen months.

3.17 DEPARTMENTALIZATION 2

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

departmentation. So NBP can be divided into the following main departments.

A) DEPARTMENTATION OF NBP

3.17.1 CASH DEPARTMENT


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Cash department performs the following functions

3.17.1.2) Receipt

The money, which either comes or goes out from the bank, its record should be kept.

Cash department performs this function. The deposits of all customers of the bank are

controlled by means of ledger accounts. Every customer has its own ledger account and

has separate ledger cards.

3.17.1.3) Payments

It is a bankers primary contract to repay money received for this customers account

usually by honoring his cheques.

3.17.1.4) Cheques and their Payment

The Negotiable Instruments. Act, 1881 3

Cheque is a bill of exchange drawn on a specified banker and not expressed to be

payable otherwise than on demand.

Since a Cheque has been declared to be a bill of exchange, it must have all its

characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.

Therefore, one can say that a Cheque can be defined as an:

An unconditional order in writing drawn on a specified banker, signed by the drawer,

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

specified person or to the bearer, and which does not order any act to be done in

addition to the payment of money.

3.17.1.5) The Requisites of Cheque


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Bearer cheques are cashable at the counter of the bank. These can also be collected

through clearing.

b) Order cheque

These types of cheques are also cashable on the counter but its holder must satisfy the

banker that he is the proper man to collect the payment of the cheque and he has to show

his identification. It can also be collected through clearing.

c) Crossed Cheque

These cheques are not payable in cash at the counters of a banker. It can only be credited

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

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

cheque will be credited to the account of the person to whom the cheque was issued and

debited from the account of the person who has actually issued the cheque.

3.17.1.8) Payment of Cheques

It is a bankers primary contract to repay money received for his customers account

usually by honouring his cheques. Payment of money deposited by the customer is one of

the root functions of banking. The acid test of banking is the receipt of money etc. from

the depositors, and repayment to them. This paying function is one, which is the

distinguishing mark of a banker and differentiates him from other institutions, which

receive money from the public. However the bankers legal protection is only when

payment is in Due Course. The payment in due course means payment in accordance

with the apparent tenor of the instrument, in good faith and without negligence to any

person in possession thereof under circumstances, which do not afford a reasonable

ground of believing that he is not entitled to receive payment of the amount thereinmentioned. It is a contractual obligation of a banker to honor his customers cheques if

the following essentials are fulfilled.

a) Cheques should be in a proper form:

b) Cheque should not be crossed:


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c) Cheque should be drawn on the particular bank:

d) Cheque should not mutilated:

e) Funds must be sufficient and available:

f) The Cheque should not be post dated or stale:

g) Cheque should be presented during banking hours:

h) 3.17.2 CLEARANCE DEPARTMENT

A clearinghouse is an association of commercial banks set up in given locality for the

purpose of interchange and settlement of credit claims. The function of clearinghouse is

performed by the central bank of a country by tradition or by law. In Pakistan, the

clearing system is operated by the SBP. If SBP has no office at a place, then NBP, as a

representative of SBP act as a clearinghouse.

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

cheques in making payments has also widely increased. The collection as settlement of

mutual obligations in the form of cheques is now a big task for all the commercial bank.

When Cheque is drawn on one bank and the holder (payee) deposits the same in hisaccount at the bank of the drawer, the mutual obligation are settled by the internal bank

administration and there arises no inter bank debits from the use of cheques. The total

assets and total liabilities of the bank remain unchanged.

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

bank as the drawer. He deposits the cheque with his bank other than of payer for the

collection of the amount. Now the bank in which the cheque has been deposited becomes

a creditor of the drawers bank. The depositor bank will pay his amount of the cheque by

transferring it from cash reserves if there are no offsetting transactions. The banks on

which the cheques are drawn become in debt to the bank in which the cheques are

deposited. At the same time, the creditors banks receive large amounts of cheques drawn

on other banks giving claims of payment by them.


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

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

is provided by the clearinghouse.

The representatives of the local commercial banks meet at a fixed time on all the business

days of the week. The meeting is held in the office of the bank that officially performs the

duties of clearinghouse. The representatives of the commercial banks deliver the cheques

payable at other local banks and receive the cheques drawn on their bank. The cheques

are then sorted according to the bank on which they are drawn. A summary sheet is

prepared which shows the names of the banks, the total number of cheques delivered and

received by them. Totals are also made of all the cheques presented by or to each bank.

The difference between the total represents the amount to be paid by a particular bank

and the amount to be received by it. Each bank then receives the net amount due to it or

pays the net amount owed by it.

3.17.2.1) In-Word Clearing Books

The bank uses this book for the purpose of recording all the cheques that are being

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

book.

3.17.2.2) Out-Word Clearing Book:

The bank uses outward clearing register for the purpose of recording all the details of the

cheques that the bank has delivered to other banks.

3.18 ADVANCES DEPARTMENT

Advances department is one of the most sensitive and important departments of the bank.

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

department is to make proposals about the loans. The Credit Management Division of

Head Office directly controls all the advances. As we known bank is a profit seeking

institution. It attracts surplus balances from the customers at low rate of interest and

makes advances at a higher rate of interest to the individuals and business firms. Credit


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extensions are the most important activity of all financial institutions, because it is the

main source of earning. However, at the same time, it is a very risky task and the risk

cannot be completely eliminated but could be minimized largely with certain techniques.

Any individual or company, who wants loan from NBP, first of all has to undergo the

filling of a prescribed form, which provides the following information to the banker.

3.18.1) Name and address of the borrower.

a) Existing financial position of a borrower at a particular branch.

b) Accounts details of other banks (if any).

c) Security against loan.

d) Exiting financial position of the company. (Balance Sheet & Income Statement).

e) Signing a promissory note is also a requirement of lending, through this note

borrower promise that he will be responsible to pay the certain amount of money

with interest.

3.18.2) Principles of Advances

There are five principles, which must be duly observed while advancing money to the

borrowers.

a. Safety

b. Liquidity

c. Dispersal

d. Remuneration

e. Suitability

a. Safety


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Bankers funds comprise mainly of money borrowed from numerous customers on

various accounts such as Current Account, Savings Bank Account, Call Deposit Account,

Special Notice Account and Fixed Deposit Account. It indicates that whatever money the

banker holds is that of his customers who have entrusted the banker with it only because

they have full confidence in the expert handling of money by their banker. Therefore, the

banker must be very careful and ensure that his depositors money is advanced to safe

hands where the risk of loss does not exist. The elements of character, capacity and

capital can help a banker in arriving at a conclusion regarding the safety of advances

allowed by him.

b. Character

It is the most important factor in determining the safety of advance, for there is no

substitute for character. A borrowers character can indicate his intention to repay the

advance since his honesty and integrity is of primary importance. If the past record of the

borrower shows that his integrity has been questionable, the banker should avoid him,

especially when the securities offered by him are inadequate in covering the full amount

of advance.

It is obligation on the banker to ensure that his borrower is a person of character and has

capacity enough to repay the money borrowed including the interest thereon.

c. Capacity

This is the management ability factor, which tells how successful a business has been in

the past and what the future possibilities are. A businessman may not have vast financial

resources, but with sound management abilities, including the insight into a specific

business, he may make his business very profitable. On the other hand if a person has no

insight into the particular business for which he wants to borrow funds from the banker,

there are more chances of loss to the banker.

d. Capital


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This is the monetary base because the money invested by the proprietors represents their

faith in the business and its future. The role of commercial banks is to provide short-term

capital for commerce and industry, yet some borrowers would insist that their bankers

provide most of the capital required. This makes the banker a partner. As such the banker

must consider whether the amount requested for is reasonable to the borrowers own

resources or investment.

e. Liquidity

Liquidity means the possibilities of recovering the advances in emergency, because all

the money borrowed by the customer is repayable in lump sum on demand. Generally the

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

fresh loans to other borrowers. Nevertheless, the banker must ensure that the money he is

lending is not blocked for an undue long time, and that the borrowers are in such a

financial position as to pay back the entire amount outstanding against them on a short

notice. In such a situation, it is very important for a banker to study his borrowers assets

to liquidity, because he would prefer to lend only for a short period in order to meet the

shortfalls in the wording capital. If the borrower asks for an advance for the purchase of

fixed assets the banker should refuse because it shall not be possible for him to repay

when the banker wants his customer to repay the amount. Hence, the baker must adhereto the consideration of the principles of liquidity very careful.

f. Dispersal

The dispersal of the amount of advance should be broadly based so that large number of

borrowing customer may benefit from the bankers funds. The banker must ensure that

his funds are not invested in specific sectors like textile industry, heavy engineering or

agriculture. He must see that from his available funds he advances them to a wide range

of sector like commerce, industry, farming, agriculture, small business, housing projects

and various other financial concerns in order of priorities.


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

reduces the risk of recovery when something goes wrong in one particular sector or in

one field.

g. Remuneration

A major portion of the bankers earnings comes form the interest charged on the money

borrowed by the customers. The banker needs sufficient earnings to meet the following:

a) Interest payable to the money deposited with him.

b) Salaries and fringe benefits payable to the staff members.

c) Overhead expense and depreciation and maintenance of the fixed assets of the

bank.

d) An adequate sum to meet possible losses.

e) Provisions for a reserve fund to meet unforeseen contingencies.

f) Payment of dividends to the shareholders.

h. Suitability

The word suitability is not to be taken in its usual literary sense but in the broader sense

of purport. It means that advance should be allowed not only to the carefully selected and

suitable borrowers but also in keeping with the overall national development plans

chalked out by the authorities concerned. Before accommodating a borrower the banker

should ensure that the lending is for a purpose in conformity with the current national

credit policy laid down by the central bank of the country.

3.18.3 Forms of Loans

In addition to purchase and discounting of bills, bankers in Pakistan generally lend in the

form of cash finance, overdrafts and loans. NBP provides advances to different people in

different ways as the case demand.


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a) Cash Finance

This is a very common form of borrowing by commercial and industrial concerns and is

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

In cash finance a borrower is allowed to borrow money from the banker up to a certain

limit, either at once or as and when required. The borrower prefers this form of lending

due to the facility of paying markup/services charges only on the amount he actually

utilizes.

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

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

in the cash finance agreement, according to which the borrower has to pay

markup/service charges on at least on self or one quarter of the amount of cash finance

limit allowed to him even when he does not utilize that amount.

b) Overdraft/Running Finance

This is the most common form of bank lending. When a borrower requires temporary

accommodation his banker allows withdrawals on his account in excess of the balance,

which the borrowing customer has in credit, and an overdraft thus occurs. This

accommodation is generally allowed against collateral securities. When it is against

collateral securities it is called Secured Overdraft and when the borrowing customer

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

called a Clean Overdraft. The borrowing customer is in an advantageous position in an

overdraft, because he has to pay service charges only on the balance outstanding against

him. The main difference between a cash finance and overdraft lies in the fact that cash

finance is a bank finance used for long term by commercial and industrial concern on

regular basis, while an overdraft is a temporary accommodation occasionally resorted to.

c) Demand Financing/Loans

When a customer borrows from a banker a fixed amount repayable either in periodic

installments or in lump sum at a fixed future time, it is called a loan. When bankers


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allow loans to their customers against collateral securities they are called secured loans

and when no collateral security is taken they are called clean loans.

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

agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus

the borrower gets a fixed amount of money for his use, while the banker feels satisfied in

lending money in fixed amounts for definite short periods against a satisfactory security

3.19 REMITTANCE DEPARTMENT

Remittance means a sum of money sent in payment for something. This department deals

with either the transfer of money from one bank to other bank or from one branch to

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

a) Demand Draft

b) Telegraphic Transfer

c) Pay Order

d) Mail Transfer

3.19.1) Demand Draft

Demand draft is a popular mode of transfer. The customer fills the application form.

Application form includes the beneficiary name, account number and a senders name.

The customer deposits the amount of DD in the branch. After the payment the DD is

prepared and given to the customer. NBP officials note the transaction in issuance

register on the page of that branch of NBP on which DD is drawn and will prepare the

advice to send to that branch. The account of the customer is credited when the DD

advice from originating branch comes to the responding branch and the account is

debited when DD comes for clearance. DD are of two types.


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a) Open DD: Where direct payment is made.

b) Cross DD: Where payment is made though account.

NBP CHARGES FOR DD

I. Up to Rs. 50,000/- is Rs 50/- only

II. Over Rs. 50,000/- is 0.1%

3.19.2) Pay Order

Pay order is made for local transfer of money. Pay order is the most convenient, simple

and secure way of transfer of money. NBP takes fixed commission of Rs. 25 per pay

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

3.19.3) Telegraphic Transfer

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

Telegraphic transfer is an order by telegram to a bank to pay a specified sum of money to

the specified person. The customer for requesting TT fills an application form. Vouchers

are prepared and sent by ordinary mail to keep the record. TT charges are taken from the

customer. No excise duty is charged on TT. The TT charges are:

Telegram/ Fax Charges on TT = Actual-minimum Rs.125.

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

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

with this department and branch manager.

3.19.4) Mail Transfer

When the money is not required immediately, the remittances can also be made by mail

transfer (MT). Here the selling office of the bank sends instructions in writing by mail to

the paying bank for the payment of a specified amount of money. Debiting to the buyers

account at the selling office and crediting to the recipients account at the paying bank


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make the payment under this transfer. NBP taxes mail charges from the applicant where

no excise duty is charged. Postage

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

Rs.40/- if sent by registered post inland on partys request.

3.20 HUMAN RESOURCE MANAGEMENT

Human Resource plays a vital role in the success of every service organization. They

interact between man and machine. Their attitude can win or loose the customer. The

positive attitude could only be created in a conducive environment, which can make the

staff dedicated towards the organization and its objectives. In reality the man is more

important than machine as it is the human which could get maximum out of machine tokeep a happy customer. However, most organizations give little importance to this very

important asset.

Various aspects related to human resource of National Bank of Pakistan are critically

examined in the following text:

3.20.1) Selection & Recruitment

Although the Bank believes in merit but in practice the selection of employees is not

done on merit. Most of the employees are low educated. This shows that candidates with

some strong family background or political pressure are given preference in recruitment

and qualified candidates are sometimes left behind.

3.20.2) Job for Life

Like the employee of public sector organizations in Pakistan, the employees of NBP also

enjoy their job for life. Since there is no risk of early retirement or redundancy in rank,

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

perform with their full potentials, and this is one of the reasons responsible for the low

productivity of the employees of the Bank.


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3.20.3) Performance Appraisal

The performance of employees of the Bank are appraised though their annual confidential

reports at the end of each year. This has become an outdated method of performance

appraisal and no longer used due to the following reasons:

1. The performance of employees is evaluated after quite a long time.

2. Element of subjectivity is involved in this method.

3. Employees participation is not ensured in the process of evaluation.

4. Objectives of employees are not quantified.

3.20.4) Inter Personal Relationship

Modern management acknowledges human resources as one of the most important

assets of an organization. But by their very nature, human beings are also the most

unpredictable. Where a number of persons work together, interactions among them, of

necessity, will lead to conflicts and NBP is no exception. Most interpersonal conflicts in

NBP can be traced back to the following major heads.

Lack of Communication

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

failure to send a massage but to an interpretation given to the massage by the receiver is

different from that intended.

3.20.5) Diversity in Values

Diversity in values, perceptions, cultural background and life-style is another reason

responsible for inter personal conflicts in NBP. Different values and perceptions about

the same issue, event or personality hinder understanding. When things come to such a

pavement, therefore, interpersonal conflicts are generated.


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The dominant trend in all modern industrial societies of the world is merit and expertise,

which helps promote cohesion and reduce conflicts. But the feudalistic mindset is still

very strong in our set up and there is no tradition of tolerance for differing viewpoints.

Hence, interpersonal conflicts are generated.

3.20.6) Corruption

Our social acceptance of corruption gives rise to corruption at every level of social and

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

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

lead to conflict sooner or later.

In the past few years, some cases of frauds have happened in different branches. The

reasons can be linked with the employee dissatisfaction of NBP.

3.20.7) Discipline & Authority

Maintaining discipline and implementation of authority (tables) in letter and spirit is the

key to success of any organization. In NBP, The authority tables are not strictly

maintained. Line managers are not fully equipped with the authority with no vertical or

horizontal interference.

3.21) DEPOSIT DEPARTMENT: -

It controls the following activities:

a) A/C opening.

b) Issuance of chequebook.

c) Current a/c

d) Saving a/c

e) Cheque cancellation


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f) Cash

3.21.1 Account opening

The opening of an account is the establishment of banker customer relationship. Before a

banker opens a new account, the banker should determine the prospective customers

integrity, respectability, occupation and the nature of business by the introductory

references given at the time of account opening. Preliminary investigation is necessary

because of the following reasons.

i. Avoiding frauds

ii. Safe guard against unintended over draft.

iii. Negligence.

iv. Inquiries about clients.

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

bank.

Formal Application

Introduction

Specimen Signature

Minimum Initial Deposit

Operating the Account

1. Pay-In-Slip Book

2. Pass Book

3. Issuing Cheque Book


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a) Qualification of Customer

The relation of the banker and the customer is purely a contractual one, however, he must

have the following basic qualifications.

He must be of the age of majority.

He must be of sound mind.

Law must not disqualify him.

The agreement should be made for lawful object, which create legal relationship

Not expressly declared void.

b) Types of Accounts

Following are the main types of accounts

1) Individual Account

2) Joint Account

3) Accounts of Special Types

Partnership account

Joint stock company account

Accounts of clubs, societies and associations

Agents account

Trust account

Executors and administrators accounts


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Pak rupee non-resident accounts

Foreign currency accounts

3.21.2 Issuing of chequebook:

This deptt issue cheque books to account holders.

Requirements for issuing chequebook

a) The account holder must sign the requisition slip

b) Entry should be made in the chequebook-issuing book

d) Three rupees per cheque should be recovered from a/c holder if not then debit

his/her account.

e) 3.21.3 Current account

These are payable to the customer whenever they are demanded. When a banker accepts

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

to the extent of the balance in the account. Because of their nature, these deposits are

treated as current liabilities by the banks. Bankers in Pakistan do not allow any profit on

these deposits, and customers are required to maintain a minimum balance, failing which

incidental charges are deducted from such accounts. This is because the depositors may

withdraw Current Account at any time, and as such the bank is not entirely free to

employ such deposits.

Until a few decades back, the proportion of Current Deposits in relation to Fixed

Deposits was very small. In recent years, however, the position has changed remarkably.

Now, the Current Deposits have become more important; but still the proportion of

Current Deposits and Fixed Deposits varies from bank to bank, branch to branch, and

from time to time.

3.21.4 Saving account


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Savings Deposits account can be opened with very small amount of money, and the

depositor is issued a chequebook for withdrawals. Profit is paid at a flexible rate

calculated on six-month basis under the Interest-Free Banking System. There is no

restriction on the withdrawals from the deposit accounts but the amount of money

withdrawn is deleted from the amount to be taken for calculation of products for

assessment of profit to be paid to the account holder. It discourages unnecessary

withdrawals from the deposits.

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

Scheme for school and college students and industrial labor also. The purpose of these

accounts is to inculcate the habit of savings in the constituents. As such, the initial

deposit required for opening these accounts is very nominal.

3.21.5 Cheque cancellation:

This deptt can cancel a cheque on the basis of;

a) Post dated cheque

b) Stale cheque

c) Warn out cheque

d) Wrong sign etc

3.21.6 Cash

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

3.22 FOREIGN EXCHANGE/DEPARTMENT:

This deptt mainly deals with the foreign business. The main functions of this deptt are:

a) L/C dealing.

b) Foreign currency accounts dealing.


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c) Foreign Remittance dealing.

3.22.1 L/C dealing

NBP is committed to offering its business customers the widest range of options in the

area of money transfer. If you are a commercial enterprise then our Letter of Credit

service is just what you are looking for. With competitive rates, security, and ease of

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

3.22.2 Foreign currency account dealing:

This deptt deals with the foreign currency accounts which mainly include dollar account,

euro account etc.

3.22.3Foreign Remittance dealing.

This is very important function of this deptt.

B) DEPARTMENTATION OF BALAKOT BRANCH, BALAKOT NBP.

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

departmentation. So NBP Balakot Branch,Balakot is divided into two main parts.

1. Cash Department

2. General Banking Department.

3.17 Cash Department:

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

There are two main functions of cash department.

i. Payment ii. Receipts

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

ii. Receipts mean collection of utilities bills, taxes etc.


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3.18 General Banking

In this section of the bank the general banking function is performed. It is divided

into five departments

Marketing Department

Remittances Department.

Computer Department.

Advances

Establishment Department Department.

Clea

Internship_Report on NBP by Jehanzeb Memon IMSA BBA 18

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