Report NBP HRM (Kamran I Tech)

7/30/2019 Report NBP HRM (Kamran I Tech)

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INTRODUCTION OF STUDY

Introduction

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

Business Administration. The students are required to undergo for six weeks 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.

Objectivesof the Study

Discuss thorough study of National Bank of Pakistan.


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Internship Report on NBP.

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

National bank of Pakistan.

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 six weeks.

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 Tech Society Branch, Lahore may also

benefit from the recommendations made at the end of the report.

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.

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

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EVOLUTION OF BANKS IN PAKISTAN

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 Babylonians

Empire, loans were started being granted for interest. The borrower has to provide guarantee

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

down standards rules 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

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time and banking though different from its present form, flourished. What we know as

modern banking originated in the 14th century in Barcelona.

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.

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.

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

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

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

Pakistan.

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

it was decided that in the interest of smooth transition it should continue to function in 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.

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

sufficient staff could be organize to operate a central bank.

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

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

Through, it was realized that the shortage of trained personal to run the central bank would

present 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

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order, which was promulgated by the government of Pakistan on 12 th 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.

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

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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 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

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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 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.

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

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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 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

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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.

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.

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 Act1974.

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

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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

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 limited

Muslim commercial bank limited

Allied bank of Pakistan limited

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

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

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

Pakistan limited.

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

with the United Bank limited.

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

limited was merged with Habib Bank limited.

The nationalization was very smooth and gave very positive results.

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

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

mark about 323 corers.

Islamization of Banking

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

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

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

House Building Finance Corporation of Pakistan. Certain amendments were made in banking

and other laws with the object of ushering in a new system of banking, which would confirm

of Sharia. A new law Modaraba Companies Ordinance 1980 was promulgated. Separate

interest free counters began to operate in all the nationalized commercial banks free counters

began to operate in all the nationalized commercial banks. The state bank provides financeagainst participation term certificate and also against promissory notes supported by

Modaraba certificate.

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

debtor, and advances credits and deposits were revised. Stipulations concerning form of

business in which banking companies may engage may also have been modified schemes

were introduced to provide interest free loans to formers and deserving students.

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

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

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

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

differential, and profit and loss sharing accounts were introduced.

Different financial schemes introduced in the Islamization process are:

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Musharika Financing.

Hire Purchase Financing.

Modaraba Financing.

Specific Purpose Modaraba.

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.

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 are making

Pakistani banking comparable to their several modern counterparts anywhere in the

developed world.

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

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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.

MISSION STATEMENT

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

quality of, operations, staff, financial strength. And products and services to develop a

culture of excellence in every spare of activity of the bank.

GOALS AND OBJECTIVES

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

direction to the panning efforts of an organization.

GOALS AND OBJECTIVES 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.

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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 theorganizational hierarchy.

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

decisions.

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.

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:

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.

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.

iv. Better Public Relations.

v. Operational and advisory services for foreign exchange accounts activities

Functions of NBP

Since NBP is a commercial bank, it performs a variety of functions.

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

major functions include receiving deposits, advancing loans and discounting of exchange.

The functions performed by NBP are:

Accepting Deposits

This function is important because banks largely depend on the funds deposited with them by

its customers. Deposits are of many types:

i. Current deposits

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

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

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

ii. PLS saving deposit

Profit and loss sharing deposits (PLS) are also called checking accounts. One can deposit and

draw money easily. Profit on PLS is calculated every month but paid after six months. PLS

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

iii. PLS term deposits

Fixed term deposits are deposits with the bank for certain fixed period before the expiry of

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

be different depending upon the time period.

Discounting bills of exchange

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.

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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

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.

Unmatched Banking Facilities

Deposit security, Guaranteed by Government of Pakistan.

Highest rates of return to attract the savings.

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Lowest rates on exports and other borrowings.

Largest contribution towards Government and Semi-Government requirements.

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

Revenues.

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

Utility Bills collections.

Hajj arrangements.

Sale and encashment of prize Bonds.

Sale and encashment of Defense Savings and Special Savings Certificates.

Safe Deposit Lockers for customers.

Rational Human Resource Management.The prestigious periodical The Banker UK recognized NBP as the best bank for 2001-2002

and NBP is the bank of the year for 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

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.

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.

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INFORMATION & DEPARTMENTALIZATION OF NBP

INTRODUCTION

This chapter presents the services and departmentalization of NBP.

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.

DEMAND DRAFTS

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

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

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

SWIFT SYSTEM

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

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

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

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

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

business and personal needs.

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.

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. This

can be encashed in all 400 branches of NBP. There is no limit on purchase of this cheque. It

is one of the safest ways for carrying money.

PAY ORDER

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

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

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

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

charges Rs 100/- for NBP non-account holders on issuing one payment order. It charges Rs

25/- for students on payment of fees of educational institutions. If some one want a duplicate

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

account holders.

AIL TRANSFERS

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

offers the most competitive rates in the market. They charges Rs 50/- exchange rate and RS

75/- postage charges on issuing mail transfer.

FOREIGN REMITTANCES:

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

taken a number of measures to:

Increase home remittances through the banking system

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

the beneficiaries

New Features:

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

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

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

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

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

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

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

beneficiaries.

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

National Income Daily Account (NIDA)

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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.

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.

Rates on NIDA

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

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

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

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

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.

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

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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.

TRADE FINANCE OTHER BUSINESS LOANS

There are two types of trade finance.

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.

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.

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.

Agricultural Credit (Medium Term):

Production and development

Watercourse improvement

Wells

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Farm power

Development loans for tea plantation

Fencing

Solar energy

Equipment for sprinklers

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.

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.

CORPORATE FINANCE

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

Medium term loans and Capital Expenditure Financing:

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

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

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

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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.

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.

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

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

NBP offers:

The lowest rates on exports and other international banking products

Access to different local commercial banks in international banking

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.

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.

DEPARTMENTALIZATION

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

CASH DEPARTMENT

Cash department performs the following functions

Receipt

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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.

Payments

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

by honoring his cheques.

Cheques and their Payment

The Negotiable Instruments. Act, 1881

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.

The Requisites of Cheque

There is no prescribed form of words or design of a Cheque, but in order to fulfill the

requirements mentioned in Section 6 above the Cheque must have the following.

a) It should be in writing

b) The unconditional order

c) Drawn on specific banker only

d) Payment on Demand

e) Sum Certain in money

f) Payable to a specific person

g) Signed by the drawer

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Parties to Cheque

The normal Cheque is one in which there is a drawer, a drawee banker and a payee, or no

payee but bearer.

a) The Drawer

b) The Drawee

c) The Payee

Types of Cheques

Bankers in Pakistan deal with three types of cheques

a) Bearer Cheques

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.

Payment of Cheques

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

by honoring his cheques. Payment of money deposited by the customer is one of the root

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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 therein mentioned. 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:

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:

CLEARANCE DEPARTMENT

A clearinghouse is an association of commercial banks set up in given locality for thepurpose 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 his account

at the bank of the drawer, the mutual obligation are settled by the internal bank

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

and total liabilities of the bank remain unchanged.

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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.

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.

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.

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.

ADVANCES DEPARTMENT

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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 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.

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.

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

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

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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 adhere to 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.

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.

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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.

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.

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.

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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 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

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

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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.

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%

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.

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.

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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.

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 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.

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

f) Cash

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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

a) Qualification of Customer

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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

Pak rupee non-resident accounts

Foreign currency accounts

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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.

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.

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.

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

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Cash

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

FOREIGN EXCHANGE/DEPARTMENT:

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

a) L/C dealing.

b) Foreign currency accounts dealing.

c) Foreign Remittance dealing.

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.

Foreign currency account dealing:

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

euro account etc.

Foreign Remittance dealing

This is very important function of this deptt.

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PRODUCT LINES

There are three types of product lines, which are as under:-

a) Retail Products

b) Advances

c) Deposits

(a) RETAIL PRODUCTS

PRODUCT LINESRETAIL PRODUCTS

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Unprecedented Safety - Unprecedented Return

Premium Aamdani

Unprecedented Safety - Unprecedented Return

Premium Saver

President's Rozgar Scheme - Easy financing for self

employmentKarobar

Affordable, Flexible & Convenient home financing for all

Saibaan

Take upto 20 Advance Salaries - Affordable Installations from

1 - 60 monthsAdvance Salary

One Card does it all - ATM plus Debit Card in one

Cash Card

Invest with Confidence - Marginal Finance Facility

Investor Advantage

Meet your need for ready cash against your idle gold jewelry

with no minimum limits Cash n Gold

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NBP KISAN Taqat

Kisan Taqat

NBP's affordable agricultural program offers you a wide range

of financing

Kisan Dost

Knitting Links AASAN Banking

Online Facility

(b) ADVANCES

Small finance/working capital for small enterprises.

Cash Finance/working capital for medium enterprises

Demand finance/Term Finance

Running Finance for personal use against DSCs/SSCs

Syndicate Finance/Consortium Financing

(c) DEPOSITS

Profit & Loss Saving Account

Profit and Loss Term Deposits Account

NBP Plus Term Deposits Account

NBP Premium Saver Account

NBP Premium Amadni Certificate

RECOGNITION & AWARDS TO NBP:

On the basis of performance the NBP get the following award

Bank of the year awards for the years 2007 & 2002 by the world renowned magazine

the Banker.

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One of the best bank in emerging markets by global finance.

Bank with the highest return on capital in the Asia and No. 08 in the world 2003.

Ranked among top 100 banks of Asia Euro money.

Kisan time award 2005- 2006.

The strongest bank in Pakistan-Asian Banker.

Best bank Pakistan 2005-Global Finance.

Best emerging market bank from Pakistan for the year 2006 Global finance.

The Banker Magazine in its July 2007 Issue announced that NBP has the best

return on capital of any bank in Asia,

In July 2007 NBPs standalone rating were upgraded to AAA/A-one plus from

AA+/A-1+by JCR-VIS credit Rating Agency.

ORGANIZATION HIERARCHY OF NBP

President

Board of Directors

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

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Assistant Vice President

Officer Grade I, II, III

Clerical Staff

Non Clerical Staff

Human Resource Management

NBP an organization that provides opportunities for its staff to have a challenging and

rewarding long-term career. To this end the Human Resource Group (HRG) encourages and

motivates its employees to excel in the responsibility that they have in the organization .It

believes that creativity and innovation comes from talent, knowledge and experience and it is

NBPs endeavor to provide and maintain an environment which not only nourishes these

strengths but also provides opportunities for the staff to have a career which has

multidimensional growth opportunities.

In doing so, HRG has been restructuring and redesigning the overall structure of the

organization, which includes rationalization, cutting down the decision layers, improvement

in staff training and hiring professionals and MBAs at entry-level management.

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The overall direction of HRG has been towards nurturing the strengths of the human capital

to its maximum with a defining principal to help create a progressive environment and

sustain a thorough commitment of our staff towards focused customer service.

HRG therefore recognizes the need to proactively invest in staff training and develop courses

on a regular basis. Under the umbrella of its Management and Organization Development

Division (MODD) its Management Development Institute (MDI) with its three fully

equipped chapters at Karachi, Lahore & Islamabad regularly conducts and outsource

technical and personal development courses for its all level of staff enabling them to meet the

challenges of the ever-changing business requirements and customer needs. During 2008,

529 courses, workshops, skill development clinics and seminars in the disciplines of Service

& Attitude, Market Research & Selling, Management & Communication, Credit & Finance,

I.T. & e-Banking, Treasury & Trade Finance, Global/ Domestic Banking Operations and on

other diverse subjects were conducted by In / Ex-House professionally skilled, qualified and

certified faculty and industry experts for 10233 people of senior / middle line management &

staff carving 1334 days training days. There is no budget limit for Training and Education at

National Bank.

HR Group aims to maintain and further improve the service-oriented culture and to make

employment not only satisfying but also enjoyable.

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ORGANIZATIONAL STRUCTURE

50

President

Commercial &

Retail BankingGroup Chief

RegionalBusiness Chief

Corporate &

Investment

Banking

Group Chief

Corporate Head

North &

Corporate Head

South

Corporate

Branches

Operations

Group

Chief

Risk

Management

Group Chief

Regional Marketing

Manages

Regional

Operations

Chief

Branch

Manager

Regional

Compliance

Chief

Operations

Departments of

The Region

Branch

Operations

Manager

Regional Risk

Management Chief

Credit Departmentof The Region

BranchCredit Officers


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Organizational structure of the Human Resource Management (HRM)

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SEVP / Group Chief,

HRM & AG, NBP Head

SVP / Regional HR

Chief, Regional

Office, AJK

PSO to Regional HRChief

No.2 in HRM

Department

Incharge

Disciplinary

Cases

Incharge

Staff

Benefit

Incharge

Staff Loan

Incharge

Accounts

of R.O.

Incharge

Litigation

& Ind.

Relations

Incharge

Inward /Outwar

d Mail


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HRM PROCESS IN THE ORGANIZATION

HUMAN RESOURCE PLANNING AND FORECASTING

The processes by which management ensures that it has the right personnel, who are capable

of completing those tasks that help the organization, reach its objectives. Another part of the

current assessment is the job a

Report NBP HRM (Kamran I Tech)

Documents