Professional Documents
Culture Documents
CHAPTER 1
INTRODUCTION
A resolution was passed in the Provincial Assembly of NWFP, in the year 1991
for the establishment of a provincial bank. It proved successful and the result was
the emergence of a new bank in the banking sector, i.e. The Bank of Khyber
Internship Report on The Bank of Khyber by Imran Khan Afridi
Pakistan. In the year 1994 it became a scheduled bank. The Head Office is situated
at 24-The Mall, Peshawar Cantt. NWFP-Pakistan. This bank has been playing an
important role for the development of different sectors in Pakistan and especially
in NWFP. It has a network of 29 branches, which are located in different locations
of our country. Despite difficult economic conditions, like lack of suitable lending
opportunities, volatility of interest rate and equity prices, the bank manages to
show good results for every year.
Then basic purpose was to work in an organization and to compare the theory and
application of the management knowledge in real life situation. Another purpose was to
improve personal skills i.e. human relations and communication skills that is to interview
and work with them, similarly the report’s purpose is also to develop analytical skills by
analyzing the working of the organization through, critical and financial analysis.
Moreover, it is also required to analyze different aspects of the organization and to
forward suggestions to put right problems, which are being faced by the banks- if
possible.
The internship report is the reflection of analytical power of the students in case of BoK.
Main emphasis has been given to the ratio analysis by merging theoretical aspects and
practical outcome of different situation for example increase and decrease of financial
trends because of the operations of the bank. This report may help students in future to
understand banking practices in our country. It would also attempt to evaluate the overall
performance of The BoK through a thorough & detailed analysis of its daily working.
Internship Report on The Bank of Khyber by Imran Khan Afridi
Secondary data has also been used. Which is gathered from Management
and Human Resource Management books for the definitions and elaborations of
certain topics; Documents published by The Bank Of Khyber (BOK) i.e. The
Bank Of Khyber Annual Report 2003 and The Bank Of Khyber Official Website:
i.e. www.bok.com.pk.
The methods of data collection are mostly based on personal observations
and experiences of actually working at the Bank. Dealings with customers, along
with general procedures involved were observed. Moreover, as the departments
are always bustling with activity, there was not enough time to carry out formal
interviews or surveys, the methods used for data collection are:
a Primary Data
The data, which is collected for the first time and exist in raw form, is called
Primary data.i
b Secondary Data
Internship Report on The Bank of Khyber by Imran Khan Afridi
The data gathered from existing resources are called Secondary data. They are in
processed form.
•
• Reference Books
• Brochures
• Newspapers
• Manuals Of The Bank
• Information Memorandum
• Internet.
Chapter1:
Gives the background of the study, the purpose of the study, the scope of
methodology that is used to collect all the relevant data and the scheme of the report
itself.
Chapter2:
This chapter is about introduction to the Banking sector, history and
establishment of the bank of Khyber.
Chapter3:
Is about organizational review i.e., mission statement, scheduled Bank status
Organizational structure, List of division/Deptt at Head Office and Manpower position at
BOK.
Chapter4:
About Khyber Bank Saddar Road Branch.
Chapter5:Micro Finance Unit {MFU}in Khyber Bank Saddar Road Branch.
Internship Report on The Bank of Khyber by Imran Khan Afridi
CHAPTER 2
According to section 7 of the BCO, 1962, the banks in Pakistan are authorized to
engage in any one or more of the following forms of business, namely:
d) the granting and issuing of letters of credit, travelers’ cheque and circular
notes;
e) the buying and selling of foreign exchange including foreign bank notes;
g) The receiving of all kinds of bonds, scripts or valuables on deposit or for safe
custody or otherwise, the providing of safe deposit vaults, the collecting and
transmitting of money and securities.
h) Acting as agents for any government or local authority or any other person or
persons;
j) Contracting for public and private loans and negotiating and issuing the same;
m) Managing, selling and realizing any property which may come into the
possession of the company in satisfaction or part satisfaction of any of its
claims.
Prior to pre-partition the entire banking sector was dominated by the Hindus
which created a great financial vacuum after the shifting of their business to India (post-
Partition). Our great leader, the founder of Pakistan, Mohammad Ali Jinnah, had at that
critical period, accepted this challenge with faith and confidence on Almighty Allah and
to continue with his mission. At the time of independence there were 487 offices of
scheduled banks, out of which 197 left over to Pakistan because of Hindu domination
over the banks. There were 19 non- Indian foreign banks with the status of small branch
offices, which were engaged solely in the export of crops from Pakistan, and there were
only two other Pakistani institutions, i.e. Habib Bank and Australisia Bank. The panic of
an uncertain future shook the confidence of the people. In response, the govt, therefore,
promulgated the Banking Companies Ordinance 1947 to safeguard the interest of both the
bankers and the customers. Meanwhile, the Imperial Bank of India, which had been
acting as the agent of Reserve Bank of India closed down most of its offices in Pakistan
and also was not willing to purchase even, token amounts of Government of Pakistan
securities. The Indian govt. withheld Pakistan’s share of rupees 75 Crores in cash
balances held by them at the time of partition. Because there was an urgency of assuming
control of banking and currency in Pakistan, in 1947, an expert committee was appointed
Internship Report on The Bank of Khyber by Imran Khan Afridi
to deal with this major issue. This committee recommended that the Reserve Bank of
India would continue its function in Pakistan. Consequently, SBP was established on July
1st, 1948, The SBP assumed full control of banking and currency in Pakistan. The
first Pakistani note was issued in October, 1948, in the denomination of Rs. 5, 10 & 100.
Following this, the SBP decided to expand the network of Habib Bank and recommended
to the govt. to establish an agent of SBP. As a result, the NBP came into being in 1949
and in the year 1952 it took over the agency function.
Consequently the outbreak of the Korean War in 1950 provided a great boom for
Pakistan’s exports and thus the demand for banks, advances increased sharply. However,
with the end of the Korean War 1952, there was a short fall in the country’s export
earnings with no appreciable change in its imports. This naturally caused a drain on the
Foreign Exchange Reserves and in turn affected the balance of payment position.
Consequently, this induced banks to provide working capital for industries & as a result
SBP sponsored the setting up of an Industrial Finance Corporation.
In the period of 1956-58 further expansion in the banking & credit facilities
resulted in the establishment of two more banks. The National Commercial Bank Ltd and
the Pakistan Industrial Credit and Investment Corporation (PICIC). 1959-66 saw the
establishment of two more Pakistani banks, i-e The Easter Mercantile Bank Ltd and
United Bank Ltd. Another very significant event in the development of banking in
Pakistan was the appointment of the Credit Enquiry Commission in 1959 to examine the
scope and working of the institutions providing credit facilities in agriculture, trade,
commerce and industry and to recommend measures for further improvements in the field
of banking. In 1960 the Rural Credit Fund was also setup with an appropriation of
Rupees one crore to provide medium and long term credits in the rural areas. In the hope
that banking would enter into a new era of further development and progress, Pakistani
commercial banks were, nationalized in Pakistan from January 1, 1974, however, it was
Internship Report on The Bank of Khyber by Imran Khan Afridi
later realized that this tip proved to be counter productive; hence a reversal has been
initiated since January 1991. By June 1997, more than 7000 branches of the above
mentioned banks were expanded and mobilized more than Rs. 887.000 billion in deposits
and provided finance to various sectors amounting more than Rs. 548.000 million. Over
the years some specialized credit and financial institutions have also developed
like the National Investment Trust (NIT), the People Finance Corporation, the Equity
Participation Fund & the National Development Finance Corporation & the Small
Business Finance Corporation to name a few, all of which are contributing their due share
in the country’s economic life.
The Bank of Khyber was established through the Bank of Khyber Act passed by
the Provincial Assembly in June 1991.It is the only bank in Pakistan having its Head
office at Peshawar.
• Meet demand of the business community to have a bank with its Head Office in
the province.
• Have accessibility of local businessmen to senior management of the bank for the
prompt credit decision making there by accelerating investment in N.W.F.P.
• Have maximum utilization if funds rose in the Province for the economic
development of N.W.F.P.
The point of distinction between BOK and other national banks is that it acts not
only as a commercial bank but also strives to be a development bank through its
emphasis on financial support, especially to small and medium sized businesses, Whose
access to credit is not always easy. For these purposes the bank has established a Project
Finance Department and Long Term Project Department. The government of NWFP and
Internship Report on The Bank of Khyber by Imran Khan Afridi
other International Agencies also sponsors these programs of the bank, mainly by
international finance commission (IFC), which has already extended a US $ 10 million
direct credit line to the bank.
The Bank has been showing improvement in all the lines of his business, mainly
deposits advances & profits. The bank has undertaken a complete computerization of its
branch operations and has also issued Traveler Cheques and has entered with American
Express and Diners Club Pakistan limited for issuance of their respective credit
cards from BOK counters. BOK has established correspondent banking relationship with
several international banks and financial institutions, and is competing hard with other
banks for its share of business.
The Bank Of Khyber was established in 1991 under the Bank Of Khyber Act of the
Provincial Assembly of N.W.F.P. The main objectives for establishment of the bank are
to:
• To mobilize private saving and public funds for delivering the same into
productive channels and ensuring their availability.
• To promote industrial, agricultural and socio-economic processes through the
active participation of private and public sector in the province.
• To help under-developed areas and create employment opportunities especially in
the rural areas of the province. Further, to guide and assist the people of
N.W.F.P., serving overseas, to effectively and profitably invest their foreign
saving in the province as well as in other parts of the country.
• To create a, diversified and portfolio for utilization of idle funds and their
investment in the pioneering of high-tech agro based export oriented and
engineering projects to ensure maximum returns.
• To participate and seek the share of the province in the capital market of Pakistan
by way of subscription through locally pools resources in the loading stock
Internship Report on The Bank of Khyber by Imran Khan Afridi
exchanges of the country and eventually paving the way for establishing a stock
market in the province.
Mission, broadly stating is the purpose for which an organization exists and why
should it compete in certain sectors and industries, within mission, sometime stated as
purpose, the organization addresses itself to what it intends to accomplish both in the l
long and short run. Mission is a very broad statement of organizational direction and is
normally summarized and documented in mission statement. In the same way, the Bank
of Khyber being an organization has a mission. The mission, documented in the mission
statement as follows:
“We are committed to ensure our ability and to provide resources with high quality
services to our client and to help create a supportive environment for micro business and
export-based venture, while maintains a highly motivated staff”.
2.6) PURPOSE
One of the purposes behind the establishment of Bank of Khyber was to fulfill the
demand of the business community of N.W.F.P, and to have a Commercial Bank with its
Head Office in the Province, to serve more effectively the people of the province. The
Head Office of the bank started functioning in November 1991. Investment processes
previously suffered, due to the time delays, since credit proposals were sent to Karachi
for consideration and approval. Accessibility of local business to senior management of
Bank of Khyber has accelerated the credit decision-making process.
Historically, there has been a net outflow of funds from the province as deposit due to
lack of investment avenues within the province and the absence of locally based
Internship Report on The Bank of Khyber by Imran Khan Afridi
Commercial bank. The Bank of Khyber has filled this gap successfully as it aims to
v
correct the resulting imbalance of promoting savings and investments within N.W.F.P. in
particular, and the country in general.
By that time Bank of Khyber has been working as non-scheduled provincial batik
with the N.W.F.P. Government holding 51% Share while 49% earmarked for the general
public, which had to be offered for subscription at the leading stock exchanges of the
country. The share offering to the general public was expected to be made by end of the
year 1993. The Bank of Khyber is the second provincial bank established in the country
after the Bank of Punjab, which was established in 1989 by the Government of Punjab.
Since 1994, the Bank of Khyber has come under the regulatory framework of
State Bank of Pakistan and operates as a Scheduled Bank at the National level.
Compliance with reserve requirement and other regulatory restriction has a negative
impact on the Bank’s profitability in 1995. However, the ensuring growth in business
expanded the profits of the bank reaching Rs.85 million in the year 1997.
Bank of Khyber has 29 Branches all over the country having Head Office in
Peshawar, Out of these 29 branches, 23 are in N.W.F.P, 2 at Karachi, 1 each at
Islamabad, Quetta, Azad Kashmir and Lahore.
HEAD OFFICE
Branches Branches
In MAIN BRANCH In
Peshawar Peshawar
Charsadda,Branch Nowshera,Branch
Hangu,Branch Tank,Branch
Hattar,Branch Muzaffarbad,branch
Timergara,Branch Lahore,Branch
Islamabsd,Branch Chitral,Branch
Quetta,Branch Mansehra,Branch
All the branches of BoK is fully computerize by new modern technology , before there
was only 19 branches who were computerize out of 29 branches but now all branches are
computerize. The program which used in BoK was “U Bank” which is now recently
change and brought a new program named “U plus”. The bank expecting more change in
the computer department to increase the efficiency of the bank.
Currently the bank employs are 351 regular officers in various departments. They include
01 Ph.D., 168 postgraduates including MBA/MPA/M.COM/M.A/M.Sc from foreign and
local universities and 169 gradates and 13 LLB. The bank provides them with on the job
training. As well as exposure to advance courses and seminars conducted by the Institute
of Bankers, Pakistan and other professional institutes the bank places high priority on
professional education and encourages its employees to sit in the professional
examinations conducted by the Institute of Bankers, Pakistan.
CHAPTER 3
The organizational structure of The BOK also has some specific aims and
objectives. In The BOK, all the structural procedures and systems are designed to serve
customers of the BOK in the best possible manner. The BOK is governed by a board of
directors, consisting of five members, in which the Managing Director of the BOK may
also hold the position of a Chairman of the Board.
A law graduate works as secretary to the board of directors. He calls the board meeting
and maintains the minutes and proceedings of the Board of Directors.
Chairman
/Managing Director
Secretary to BoD is
Secretary to
Director P&E
Khyber Bank.
Internship Report on The Bank of Khyber by Imran Khan Afridi
Organization
Board of Directors
Managing Director
Managing Committee
Personnel &
Banking Operation
Establishment Division
Division
Investment
Branch Operations
Department
MFD
International Banking
Department
P,T&E Deptt.
Credit Divisions
Public Relation
Assets Management Department
Department
3.4) DEPARTMENTATION
i) Departmentation by function
• Credit
• Finance
• Islamic Banking
• Internal Audit
• Information Technology
• International Banking
• Human Resource
Internship Report on The Bank of Khyber by Imran Khan Afridi
• Treasury
3.4.2) FINANCE
polices, management directives and strategy, ensuring that quality budgets and forecasts
are drawn up and consolidated for approval. ix
Finance division exercise budgetary control on all expense and income items at
both Head Office and branch level, ensuring the effective monitoring arrangements are in
place in respect of adherence to budgets/forecasts. It continually reviews the accounting
and control system. It monitors capital adequacy in accordance with regulatory directives.
It leases with external auditors, tax authorities and SBP inspector, and facilitates their
duties. It provides necessary assistance to rating agencies. The maintains financial data
bank and carries out industry financial analysis vis-à-vis banks strength and
opportunities.
The Bank of Khyber has taken the first step towards Islamic banking and for this
purpose an Islamic banking division has been established to complete the necessary
regulatory and operational formalities thereby paving the way for conversion of all
branches of BOK into Islamic Banking Branches
The Islamic Banking aims and targets to implement the decisions of the board of
Directors to gradually convert the whole bank into an Islamic bank within three years
under the supervision of the Shariah Supervisory Board as per Rules and Regulations of
the State Bank of Pakistan. To achieve the target, Islamic Banking Division has devised
an action plan for the expansion and conversion of the whole bank by December 2006
and to develop the business in various areas. According to the plan six branches of the
Bank will be converted into IBBs at the end of 2005 and the remaining in 2006.
Islamic Banking Division is planning to start accepting deposits from all branches
of the Bank of Khyber as per standing instructions of the SBP. Disbursement of the funds
under Islamic Financing Modes through other branches of the Bank well also be
started very soon. Development of Business through Internet is also under active
consideration.
The Internal Audit Division works independent of the management and reports to
Audit Committee of the Board of Directors. The audit committee comprises of three non-
executive directors and the head of Internal Audit Division has freely access to the
chairman of the committee. The Internal Audit Division consists of two departments
namely Audit &inspection and compliance &implementation. x
The internal Audit Division conducts risk based of the bank on the risk matrix
mechanism including compliance audit.I.T Audit and management Audit.
Internal Audit Division provides regular training to its personnel in various fields
of banking to enhance their skill and proficiency. It ensures efficient/effective utilization
of resources and is on the front line with management for risk management, internal
controls and achievements of goals.
The I.T department of the Bank was established in 1994 at State Life Building
and all branches were successfully automated by the year1998. IT department has
progressed in the last eight year and trying its level best to abreast in the field of fast
developing technology. In order to achieve its goals, the management has decided to start
on-line Banking in the very near future, this will facilitate the customers of the bank of
Khyber and they will be able to transfer money between any two BOK Branches through
out the country. Recently, The Bank of Khyber has joined MNet ATM Switch, which is
operated by MCB and allows Bank customers to have access to over 200 ATMs
throughout Pakistan. They are even available in areas like Murree, Abbottabad
and Swat.MNet ATMs are also present in all three main Airports& Islamabad
International Airport. The Network is expected to grow in future.
3.4.8) TREASURY
Treasury was a main source of revenue generation during 2003,for BOK .The
year 2003 was marked with low interest rate, robust capital activities in the capital
market. xii
Keeping in view downward trend in the interest rates, the treasury department has moved
quickly to invest in the medium to long-term government papers, which was giving
relatively higher yields. The treasury also traded in the secondary markets and maintained
trading portfolio of TBs and Pakistan Investment Bonds (PIBs) that had generated trading
profits.
Bank of Khyber is now gearing towards revamping its Treasury would soon assume a
more pro-active role in serving BOK customers, especially the corporate clients. In future
Internship Report on The Bank of Khyber by Imran Khan Afridi
the department will be able to manage corporate customer funds and quote money market
related rates for short-term corporate size loans.
Personnel and Training Department is working in the bank since its anticipation
in 1991. An Assistant Vice President heads the department. The P&T department has
staff strength of seven members.
The P&T department is maintaining all the Human Resource records of salary, leaves,
qualification, promotions and ACR’s.
1. Recruitment
2. Training
3. Allocation of Administrative Budget to Branches & Head Office.
4. Promotion
5. Staff Advances
6. Disciplinary Proceedings
7. Resignation
8. Transfer-posting
9. Salaries, other Fringe Benefits
10. TA/DA
11. Leaves
12. Creation of posts
13. Payment of Dues to Employees Leaving the Bank.
14. Insurance Coverage for employees House Building Advance.
15. Enlistment of Lawyers on Bank’s Panels.
16. To arrange Group Team Insurance for Employees.
Internship Report on The Bank of Khyber by Imran Khan Afridi
The administration and establishment department of the Bank works under the
human resource department .The Assistant Vice President (A.V.P) of HRD
department is responsible for the tasks of these departments .The working strength of
A&E Department is three members. This department works with public relations and
Internship Report on The Bank of Khyber by Imran Khan Afridi
personnel and training departments to accomplish the goals and objectives of HRD
Department.
6. Administrative and over all supervision of the deptt as incharge of the deptt.
7. Putting notes for seeking prior administrative approval of printed and security
stationary from purchase committee and after approval; order and placed to
printer. After receipt of respective consignments; payment notes are submitted
to purchase committee.
Internship Report on The Bank of Khyber by Imran Khan Afridi
An Assistant Vice President (A.V.P) heads the public relations department of HRD. An
officer grade-II is responsible for providing better quality stationary to the employees of
the Bank. PR also deals with coordination with other banks, financial intuitions and
government agencies. This department also helps in arranging bank functions, programs,
& seminars. This department carries out all the activities that will bring good name to the
Bank. This department has connections with the national print & electronic media to give
due coverage to the bank activities.
The Bank Of Khyber has a Network of Correspondent Banks all over the world.
The bank is working hard to provide its customers the state of art Facilities.
Internship Report on The Bank of Khyber by Imran Khan Afridi
CHAPTER 4
Bills &
Remittance
s
Consumer Department Accounts &
Finance Deposits
Department Department
Saddar
Foreign
Branch Clearing
Exchange
Department
Department
Manager
Advances Cash
Department Department
Micro
Finance
Department
Internship Report on The Bank of Khyber by Imran Khan Afridi
The other type of accounts which are opened by the bank are:
i. Security Deposit receipts (SDP’s)
ii. PLS. Notice Deposits or Notice Deposit receipts (NDP’s)
iii. Accounts of minors
iv. Joint accounts
v. Account of sole proprietor
vi. Accounts of partnership firms
vii. Accounts of limited companies
viii. Trust accounts.
ix. Societies/Associations/clubs accounts
For remittances there is no need to open account, as when required. Any person who is of
sound mind according to contract act may involve and can sign the application to enter in
a contract of remittances.
This was the first formal sector of micro finance operation of any of the commercial
banks in the country. So because of the perceived risks associated with micro financial
operations and its high cost of operations, the Bok renamed its micro business
development deptt, to MFU so as to run it as a profit center and demonstrative the
commercial viability of micro finance.
CHAPTER 5
5.3 OBJECTIVES:
Following are the main objective of MFU:
i. Equal distribution of financial resources.
ii. Involvement of small unit of business to long units.
iii. Promotion of employment and income generation.
iv. Creation of sustainable structures to improve access of credit to low income and
disadvantaged segment of the society.
v. Expose the small business product to a large market.
Internship Report on The Bank of Khyber by Imran Khan Afridi
ii) MCF:
Bank of Khyber issues loan for motorcycle. For the last 3 to 4 months Bank of Khyber
restricted this facility to only Poloce and Post office employees. Due to high default rate
non governmental employees has been exempted from this facility.
REQUIREMENT FOR MCF LOAN:
i) NIC.
ii) CIB.
iii) Salary Slip
iv) Driving Lience.
v) 2 Guarantor {same department guarantors, letter of comfort}.
vi) Guarantors’ NIC and Salary Slip.
This loan is given for 3 Years with Markup 16%.
iii) SCF:
The Bank of Khyber also issues loan to its staff. Limit of this loan is up to 40,000 for
3 Years.
REQUIREMENT FOR SCF:
i) NIC.
ii) Staff Loan Performa {signed by head of that department of which the
borrower is employee}.
iii) Employee on contract will show guaranty of Permanent employees.
iv) Permanent employees needs no guaranty.
v) Markup for Graduate employee is up to 14%
vi) Markup for below graduate employee is up to 16%.
vii) Staff Loan
Internship Report on The Bank of Khyber by Imran Khan Afridi
The basic purpose of staff loans is to relieve their employees or staff members
from and type of problem they are facing regarding their accommodation, connivance
or any problem that is going to hurt their performance while they are on the job.
BOK offers 5% of the total deposits of the year for the staff loans. For example, if
the total deposits for the year are 100,000/- then the staff loan for that year will be 5%
of 100,000/- i.e. 5000/-
The criteria and procedure followed for the House Building Finance is as follows;
• The employees applying for this loan should have a length of service
of three years.
• The selected employee for the loan will be paid a loan equal to his
eighty (80) basic pays.
• This loan will be paid in two equal installments. The first installment
will be paid when the application is accepted and the second
installment is given after the property on which the house is going to
be built is Mortgage with the Bank.
• The length of recovery for this type of loan is twenty years (20) OR
240 installments.
• The rate of Mark up for this type of loan is 8%.
The criteria and procedure for this type of loan is followed as;
• The person applying for this loan should have a service period of at
least one year.
• The amount of loan payable for the car is one hundred and fifty
thousand rupees only. (150,000/-) with a mark up rate of 8%.
• The amount of loan payable for the motorcycle is forty thousand
rupees only (40,000/-). There is no mark up on these loans; it is free
of mark up.
• The recovery period for this type of loan is 10 years.
House Building Encashment
This type of loan comes into the frame when an employee or staff member who
has already applied for the house building loan and is accepted for that purpose as
Internship Report on The Bank of Khyber by Imran Khan Afridi
well and during this course he either gets promotion or his salary increase by any
special increment so he becomes eligible for this loan, two things should be checked
while giving this loan,
• Evaluation of the property, what is the value of the property for which
he is asking for this type of loan. For example, if he the loan available
for him is 150,000, then the value of the property should be round
about 170,000/-
• Legal opinion must be taken from the Lawyers in order to avoid the
complications of Audit.
Personal Loans
The criteria and procedure for the personal is that the applicants should havexiv
This loan was first started on commercial basis for general public, but due to the
consistent demand of the staff members of the BOK, it was approved by the higher
authorities and the bank started offering this to its own employees as well.
• The employee applying for this should have five (5) years as a length of
service.
• He/She will have to pay 10% as a down payment.
• The mark up rate will be 6%.
• He/She will have to pay 3% as Insurance per annum.
• The vehicle should be registered at the name of the bank.
• If the employees ha already availed the car loan then it should be
adjusted before disbursement.
• Junior officer, OG-I, OG-II can avail up to Rs.300, 000/-
• OG-I and AVP can avail up to Rs.500, 000/-
• VP and above can avail up to Rs.700, 000/-
Internship Report on The Bank of Khyber by Imran Khan Afridi
iv. Conditions: - This includes all the economic and industry factors that effect the
borrower’s operations. So the lender should also see about each and every aspect
of the business.
v. Collateral: - Risk analysis generally includes a consideration of the borrower’s
ability to pledge assets of on going value.
1. Who is the borrower? Is the branch satisfied about the character? Is the purpose of
borrowing consistent with objective of the company?
2. Is the purpose is legal? What is the amount required? Is the security offered
acceptable and adequate?
3. What is the period of advance and what is the rate of mark up charged? Will it be
profitable to the bank?
To attend the customer varied borrowing need, banks make loans which may be
classified as consumer loans or corporate credits. So during the course of a assessing
borrower’s credit needs, visiting the borrower’s premises and preparation of call/credit
report is of vital importance.
5.7.1VISITING BORROWER:
It is necessary for the credit officer that he visits the borrower premises and
satisfies himself that the loan is taking for the suitable purpose and during visit he must
get the idea about the borrower’s assets and their quality. A credit officer during his visit
asks a set of questions considering a credit facilities for a typical manufacturing unit.
These are sum information which the credit officer can get at the time of visit.
knowledge of the borrower’s current financial position, his past success or failures etc.
the objective of analyzing financial statement is to understand the manner in which the
borrower’s own resources are employed, his liquidity position, the ratio of net worth to
borrowing and of current assets to current liabilities.
The analysis of account should provide answers of the following major areas.
i. Whether the borrower’s net worth justifies the level of credit facilities being
requested.
ii. Whether the current assets are able to meet the current liabilities.
iii. Whether there are sufficient earnings to repay the credit facilities.
iv. How does the amount of equity in the business compare with the borrowed fund?
v. When assessing the borrower’s liquidity position and profitability.
The analysis of financial statements on a going concern basis takes two main forms, first,
various relating to the business at a particular data are examined and various relationships
between them are computed. So this analysis can be vary useful to the credit officer in
understanding the historical cash flow profile of a business.
A. BOARD OF DIRECTORS:
It decides all credit matter, fund-base above Rs 150 M and non-fund based above
Rs 200 M.
B. EXECUTIVE COMMITTEE:
It decides all credit matter fund based above Rs. 30 M up to Rs 150 M and non-
fund based above Rs 50 M up to 200 M.
C. CREDIT COMMITTEE:
The board of directors has delegated credit sanctioning to the managing director who
constituted the credit committee for sanctioning the credited facility they sanction fund
base facilities up to Rs 1 M and non-fund base facilities up to Rs 2 M and scrutinizes all
the proposals received.
The primary responsibility of monitoring credit facilities rest with the branch
since it has direct contact with the borrower’s. Control over credit facilities can be
achieved partly through the maintenance of a good diary system of record such items as:
i. Payment of life policy premium.
ii. Payment of fire & burglary policy premium.
iii. Expiry or renewal of guarantee.
iv. Expiry or renewal of facilities.
v. Expiry or renewal of fixed deposit receipts.
The credit officer also insures that insurance policy is kept by the prompt payment
of premium. Regular inspections should be carried out to insure that the value and
salability of the goods continue to justify the level of the advance. An initial valuation
report by a chartered bank’s approved evaluator must be obtained. Periodical check of the
cash security held by way of lien on deposits or other form of liquid security will be
check by the credit officer, hence the credit officer will monitor all the activity of the
borrower to insure himself.
Internship Report on The Bank of Khyber by Imran Khan Afridi
A. PRELIMINARY ENQUIRER: -
The credit officer in initial investigation approach other banks in same area and
gather information about his credit worthiness also the references given by the
customer are used for gathering information. Central information bureau (CB) of the
state bank of Pakistan is another source for collecting information.
B. CREDIT ANALYSIS: -
Credit analysis refers to the process through which qualitative and quantitative factors
having direct bearing on the business of the customer are analyzed
C. QUALITATIVE ANALYSIS: -
It is carried out to ensure that the credit is extended to ensure that the credit is
extended to a genuine borrower who has the capacity to borrow and a good intention
to pay back the loan to the bank on due date with profit. In this case information is
obtained from the borrowers, their competitors and other stakeholders or the general
observation of the lending bank.
D QUANTITATIVE ANALYSIS: -
For quantitative analysis financial statement provide a summarized view of the
financial position and operations of the business. The analysis of financial statement
Internship Report on The Bank of Khyber by Imran Khan Afridi
The main objective of credit analysis is to avoid problems that may crop up due to
lack of good judgment with regard to the following:
a) Negative Macro indicators.
b) Negative Business factors.
c) Negative management factors.
d) Negative financial indicators.
Internship Report on The Bank of Khyber by Imran Khan Afridi
After sanction but before disbursement, the credit officer must insure that charge
documents are obtained from the borrower, if the credit facility is sanction against
mortgage of fixed assets then it should be register with registrar, in case of company it
should be register within 21 days with the registrar of the company.
5.10.9. DISBURSEMENT: -
Upon the completion of the security / charge documents and acceptance of loan
facility, so can be made in the following mode
The approval limit of the credit facility is recorded and withdrawals by the borrower
through checkups. Markup account with nominal interest of the borrower is opened to
record the accrual and payment of markup on quarterly or half yearly basis. This type of
finance is given only for the working capital requirement.
Internship Report on The Bank of Khyber by Imran Khan Afridi
CASH FINANCE: -
A separate account is opened in the name of the borrower and the cheque book is issued
for withdrawals, and a markup account is opened to record the accrual and payment on
quarterly and half-yearly basis.
In both the case demand / term finance, a liability account with the name of borrower is
debited for the amount of loan and credit to the current or saving deposit account of the
borrower. In case of demand finance it will be repayable in lump sum while term finance
in installment.
Markup account for the concerned borrower is also to record the accrual and payment
of markup.
5.11. RECOVERY: -
This is the most critical activity of credit officer, the following steps are involved
i) Verbal and written reminders to the credits customers for payment of the
banks dues.
ii) In case of protected default, service of legal notice upon the defaulting
borrower.
Internship Report on The Bank of Khyber by Imran Khan Afridi
remedy,
v) Tracing out assets of the defaulting and putting the same to auction
CHAPTER 6
CONCLUSION AND RECOMMENDATION
1. In order to survive and grow in intense competition, the Bank should pay
more and more attention to “Business Development”. Business
development means policies and programs to promote the proper marketing
of different scheme and services that has been already offered.
2. In most of the cases market research and analysis is not carried out.
Projects are launched with pre-conceived ideas, based on personal
judgments and guess. It is very essential for the Bank to carry out a detailed
Internship Report on The Bank of Khyber by Imran Khan Afridi
market research/analysis and in such way can prepare best products like
Maal- A-Maal scheme in the market.
3. The rules and the regulations within the organization and the procedure
must be dynamic, flexible and subject to continuous monitoring and
evaluation.
7. The BOK lacks female staff in their various branches. It is suggested that
more female staff should be recruited and open new female branches.
Internship Report on The Bank of Khyber by Imran Khan Afridi
11. The loan and advances departments should be made free from the political
influence. Because we observe the situation in the past. The political
influence created the stuck up loan problem. And it is very difficult to get
back loans from those people. So BOK should have the policy to
investigate those customers who get loans for a productive purpose or for
any purpose, and after the complete verification the loan should be sanction
then the stuck up loan or bad debt ratio can be decreased.
12. The top management of the bank should make a committee for proper
research and development to identify the customer’s needs and design
some new scheme and strategies to overcome the stated weakness and use
the opportunities. BOK should take some steps to face the threats and they
Internship Report on The Bank of Khyber by Imran Khan Afridi
have to properly plan for the growth of the bank and introduce some new
scheme such as “Apna karobar” scheme to encourage entrepreneurship
development in the province.
13. BOK should have the policy to transfer their employees time to time from
one department to another department then they can have knowledge of
more departments and the job rotation factor can be solved. Then the
employees feel not bored and can work efficiently and effectively.
14. The bank should be made independent of political influence, which will
ensure the efficiency of the bank to vigorously pursue the policies of the
bank for the development of the province
15. To improve the lending position of the bank, BOK must reduce the mark-
up rates. As well as the procedure of loan securing should be made
convenient
16. The bank must increase its network of branches especially in rural areas to
mobilize their savings effectively.
17. The management of the BOK must improve the upward communication so
as to have proper feedback and also to increase employee’s involvement in
the bank operations.
18. One of the problems in BOK is that all the activities and functions are
centralized, which is adversely affecting the performance of the bank.
There is a need of decentralizing some of the functions due to which the
Internship Report on The Bank of Khyber by Imran Khan Afridi
20. The bank should start online banking transitions so as to facilitate the
customer. Because the majority of the private banks have already started
offering this facility. This help BOK to offer 4 hours service and the
concept of banking hours will diminish and the general hesitancy of
customers to walk into a bank will be reduced.
Internship Report on The Bank of Khyber by Imran Khan Afridi
1. Need for simplified legal procedure – e.g power given to bank managers for
sealing of businesses and arrest of borrower (making default a criminal offense).
2. Credit Information Bureau for small loans to check for creditworthiness.
3. Reduce charge document (i.e DP note, Finance Agreement etc) fees for small
clients – e.g. for all loan sizes DP Note amount stamps cost is the same i.e. Rs
100.
4. Simplification of documentation procedure so that one charge document be taken
as a proof of claim against the party.
5. Similarly simpler and less costly method of mortgaging property required in case
of small loans by reducing and/or removing mortgage registration fees.
6. The problem of loaning to pardanashin women in rural areas who have ID cards
without pictures.
7. Restriction on cash receipts from clients outside branch premises.
8. Requirement of less costly funds for on lending. Micro finance operations are
more costly than the normal commercial banking operations. In order to reduce
cost to the borrower (lower markup rate) and increase profitability (higher
spread), cheaper funds in the form of credit line is required..
Internship Report on The Bank of Khyber by Imran Khan Afridi
BIBLOGRAPHY
1) Sekaran, Uma (1999). Research Method for Business, 3rd edition, New York
4) Stephen P. Robbins and Mary Coulter, Management, Ed. 5th, USA: Prentice Hall
Inc, 1998, p329.
5) Annual Report 2003 of BOK p 15
9) Internet (www.bok.com.pk)
10) Rose Peters. (1991). Commercial Bank Manaement.Boston: Donnelley & son
Company.
11) Personal visit to head office & Interview with Mr.Mumtaz Ahmad In
charge HRD
12) Findings during internship at Saddar road branch.
13) CONSUMER FINANCE manual 2006.
Information provided by Mr.Yousaf (In charge consumer finance Saddar
road branch).
14) Information provided by Mr. Abdul Hameed Marwat (Credit officer Saddar
road branch).
15) The Bank of Khyber, Annual Report, 2002.
Internship Report on The Bank of Khyber by Imran Khan Afridi
20) The Bank of Khyber, Personnel and Administration Department Manual 2006.
21) The Bank of Khyber, Consumer Finance Manual 2006.
22) The Bank of Khyber MFU (2005-06), Micro Finance Unit an Overview.
Peshawar.
23) Lot of information from Mr Shahid Amin OG 3 MFU Saddar road.
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