Preface

n order to be able to cope with the changing environment it is necessary to have some practical experience. As the students of Business Administration we have to pass through a series of various managerial techniques. During this practical course

we are provided with an opportunity to learn that how the theoretical knowledge can be implemented in practical grounds. I was selected to do my internship in National Bank of Pakistan Khayaban-e-Sarwar (Gadai) Branch D.G.KHAN. I worked there for six weeks & it gave me a greater practical knowledge about the operations of a bank. In the following pages I have narrated my experience, observations & all the working activities which I observed during my six weeks internship at National Bank of Pakistan Khayaban-e-Sarwar (Gadai) Branch D.G.KHAN.

ACKNOWLEDGEMENTS
I am highly grateful to almighty Allah who gave me the power to complete this report. I am also highly thankful to my honorable teachers for theirs guidance. I am very thankful to my parents, because I may be unable to finalize my internship and my internship report with out their precious prayers. I am also very thankful to all my dear friends, who cooperated with me day and night during the making of this internship report and also in its completion. I am indebted to all the employees of National Bank of Pakistan Khayaban-e-Sarwar (Gadai) Branch D.G.KHAN and special thanks to MR. Zulfikar Ali Khan, Officer Grade 1, who was manager in National Bank of Pakistan Khayaban-e-Sarwar (Gadai) Branch D.G.KHAN.

Mohammad Sarwar

Table of Contents
Chapters 1 Introduction of Sector 1.1 Evolution of banking 1.2 Definition of banks 1.3 Types of banks 2 Introduction of Organization (NBP) 2.1 Banking History 2.2 History of NBP 2.3 Branch Network 2.4 Mission Statement 2.5 Corporate Philosophy 2.6 Objectives 3 Organizational Structure 3.1 Organgram of NBP 4 Major Functional Areas Where Internship Was Conducted 4.1 General Banking 4.2 Accounts section 4.2.1 Types of Accounts 4.2.1.1 Savings Account 4.2.1.2 Current Account 4.2.1.3 Fixed Account 4.2.2 Procedure of Opening an Account 4.2.2.1 Information Required by Bank 4.2.2.2 Documentation In Case of Limited Company Account 4.2.2.3 Documentation In Case of Partnership Account 4.2.2.4 Documentation In Case of Club, Society, or Trust Account 4.2.3 Issuance of the Cheque Book 4.2.3.1 Loose Cheques 4.2.3.2 Payments of the Cheques 4.2.4 Procedure for Closing an Account 4.2.5 Routing of Expenses 4.2.6 Preparation of Daily Activity Report 4.2.7 Preparation of Daily, Weekly and Monthly Statements 4.2.8 Statement for Tax Purpose 4.3 Remittances Section 4.3.1 Instrumental Transfer 4.3.2 Electronic Transfer 4.4 Locker Service 4.5 Billing and Govt. Receipt/Payment 4.5.1 Scrolling Page # 6 7 7 8 10 11 13 14 17 18 18 20 21 23 24 24 24 25 25 25 25 26 26 26 27 27 27 27 28 28 28 29 29 30 30 31 32 32 32

Table of Contents
Chapters 5 Others Areas (Departments) 5.1 Credit and advances department 5.1.1 Credits 5.1.2 Advances 5.2 Types of Loans 5.2.1 Criteria Checked for Loans 5.2.2 Procedure for Sanction of Loans 5.3 Computer Section 5.3.1 Types of Branches 5.3.2 Evening Data Receiving Centre 5.4 Consumer & Retail Banking Section 6 7 8 9 Financial Analysis 6.1 Ratio analysis SWOT Analysis Recommendations Annexure 9.1 List of Standard Books 9.1.1 Registers 9.1.2 Vouchers and Scrolls 9.2 References Page # 33 34 34 35 36 38 42 44 44 44 45 48 49 51 55 57 58 58 59 60

Executive Summary

Chapter 1 Introduction of Sector

1.1 EVOLUTION OF BANKING

It has not so far been decided as to how the word bank originated. Some authors say that this word is derived from the word bancues or banque which mean a bench. The explanation of this origin is attributed to the fact that the Jews in Lombardy transacted the business of money exchange on benches in the market-place; and when the business failed, the banco was destroyed by the people incidentally the word bankrupt is said to have been evolved from this practice the opponents oh this opinion argue that if it was so, then how is it that the Italians money changer were never called Banchierei in the middle ages? Other authorities hold the opinion that the word bank in derived from the German word back which means joint stock fund latter on when the Germans occupied major part of Italy the word back was Italianized into bank. It is therefore not possible to decide as to which of the opinions is correct, for no record is available to ascertain the validity of any of the opinions.

Modern Banking
Banking in its modern form and structure stared in Britain when many of the Lombardy merchants came to England in the fourteenth century and settled in the parts of the city of the London now called Lombard Street. The king Edward III established the Office of Royal Exchanger for changing foreign money at a profit for the benefit of the Crown In 1854 the joint Stock Companies Act opened an era of corporations; and the Limited Liability Act, 1855, restricted the liability of the share holder of the limited company to

1.2 DEFINITIONS OF BANK

(1) Banks do business of money. Rather banks do business of lending and borrowing loans. (2) Banks are guardian distributor of cash money. (3) Banker or a bank or a person or company carrying on the business receiving moneys and collecting drafts for customers subject to the obligation of honoring cheques drawn upon them from time to time by the customer to the extent of the amount available on their current accounts.

1.3 TYPES OF BANKS

Primarily all banks gather temporarily idle money for the purpose of lending to other and investment gain in the form of return, profits and dividends etc. however, due to the verity of resources of money and the diversity in lending and investment operations, banks have been place in various categories, such as Commercial bank Savings bank Merchant banks Mortgage banks Consumer bank Investment bank Central bank

Commercial bank: The commercial banks received deposits from the general public, which are repayable on demand upon written orders of the depositors. As their most distinctive feature the commercial banks maintain the checking accounts for the constitutions. The commercial banks are also distinguished for providing short-term finance to trade, commerce and industry to enable these sectors to expand their productive activities Merchant banks: Merchant banks are those, which have been mainly financing the domestic and international trade. During the late 18th and early 19th centuries the trade between countries was financed by bill of exchange by well-reputed merchants houses for which they would charges a commission for their services Savings banks: The basic purpose of these banks is to inculcate the habit of saving in the people the savings banks deposits are not repayable upon only the written order of depositor but the depositor of his agent has to appear personally at the saving banks to make withdrawal and for this purpose he must present a pass book a certificate of deposit or some similar documents to prove his right to receive his payments. Post office savings banks and savings accounts at national saving organizations are well known national saving banks in Pakistan.

Mortgage banks: These banks mainly deal in loans for acquisition or construction of real estate against the securities of mortgage. Consumer banks: These banks providing finance for purchasing consumption goods for the use of the customers daily usage. Investment banks: These banks assists business houses and governmental bodies to raise money through the sale of stocks and bond for usually long term purposes these banks perform the usual functions of raising deposits of idle money from the public and finance the business houses other bodies. Central banks: Central banks occupy the unique position in banking structure of a country because they have been interested with the responsibility of controlling the money supply, interest rate, and financial market of a country for the purpose of economic development.

INTRODUCTION ABOUT BANKING SECTOR

Banking is the business of providing financial services to consumers and businesses. The basic services a bank provides are checking accounts, which can be used like money to make payments and purchase goods and services; savings accounts and time deposits that can be used to save money for future use; loans that consumers and businesses can use to purchase goods and services; and basic cash management services such as check cashing and foreign currency exchange. Four types of banks specialize in offering these basic banking services: commercial banks, savings and loan associations, savings banks, and credit unions. A broader definition of a bank is any financial institution that receives, collects, transfers, pays, exchanges, lends, invests, or safeguards money for its customers. This broader definition includes many other financial institutions that are not usually thought of as banks but which nevertheless provide one or more of these broadly defined banking services. These institutions include finance companies, investment companies, investment banks, insurance companies, pension funds, security brokers and dealers, mortgage companies, and real estate investment trusts.

Chapter 2 Introduction of Organization (NBP)

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2.1 BANKING HISTORY IN PAKISTAN

At the time of partition the total numbers of Commercial Banks in Pakistan were 38 .Out of these Pakistan had 2 banks, India had 29 and there were 7 exchange banks. The total deposits of Pakistan banks stood at Rs. 880.0 millions where the advances were Rs 198.0 million. Before the partition of Sub Continent the entire banking business was almost controlled and managed by non-Muslims. The Muslims were deliberately kept cut of banking profession by the wealthy Hindu community. When Hindu capitalists became sure of the division of Sub Continent, they secretly began transferring their capital to the safe places in India. The funds and the other valuables were transferred at an accelerated pace to India and there was a mass scale migration of non Muslims from West Pakistan to India which also caused the drain on the bank deposits. The Hindus in order to ruin the economy of the newly born State closed down most of the head offices and the branches of scheduled and non-scheduled banks in Pakistan. The number of scheduled banks branches was reduced from 619 to 213 in both the wings of the country after independence. The non-scheduled banks also suffered a severe jolt and their number was reduced from 411 to 106 over the same period. West Pakistan from where there was greater exodus of non-Muslims to India suffered a great deal, as a number of branches fell down (from 487 to 69). In the East Pakistan though the number of branches were not closed in such a great number as in West Pakistan, large portion of the deposits were with drawn from the banks and transferred to India by the non Muslims. The mass scale closure of branches and withdrawal of the deposits caused a dead lock in the banking business in Pakistan. The government of Pakistan was quite aware of the serious banking situation caused by the withdrawal of deposits and wholesale migration of banking staffs to India. It took up the challenge and started reorganizing the crippled banking immediately after partition. A moratorium of free months was also allowed to banks that had financial difficulty due to sudden withdrawal of deposits.

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Each bank has to open at least one central office in Pakistan where it could consolidate work of all its branches and start paying out to depositors. The government took some effective measures for providing banking training facilities to Muslims. There were some complaints that Hindu banks were not honoring the cheques of Pakistani national and were also refusing to give securities kept in their custody. The government issued an ordinance, which empowered it to investigate all such complaints, and if satisfied of their bonafide, the payments should be realized. In case the bank insisted on non-payments, the government should realize the assets of the banks, which were sufficient to discharge such liabilities. The government of Pakistan also allowed the removal of valuables kept in save deposits vaults and lockers by submitting an application and getting necessary approval from the custodian of evacuee property. The government of Pakistan tried to provide all kinds of facilities with sincerity to the known Muslim bankers for restoring normal banking facilities in the country but the response was discouraging. An inter dominion agreement was reached between India and Pakistan in April 1949. The main provisions of the agreement were as under: The inter dominion agreement could not be fully imported. India delayed the transfer of Muslim deposits to Pakistan. The nondevaluations decision of Pakistan government further led to the suspension of remittance facilities through normal banking channels. Due to panicky withdrawal of deposits; some banks went into liquidation and the payments could not be made to the depositors.

Measures Taken To Develop the Banking System in Pakistan

The State Bank of Pakistan, which is the central bank of the country, was established in July 1948. The National Bank of Pakistan was established on 1949,to serve as an agent to the SBP. The Industrial Development Bank of Pakistan was set up on August 1, 1961 with a Paid up Capital of Rs; five crore. The Agricultural Development Bank of Pakistan (ADBP) was set up in 1961. it provides short , medium and long term loans to the

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farmers. In Jan, 1974 the entire commercial banks were nationalized. The weaker commercial banks were merged with the stronger once and in all five major banking companies were formed. MCB and ABL have again been privatized. Pakistan banking council was set up for coordinating the activities of the nationalized commercial banks. The banking council formulates the policies and guidelines for the banks. Interest has been eliminated from the banking transaction from July 1, 1985. The banks are now accepting saving deposits on Profit and Loss sharing bases. Modaraba and Leasing Companies are also operating in Pakistan. The banks nationalized, due to weaknesses such as over staffing, deterioration in customer services, raising bad debts, loan on political bases etc, are being gradually denationalized. MCB was privatized in April 1991. The shares of ABL have also been sold to its 7500 workers. Permission to open ten banks in the private sector has also been given. The permission to open an Investment bank has also been given. It will go a long way is providing capital for the industrial projects. The government of Pakistan has also liberalized the exchange and payment procedure. The Pakistani firms and companies can now maintain Foreign Currency accounts in Pakistan on the same bases as known Pakistanis.

2.2 HISTORY OF NATIONAL BANK OF PAKISTAN

The normal procedure of establishing a banking company under the Companies Law was set aside and the Bank was established through the promulgation of an Ordinance due to the crisis situation that had developed with regard to financing of jute Trade. The Bank commenced its operations from November 20, 1949 at six important jute centers in the then East Pakistan and directed its resources in financing of jute crop. The Banks Karachi and Lahore offices were subsequently opened in December 1949. State bank of Pakistan after its formation demanded from the Indian Reserve Bank the assets against the Indian currency retired from Pakistan territory. Government of India refused to hand over the assets worth about five hundred million rupees. The dispute is still unsettled and these assets are still not delivered to Pakistan. Until June 1950, the Bank was

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engaged exclusively on jute operation. Thereafter, it was felt that it could expand its business to include other commodities as well. Bank took a big stride in 1952, when it replaced the Imperial Bank of India, as an agent of State Bank of Pakistan. With the passage of time its functioning diversified as they take over the function of different institution with the passage of time like in past they took over the function of Imperial bank of India and now of NDFC (national development Finance Corporation) It is working as the agent of the state bank of Pakistan and performs its functions wherever state bank of Pakistan is not present. The government floated its 10 % of the shares in the open market in past and the ratio became 60: 40 and in future they trying to make it 55: 45.In 1999 national bank celebrated its golden jubilee during the last fifty years bank has made substantial strides in the financial services industry in Pakistan. In 1999 its market share was around 22% and it remains the largest financial institution in Pakistan.

2.3 Branch Network

With the geographical development of its branches, the Bank has been able to extend its services to a much larger number of Pakistanis all over the country. Today it has more than 8.5 million accounts. Bank maintains its presence in all the major financial centers of the world through its 15 overseas branches and 5 representative offices. Of these, three representative offices have recently been set up at Tashkent (Uzbekistan), Baku (Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging opportunities in CIS countries. Banks role globally is well assisted by its network of correspondent banks located strategically in Asia, America, Europe and Africa. Apart from having a vast branch network, Bank is at the forefront in the acquisition and application of new technologies in every aspect of its banking facilities. It has acquired leased telephone lines for on-line banking. The Bank has 12 Regional Computer Centers to cover various on-line and batch system requirements of branches and controlling

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Domestic Branches Domestic Branches

16 Overseas Branches
4 Representative Offices 1 Subsidiary 1 Joint Venture

29 Regional Offices 1,189 Branches

143 Online Branches

4 Subsidiaries

Branch Network: NBP has an extensive domestic branch network of over 1500 branches located all over Pakistan. The Bank also has a presence in 24 international locations including the USA, United Kingdom, Europe and the Far East. And now the NBP is going to open its international branch in India. The branch will be located in the Dehli or the Mumbai. By opening its branch in India, the NBP will become the first Pakistani bank who will operate in the India.

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BRANCHES ALL OVER THE COUNTRY

NBP has the following branch network system throughout the country.

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Ownership:
NBP is 100% owned by the Government of Pakistan (GOP).

Deposits:
NBP holds 24.6% share of time and demand deposits in the country. Local currency deposits comprise 67% of bank's total deposits while foreign currency deposits account for the rest.

Assets:
NBP's total assets stood at PKR350 billion on December 2001. This included total earning assets of about PKR268 billion with gross loan portfolio of PKR140 billion. The bank also has an investment portfolio of PKR91 billion, which comprises treasury securities, corporate bonds, shares and other securities.

Deposits:
As of December 2001 NBP had a paid-up capital of PKR1.46 billion divided into 146 million shares of 10 rupees each. Total shareholders' equity was PKR10 billion, however, revaluation reserve has increased shareholders' funds to PKR16 billion. NBP has, however, increased its paid up capital from PKR Rs. 1.46 billion to Rs. 3.73 billion through issuance of bonus shares (subject to corporate and shareholder approvals). Financial Highlights: Amounts in Million Year to1998 December Total Deposits 235,932 Total Assets 274,117 Total Equity 9,035 Total Loans 85,854 Total 108,207 Investments Net Profit (795) 1999 254,863 310,599 12,232 105,597 106,449 62 2000 273,391 325,320 15,411 109,524 102,969 529 2001 294,754 349,932 15,962 122,294 91,277 (178)

2.4 Mission Statement of National bank of Pakistan

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To be recognized in the market place by Institutionalizing a merit & performance culture, Creating a powerful & distinctive brand identity, Achieving top-tier financial performance, and Adopting & living out our values

2.5 Corporate Philosophy at National Bank

We at NBP believe that our customers are our most important and 1st responsibility, we must, therefore, serve our present customers and promise to serve our potential customers to the best possible on-counter and behind-counter services. We should try to provide a total and integrate package of services to create satisfied clientele. Our braches, regional offices and head office should regard the customer as their most priority, serving them with maximum possible helpfulness and courtesy. Our second most important responsibility is the employees who work for our great institution. They must have their security, stability and fair treatment in their jobs in recruitments and assignment, in training and development, in promotion and placement. Till separation. They should be treated with dignity and should be made to rise to their highest potential working condition should be attended. Supervisor should be tough minded but fair in the pursuit of bank objectives. Our third most important responsibility is our executives and officers. They should have talent, education, experience and ability with a premium, place on commitment, knowledge, leadership and orientation towards action, implementation, improvement and achievement of goals. Our fourth responsibility is to the communities that are served by our great institution. Our 1st community is the Pakistani nation whose service is the reason for our existence. Our 5th responsibly is to our owners and stockholders. We must make a sound profit and protect our business by creating financial services.

2.6

Objectives of National Bank

Objectives are ends towards which an enterprise activity is aimed. The purpose of business is production and marketing of economic goods and services but to accomplish these objectives to a number of enterprise objectives may be necessary. National bank of Pakistan has certain objectives. These objectives are the followings: (1) (2) (3) (4) (5) (6) Advancing loans Accept deposits Remitting of funds Sale of promissory notes Selling and realizing property of bank claims Investment or underwriting of stocks

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(1) Advancing loans:

One of the main objectives of NBP is advancing loans to industrialists and traders against security of stock, debentures or other securities

(2) Accept deposits:

Bank provides deposit facility to its customers. The types of deposits are Profit and loss saving accounts Fixed account Current account

(3) Remitting of funds:

The bank provides the facility to its customers remitting large amounts of money in the form of bank Drafts, Telegraphic Transfer, Mail Transfer to where ever the customers want.

(4) Sale of promissory notes:

To sell and realize the proceeds of sale of any promissory notes, debentures, stock receipts, bounds, shares etc.

(5) Selling and realizing property of bank claims:

To manage sell and realize all property whether moveable or immoveable which may come in any way of the bank in satisfaction of its claim.

(6)Investment or underwriting of stocks:

To invest the funds of the bank in or the underwriting of any of stocks, funds, shares securities, debentures, bonds or scripts or other securities for money issued by any public limited companies and to convert them into money when required.

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Chapter 3 Organizational Structure

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3.1 ORGANOGRAM OF NATIONAL BANK OF PKAISTAN

PRESIDENT and CHAIRMAN

CHIEF REPRESENTATIVE BOARD OF DIRECTOR

PSO & SECRETARIAT SECRETARY

OPERATION COMMITTEE

CREDIT COMMITT EE

ASSET & LIABILITY COM

FINANCE GROUP OPERATIONS GROUP

REGIONA L OPERATIO N OFFICERS OPERATIO N DEPARTM

IT OPERATIONS & SERVICES REGIONAL COMPUTER CENTERS SWIFT CENTERS ATM

LOGISTICS SUPPORT ENGINEERI NG GENERAL SERVICES SECURITY STAFF WELFARE SPORTS

FINANCE & ACCOUNTS DEPT

EMPLOYE E INSURANC E PENSION RETIREME NT BENEFIT PROVIDEN T FUND

CORPORAT E INVESTME NT BANKING GROUP

FOUR OVERSEAS REGIONAL OFFICES FAR EAST EUROPE & USA CENTRAL ASIA MIDDLE EAST

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AUDIT GROUP

RISK MANAGEME NT GROUP

REGIONAL AUDIT OFFICE

REGIONAL CREDIT CHIEF CREDIT DEPT HEAD OFFICE

HEAD OFFICE AUDIT SPECIAL ASSET MANAG EMENT GROUP

IT PLANNING DEVELOPME NT GROUP

STRATEGIC PLANNING AND ECONOMIC RESEARCH GROUP HR MANAGEME NT DEPT

RETAIL BANKING

IT SYSTEM DEVELOPMENT NETWORKING SOFTWARE DEVELOPMENT HR MANAGEMEN T RECRUITMEN T /PLACEMENT COMPENSATI ON BENEFIT PERSONAL DATA DISCIPLINE ORGANIZA TIONAL DEVELOPM ENT & TRAINING PROMOTION PERFORMANCE APPRAISAL GOAL SETTING TRAINING UNION AFFAIRS

ALL REGIONAL CHIEF OFFICER ALL RETAIL BANKING OFFICER

ELECTRONIC PRODUCT AND SERVICES DELIVERY TO OPERATIONS GROUP

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Chapter 4 Major Functional Areas Where Internship Was Conducted

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4.1 GENERAL BANKING

I conducted my internship in the followings major functional areas. All these major functional areas are collectively known as the general banking area. General banking area is also called as the operations group. It consist on following section ACCOUNTS SECTION REMITTANCES LOCKERS BILLING AND GOVT. PAYMENT/RECIEPT AND THEIR SCROLLING

4.2 Accounts section

Accounts Department of the bank can be considered the most important department. This department is basically concerned with processes and activities of recovering, sorting, summarizing and reporting data resulting from the whole day transactions of all the departments. Actually the process of this activity starts from the preparation of all the required vouchers by different related departments. When these vouchers are prepared, these are posted into respective computer terminals by the relevant departments. Before merging, a batch list is printed out by Computer Department and duly checked by the respective departments. After this, merging stage comes, after which a proof list is printed out. This is the stage, where Accounts Department starts performing its function. Proof list is checked by the Accounts Department. This section performs the following functions: Opening of Accounts Issuance of cheque books Closing of accounts Payment of Cheques

4.2.1 Types of accounts

Following types of accounts are opened in NBP Saving account Current or demand account Fixed account

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4.2.1.1 Saving account (PLS)

This type of account is designed to encourage the saving habit of the customer and lead to a long-term banking or investment relationship. Bank saving accounts are in the nature of deposits accounts and are not normally available for drawings. Rates of interest are typically ahead, by a small margin. Saving accounts with the banking sector represent a very small proportion of total deposits. Customer can make any withdrawals from type of account. The cash reserve ratio is typically low them the current account because the withdrawals against this account is very low. The minimum balance for this is Rs.100.

4.2.1.2 Current or demand account

These are those deposits, which can be drawn by the depositor at my time by presenting a cheque to the bank. People deposit their money in this account they gave a ready command on their account in developed and under developed countries of the world, a very significant part of money is kept under current or demand account. On this type of account of interest transfer of cash or by cheque takes place at sight. The cash reserve ratio for this account is very high. The operating cost for the handling of this type of account is very high because withdrawals are very regular.

4.2.1.3 Fixed account

Fixed accounts are those, which are deposited for a fixed period of time and are repayable after the expiry of stipulated time to the customers. Those people who have surplus funds and want to have save investments deposit the amount in the fixed account. The rate of interest given to depositor varies with the length of deposit, i.e. it is higher for longer period and lowers for shorter period. The rates on this type of deposits are higher than the saving bank accounts. The cash reserves against this deposit are very low because there is no fear of withdrawal of a month before the stipulated of time. No paying books or passes book or cheque book is issued to the customers against this deposit to the depositors. The authorities of national bank of Pakistan have the right to revise all these rates of interest with out any notice to customers generally rates of interest are revised after six months. The amount deposited for 7 and 30 days short term notice and accumulated for the period exceeding the limit and the customers can get the interest of the extra days of deposit but in the case of months and years the customer did not get any additional interest for the exceeding period of deposit.

4.2.2 Procedure for Opening an Account

First of all, the customer gets an account opening form from the bank, which requires all information necessary for opening account and also the documents required. An account can be opened as: 1) An individual account 2) Joint account
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3) Proprietorship account 4) Limited company account 5) Partnership 6) Club, society, association and trust

4.2.2.1 Information Required by the Bank

Following information is required by the bank during the opening of an account. Name Address Telephone No. Currency of Account Nature of Business Country of Residency Special instructions regarding the account Signatures

4.2.2.2 Documentation In case of limited company Account

Following documents are necessary during opening account in case of limited company: Photocopy of Computerized NIC of each director Application form Copy of companys memorandum and articles of association List of directors Copy of board resolution Certificate of incorporation Their signature cards Certificate to commence business

4.2.2.3 Documentation In case of Partnership Account

Following documents are necessary during opening account in case of partnership: Application form A copy of partnership deed Signature cards of partners

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 Registration certificate copy A copy of National Identity Card of each partner

4.2.2.4 Documentation In case of Club, Society or Trust Account

Following documents are necessary during opening account in case of club, Society, Association or Trust: Application form Copy of rules Certified copy of resolution Signature cards When the concerned officer is satisfied then he opens the account and gives an account number that will be used in all communications with the bank in regard to the account and when making deposits and withdrawals. Bank has the right not to open an account without assigning any reason or to close the account if it is not operated in a satisfactory manner by the instructions of the head office.

4.2.3 Issuance of Cheque Book

After opening the account, a cheque book is given to the customer to sign upon which the number of cheque book issued and the name of the customer is written. Bank issues a cheque book against requisition. A cheque book may be of 20 (PLS), 10, 25, 50 or 100 leave (current A/C). Rs 3 per leaf as excise duty are charged to the customer. A cheque book register is maintained by the office. In this register, the cheque book inventory, cheque books issues are recorded.

4.2.3.1 Loose Cheques

If any customer forgets or leaves his cheque book at his home, which is far away from the bank or whatever the case may be, the customer applies with the bank for the issuance of loose cheque by the bank as he does not has his cheque book with him and the money is urgently required, the this cheque is called the loose cheque. Bank issues a loose cheque for Rs. 50 as charges for the issuance of the loose cheque plus Rs. 4.50 as excise duty.

4.2.3.2 Payment of Cheques

It is banks primary function to repay the money required for its customers account usually by honoring his cheques. It is a contractual obligation of a banker to honor its customers cheque if the following essential are fulfilled : Cheque should be in a proper form

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 Cheque should not be mutilated Cheque should be drawn in this particular branch Cheque should not be damaged No unauthorized material alterations Funds must be sufficiently available Cheque should not be post date or stale Cheque should be presenting during the banking hours

4.2.4 Procedure for Closing an Account

The customer can close the account. Customer is required to submit an application for closing the account. Then the account is closed out and his balance is paid to him after deducting the closing charges, i.e., Rs. 200 and the application is filed in Account Closing File. Remaining leaves of cheques will also be collected from the customer. The activities of Accounts Department can further be divided as: Routing of expenses vouchers Preparation of daily activity reports Preparation of weekly and monthly statements Preparation of statements for tax purpose.

4.2.5 Routing of Expenses

Vouchers of all expenses and material purchases are routed out through this department. As far as the expenses are concerned, they include the heads of salaries paid to confirmed employees of bank, wages paid to employees that are on contractual basis, rent of the building, lease installment and insurance premium paid to insurance company for the insurance of vehicles and cash in safe and counter. Expenses also include the utility bill, which consists of courier, electricity, water and gas bills, medical expenses, which are reimbursed.

4.2.6 Preparation of Daily Activity Reports

As far as the daily activity reports of this department are concerned, these include the following heads: Voucher collection Loan transactions General ledger transactions Foreign currency related transactions Fixed deposit related transactions

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The checking is on daily basis.

4.2.7 Preparation of Daily, Weekly and Monthly Statements

Daily Statements These statements are sent daily to Main Office Karachi. These are: Daily Affair Statement, which is same as Balance Sheet Statement of Income and Expenditure, which includes the details of income generated and expenses incurred by the bank. Weekly Statements These statements are generated on weekly basis for the purpose of sending it to Head Office. These also include: Statement of affair Deposit and advances position of the bank

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

Provisional statement of income and expenses. This statement adjusted for accruals and pre-payments.

Monthly Balance Sheet and Income Statement Comparative Statement

4.2.8 Statements for Tax Purpose

The department also prepares two statements for the purpose of paying tax on monthly and annual basis. These statements are generated for the purpose of submitting to Central Board of Revenue. These are: 1. Statement of deduction of income chargeable under the head salary

under Section 53 (Tax deducted at source) 2. Withholding Tax from the payments made to vendors, suppliers and

other parties providing various services. The rate of withholding tax is as follows: Suppliers 2.5%

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 For other parties

5%

4.3 Remittances Section

Remittances can be made through: Instrumental transfer Electronic transfer

4.3.1 Instrumental Transfer

Instrumental transfers are following Demand Draft It is an instrument, which is payable on demand and it is only presentable in the city/country. When any draft, i.e., an order to pay money, drawn by an office of bank upon another office of the same bank for a sum of money payable to order on demand, purports to be issued by or on behalf of the payee, the bank is discharged by the payment in due course. When a person requires a draft, he should be asked to complete the prescribed application form in which he should state the amount of the draft, the name of the payee, and the place of payment. The person to those persons, who have been duly authorized to act on his behalf, should sign this application form. An advice is prepared and two copies of this advice are sent to the Head Office. The bank charges 3% withholding tax and commission according to the rate list (minimum is Rs. 200). Pay Order It is an instrument, which is payable in demand and only presentable in city. Pay order is also called the bankers cheque drawn upon the issuing bank itself. It is not negotiable and therefore, bankers tend to cross the instrument Payees account only to avoid the possibility of dealing with instruments with forged endorsement. The pay order is issued favoring individuals, commercial concerns, and government departments. On the presentation of pay order, the bank is liable to pay the amount to the customer. Bank charges excise duty of Rs. 4 and service charges of Rs. 100. Pay Slip It is an instrument, which is issued by bank and used for expenditure purposes, i.e., electricity bills, maintenance bills, security bills, fixture and fitting, etc. Call Deposit Call deposit are not actual deposits of bank. It is in fact the liability of the bank. Call deposit are ofently prepaid by the bank for contractors

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PROCEDRE OF CALL DEPOSITS Following steps are involved 1) Depositor fills the credit vouchers for call deposit. He writes the following information Name of company Amount Date 2) He deposits the cash along with filled voucher in the cash department ENCASHMANT OF CD For the encashment of call deposit needed 5 rupee stamp two signature of customer on the back side of CD token issued accountant make entry in the CD register show that it has returned

4.3.2 Electronic Transfer

Electronic transfer is of following types Telegraphic Transfer It is the message, which is sent from one branch to another on the order of payer to payee through wire. It is one of the quickest means to transfer fund through the use of telex/fax/internet or cable. Payment to the beneficiary is affected directly by the drawee office upon identification or through credit into beneficiarys bank account. As such remitting office is not required to issue any instrument payment to the remitter for delivery to the beneficiary. Issuance and Payment of Telegraphic Transfer Outgoing Application form is filled by the client in whom the name and account number of the beneficiary, which is to be credited and name of customer, is required. For telegraphic transfer, the payment can be made in case or by cheque or by debiting the customers account if he is the account holder. The amount of Telegraphic Transfer should be written on the form. The amount is transferred to beneficiarys account in the other bank. An advice is given to the customer but application is filled in the record of the bank. If the beneficiary is not the account holder of DBL, bank credits a Telegraphic Transfer payable account and when payment is made to the beneficiary, TT payable account is debited. Issuance and Payment of Telegraphic Transfer Incoming When a TT is received then an entry is passed in TT incoming register after verifying the test. When a person comes and wants to encash his TT, bank checks the statements of that person. If the bank finds any account credited to the persons account against TT, bank
31

prepares a voucher for this payment against that TT. The customer then presents that certificate to the cash counter and collects money. Mail Transfer It is the same like TT, but in this type, the message is sent through mail rather than telex. The procedure is same as TT, but the advice is sent through mail rather than wired. Travelers cheques (TC) These are also called TC. Travelers cheques first came into use century ago. Form of travel currency giving to the holder .the security of a letter of credit and convenience of a local currency. In practice, they are acceptable in payments of accounts on board ship, at hotels and in stories. They are in form of a draft. They should be so signed immediately on issue and place is provided on the cheque for the signature of the beneficiary on it.

4.4 Lockers service

National bank of Pakistan also provides lockers facility in the country. The lockers issued only to the depositors. No lockers are issued to any unknown person. The dual control system is used for lockers. The officer has master key to apply on the locker but he cannot open the locker of any person. The locker holder provides the bank has specimen signature. Whenever the locker holders come to open the locker, his signatures are verified by the officer and then will be able to open his locker. If the key of the locker is lost company providing these lockers breaks the locker and new lock is fitted in its locker and lock is destroyed in the presence of the locker holder and bank charges RS 1200 for that. In case the locker holder dies, the court opens his locker in the presence of his heir as mentioned in his will or and his belongings are given to them and the locker is closed.

4.5 Billing and Government Receipt/Payment

This department is performing following functions Collection of utility bills Collection of dues of education institutions Payment of salaries Payment of zakat Payment of pension

4.5.1 Scrolling
It is the procedure of recording of the collected utility bills and the recording of the payment of the pension. All utility bills including the bills of PTCL, SUI GAS, MEPCO, and the PASSPORT bills. Furthermore the pension that is paid is also being scrolled. This

32

recording is sometimes MANUAL and sometimes it is done through the COMPUTER (MS EXCEL).

Chapter 5 Other Areas (Departments)

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5.1 CREDIT AND ADVACNECS DEPARTMENT 5.1.1 Credit

It may be defined as The sale of goods and services and money claims in the present in exchange for a promise to pay in future. The most important activity of the bank is the granting of credit to the customers. NBP provides short term long terms financing for domestic and international trade. The policies made by central office of the cash can be amended on the basis of the rules and regulation, economic risk of each country board of directors and committee of the NBP made this type of decisions and informed about these decisions to the branch managers. Manager can grant the credit limit to each customer with in the declared limits approved by the controlling offices i.e., co, GHQ, circle and zonal. Banks grant credit to the customer for a certain period of time. The banks provided credit to the customers so that they can purchase ahead of their liability. By giving these facility to the customers large scale production of commodity can be achieved and economic growth rate can be increased. The power to sanctioned loans had been delegated for controlling different offices, according to amount of loan. This department is also called as risk management group. The following elements are used for credit selection.

Character
It is based on the borrower willingness to repay the obligation. The loan officer sees the family background mode of living, business nature, habits, moral reputation and etc. before giving the loan.

Capacity
The ability of borrower to repay the loan when it is due. The borrower ability to repay the loan is assessed by the office so that he will be able to repay the loan in future.

Capital
The officer assesses the capital of the borrower. If assets held by the borrower are liquid, they can be easily convertible in cash; but if non liquid is used then it is risky to given loan.

Collateral
t is collateral security. It may consists of stocks bonds , bill of exchange, bills of lading, etc. the bank has protect him self from any discrepancy in the future. They increase the ability of the borrower to obtain the funds from the bank.

Condition
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The economic condition of the borrower is determined. The economic conditions of the borrower in and out side the country effects the repayment of loan. If condition is favorable then loan is given otherwise vice versa. .

5.1.2 Advances
Advances provided by the bank are of the following two types. Funded Non-funded

Funded
In fund based bank contributes a large amount of the fund based on clarified as follows TYPES OF ADVANCES Demand Finance One time disbursement of the whole amount sanctioned, as the limit for the credit allows. Any person, individual, group, company, firm and all others can achieve this mode of financing. The mark-up or interest is calculated on the total amount disbursed and requires to be paid before the date of final adjustment. Regarding the amount, limit and period, it depends on the nature of the case in review. Cash Finance In this mode of financing the borrower is allowed to make withdrawals of funds as he requires, but the total amount outstanding cannot exceed the limit sanctioned. The markup/interest is calculated on the amount outstanding on his account. The calculation of mark-up/interest is based on the number of days a specific amount is withdrawn. This finance if normally borrowed by small traders or individuals for their petty matters involving cash transactions up to rupees three hundred thousand maximum. Running Finance To assist a large-scale business operator to carry on his day to day requirements of liquid funds, this account is opened is made operation in his favor. Running finance is provided where the amount goes beyond rupees three hundred thousand. The mark-up/interest is calculated the same way as in case of cash finance. Security against running finance is that which is easily convertible in to cash and bank kept 25% margins with it.

Non-Fund

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Bank provide non fund advance in the following form: Guarantee Imports

Guarantee
A guarantee is a promise between one person to another person or party to answerable for the debt of a third party. Bank issues guarantee after 100%cash collaterals are provided by the person i.e.50% in the form of the property.

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

Sight LC Usance or DA LC.

Sight LC In this type of L.C when payment is made documents are released. A cash margin of 30% is relational by the bank. Usance or DA L.C The bank retains the payment after a period of days, which is given in the L.C a margin of 30%.

5.2 TYPES OF LOANS

The credit department of NBP is providing the following types of loans 1. Short term loans 2. Long term loans 3. Working capital loan 4. Syndicate (project) loan 5. Monitoring

Documentation in short term financing

Demand promissory note Mark up agreement

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Letter of guarantee in personal capacity Letter of authority Letter of pledge Memorandum of deposit of title deal

Status reports
A credit report is an assessment of borrowers character and capacity from a bankers point of view. Credit reports on borrowers called Status Reports, financial reports, bankers opinion or confidential reports. All these terms carry more or less the same meanings. The study of a borrower is a study of his character, capacity and capital, and collateral often known as the 4Cs to consider his credit worthiness and eligibility for the bank advance. The purpose of compilation of credit report of the borrower is to assess their net worth. It must contain information about borrowers means, character, integrity, assets, liabilities, business and experience. Besides, borrowers own investment, details of properties, must be obtained. The borrower may be asked to give written clarification of their existing liabilities. In the case of Limited Companies, their borrowing powers to be verified from their Memorandum & Articles of Association. Their certification of incorporation to be examined, exiting borrowings, prior charge on their fixed assets, paidup capital, reserves, profit and loss position, detailed particulars of their directors and complete analysis of balance sheet must be incorporated in the credit report. Independent inquiries about the borrowers and opinions form their previous bankers must be made. As such a comprehensive credit report is compiled which serves as a constant guide to the banker about his borrower. This report is prepared by the bank of the intending borrower with a view to considering his Credit Worthiness and Eligibility for the Bank Finance. Besides other things it contains the net worth of the borrower.

Net worth of borrower

Individuals Net of the individuals worth is the total investment or equity of the sponsors/borrowers in the company through which they are asking for credit and in the other sister concerns. Firms Total investment in Business + Properties liabilities Paid-up-capital + Reserves + Profits (Losses)

The Investigation process

1. Knowing the market place 2. Risks inherent in lending Management risk
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 Market risk Earnings fluctuations risk Default risk Marketability risk

5.2.1 Criteria checked for loans

Following criteria are major in the checking of the loans issuance: 1. Financial Conditions Financial conditions should be reflected in the following terms Net sales Gross sales Operating profits Net profits (at least for the last 3 years) 2. Structural Liquidity It refers to the extent of liquidity usually available in the business, or which is the routine requirement of the borrower based on the nature of his periodically maturing liabilities. 3. Industry/Business of Operation The banker has to check that in which industry or segment of market the loan is being given this is important because if there were a recession in that industry for decades then it would not be feasible to invest in such a business. Certain traditionally stable industries are in Pakistan in which NBP feels satisfied while investing. For example in they feel satisfied by investing in ICI. 4. Debt Equity Management Excessive reliance on debt, rather than plough back of profits or injection of fresh equity, to maintain a healthy combination of debt and equity is thought with danger because ultimately the debt servicing requirements place a heavy burden on its liquidity thereby its survival.

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5. Asset Management Asset management involves the analysis of how productively the assets of the company are being used. Sales and profitability can be measured with this. 6. Borrowers Credit Worthiness In order to get a complete picture of the borrowers credit worthiness, inquiries will have to be made about: His business. Trade experience. Assets and liabilities. His account with bank or with other banks. His financial statements and income tax returns. An interview with him will be necessary to elucidate or supplement the information that may have been collected. 7. Management Before giving loan NBP also checks whether the management have the depth, skill and experience. If the management is aggressive and adoptive to the new changes then it is most likely that the banker may receive the loan back on due date 8. Securities In case the borrower is not in a position to meet his obligations, there must be something else to call back upon. So bankers take securities to have a resource to them to guard liquidity, that is, security is an insurance against calamities. In case of cash finance the customer have to give the same amount of money to the NBP as a security for which it takes loan.

Condition for security

The security must be liquid or radically convertible to cash with more then adequate margin of safety fully under the banks control, having high value, which can with stand volatile market condition. Secured by acceptable immovable tangible collateral with necessary margin and fair degree of marketability under the forced sale situation (should have buyer).The types of securities may vary from a piece of land or building to commercial papers or ornaments. Further, security has its own importance, not only as

39

constituting the ultimate source of recovery in the event of failure of the borrower or his enterprise, but as providing a measure to the borrowers own stake in the enterprise and also placing the limitation on his future borrowings. However, though security serves as a cushion to fall bank upon in case of need, but its adequacy alone should not form the sole consideration for judging the suitability of the loan. So the choice of security is not made in isolation, but keeping into consideration the customer and security offered together.

Guarantees
A grantee is defined as An undertaking by a person to responsible for the debt of another person. National bank of Pakistan issues guarantees to government agencies like atomic energy, high way department, and customs arthritis. Sui northern gas and others. It also issues guarantee to multinational organization like Siba gigay, Sandoz, PBS, and etc. for the purchase of pesticide or insecticide from any fertilizer company. Bank accepts only long other bank guarantee but in some cases personnel guarantee is also accepted. The guarantee issued is treated as contingent liability. According to local rules and regulation the policy for issuance of guarantee can be changed. The expiry of the guarantee can be set by both bank and guarantor. The minimum period is one year and the guarantee can be reissue for extra period with paying charges. The two officers whose signatures appears in the specimen signature book of bank and also counter sign by the zonal chief must sign each guarantee. Both officers must also sign any amendment. Am amendment in the guarantee can be made after giving written application to issuing branch. If the value of the guarantee is reduced by the amendment the liability amount will be reduced and if will value is increased additional liability entries will be passed. The bank provides following types of guarantees to the customers. Bid bond Mobilization bond Performance bond Bid bond The facility provided at the time of bid opening is called bid bond. Mobilization bond When the bid is accepted, the bank provides this type of facility to the customer. Performance bond
40

When the project is completed, the contractor about the performance of the project provides a performance certificate for one year. During one year, if there is any mishap in the project the repair otherwise authorities claim the performance charges from the bank. Bank charges commission on issuance of guarantee as per their schedule of charges. If the party did not pay the amount in the stipulated time period, bank puts this case for recovery. If some amount is recovering then it is good otherwise bank deduct the amount from its profit and starts the legal procedure against the property pledged by the customer to bank. Bank assesses the demand of the customer and then writes letters to other banks to provide them confidential report of credibility about the customer this is one provided in the shape of CIB (credit information bureau) report provided by the SBP. In this report the credits of the customers with the bank operating in Pakistan are given. After checking this report the bank issues the guarantee to the customer. In case of death of his heir as given in the will be responsible for that guarantee.

Security
It is an interest or right in the property gives to the creditor to convert it in cash in case of debtor fails to meet the principal and interest. The bank provides the following securities to the customers.

Mortgage
Transfer of interest in movable property for securing the payment of money lend on existing or future liability. The bank provides the following two types of mortgage. Registered mortgage Equitable mortgage RegisteredMortgage Registered mortgage is provided on the residential property, commercial industrial property, raw plot, etc. A party can get registered mortgage if they provide the following documents to the bank. Title deed Non encumbrance (NEC) pit form (in case a constructed hose) Valuation certificate Affidavit Mortgage deed Personnel guarantee of mortgagor Power of attorney Legal opinion.

Banks examine all these reports, and if they are correct then issue the mortgage to the party. The bank examines these reports to see that the property they want to mortgage is registered and is not already pledged. The bank also calculates the value of the property
41

and

the

legal

opinion

of

the

customer

in

case

of

non-payment.

Equitable mortgage Equitable mortgage is provided on the residential property, commercial industrial property, raw plot, etc. Title deed Non encumbrance certificate Pti form (in case a constructed house) Valuation certificate Affidavit Memorandum of deposit of title deed Personal guarantee of mortgagor Power of attorney Legal opinion

In this mortgage a charge form bound the customer for any legal action in case of nonpayment. In this type of mortgage hypothecation of stocks involves. Pledge A pledge is an a class security given to customers for stocks ware house, customs, and etc. it is defined as actual delivery of movable property to lender as security for a loan. When the customer makes the payment of the loan in full he can back his mortgage property from the bank i.e. when full payment is made the stock is released.

5.2.2 Procedure of sanction of loan

In Credit department 1st step is to preparation of credit line proposal for the preparation of credit report. For this following information required by the bank from the party Purpose of loan Details of all firms or companies associated with business Name of proprietor/ partner/directors Accurate and up-to-date balance sheet and profit and loss statement of last two years of business Market report of the borrower repute Report from the bank if borrower has maintain his account with the bank CIB report Full details of existing limit and actual liability against the business Particular about the foreign exchange deposits and bills given by the borrower to the bank

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 Memorandum and article of association in case of limited company Audited report of balance sheet and income statement of last two years After checking all the securities, customer verification the manager done the following tasks 1. Preparation of credit proposal 2. Prepare the about the customer 3. Sanction of loan

1) Preparation of credit proposal

After formal application for the credit the party submits approval. For this purpose borrower can use coarse paper or the form provided by the bank. Along with the application borrower also submits the documents required by the bank. The bank manager evaluates the documents provided by the borrower. He gets the partys credibility report confidentially from the other commercial banks. He checks the balance sheet and income against the assets in the company. He also measures the percentage of owners equity. Then he doses the ratios analysis of the company. If the party is involved in the export and import business then the data of the last three years of this business is considered. The manager of the bank also examine the project violability, the securities provided by the debtor to the bank are evaluated by measuring their worth. In the case of pledge is assessed by the manager while in case of new party manger checks from where the party is financing for their business

2) Prepare the Proposal about the customer

After preparing the proposal manger prepare the report about the customer. Report contains the following information Name of the company Date of establishment Address Nature of business Branch office Worth of business Date Bankers opinion Head cashier opinion Branch manger opinion In case of partnership business following informations is included in the report Partner, their share in capital, profit and loss Deed of partnership Partnership letter Turn over Net profit Personal property of partners Bank balance of partners

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 Advance payment of suppliers Particular of machinery installed in the factory through financing Incase of corporation/limited companies the following information are included Incorporation and commencement of company Sales offices Capital information Directors and their contribution to capital Balance sheet with explanation and evaluation Net worth of the company

3) Sanction of loan
If the limit of the loan lies with in the power of manger then he sanction the loan otherwise manger with the covering letter along with all necessary documents sends it to the concerned sanctioning authority.

5.3 Computer Section

Through this department bank has make its way to enter in twenty first century. This department is playing a very important role in making the banking procedures faster and helping the bank for providing new services to its customers. This division provided the bank with online branches, systems to make the whole procedure foolproof.

5.3.1 Types of Branches

There are three types of Branches in all over Pakistan of NBP 1. Online Branches: The branches, which are directly, link with central computer AS-400, through wide area networking through fiber optics. These branches have dumb terminal directly linked with central computer. Yet only forty-four branches all over Pakistan are online. Of these fortyfour, seventeen are located in Karachi, seven in Lahore, two in Islamabad and two in Multan and two each in other regional head offices. 2. Batch Branches: The branches where all transactions are carried out with the computer base system but these branches are not connected to the central computer with wide area net working. Batch branches are using three type of system, Branch Back Office (BBO) based on FoxPro, Branch Automated System based (BAS) on UNIX, Branch Integrated System (BIS) based on FoxPro in Karachi mostly branches are facing this problem. BAS was establish in the beginning while BBO is currently implemented now efforts are under way to convert all branches into Electronic Banking System (EBS) which is used by online branches as this system does not require a person to remain sitting till the branch closed its daily operation but the system automatically close it self when the branch timing is over. The database in head office is also based on this system. 3. Manual Branches:
44

The branches where all transactions are carried out manually and records are maintained on registers usually stored in big wardrobes. All branches in Pakistan report to there regional head office regarding there daily transaction. In the RHO through On Line, terminal data goes to head office central computer; Except for branches those are On Line as they transfer there daily data directly through there own terminal. As day-to-day, activities of all branches are recorded in a central computer.

5.3.2 Evening Data Receiving Center

Data form batch branches reach the main branch in floppy diskettes while form manual branches it is in form of hard copy. Data comprises of transactions in profit loss account, current account, advances etc termed as Daily Transaction Report. Clerk in charge register all diskettes and manual in registers called job booking register one for each of two type of data. These floppies and manual are bring in by riders. There are fourteen riders in total who bring information form all branches located in Karachi region. Data Entry Department The next task after receiving the data is to enter that data in to a computer. The floppy disk is directly inserted in the computer. The program in used is based on COBOL language. This program is designed in away that it demand Hash Value value before opening the floppy for further action this value serve the purpose of password or pin code send by the branch on entering that value the data enter in to the computer. This computer is attached with the terminal of central computer. The operator of that terminal takes the data from the computer and converted it in to a text file through that terminal the data finally goes to the central computer. Defects and Error Handling Errors of different origin occur when the data goes to central computer. Sometime retrieving data from the system (BAS, BBO, and BIS), other than used in HO (EBS) also caused errors. Other errors include Unmatched (This error occurs when document no matched with the previous one exists), no master (when opening of new account is not mentioned), Date in Valid, duplicate cheques (this error occur when the last objection is not removed). These and other such errors are seen by the person in charge. In the end of day print out of the data enter in central computer is taken. Any Incomplete information for any branch and any information require by that particular branch is sent to that branch. More over material is used to make a WST which is sent to State Bank of Pakistan.

5.4 Consumer and Retail Banking Section

Consumer and retail banking department is offering two facilities to their customers 1) NBP Advance Salary 2) NBP Student Loan Scheme 3) NBP Rozgar Scheme

45

1. NBP Advance salary

NBP advance salary facility allows you to draw three months salary in one go. NBP advance salary offers you Take up to three months advance salary take home Fastest processing and immediate disbursement Easiest facility for 1 to 36 months Minimum documentation Eligibility This facility will be available to permanent employee of Federal and provincial Govt. Semi Govt, autonomous, semi autonomous, local bodies and Govt corporations Other corporations and organizations approved by NBP Those who qualify for this scheme should have: Three years of service age remaining Salary account at NBP Limit of Finance Three net take home salary Customer must have account with national bank which show last three months salary in his/her account Calculation of limit Average of three months and minimum salary which ever is less taken it as base and multiply it by three Maximum duration of loan Three years is max duration. Requirements Following requirements are necessary for this scheme: Three months salary certificate NIC photocopy Auto roll over form Application form IB-12 Three undated cheques Annexure C Annexure D Account opening form

Procedure
After filling the application customer signed it with his salary-disbursing officer then under taking is officer approving it. Open the account that is calls separate loan account, which is once Debit and many time credit.

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2. NBP Student Loan Scheme

Pursuant to the announcement made by the Federal Finance Minister in his 2001-2002 budget speech, a STUDENTS LOAN SCHEME (SLS) for Education was launched by the Government of Pakistan in collaboration with major commercial banks of Pakistan (NBP, HBL, UBL, MCB and ABL). Under the Scheme, financial assistance is provided by way of Interest Free Loans to the meritorious students who have financial constraints for pursuing their studies in Scientific, Technical and Professional education within Pakistan. The Scheme is being administered by a high powered committee comprising Deputy Governor, State Bank of Pakistan, Presidents of the commercial banks and Deputy Secretary, Ministry of Finance, Government of Pakistan. ELIGIBILITY Under the scheme the students are eligible to apply for loans provided 1. He/she has obtained admission on merit in the approved universities/ colleges of the public sector mentioned hereunder. 2. he/she falls at the time of admission within the age bracket of:For Graduation Not exceeding 20 Years For Post-Graduation Not exceeding 30 Years For PhD Not exceeding 35 Years 3. He/she has secured 70% marks in the last public examination 4. He/she has undertaken the study of the subject given below 5. He/she is unable to pursue studies due to financial constraints. TYPES OF LOAN The loan facility will be available for entire duration of the study for:Schedule Fee Paid directly to University/College Boarding expenses excluding meal charges Procurement of textbooks--- Disbursed directly to the student REPAYMENT The maximum period of repayment of loan is 10-Years from the date of disbursement of first installment .The borrower shall repay the loan in monthly installment after six months from the date of first employment or one year from the date of completion of studies, which ever is earlier. Under the Scheme, loans are available in the following subjects. i) Engineering ii) Electronics the

47

iii) Oil Gas & Petro-Chemical Technology iv) Agriculture v) Medicine vi) Physics vii) Chemistry viii) Biology, Molecular Biology & Genetics ix) Mathematics x) Other Natural Sciences xi) DAWA and Islamic Jurisprudence xii) Computer Science/Information (LL.B/LL.M Sharia) System and Technology including hardware. xiii) Economics, Statistics and Econometrics xiv) Business Management Sciences xv) Commerce

Chapter 6 Financial Analysis

48

FINANCIAL ANALYSIS FOR BANK Financial year

The financial year of the Bank commences from the 1st day of January and ends on the 31st day of December every year.

Non-performing loans
As on 31 December 2005, the Bank's non-performing loans (NPLss) amounted to Rs. 30,323 million, which was 19.11% of total advances as against 21.48% as on 31 December 2004, showing an improvement of 2.37%. Provision against non-performing advances was Rs 18,296 million as on 31 December 2000, which is 60.34% of NPLs. This high ratio reflects prudence of the Bank's management while determining provisions. Remaining NPLs are covered by forced sales value of mortgaged property, Federal Government Guarantee or are in category other than loss. The Special Assets Group at Head Office with full co-ordination between field functionaries and Head Office is monitoring NPLs and deals with the classified portfolio of the Bank along with Remedial Management, Legal framework, Statistical Analysis of classified accounts, Revival of Sick Industrial Units, Consortium Financing and Ex-Mehran Bank Limited affairs etc.

6.1 Calculation of Different Ratios Earning assets to total assets

Earning assets to total assets = Earning assets / total assets YEAR 2004 Earning assets to total assets = 286230528 / 17510437 =16.34 2005 Earning assets to total assets =319676497/23936263

49

=13.35

Return on earning assets

Return on earning assets = profit after taxation / earning assets YEAR 2004 Return on earning assets =1148529/286230528 =0.004 2005 Return on earning assets =2253385/319676497 =0.007

Loan loss coverage ratio

Loan loss coverage ratio = provision against non-performance loans profit or loss before taxation YEAR 2004 Loan loss coverage ratio =2926554/3015629 =0.97 2005 Loan loss coverage ratio =1822154/6044811 =0.30 &advances/

Equity to total assets

Equity to total assets = total equity / total assets YEAR 2004 Equity to total assets =11958673/17510437 =0.68 2005 Equity to total assets =14279303/23936263 =0.60

Deposits time capital

Deposits time capital = deposits/ capital YEAR 2004 Deposits time capital =33123726/3730384 =8.88 2005 Deposits time capital =13248569/3730384 =3.55

Loans to deposits
Loans to deposits= loans/ deposits YEAR 2004 Loans to deposits =170319096/33123726
50

=5.14 2005 Loans to deposits =140547374/13248569 =10.61

Current ratio
Current ratio=current assets / current liabilities YEAR 2004 Current ratio =79155081/2245349 =35.25 2005 Current ratio =55531453/3365744 =16.50

Chapter 7 SWOT Analysis

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STRENGTHS WEAKNESSES OPPORTUNITIES THREATS (SWOT) ANALYSIS STRENGTHS

NBP one of the largest financial institutions of Pakistan with eight million of customer base NBP holds 24.6% share of time and demand deposits in the country. Local currency deposits comprise 67% of bank's total deposits while foreign currency deposits account for the rest. NBP has an extensive domestic branch network of 1365 (according to the latest data) branches located all over Pakistan. The Bank also has a presence in 22 international locations including the USA, United Kingdom, Europe and the Far East. NBP cash provision as percentage of non performing loans equal to 60% this coverage factor for the non performing loans is the highest amongst the nationalized commercial bank. NBP is working as right arm government of Pakistan as it is responsible for all claims of government for recovery as well as payment. All depositor of NBP are in relief that their money security is guaranteed by government of Pakistan. It acts as an agent of the Central Bank wherever the State Bank does not have its own Branch.

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WEAKNESSES
NBP staff especially at lower considers their work as burden. They usually waste time in other task a part in performing their duty. Using government property for there own need. They are reluctant to accept change brought by latest restructuring efforts. The general out look and interior layout of branches are not as required according to modern banking NBP bearing up large burden in running those branches, which are not producing any income but keep on adding expenditure. NBP is relying on its traditional sources of income it has not taken benefit from innovation in banking like introducing retail banking or consumer banking and using any type of scheme to generate more deposits and producing more advances. Further, more dont even continue its credit card due mismanagement and lack of control. NBP is far behind in offering modern banking facility like automated teller machines then other commercial bank in Pakistan as only some branches in all over country have this facility. Data gathering from those branches which are not online, is time consuming, and not fool proof. Quantum of settlement within different branches is pending because of this updating daily record is becoming very difficult. Customers have to fallow long lengthy procedure for opening of account as well applying for debt, which discourage most of the people to invest in NBP. In NBP, most of the time,merit not has importance in hiring of employees. Such practices are black spot on the face of bank and resulted big losses and fraudulent acts by NBP own employees.

OPPORTUNITIES
NBP current management has boarder vision. They have taken steps to improve customer services, streamline internal procedure and creating a delectating climate for technology initiative. To achieve above mention objective they have created operation group Starting of the retail banking initial working. Setting of target for of making at least 300 branches country wide on line.
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Closing of all those branches, which are burden on NBP. Management to offer specialized services to major corporate including advisory and debt syndication introduces the concept of relationship manager. Comprehensive training programs has been develop to up grade the core banking skills of the existing staff as well as integrate high quality hiring. To improve the motivation of staff a merit-based culture is being promoted.

These opportunities will make NBPs future prosper and can make NBP not less than any modern commercialize bank in Pakistan.

THREATS
Major threats NBP facing is from its competitor especially from denationalized commercial bank. In which MCB is on the top of the list, The Bank provides 24 hour banking convenience with the largest ATM network in Pakistan. Retail banking and consumer banking resulting in the products such as credit cards, and automobile finance lending to small individual consumers, and purchases of automobiles, housing, and consumer goods are generally made on a cash basis. These are causing another threat, if not counter will result in significance loss of customers Recently banks and other financial institutions have introduced innovative schemes to attract deposits, like gift checque scheme by MCB. These schemes offer prizes on short and long term fixed deposits, through lucky draws. Now banks are using technology which covers the distance no matter how far away any one, through a satellite based, on-line real-time banking system and by offering telephone banking, electronic funds transfer, E-Banking and other modern facilities.

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Chapter 8 Recommendations

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RECOMMENDATIONS
NBP should be in pace with on going changing in banking industry, like other bank. Now this bank combining all it power and trying to approach other banks. Latest reorganizing efforts are necessary to make it cost effective also making its facility accordingly to modern banking. These must continue. Bank management has to put its all effort to change the prevailing culture of the bank and to put the foundation stone of business oriented culture. In which employees give important to the bank and its customer. To attract the customer in the future NBP should give more facilities of retail and consumer banking. Plus the technology in the banking is another week area need to be stressed. The outlook and interior lay out of the branches should is another be improved. The procedure of taking services from the bank must be made easier and straight forward not involving long difficult procedure for simple task.

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Customers should be given importance and should be treated in well behaved manners.

Chapter 9

Annexure

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9.1 List of Standard Books

Some of them are used now and some of them are used earlier. Some of them are also used in the main branches only while some of them are used in the small branches only. In this list of standard book, B stands for the registers while F stands for the vouchers and scrolls.

9.1.1 Registers
Description Attendance Register (revised) Leave Record Register Bank Cash Scroll/ Manager Scroll Token Register Bank Transfer Scroll Subsidiary Day Book of Credits to Accounts Analysis of Internet, Exchange, Commission and Discount Register Register of Balances with other Banks Power of Attorney Register Branch Documents Register Current/Cash Credit/Savings Bank A/C Index Register Cheque Book Register Current/Cash Credit Account Ledger No. B-1 B-2 B-3 B-4 B-5 B-6 B-13 B-14 B-15 B-16 B-17 B-18 B-19

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Cheques Referred & Returned Register Progressive Balance Book Stopped Cheques Register Lost Documents Register Inoperative Current Account Register Fixed Deposit Register Fixed Deposit Internet Register Short Term Deposit Ledger

B-20 B-21 B-22 B-23 B-24 B-25 B-26 B-27

9.1.2 Vouchers and Scrolls

Description Declaration of Secrecy Advice of Change of Incumbency of a Branch Relieving Managers Certificate Confidential Report Officer Confidential Report Last Pay Certificate Record of Service T.A Bill Form Staff Position Statement Quarterly Managers Monthly Certificate General Receipt Form Weekly Statement Abstract Weekly Statement Abstract (Discounted) N.B.P General Account Daily Statement N.B.P General Account Credit Originating (Fanfold Set) N.B.P General Account Debit Originating (Fanfold) N.B.P General Account Credit Originating (T.T Set) N.B.P General Account Credit Responding N.B.P General Account Duplicate Credit (Originating Set) (One Leaf)
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No. F-1 F-2 F-3 F-4 F-5 F-6 F-7 F-8 F-9 F-10 F-11 F-12 F-13 F-14 F-15 F-16 F-17 F-17(A) F-19

N.B.P General Account Duplicate Debit Originating Set (One Leaf) General Voucher Credit Specimen Signature Card Reminder for Acknowledgement of Cheque Book Objection Memo Statement of Account Balance Confirmation Credit Balance Confirmation Debit Balance Certificate

F-20 F-51 F-65 F-70 F-71 F-73 F-74 F-75 F-76

9.2 REFERENCES
I have concerned the following resources for the making of my internship report. These resources include the different employees of NBP, different relevant internet websites and the annual report of NBP. WEB REFERENCES: 1. www.NBP.com.pk 2. www.bankshistory.com 3. www.financewise.com 4. www.ventureline.com 5. www.google.com 6. www.yahoosearch.com 7. www.hotmailsearch.com 8. www.gmailsearch.com 9. www.ask.com 10. www.allrefers.com

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11. www.reports.com ANNUAL REPORT REFRENCE: Annual Report of National Bank of Pakistan PERSONAL REFRENCES: I used following personal references during completion of my internship and internship report. 1. Zulfikar Ali Khan (OG 1 NBP) 3. Adil Shehzad (Worker NBP) 2. Mohammad Ajmal Khan (OG 2 NBP) 4.Baseer Ahmad (Worker NBP)

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