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Internship Report

INTRODUCTION

OF

THE BANK OF PUNJAB

Mohammad Basit Mushtaq 1 MBA (Marketing)


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Introduction:
Established in 1989, in pursuance of The Bank of Punjab Act 1989 and was given the
status of scheduled bank in 1994.

The Bank of Punjab is working as a scheduled commercial bank with its network of 266
branches at all major business centers in the country. The Bank provides all types of
banking services such as Deposit in Local Currency, Client Deposit in Foreign Currency,
Remittances and Advances to Business, Trade, Industry and Agriculture. The Bank of
Punjab has indeed entered a new era of science to the nation under experience and
professional hands of its management. The Bank of Punjab plays a vital role in the
national economy through mobilization of hitherto untapped local resources, promoting
savings and providing funds for investments. Attractive rates of profit on all types of
deposits, opening of Foreign Currency Accounts and handling of Foreign Exchange
business such as Imports, Exports and Remittances, Financing, Trade and Industry for
working capital requirements and money market operations are some facilities being
provided by the Bank. The lending policy of Bank is not only cautious and constructive
but also based on principles of prudent lending with maximum emphasis on security. As
agriculture is considered as backbone of our economy the Bank of Punjab has introduced
"Kissan Dost Agriculture Finance Scheme" to small farmers.

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History
The Bank of Punjab started functioning with the inauguration of its first branch of 7-
Egerton Road, Lahore on November 15, 1989. The architect of the bank Mr. Nawaz
Sharif then, the Chief Minister of Punjab, performed the inauguration.
In Pakistan, over long periods of time the gap in saving and investment and balance of
trade deficit has posed serious threat to the target levels of growth The ailments related to
the budgetary deficit and public debt, both foreign and domestic are in addition.
Interestingly even such adverse circumstances growth of real sector during the preceding
year registered a favorable change, which speaks of hidden potential and strength of
economy
Fortunately, the banking sector of the country has the well organized and properly
institutionalized system, which is the major vehicle not only for mobilization of resources
to finance trade, agriculture, and industry but also for the effective conduct of monetary
policy.
The emergence of new bank on the national scene in the early 1990s has done two
important services to the nation.
 The saving base of the economy has effectively enlarged and hence the
investment opportunities have increased.
 The services of the banks in the fact of severe competition have improved
considerably so that now consumer are left with extensive choice to do or undo
their business relations with these banks keeping in view quality of their services.
The Bank of Punjab is working as a scheduled commercial bank with its network of 266
branches at all major business centers in the country. The Bank provides all types of
banking services such as Deposit in Local Currency, Client Deposit in Foreign Currency,
Remittances, and Advances to Business, Trade, Industry and agriculture.

The Bank of Punjab has the privilege to discharge its responsibilities towards national
progress and prosperity. Within the couple of years of its scheduling, the bank has not
only carved out for itself prominent niche in the mainstream banking of the country but in
certain areas it has the distinction of taking the lead. .

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Constitutional Base:
The Bank of Punjab was established under the provisions of Section 28 of Federal List
included in the 4th schedule of the Constitution of the Islamic Republic of Pakistan 1973.
The Bank was established under the Act of Punjab Assembly viz. The Bank of Punjab
Act 1989. The Bill to this effect was passed by the Provincial Assembly on July 3, 1989
and was passed to, by Governor Punjab in accordance with the Provisions of the
Constitution on July 26, 1989.

The Act provided for the foundation on which the edifice of the bank was erected. It also
included and provided for various modalities concerning the structure, the organization
and scope of the bank laying down its objective share capital and principle of lending.
The Act defines rules for the following.

1. Short title, extent, and commencement.


2. Establishment and incorporation of the Bank.
3. Share Capital.
4. Register of Shareholders.
5. Qualification of Shareholders.
6. Government to be shareholders.
7. Head Office of the Bank.
8. Board of Director.
9. Managing Director.
10. Qualification and disqualification of the directors.
11. Removal of Directors.
12. Terms of office of directors.
13. Vacancies.
14. General and special meetings.
15. Votes of the shareholders.
16. Business, which the Bank is authorized to transact.
17. Business, which the Bank is not authorized to transact.
18. Auditors / Governments auditors.

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19. Right and duties of the auditors.


20. Liquidations of the Bank.
21. Powers of the Board to make byelaw.

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SCOPE OF “THE BANK OF PUNJAB”

Being a commercial bank, The Bank of Punjab performs all such functions as are
attributed to commercial banking institution both in the area of resources mobilization,
loans and investment. The bank is thus providing all types of advances to business, trade
and commerce on seasonal and annual basis, and is ensuring, through the product policy,
the safety and protection of its loan portfolios, as the resources base of the bank expands,
projects financing will also be brought into its fold.

Management of the Bank.

At the level of Decision-making and implementation, senior management of the


bank is drawn from highly accomplished bankers with rich experience in the banking
profession both domestic and international.
The entire responsibilities of policy formulation and management have been
placed, under the law, with the Board of Director. Furthermore it will be heartening to
know that Mr. Nawaz Sharif, during his chief Minister ship of the province of Punjab
issued special instructions to the political and executives echelons not to interfere in The
Bank of Punjab, thereby ousting the possibility any pressure which may be put on the
management of the bank in respect of recruitment of staff or provision of credit. These
instructions have become an essential part of the culture of the bank.

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CORPORATE INFORMATION (The Bank of Punjab)

Name: The Bank of Punjab


Registration # 00000013054/19891102
Registration Date: 15- 11 – 1989
CRO Lahore

Auditors
A.F. Ferguson & Co. Chartered

Registered Office
7-Egerton Road, Lahore
Pakistan

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Vision Statement

"To Participate prominantly in the economic and social


development of the country to a well established and compatitive
credit delivery system managed by a motivated and efficient
Human resource."

Mission Statement

“Be a dynamic resource of economic development and growth for


stakeholders through service excellence achieving high standards
of professionalism, dedication integrity and team work.”

Core Values

 Integrity

 Dedication

 Transparency

 Team work

OBJECTIVES
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The Bank of Punjab being a commercial bank performs all those function as are
attributed to such banking institutions both in the areas of resources mobilization and
investment. It is providing funds for commerce, trade, industry, and agriculture but its
main emphasis is on accelerated development of agro-based industry. So the main
objective of the bank is to channelize the resources into sectors, which have suffered
from neglect. Other objectives included.
1. To provide speedier services to the common man.
2. To provide the highest rate of return to the shareholders by achieving good
profitable growth.
3. To enter into financing contracts and to mobilize resources in local and
now in foreign currencies consistent with the objects of the bank

ORGANIZATIONAL STRUCTURE

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BOARD OF DIRECTORS
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CHAIRMAN

SENIOR EXECUTIVE VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

OFFICER GRADE-I

OFFICER GRADE-II

OFFICER GRADE-III

CASH OFFICER

CATEGORIES OF SERVICES

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The services in The Bank of Punjab are classified in different categories.

Category A.
♦ President

♦ Executive Vice President (EVP)

♦ Senior Vice President (SVP)

♦ Vice President (VP)

♦ Assistant Vice President (AVP)

Category B.

♦ Officer Grade I

♦ Officer Grade II

♦ Officer Grade III

♦ Cash Officer

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Category C.

♦ Clerical Staff

Category D.

Non-Clerical Staff

♦ Driver

♦ Guards

♦ Gate Keepers

♦ Tea Boys

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DIVISION AND DEPARTMENTS

DIVISION DEPARTMENTS

♦ ADMINISTRATION ♦ ORGANIZATION & METHODS

♦ OPERATIONS ♦ INFORMATIONAL & TECHNOLOGY

♦ BUSINESS DEVELOPMENT ♦ OFFICERS TRAINING INSTITUTE

♦ CREDIT ♦ SHARES

♦ INTERNATIONAL ♦ LAW

♦ FINANCE ♦ STATIONERY

♦ RECOVERY ♦ PLANNING RESERCH & PUBLICATION

♦ AUDIT & INSPECTION

♦ TREASURY

HEADED BY: - HEADED BY: -

GENERAL MANAGER CHIEF MANAGER

REGIONAL CHIEFS

BRANCH
NETWORK
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REGIONAL NET-WORK

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There are 266 branches of the BOP in all over Pakistan; the detail of the network is
described below:

FAISALABAD LAHORE
Total Branches 39 Total Branches 66

GUJRANWALA MULTAN

Total Branches 46 Total Branches 62

KARCHI / QUETTA RAWALPINDI


Total Branches 06 Total Branches 42

Head office, 7-Egerton Road, Lahore


042 – 9200421-33

Officers’ Training Institute, Lahore


(042) 5714180 – 5755625

Main Branch, Lahore


(042) 9200419 – 9200383 -
9200351

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Administration/Human Resource Division


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G.M

Admin & Officer’s Training

Establishment Institute

This division deals with the problems relates to the staff administration. The main

function of this department is to arrange a comprehensive training program for recruited

staff. Others function includes:

♦ Recruitment

♦ Staff remuneration

♦ Placing the staff

♦ Providing and defining the opportunities for career development and

growth

♦ Devising and implementing services rules.

♦ Promotion and demotion

♦ Suspension and termination

♦ Transportation

Operations Division

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G.M

Computer Dept.

Stationary Dept.

Engg. & Maintenance

O & M Department

This Division is concerned with the operational working in general banking,


which is concerned with the routine working of the bank. Any problem or ambiguity arise
in any branch working are rectified and suggested for correction by this division. This
Division usually takes technical procedures involved the decisions like commissions.
And also.

♦ The maintenance of the existing building owned by the bank.

♦ Opening new branches and their maintenance.

♦ It also deals with the stationery problems of the bank.

Business Development Division


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Marketing
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G.M

PRP

Department

It is the other name of the marketing division. It promotes the bank cause i.e. deposits and
work for the over all development of the bank. Deposits are the lifeblood of any bank.
Without deposits bank cannot perform any function of banking. This division fixes the
deposits target of every branch by keeping and eye over the potential customers in the
area. It gives motivation to branches to achieve their targets through different campaigns
and schemes like cash prizes and special increments. It publishes a bulletin in which
those branches are encouraged who achieves their monthly targets. The main function is
to develop and attract the customers and depositors. It also manages:

♦ Advertising policy
♦ Sales promotion.
♦ Schemes offered by the bank.

Credit Division
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G.M

Agriculture Credit Wing

This division control over all credit operations like sanction of loans, Inland Bill

Purchased (IBP) and also keeps check over securities mortgage, hypothecating or pledge.

It also fix the rate of mark-up and other decisions concerning with the credit.

There is a credit committee, which consists of senior officers; Branches send the

credit proposal to head office credit division. Credit committee approves it after making a

through analysis. It also

♦ Prepare the policies regarding the sanctioning loan

♦ Monitor loans and credit

♦ Look after the portfolio of the bank

♦ Define credit limits against specified securities.

International Division

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G.M

International wing

Forex Money
Market
Investment

Engg. &
Maintenance

This division is providing important services to the bank regarding the matters of

International Trade, Import, Export Letters of Credit, Travelers cheque etc.

♦ It develops “Correspondent Relationship” with others on commission basis and

this helps to deal with the clients having import export business.

♦ It handles treasury operations.

♦ The Marketing and Spot Inspection cell, which were introduced by the bank, are

showing positive results in terms of achieving foreign currency deposit targets

and other foreign related business.

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Finance Division
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G.M

Balance Sheet
Results Monitoring
SBP Affairs, and
Compliance.

Shares Dept.

Company Affairs

It controls the routine financial matters. The permission of special expenditure


incurred in the branches, and other such cases. The daily position and HO Extracts are
daily sent to this division by all the branches. This division not only estimates the profit
and loss of every branch but also prepare overall income statement and balance sheet of
the complete bank. It also keeps record of total deposits of the bank and then their
classification in the form of loans into different sectors of economy. The basic functions
are:

♦ Monitoring the fiscal and financial policies of the bank.


♦ Deals in exploring means for investing surplus bank funds.
♦ Maintenance and investment of Gratuity and Pension Funds of the employees.

Recovery Division
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G.M

Law
Department

The recovery division, which was established in 1994 to assist in regularizing the

difficult loan accounts, has rendered valuable services in this respect. To effect recoveries

in an efficient manner, a policy has been framed in accordance with the guidelines issued

by the State Bank of Pakistan Moreover, recovery cells at regional levels have been set

up to assist the head office. This division looks after the matters of recovery of loans with

the assistance of legal advisors.

Audit and Inspection


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Division
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G.M

Audit of Rectification
Branches and Persuasion

This department ensures appropriate system of checks and balances. It checks all the

irregularities, errors and forgeries if any, under the rules and regulations formed by the

Government of Punjab. For this purpose it doesn’t only keep and eye on the branches in

their vicinity but also conduct surprise and comprehensive audits of the branches. This

strategy has improved working at the branch level. It not only points out the

discrepancies but also tries to solve it. Surprise audit maintain a good check on the over

all working of the branch especially of the side of finance.

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 Service Provide to Customer

 Deposit Section

 Nature of Deposit

 Account Opening Section

 Clearing Department

 Remittance Department
 Advances/Credit Department

 Securities for Advances

 Agriculture & Economy

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SERVICES PROVIDED TO CUSTOMERS

The following are the services being provided to the claim

♦ Acceptance of deposits

♦ Granting of loans

♦ Transaction Foreign Exchange Services

♦ Remittance – Collection

♦ SPEDFAX- instant Fund Transfer Service

♦ Lockers facility

♦ Utility Services

The Bank of Punjab attaches specials importance to the fee earning business and business

base remuneration. As part of diversification of the banks utility services, the collection of bills of

INSTAPHONE (mobile phone network) was added to existing collection arrangements for

WAPDA, SUI GAS, WASA, PTCL, and PAKTEL. By using bank’s extensive branch network,

effort have been to made to maximize the exploitation of this source in view of its rich potential

of yielding business and deposit direct earning of commission.

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DEPOSIT SECTION

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

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

today business enterprise. But in the case of a entire banking system is based on it. The

borrowed capital of the bank is much greater then their own capital. Banks borrowing is

mostly in the form of deposits.

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

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

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

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

profit of the bank.

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

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

debts. When banks receive deposit from a customer, the relationship of a debtor and

creditor is established where by the customer become the creditor and the bank a debtor.

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

therefore use it as deems appropriate. But there is an implicit agreement that the amount

owned would be paid back by the bank to the depositor after a specified period.
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NATURE OF DEPOSITS

 CURRENT DEPOSITS

 PROFIT & LOSS SHARING ACCOUNT

 SHORT NOTIC TERM DEPOSITS

 CALL DEPOSIT

 TERM DEPOSIT RECEIPTS (TDR).

CURRENT DEPOSITS:

In this type of account the client to allowed to deposit or withdraw money as and
when he likes. Because of their nature, these deposits are treated as the current liabilities
of the bank. There is not profit on such deposits. Usually this type of account is opened
by the business.

PROFIT & LOSS SHARING ACCOUNT.

This type of accounts is one step towards the Islamization of banking system in
Pakistan. There are two types of PLS Accounts.

 PLS Saving Account

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

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PLS saving accounts can be opened with the minimum sum of Rs. 100 and PLS-
TDR account can be opened for a sum of Rs. 1000 or above. Profit is paid on both types
of the PLS account on half yearly basis.
Under PLS saving account the depositor undertakes to share profit or loss on the
deposits earned or sustained by the bank. Secondly the bank is at the liberty to invest the
funds of the deposits in any avenue, it deems fit. The PLS deposits are invested in non-
interested channels.

SHORT NOTICE TERM DEPOSITS (SNTD)

This kind of deposit is for a short period. The depositor may withdraw his deposit
at any time by giving seven days notice to the bank. This type of deposit facilitates the
depositor to withdrawn his amount with interest of the deposited period.

CALL DEPOSIT

Call deposits are the sorts of deposits, which are deposited with the banker against
any tender. This is without interest deposit. This may be with interest provided the
depositor has agreed to keep this amount with the bank for some fixed period.

TERM DEPOSIT RECEIPTS (TDR)

This type of deposit is same as the SNTD. The difference is that SNTD is for
short period (7- 30 days) while TDR is for long period (1 month up to 5 years).

ACCOUNT OPENING SECTION

Account opening is the first step towards establishing a relationship between the
customer and the bank. The Bank of Punjab is offering basically two types of account:

 CURRENT DEPOSIT ACCOUNT


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 PROFIT & LOSS SHARING ACCOUNT

The necessary condition for a customer, who wants to open an account with the
bank, is introduction, which is preferably by the bank officers or any account holder of
the bank. The different categories of accounts that are available are as under.

 INDIVIDUAL account
 Joint Account
 Partnership Account
 Limited Company Account
 Clubs, Society, Association, or Trust Account
 SNTD
 TDR
 Foreign Currency Deposit

CLEARING DEPARTMENT
Clearing is the most important department of the bank performing various

functions.

Clearing House:
A clearinghouse is an organization of the member banks, working under SBP and
which is for the purposes of setting inter banks claim resulting from transmission of funds
from one bank to another. The branch cheque/instruments are credited into the account of
the customer. The clearing can be:
♦ Outward
♦ Inward

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


separately for each bank mentioning the total number of instruments and the amount of
the instruments. Then these are recorded in a register called “OUTWARD CLEARING
REGISTER” then a main schedule is prepared showing the total number of cheque and
their aggregate amount being presented in the clearing.
The cheque/instruments are handed over the clearing branch. Central clearing
branch issue CREDIT ADVICE to the branch for passing credit to its customer
immediately. The branch on receiving credit advice debits the clearing account and credit
the respective customer accounts.

Inward Clearing
On receiving cheque/instruments from central clearing branch, the in charge
checks the number and amount of cheque received in clearing must tally with the main
schedule received from central clearing branch.
These cheque/instrument are entered in “INWARD CLEARING REGISTER” for
the cheque/instrument passed in clearing is a credit advice for the aggregate amount of
cheque passed in clearing is prepared, drawn on central clearing branch.

Reserves at State Bank of Pakistan.


Deposit held by bank at SBP serves as check clearing and collection balances.
Rather than physically transferring funds between banks, check clearing and collection
can be done by simply debiting or crediting a bank’s account at SBP.

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REMITTANCE DEPARTMENT

Remittance is a major function of the bank. It is the transfer of money from one place to
another place. The need for remittance is commonly felt in commercial life particularly
and in everyday life generally.
By proving this service to the customers the Bank of Punjab earns a lot of income in the
form of service charges.

The Bank of Punjab deals with the following type of remittances: -

 Demand Draft (DD)


 Mail Transfer (MT)
 Telegraphic Transfer (TT)
 Pay Order

Now we discuss all these in detail: -

DEMAND DRAFT (DD):

Demand draft is a written order given by the one branch of a bank on behalf of customer
to another branch of the same bank to a certain amount to the certain person.

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Procedure for Prepare Demand Draft.

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


 Name of the parties involved
 Date
 Amount to be sent
 Account number (if DD is crossed)

2. A credit voucher is filled in order to get the excise duty and exchange
commission.
3. The sender deposits the total amount of the two vouchers i.e. the debit and
credit vouchers.
4. Then the cashier sends the cash receipt voucher to the accounts department
and the account records the amount paid in his cash scroll.
5. Accountant gives the DD leaf along with the DD voucher to his assistant who
records the sender’s name, amount and receiver’s name. After writing all the
information in the DD register he gives it to the officer along with the DD for
authentication.
6. After authentication the DD is handed over to the sender and bank sends the
advice to the concerned branch. So when the party presents the DD in the
concerned branch its payment could be made.

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Parties involved in the Demand Draft

The following parties are involved in demand draft;

1. Purchaser or Sender

The purchaser is the person who sends the money to a particular person payable at a
certain branch.
2. Issuing or Drawing Branch

The branch from where the demand draft is issued to another branch of the same bank.
3. Drawer Branch

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

The person who is entitled to receive the amount after presenting the demand draft in the
drawer branch.

MAIL TRANSFER (MT):

It is the transfer of money from one branch to another branch of the same bank through
mail service. In mail transfer there is no need of advice as the amount is directly credited
to the receiver’s account.

Procedure
1. First a voucher is filled in whish the sender writes the amount to be sent, name,
account number of the receiving person with the branch name and date.
2. A credit voucher is filled in order to deduct exchange, postage charges according
to the amount of the mail transfer.
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3. The sender deposits the total amount in the cash department.


4. The cash officer gives the vouchers to the officer after affixing received cash
stamp and writing the amount in red ink.
5. Then the officer writes the amount paid in the cash scroll and gives the MT to his
assistant.
6. MT leaf is filled according to the information provided in credit voucher. He also
writes the same information in the MT register. Then he gives the MT leaf and
MT register to the officer for authentication.

TELEGRAPHIC TRANSFER (TT):

This is the most urgent method of remitting the money from one place to another place.
This method is used when the sender desires to send urgently, in this case the sender
request the manager of the branch to issue TT.

Procedure;
For sending the TT the manager and officer apply a test. In the test the manager and
officer uses a coding technique. They write their own code numbers, which is allotted, to
them as the bank branch code. After making all the conformation the concerned branch
makes the payment to the receiver. If the sender wants to convey the same message
through telephone then he has to pay the charges of telephone along with the TT charges.
First the person deposit the TT amount along with the charges through the credit voucher
then his TT sent to the relevant branch.

Pay Order (PO):


A pay order is a written order issued by the bank on its own branch, drawn upon and
payable by itself to pay a specified sum of money to the person. The purpose of a pay
order is to transfer the fund from one place to another. It is usually not issued in favor of
the parties of other cities. Usually the pay order is issued for the local transfer of money
from one person to another or from the person to any other department. It is used for
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different purposes. The purpose may be the repairs of the branch or renovation of the
branch.

Procedure
The procedure of a pay order varies with the nature of the purpose. If the work is of huge
amount then first the manager writes a letter to the Zonal Chief in order to get sanction of
the work. Then the advertisement of the work is given in the newspaper in order to invite
the contractors. But if the work is small then the branch manager has discretionary power
to select the party whose rate is lowest. After finishing the work the contractor submits
the bill of work on his stamp pad. Then the bank issues a pay order, against the pay order
the contactor gets the amount from the issuing branch.

“Major source of bank’s Income”

It is the loan function, which produces the major person of bank’s income, and as such it
is the major areas of professional banker’s concern and attention
.

Principles while advancing

Basically there are five principles that must be duly observed while advancing money to
borrowers.
 Safety
 Liquidity
 Disposal
 Remuneration
 Suitability

Forms of Lending

Many there are two types of advances:


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♦ Short-term (maturity within one year)


♦ Long term (maturity with the period of more than one year)
However they are further classified as:
♦ Running Finance
♦ Demand Finance
♦ Cash Finance
♦ Letter of Guarantee

Running Finance
This form of finance was previously known as “overdraft”. When a customer
requires the temporary accommodation, his bank allows withdrawal his account in excess
of credit balance, which the customer has in its account, a running finance occurs. The
accommodation is thus allowed collateral security. When it is against collateral securities,
it is called a “Secured Running Finance” and when the customer cannot offer any
collateral security except his personal security, accommodation is called a “Clean
Running Finance.” The customer is in advantageous position in running finance because
he has to pay the mark-up only the balance outstanding against him on daily product
basis.

Demand Finance.
This is common form of financing to commercial and industrial concerns and is
mad available either against pledge or hypothecation of goods produce or merchandise.
In Demand Finance the party is financed up to a certain limit either at once or as and
when required. The party due to facility of paying mark-up only on the amount it actually
utilizes prefers this form of financing.

Securities for Advances.


♦ Pledge
♦ Hypothecation

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♦ Guarantee
♦ Indemnity
♦ Charge
♦ Advances against “ Stock Exchange Securities
♦ Advances against immovable property “Mortgage”

Pledges:
“The bailment of goods as security for the payment of the debt and the
performance of a promise is called pledge.”
Pledge is the characteristic mode of taking goods as the security and the pledge occurs
when the goods or document of the title thereto or the securities are delivered by the
customer to his banker to be held as security for the repayment of the advance.
In a pledge, the ownership remains with the pledge but the pledgee has the
exclusive possession of the property until the advances in repaid in full, while in case of
default the pledgee has the power of sale after giving due notice. People with the safe
custody of goods, when entrusted with the goods for the specific purpose may not make
the valid pledge.

Hypothecation.
“A legal transaction where by goods may be made available as the security for a
debt without transferring either the property or the possession to the ledger.”
When the property in goods is in charged as the security for a loan from the bank
but the ownership and the possession is left with the borrower, the goods are said to be
hypothecated. The essence of the hypothecation is that neither the property in the goods
nor the possession of them passes to the lender, but the security is guaranteed by means
of Letter of Hypothecation, which usually provides for a banker’s charge of the
hypothecated goods.

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Guarantees:
“A contract to perform the promise, or discharge the liability of the third person in
case of his default.”
This is so when an application for the advances cannot offer any tangible security,
the banker may rely on the personal guarantees to protect himself against loss and
advances or overdraft to the applicant. Therefore a guarantee may be either written or
oral. The Grantee is a promise by one person called the guarantor or security to another
for answering the present or future debt if a second person called the “Principal Debtor”.

Indemnity:
“A contract by which one party promises to save the other from loss caused to
him by the conduct of the promisor himself or by any other person is called the contract
of indemnity.”
Thus in an indemnity, the promisor is the only person who becomes liable to the
promise if the latter suffers a loss on account of his doing something at the express desire
of the former.

Charge:
When immovable property of one person is by act of parties, or operation of law,
made security for payment of money to another, and the transaction does not amount to
mortgage, the latter person is said to have the charge on the property, and all the
provisions herein before contained which apply to a simple mortgage shall, so far as may
be apply to such charge.”

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This means that a charge is a right of payment out of certain property. The charge
can be created by the act of parties or by the operation of the law and although the
property is made a security the payment of loan, is still not he mortgage.

Advances Against Stock Exchange Securities.


Stock Exchanges Securities is the vast term which covers all gilt edged securities
such as:
 Federal and Provincial Government Bonds
 Post trust or Municipal Bonds
 Shares and debentures
Banker, as security for advances to the customer, frequently accepts these securities.
Advances can be against:
♦ Preference Shares
♦ Ordinary Shares
♦ Preferred Shares
It can be
♦ Quoted or Unquoted
♦ Registered
♦ Bearer
♦ Inscribed

Advances Against Immovable Property (Mortgage).


A mortgage is the transfer of and interest in specific immovable property for the purpose
of securing the payment of the money, advanced or to be advanced. By way of loan, and

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existing debts or the performances of the engagement this may rise the pecuniary
liability.
The transfer is called the ‘mortgager’ and the transferee the ‘mortgagee’ the principal
money and interest of which payment is secured for the time being and instrument by
which the transfer is affected, is called the letter of the mortgage deed.

AGRICULTURE AND ECONOMY


Availability of adequate flows of credit for industry and agriculture are a sine
qua non for the growth and development of an economy. This acquires added importance
when agriculture is the mainstay of the economy as also the sector where the bulk of the
poor are concentrated. Growth and productivity in Pakistan's agriculture has slowed
down in recent years and is, therefore, of serious concern given its importance for the
economic prosperity of the country. Apart from various other weaknesses in the
infrastructural support of the agricultural sector, inadequacy and lack of efficacy of
credit, flows to support agriculture related activities has been a major constraining factor.
Agriculture is the largest sector of the economy. It contributes 25 percent to GDP,
provides raw materials to 80 percent of industry and employment to over 50 percent of
the population. This is a sector that has the shortest gestation period for investments and,
therefore, a remarkable capacity to bring about a turn around in the economy. This
important sector in Pakistan is suffering from a number of maladies and is consequently
witnessing stagnation in productivity.
Due to policy and administrative exigencies, the savings in the agriculture sector
remain low and, therefore, the sector has perpetually remained capital starved. The
pricing of input and output in agriculture over the years has forced the majority of
farmers in Pakistan to plough back their incomes into agriculture and non-institutional
credit, and has more often than not served to sap their potential earnings. Needless to say,
that shortage of savings and lack of availability of capital is one of the major reasons for
poverty in the country. The agricultural and rural sectors in Pakistan in general and in
Punjab in particular are, therefore, suffering from severe under-development. Under a
desirable development model, Punjab can:

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


foods items and industrial raw materials.
♦ Develop agro-based industry in the rural sector for economic value addition;
♦ Generate additional employment opportunities in rural as well as adjacent small
towns/cities;
♦ Control massive migration to the urban centers that in turn is causing a number of
social, administrative (i.e. law and order) and economic problems for the urban
areas.
♦ Elevate poverty and improve the income generating capacity of the agri-based
population.
Never before in the history of Pakistan, has the development of the agricultural and
food sectors been as critical as at this juncture and appropriate short and long term
measures are necessary for its revival, sustenance and stability. Supply of credit by
Financial Institutions for meeting the specific needs of agriculture and rural sectors are
essential components for improvement in both short and long-term development of the
country. This has assumed even greater importance in the present situation of declining
water availability. Per acre, production is plummeting. The per acre yield of most of the
crops is stagnant rather diminishing. The most important factors responsible for this
downward trend in productivity are: -

FACTORS RESPONSIBLE FOR LOW YIELD PER ACRE:

o Imbalanced fertilizer use


o Lack, availability of certified, and good quality seeds
o Improper control of pests and weeds

SCARCITY AND INEFFICIENT USE OF WATER:


Natural and mechanical water resources.

NON-USE OF MECHANIZED FARMING PRACTICES:


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♦ LACK OF EDUCATION AND RESOURCES, MOTIVATION TO USE


ADVANCED TOOLS FOR AGRICULTURE:
♦ HIGH COST, LOW OUT PUT, UNSKILLED LABOUR INTENSIVE
♦ NON-AVAILABILITY OF CREDIT AND FINANCIAL ASSISTANCE TO
THE AGRICULTURE SECTOR
.
The importance of availability of credit to the agriculture sector has always been
recognized by Government and given Top Priority. Specialized institutions have been in
place for a number of years. However, these institutions have failed to realize the full
potential from the sector and at times contributed to its further deterioration. It is
therefore of paramount importance that The Bank of Punjab through well thought out
policies ensures that it does not repeat the follies of the past.
A number of institutions are in the field yearning to obtain results. We in The Bank
of Punjab will support the role of the Government in providing much needed support to
the agriculture sector but with a difference. The difference being that instead of
subsidizing the needs we will be active participants in economically viable projects
thereby safeguarding the investments of the Bank.
A precondition to lending by the Bank will be an undertaking from the
customers/borrowers not to borrow from any other source whatsoever. This is important
to ensure against any multiple borrowing and more importantly to restrain the borrower
from falling into a debt trap.

The Bank of Punjab has been at the forefront in contributing to the Agriculture Sector at
a limited scale and has initiated schemes in harmony with the State Bank of Pakistan
approved/eligible programmes for the assistance/help of the agriculture farmers.
Presently, the Bank is financing farmers in some specific areas only. The State
Bank of Pakistan has expanded the scope of its scheme and included a number of items
eligible for credit under Agri-finance Schemes.

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In terms of the importance, priority and current needs. We have short listed the
items from the State Bank of Pakistan's list provided under cover of its Circular letter No.
ACD/1044/1050/PD/P-08/2001 dated 26.04.2001.
The list of eligible items for Agri-Credit is mainly divided in two sectors; i.e.

► Farm Credit. And


► Non-Farm Credit
Farm Credit is further bifurcated into:
 Short-Term
 Medium-Term
 Long-Term Credit.
The priority items, which are recommended for inclusion in our schemes, are given here
under;

FARM CREDIT (SHORT TERM)


EXISTING: (Kissan Dost Agriculture Finance Scheme) Product
/purpose of Finance) Seeds, Fertilizers, Pesticides, Herbicides, Weedicides. All types of
labor and water charges are already embodied in our package financing, i.e., 8000 Per
Acres (no change)

PROPOSED:
(Product /purpose of Finance)
1. Orchard and Nursery 2. Manual Sprayers
3. Sericulture 4. Apiculture

Farm Credit (Medium & Long Term):


EXISTING: Tractors

(Product/purpose of Finance)

PROPOSED:
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(Product & Purpose of Finance)


Tube-Well
Installation of Tube-Well, water management, equipment, modules & culvert,
lining of channels etc. Solar energy plants and pumps for irrigation, equipment for
sprinkle/trickle/drip irrigation system.

Mechanization Support
Agri-implements, Equipment, i.e. trailers and thrashers,
power tillers, power & boom sprayers, ploughs and cultivators, ridggers / drills,
rotavators, diggers, saw machines for crates making, press machines for wheat straw and
dry fodders.

Farm Transport
Lease finance for purchase of Motor Cycles and small Vans for Milk and
other agri products transportation to local market.
Islah-e-Arazi
Precision land leveling & reclamation, soil
improvement, embankment, land formation and land improvement, laser leveling
etc.

Non-Farm Credit: (Livestock Development)


For the time being, we do not propose to extending Non-Farm Credit, i.e. for big
Dairy Farms, Poultry Farm but will accommodate existing borrowers and established
small individual farmers by financing livestock. (Goat, sheep, cattle & fattening animals)
on a limited scale to revive, accelerate and supplement the income generating capacity of
the small farmers.

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 Strengths

 Weaknesses

 Opportunities

 Threats

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STRENGTHS
 The major shares of BOP is owned by the

Govt. of the Punjab, so it can develop a

good image & trust among it customers.

 Stability of Bank is strength of any bank.

The Bank of Punjab has stable growth since

its establishment.

 The Bank provides the loan facility on

sound basis that is very crucial for any bank

to recover the loan. The Bank of Punjab has

conservative policy for advances. So there

are very less bad debts.

 Personal selling has key role in banking

service. The officers of the Bank of Punjab

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go to the potential customers to develop the

business. By the relationship with

customers, they achieve the deposit targets.

 The promotion criteria of the bank are on the

basis of the efficiency and passing the

diploma examination of Pakistan Institute of

Bankers.

 It is the policy of the management that

requirements are made according to the

principles of merit. The bank to train them

in gives the staff banking. The past

percentage of the candidates of Bank of

Punjab is the highest among the entire

commercial every year.

 People have trust in the Bank of Punjab

because govt. of Punjab 52% shares of the

bank.

 There is no union in the Bank of Punjab.

 Working environment is good. Officers and

managers work together as a team. They are

very cooperative with each other.

 Higher management is experienced.

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 The management style of the management is

flexible.

 Profit rate is high as comparative to other

banks.

WEAKNESSES
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 The Bank of Punjab is centralized organization. The authority is not given to the
branch level. Managers have to take permission from the Regional office or Head
office for credit. Manager had to get permission if they have to given more rate of
profit to the customers. So the customers have to wait for days, which may cause
the change of customers. Managers cannot negotiate with customers without the
permission of head office.
 The Bank of Punjab has less modern technology. Only few branches are
computerized. Due to lack of modern technology, the bank’s services are low and
foreign banks have large market share. In this era modern technology is very
necessary for competitions.
 Salaries of the officers are less as compared to other private banks.
 The Bank of Punjab has very less promotional activities. Their advertising
campaign is very low. They only use personal selling.
 The Bank of Punjab has very less staff in the branches of South Punjab as
compared to Upper Punjab. This creates the problem employees have to spent
most of their time in the bank to complete even their daily routine work. They
have to sit till 7:00 to 8:00 PM before going back to their homes. For this reason
their normal life is disturbing which create the irritation in the behavior of
employees.
 The bank’s expenses are increasing at very high rate.
 The Bank of Punjab has less interest in foreign exchanges. And BOP has less
number of expert officers in the foreign exchange business.
 Mostly small branches are going in loss.
 The Bank of Punjab has only six regional office in whole Pakistan. It is very
difficult to control all branches in one region.
 BOP is not taking keen interest in the marketing of traveler cheque than others
bank. BOP is loosing its share due to the less interest.

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OPPORTUNITIES
 Although commercial banks have launched many products but a gap exist
between the customer’s want and what the banks are providing. This is an
opportunity for the Bank of Punjab to move in and fill the gap between the ideal
bank and the current service offerings by aggressive advertising, consumer
friendly attitude products and service for attracting customers.
 The Bank has opportunity to expand the branch network all over the country, and
it would be able to develop business and can start many other schemes for
investment.
 The Bank has opportunity to use latest technology for providing good services to
customers.
 There is an opportunity for more businesses if the BOP opens its branches in
foreign countries.
 There is an opportunity for more businesses if the BOP offered credit cards.
 Different multinational are establishing their businesses in Pakistan. So there is a
lot of potential for future businesses.

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THREATS
 The salaries of the officers of the Bank of Punjab are less as compared to other
private banks. It may cause transfer of the experts from the Bank of Punjab to
other banks.
 Expansion of newly establishment banks like Picic Bank, Union Bank, Al-Falah
Bank, Askari Commercial Bank etc. and their better performance may cause loss
of the marker share of the BOP. According to the World Bank report, the Pakistan
has become an “over banked” economy. With the cutthroat competition for
deposits in the industry, the battle is on for the market share. The concept of 24
hours banking, Telephone and On-Line Banking, Automatic Teller Machine
(ATM), and credit card are a direct result of the intense competition. But the BOP
is far behind the above –mentioned services and will not provide better services as
compared to other banks; it will lose its market share.
 The Bank of Punjab is also forced to give loans on potential basis. Due to this the
recovery of such loans may become very difficult.
 Promotional activities of the BOP are nor sufficient. Due this it may lose market
share.

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AREAS OF IMPROVEMENTS FOR “BOP”

TECHNOLOGY:

 Work processes:

 Methods:

 Equipments:

STRUCTURE:

 Work specialization

 Departmentalization

 Chain of command

 Span of control

 Centralization

 Formulization

 Job redesign

PEOPLE:

 Attitude

 Expectations

 Perceptions

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 Behavior

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In the light of the Knowledge obtained during internship and studying the organization,
the following recommendations may prove to be successful to the bank.

 In order to capture a considerable share in the banking sector of the country, the
prime objective should be awareness in the general public. For this it should
launch a well-planned advertising campaign in the general public.
 Physical facilities in a bank also play their role in enhancing its grade and sound
image. The bank should keep these facilities like furniture, parking facilities for
the customer.
 Salaries of the officers must be compatible to other private banks so that the BOP
can attract professionals, intelligent persons.
 The Bank of Punjab should minimize its expenses.
 Special awards should be given to the hardworking employees who performed
extra-ordinary in the bank.
 The bank should come up with new and innovative products. It would be
advisable to make these products while keeping in mind the gap between what
people want and what their banks are providing them.
 The Bank of Punjab should concentrate more on advances than on investments
 The bank should come up with such products or services in which the customers
would not have to come to the bank at any stage i.e. Telephone Banking etc.
 The Bank of Punjab should use the latest technology because the bank which can
provide speedy, accurate and standard services in the delivery of products, loans
etc. to the customers will be successful e.g. computerization, fax installation.

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 The authority should be delegated to the manager level.


 MIS should be improved by connecting all regional offices and branches to the
head office through a network for timely delivery of information.
 Management of Bank of Punjab should try to avoid the political influences and
should give loans on merit.
 The bank should make a plan to gear up its recovery function on war fooling and
recognize the recovery function.
 The Bank of Punjab should give some extra credit to concern to professional
qualifications such as MBA(IT)’s, M.B.A’s, C.A’s A.C.M.A’s at the time of
recruitment and selection.
 Interview should be conducted while recruiting personnel, to consider the
personality characters, communications skills and sociability.
 The bank should adopt a policy to accommodate and facilitate the research
scholars who want to study the banking affairs. The universities and other
institutions can help to launch the studies regarding banking business.
 All possible efforts should be made to protect the bank from the interruption of
Provincial government.
 There should be an association of employees to convey the voice of the
employees to the administration.

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The Bank of Punjab is contributing a lot towards the industrial development and capital
formation in the country. As it is exhibit from the data regarding the bank’s financial
performance as shows in the financial performance as shows in the financial analysis, that
bank is sharing major banking business of the country. Further more the policies and
schemes as are introduced and carried on by the bank are of great source of help in its
trading and non-trading growth They facilitate trade both inside and outside the country.
The Bank if Punjab has endeavored to remain in the forefront of modern financial
institutions and has consistently shows tremendous growth in all area of its activity.
However after scheduling, due to its emphasis on consolidation and controlled lending,
the growth of profit has somewhat declined. But the ban’s performances are in line with
its set goals.

The policies of the bank are uniform and going very smoothly. The employees are given
all the possible facilities and generous compensation. In return employees are stressed for
their best efficiency. Merit policy prevails in all the activities of the bank. Administration
has studied the administration of all other banks, and all their problems and drawbacks
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are planned to be avoided. Therefore, the policies of the management are progressive and
proper. The progressive approach and trend towards progress and prosperity reflects that
bank will touch the zenith of development and progress. The dedicated, enthusiastic and
motivated employees can bring that time even earlier.

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