Nbp Report

Internship Report on NATIONAL BANK OF PAKISTAN National Bank of Pakistan Bannu Cantt Branch Submitted By: ARIF ULLAH KHAN MBA INSTITUTE OF MANAGEMENT STUDIES UNIVERSITY OF PESHAWAR Session 2004-06 Internship Report on NATIONAL BANK OF PAKISTAN Bannu Cantt Branch Bannu Internship report submitted to the Institute of Management Studies, University of Peshawar in Partial fulfillment of the requirements for the Degree of Master in Business Administration (Finance) Supervised By: Sir. AAMIR HUSSAIN INSTITUTE OF MANAGEMENT STUDIES UNIVERSITY OF PESHAWAR Session 2004-06 INSTITUTE OF MANAGEMENT STUDIES

Internship Report on NATIONAL BANK OF PAKISTAN National Bank Bannu Cantt Branch Supervisor: Signature:_________________________________ Name: Sir. AAMIR HUSSAIN Designation:Office Manager Organization:Institute of Management Studies University of Peshawar ACKNOWLEDGEMENT Keeping pace with time is the key to success, left behind means lost. Commerce is a fast moving subject. The person who are engaged in business and those who are to enter in this profession must acquaint themselves with the fundamentals and new development of Business organization and Management.

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This report is an essence of my degree requirement and without writing report the whole training process will end in smoke. Computation and purification of data become fruitful when it comes in the shape of information. It is very hard to convert data into information, it requires wide span of time, but still it was a great experience for me to have a feel of the practical world and keeping in view the limitation of the study. This seems reasonable attempt. Since banking wide spread profession, it is impossible to jot out each and every function, so I highlighted is a few functions of banking.

Being the student of Banking & Finance I tried my level best to decimate as much information as was necessary to bring justice to my internships at Deposits, Remittances, Credit & Foreign Exchange departments at NBP. I will like to thank all the staff of NBP Bannu Cantt Branch especially Manager Mr. Mattiullah Khan & Operation manager Mr. Feroz Khan, Mr. Farhad and Mr. Asif Shah who treated me with care and answered all my quarries. I will also like to thank Mr. Rehman ullah Khan for his support and guidance. In the last but not the least I will like to thank my Mother for her prayers and affection. pic] CHAPTER 1 INTRODUCTION 1. BACK GROUND OF STUDY The study is about the internship at National Bank of Pakistan. Internship is an integral part of all management courses at IMS. The student requires spending a specific time period in an organization in order to get first hand knowledge of real life situation. This study has been conducted in National Bank of Pakistan, Bannu Cantt Branch. NBP is a highly profitable organization, having a huge network within and outside the country. To know about the organization and its function it was important to work there.

This internship of two months helped the students write some useful information about National Bank of Pakistan. The socio-economic growth of any developing country depends mainly on the health of its financial institutions. The banking sector is one, which plays a vital role in the development of the economy. It’s involvement in the industrial sector, trade and commerce of the country makes it an integral and important tool for the over all development of the country. With the advent of modern technology and increased competition, banks are undergoing major changes, thus making this field a challenging one.

Banking sector, no doubt, has a pivotal role in the development of our national economy. Moreover, the role of banks in the NWFP is of significant importance due to the huge amount of home remittances from abroad. Home remittances contribute not only to this province, but also to the national economy. National Bank of Pakistan is one of the leading and first government recognized bank in Pakistan. NBP was established in Nov 9, 1949 and it started functioning from November 20, 1949. There are certain characteristics, which sets NBP apart from other nationalized commercial banks.

These characteristics are the reasons of the development of NBP. The most important characteristic of NBP is that, it works, as an agent to the State Bank, Where State Bank does not have a branch of its own. The NBP also act as a trustee to the National Investment Trust (NIT), which is one of the premier financial institutions of the country. It is charged the responsibility of mobilizing small savings. The establishment of NBP thus signaled the achievement of another milestone in the development of the banking industry in Pakistan. . 2 PURPOSE OF STUDY The purpose or objective of this report is to define and describe different functions and products offered by the bank to its valued customers, to identify some weaknesses related to the management of the Bank, to analyze the performance of the Bank and finally to give some necessary recommendation to the management of the bank. This study can help the students of IMS in making their reports about their organization. This can help the management of the NBP in improving the performance of the Bank.

As NBP is one of the oldest and well-established banks in the public sector, so NBP is preferred in order to get more knowledge of the organization. Also it is a degree requirement and a source of practical knowledge. Internship in NBP had certain objectives such as: • To observe the work in different departments of NBP. • To develop the relationship to get more information. • To apply managerial skills in real work place. • To getting confidence while interviewing the heads of the different departments. • To develop analytical skills for organizational analysis and financial analysis etc. 3. SCOPE OF STUDY

The time duration of two months was quite adequate for the completion of study and observation of the Bank. NBP is one of the oldest and well-established banks of Pakistan; efforts were made to study the existing setup and functions of Bank. Some of problems faced by the Bank have been identified and remedies have been suggested to these problems. During internship at NBP Bannu Cantt Branch the following departments were observed. • Deposit Department • Remittances Department • Advances Department • Account opening Department While working in these department problems were identified and recommendations were given to overcome those problems.

Also comparative analysis of three years financial statements and SWOT analysis of NBP was done. An overview of the five- (5) year performance of the overall NBP is also included. 4. LIMITATIONS OF THE STUDY The vast scope of the operations of a bank is difficult to be analyzed in a limited time of six months. The lack of information is another limitation of the study. 5. METHODOLOGY OF STUDY During internship at NBP the most important task was to collect as much quality information about the organization as possible. Due to this reason, a number of techniques wee used to collect the required material and compile the report.

The methodology, which was adopted for this research, is based on both the primary data as well as secondary data. 1. 5. 1 Primary Data The first hand data, i. e. the data collected for the first time is called as Primary Data. The Sources of Primary Data ? Unstructured interviews with bank employees. ? Personal observations. ? Questioner. 1. 5. 2 Secondary Data And the data which is collected from other sources and already processed through mathematical and statistical techniques are called the Secondary Data. The Source for Secondary Data • Annual Reports Manuals of departments of the bank. • Relevant books • Brochures and circulars of the bank • Internet 6. SCHEME OF REPORT This report is divided into four (4) sections. Section I This section consists of one chapter. First chapter of this report describes the background, scope, methodology and scheme of the report. Section II This section consists of review of the organization. Chapter two includes a brief history of overall banking sector in Pakistan . It discusses history of NBP, activities performed by NBP and the role it is playing in the economic development of the country.

Chapter three consists of the organizational structure of NBP, board of directors, executive committee. It also discusses the human resource management of NBP. Chapter four has brief summary of different departments and review of instruments and machines used in NBP Cantt. Branch. Chapter five briefly explains all the functions of Deposit department. Chapter six reviews the function of Remittances department. Chapter seven consists of the review of activities performed by Establishment and Advances department. Chapter eight includes the review of the activities performed in Foreign Exchange department.

Chapter nine includes different services offered by NBP. Section III In this section of report comparative analysis of financial statements and SWOT analysis of NBP is discussed. Chapter ten consists of Financial Analysis of the NBP. It also includes comparison, graphical representation and interpretation of three years financial performance of the NBP. Chapter eleven consists of SWOT analysis & brief analysis of staff of NBP Bannu Cantt Branch Agency Section IV Keeping in view the SWOT Analysis is given in chapter eleven; chapter twelve consists of the Findings and Recommendations. pic] CHAPTER 2 HISTORY OF BANKING 2. 1 WHAT IS BANK? There is no consensus on the origin of the word Bank. According to some authorities, the word bank itself is derived from the word “bancus” or “banque”, means a bench. The early bankers, the Jews in Lombard, who are thought to be the forefathers of Banking used to transact their business on benches in the market places. The word bankrupt also comes from there. However, the Oxford Dictionary’s Millennium Issue gives a precise meaning of the word bank defined as” Bank is an establishment of depositing, with drawing and borrowing money”.

Although banking has developed too much than deposits withdrawl and borrowing of money, yet the basic function of bank remains as described above. 2. 2 BRIEF STUDY OF BANKING Banking is thought to begin somewhere in early 2000 BC when the Babylonians developed a banking system. The origin of modern banking can be found in the modern dealers in Florence, who received money on deposits, and were lenders of money in the 14th century, and the names of the Bardi, Acciajuoli, Peruzzi, Pitti and Medici soon became famous throughout Europe as Bankers.

The structure and modern form of banking started taking shape when many of the Lombardy merchants came to England in the 14th century and settled in the part of the city of London now called Lombard Street. They were so resourceful that even the kings had to depend on them for loans. The goldsmiths at that time also started issuing receipts to their depositors in respect of the cash or gold articles left with them. These were called Goldsmith Notes. An important step in the evolution of banking was taken when these goldsmiths started lending at interest and issues cheque books.

Some of the goldsmiths, after they were refused payments by Charles II, formed themselves into a Corporation in1965, known as the Bank of England. This proved to be a turning point in banking history and paved the way for modern banking through different legislatures by the British Government. 2. 3 BANKING IN INDO-PAKISTAN SUBCONTINENT Ever since, money became the medium of exchange in our society, banks existed in one form or the other. In those days their function was mainly to lend money to the people and the kings.

The Vedic Epics clearly mentioned about giving and taking of credit and also contracts of debts at dicing. Later on, Manu in his “Sammurti” clearly mentioned these transactions by saying, “a sensible man should deposit his money with a person of good family, of good conduct, well acquainted with the law, veracious, having many relatives wealthy and honorable”. Manu has also prescribed the rules to govern the policy of loans and rates of interest. During the fifth century people were accustomed to use “hundies” as a credit instrument.

The land revenue was collected generally in kind, while the services were paid mostly in cash. Therefore, banker’s assistance in these and other financial matters of State was very much necessary. The bankers enjoyed very good reputation, and the people deposited their jewelry and cash holdings with them for custody. Loans were given to the people against personal and other securities such as ornaments, goods and immovable properties and the banker and customer had very cordial relations. The Muslim rulers provided substantial encouragement to the farmers by giving them interest-free loans and grants in cash.

They also allowed them to pay the land revenue in cash or kind. This “agricultural finance” resulted in bumper food production, which had a great surplus after consumption at home. Therefore, it was being exported against pure gold. Industrial development was not ignored at all. State loans were also given for increase in production. These factories thus produced enough for local consumption and left substantial quantities for exports. Textile, calico-printing and dyeing, pottery, china-ware, indigo, opium, metal-work, paper, leather and sugar etc. ere being exported to foreign countries like China, East Indies and Pacific Islands against pure gold. Thus the port towns of “Surat” and “Coa” (Gujarat), “Calicut” and “Cochin” (Malabar coast); “Masulipatam” and “Negapatam” (Coromandal coast) became the centers of the world trade, where foreign buyers used to come for purchase of Indian commodities. Muslim historians of the 12th century have also mentioned some, bankers known as “Multani” and “Shroffs”. They used to act as agents to the government to collect revenue. Such a prosperous society did need a well-regulated financial administration and monetary system.

Muhammad Tughlaq was the first king to have introduced token currency in India. Akbar established mints all over the country to prepare and issue currency. Royal Treasuries were also established all over the country under a well conceived plan so that they could function as the offices of “Central Bank” of that time, they also worked as the drawing and disbursing offices to the Government. Though the Muslim rulers did not establish “Bank” as such, yet the revolutionized the entire financial and monetary structure in India and the old “Sahokars” and “Mahajins” were eliminated.

Government introduced reforms were so effective that these “classical-bankers” were pushed into the past. Due to the prosperity of Indian society of that time, the Royal mints and Treasuries did act as agencies for transfer of money as well as for custody of valuables. 2. 4 BANKING IN PAKISTAN At the time of independence, the areas, which now constitute Pakistan, were producing only food grains and agricultural raw material for Indo-Pakistan subcontinent. There were practically no industries, and whatever raw material was produced was being exported from Pakistan.

However, commercial Banking facilities were provided fairly well here. Before partition of sub-continent, the entire baking system was almost in the hands of non-Muslims. When Hindus capitalists became sure of division of sub-continent, they transferred their funds to safe places in India. Pakistan was declared an independent state. In mass scale migration of Non-Muslim from Pakistan to India caused the reduction in bank deposits. The number of scheduled bank branches was reduced from 619 to 213, and the number of non-scheduled bank reduced from 411 to 106.

The independent state of Pakistan did not have a central bank of its own at the time of independence. As a new country without resources it was very difficult for Pakistan to run its own banking system immediately. Therefore, in accordance with the provision of Indian independence Act of 1947, an Expert Committee was appointed to study the issue. The Committee recommended that the Reserve Bank of India should continue to function in Pakistan until 30th September 1948, so that problems of time and demand liability, coinage, currencies, exchange etc. are settled between India and Pakistan.

It was also stipulated that Pakistan would take over the management of public debt and exchange control from Reserve Bank of India on Ist. April, 1948, and that Indian Notes would continue to be legal tender in Pakistan till 30th September 1948. Following the announcement of independence Plan June 1947, the Hindus residing in the territories now comprising Pakistan started transferring their assets to India. Moreover, the banks including those having their registered offices in Pakistan transferred to India in order to bring a collapse of new State.

Some important dates are mentioned here, The first important date was establishment of Habib Bank Limited, on August 25, 1941 at Bombay. This was the first bank in Indian sub-continent, which was operated by Muslims. Habib bank Limited transferred its Registered Head Office to Karachi on August 07, 1947. It played a great role in the Pakistan’s Economic Development. The second important date in the history of Banking in Pakistan is the establishment of Australasia Bank limited, at Lahore on December 03, 1942. Its name was changed to Allied Bank of Pakistan Limited, on July 01, 1974.

After nationalization of the Banking Industry on January 01, 1974, three other banks were merged in to it. The other important date is July 09, 1947; when the Muslim Commercial Bank Limited was registered and incorporated at Calcutta. Its registered Head Office was transferred to Dacca on August 17, 1948. Subsequently its registered Head office moved to Karachi on August 23, 1956. The most important date is July 01, 1948, when State Bank of Pakistan was established at Karachi as the Central Bank of the country. Central bank addressed itself with an urgent task of creating a national banking system.

In order to attain this goal it provided every help and encouragement to Habib Bank to expand its network of branches, and also recommended to Government the establishment of a new bank which could serve as an agent of the State Bank. As a result, The National Bank of Pakistan came into being on November 09, 1949, and by 1952 it became strong enough to take over the agency function from the Imperial Bank of India. This was the first Commercial Bank in the public sector. By December 1973 there were 14 scheduled banks with 3042 branches all over the country. They were: 1. National Bank of Pakistan. . Habib Bank Limited. 3. Habib Bank (overseas) limited. 4. United Bank Limited. 5. Muslim Commercial Bank Limited. 6. Pak bank Limited. 7. Standard Bank Limited. 8. Commercial Bank Limited. 9. Australia Bank Limited. 10. Bank of Bahawalpur Limited. 11. Premier Bank Limited. 12. Sarhad Bank Limited. 13. Lahore Cooperative Bank Limited. 14. Punjab Provincial Cooperation Bank Limited. At the end of June 1999, the number of scheduled Banks in Pakistan was 52 with 7,874 branches . Out of these; there are 25 Pakistani banks with 7,779 branches and 27 foreign banks with 95 branches. . 5 HISTORY OF NATIONAL BANK OF PAKISTAN With the establishment of the central banks, the country has ushered in new era in the development of banking. Soon the industry was faced with another problem of considerable magnitude. This happened in late 1949. The British Government devalued its currency in September 1949 both Indian and Pakistan currencies were pegged on a fixed exchange rate basis with the pound sterling. Inline with the British Government’s decision, the Indian Government also devalued it rupee to maintain parity with the pound sterling.

Pakistan, however, did not devalue its currency. India did not view the Pakistani decision in the right spirit and Pakistan’s refused to bring its currency at par with that of India led to a crisis in trading between the two countries. India’s refusal to lift the Pakistani jute, as reprisal resulted in a financial crisis for the jute growers, who could not be paid. Only the Commercial bank in public sector could have offered payment, in lieu, to magnitude the financial sufferings of jute growers.

The government responded to the situation quickly and decisively, on November 9, 1949, an order was promulgated by the Governor General bringing in being the National Bank of Pakistan which started functioning from November 20, 1949. In the course of its department the National Bank of Pakistan, in addition to being a commercial bank in the public sector at a time when all other commercial bank were in the private sector also came to acquire certain characteristics. The most important of these characteristics is that the National Bank acts as an agent on behalf of central bank.

The National Bank also acts as a trustee to the National Investment Trust (NIT), one of the premier financial institutions of the country, charged with the responsibility of mobilizing small savings. The establishment of National Bank thus signaled the achievement of another milestone in the development of the banking industry in Pakistan. 2. 6 THE HISTORY OF NBP (1996-2000 &ONWARDS) Like all businesses in Pakistan, National Bank of Pakistan also endured a great pressure in this period. When the biggest bank of the country was faced with losses, Government of Pakistan made some reforms.

Pakistan Banking Council was demolished and all banks were put under independent board of governors. Default of loans is the big issue since that time. In 1996-1997 the Government of Pakistan pressurized all the institutions of the country to down size their staff so as to cut down the expenses. This was the demand of IMF. As a result Golden Handshake Scheme was offered to the employees and a large number of employees opted to leave. This decision was very costly and was amortized. In the second phase of the cost reduction program, the number of branches including the branches that were running in losses was reduced by a figure of 100.

The decision of May 28, 1998 nuclear tests followed by political decision of freezing of foreign currency accounts gave hard time to NBP. But still, NBP performed very well and succeeded in increasing the deposits. NBP was also successful in collecting reasonable amount of money from the defaulters. After some time the situation was made worst by economic crises of East Asian countries. National Bank of Pakistan performed well in this region and maintained its credibility. National Bank of Pakistan as per its tradition, forwarded funds for revival of almost sixty sick units with Rs. 3. billion in 1998 . NBP also participated in self-employment scheme with Rs. 1. 9 billion. NBP also introduced ATM card system and became a member of SWIFT in New York as well. In November 2000, 10% share of NBP’s shares were offered to general public and listed on all domestic Stock exchanges. It has also prepared a plan for electronic banking and E-commerce. By analyzing these improvements we can say that the Officials and Directors of the bank are fully aware and alert for the challenges of globalization and modernization. 2. 7 ACTIVITIES PERFORMED BY NATIONAL BANK OF PAKISTAN

NBP is providing all types of banking services of mercantile and commercial banking permitted in the country, which includes: • Handing of treasury transactions for the Government of Pakistan as an agent to the State Bank of Pakistan. • Providing services under a Trust Deed as Trustee to the National Investment Trust (NIT) including safe custody of securities on behalf of NIT. • Accepting of deposits of money against current, saving, term deposit and profit and loss sharing accounts. • Borrowing money and arranging finances from other banks. • Advancing and lending money to its clients. Financing of projects, including technical assistance, project appraisal through long-term/short term loans, Term finance and Musharika Certificates, etc. • Buying, selling, dealing, including entering into forward contracts of foreign exchange. • Financing of bonds, scripts and valuables for safe custody. • Carrying on agency business of any description other than being agent on behalf of clients including Government and local authorities. • Generating, undertaking, promoting and issuing of shares and bonds, etc. • Transacting guarantee and indemnity business. Sale and encashment of Prize Bonds through its 266 authorized branches. • Joint venturing with foreign dealers, agents and companies for is representation abroad. • Participating in “world Bank” and “Asian Development Bank” lines of credit. • Providing personalized Hajj services to intending Hajjis. 2. 8 STATUS AND NATURE OF BUSINESS National Bank of Pakistan (the bank) was established under the National Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges. It’s registered and head office is in Karachi. The bank is engaged in commercial banking and related services in Pakistan and overseas.

The bank also handles treasury transactions for the Government of Pakistan (GOP) and also provides services as trustee to National Investment Trust (NIT) including safe custody of securities on behalf of NIT. 2. 9 ROLE OF NATIONAL BANK OF PAKISTAN IN ECONOMIC DEVELOPMENT Banks play significant role in promoting the economic activities and economic development of a country. Industry, agriculture, trade, commerce and many other economic activities are highly dependant on banks. Banks help in mobilization of money. They also help in promoting the growth of internal esources for development by attracting deposits into productive loan and investment. Banks not only collects the savings of the people but also give loans for the development of industry, trade and commerce. NBP has been playing a major role in financing and developmental activities in Pakistan. It helps in the growth of economy in all spheres of our national life. It has contributed significantly to economic growth of the country and has served to trade and industry in a wide sphere of operations. The NBP was the first bank to introduce scheme of credit to small borrowers like farmers etc, for the promotion of agriculture.

The bank advances liberal credit for rural and agricultural development. Small short-term loans are given to the farmers free of interest. These advances can be in the shape of fertilizers, seeds and agricultural implements. The NBP is able to attract large amount of deposits through its large number of branches all over the country and thus is able to provide large amount of loans to different sectors. The NBP is also providing finances to small-scale industries for the period up to five years; it has introduced the people’s credit facilities to the common man at the large and more liberal scale than before.

The main objective of this scheme is to make a contribution toward building up of a developing nation. The NBP also helps to promote the establishment of new companies by underwriting their shares. The bank also contributes towards the earning of foreign exchange though its foreign exchange business in Pakistan and abroad. MISSION: “To be recognized in the market place by institutionalizing a merit and performance culture, creating a powerful and distinctive brand identity. Achieving top – tier financial performance, and adopting and living out our core values”. VISION: To be the pre-eminent financial institution in Pakistan and achieve market recognition both in the quality and delivery of services as well as the range of product offering. ” CHAPTER 3 ORGANIZATIONAL STRUCTURE Organizational structure is the framework that defines the boundaries of the formal organization and with which the organization operates. A suitable organizational structure for the nature of the organization leads to better performance. The organizational structure of the bank constitutes a board of directors and an executive committee as the governing bodies.

The National Bank of Pakistan (NBP) has 1189 branches all over the country, 16 overseas branches & 4 subsidiaries. The head office is operationally in charge of central affairs including the delegation of power and authority to the regional headquarters all over the country. These regional headquarters direct the function of the 12 corporate branches. The NBP has 29 regions (circles) in four provinces as given below: Table 3. 1 NBP Provincial Headquarters & No. of Regions Provincial Headquarters | No Of Regions | |Sindh |6 | |Baluchistan |2 | |Punjab |14 | |NWFP |5 | |Azad Kashmir |2 |Total |29 | 1. HEAD OFFICE The NBP has its own organizational structure and its Head Office is situated at Karachi. All branches, regional offices and corporate branches work according to the rules and regulations issued by the Head Office from time to time. The Head Office of National Bank of Pakistan, which is primarily responsible for making policies and execution of policy decision include, ) Board of Directors b) Executive Committee c) Divisional head offices and provincial headquarters The Head Office has nine divisions, which are further divided into different wings. It is operationally in charge of central affairs including the delegation of powers and authority to the 29 Regional Headquarters all over the country. These Regional Headquarters direct the functions of the twelve corporate branches. 2. BOARD OF DIRECTORS

The Board of Directors nominates the executive committee, which nominates divisional heads. It consists of president, six directors working under president and one Secretary. President is the governing body and other six directors and one Secretary work with him in a systematic way. The Board of Directors of National Bank of Pakistan NBP has one President and six members as given below: Table 3. 2 NBP BOARD OF DIRECTORS STRENGTH President of the bank |1 | |SEVPs of the bank |3 | |Representative of the PBC |1 | |Representative of government |1 | |Outsiders |1 | |Total |7 | 3.

EXECUTIVE COMMITTEE Executive Committee consists of one President and nine members and among these nine members, one member perform functions of both member and Secretary. Board of Directors nominates executive committee and executive committee nominates the divisional heads. NBP has an executive committee with President as its chairman; five SEVPs are its members and president’s advisor as an observer. This body monitors the day-to-day affairs of the entire bank and has sanctioning authority for financial and business proposals. 4. DIVISIONAL CHIEFS In order to improve the management and operation of a bank, it has been split up into a number of divisions.

Each division of a bank is placed under the supervision and control of Divisional Chief or Senior Executive Vice President (SEVP) or Executive Vice President (EVP). The Head Office management controls all the divisions. The nine divisions of NBP are as follows: a. Management Support Division b. Audit and Inspection Division c. Treasury Management Division d. Credit Policy Management Division e. Marketing and Development Division f. Overseas Banking Division g. Special Assets Management Division h. Bank Secretary Division. 5. PROVINCIAL CHIEFS In order to improve the performance of the banking system, each bank has Provincial Chief who has the power for sanctioning finance and other credit facilities.

The head quarters of the chiefs are situated in Lahore, Karachi, Peshawar and Quetta. The National Bank has 29 regions (circles) in four provinces and Azad Kashmir. 6. REGIONS OF NBP On May 13, 2000 a circular was issued in which zones were abolished and the whole country and Azad Kashmir was divided into 29 regions. The changeover process started from 1st August 2000 and was completed by 31st August 2000. The new setup was made fully functional by 15th September. 3. 6. 1 Regional Management Committee A regional management committee controls all regions. Regional management consists of i. Regional Business Chief ii. Regional Operations Chief iii. Risk management Chief iv. Compliance Chief The Names of the Regions are: |S. No. Region |S. No. |Region | |1 |Karachi South |2 |Karachi Central | |3 |Federal Capital |4 |Karachi West | |5 |Rawalpindi |6 |Lahore East | |7 |Faisalabad |8 |Gujranwala | |9 |Peshawar |10 |Mirpur A. K. |11 |Multan |12 |Gujrat | |13 |Sialkot |14 |Hyderabad | |15 |Abbotabad |16 |Sargodha | |17 |Mardan |18 |Jhelum | |19 |Quetta |20 |Sahiwaal | |21 |Bhawalpur |22 |Dera Ghazi Khan | |23 |Dera Ismail Khan |24 |Jhang | |25 |Muzaffarabad A. K. |26 |Sakkhar | |27 |Larkana |28 |Gawadar | |29 |Gilgit |**** |**** | 3. 7CORPORATE BRANCHES Corporate branches play an important role in the setup of National Bank of Pakistan, to serve the businessmen and the corporate sector of Pakistan. There are twelve corporate branches, present in the following cities. TABLE 3. 4 CORPORATE BRANCHES OF NBP City | No Of Corporate Branches | |Karachi |3 | |Lahore |3 | |Islamabad |1 | |Rawalpindi |1 | |Quetta |1 | |Peshawar |1 | |Mirpur (AJK) |1 | |Faisalabad |1 | | Total |12 | 8. OVERSEAS BRANCHES

NBP has 16 overseas branches, in the following 11 countries. Table 3. 5 NBP FOREIGN BRANCHES |S. No. |Country |S. No. |Country | |1 |USA |2 |France | |3 |Germany |4 |United Kingdom | |5 |Egypt |6 |Peoples Republic Of China | |7 |Korea |8 |Africa & Middle East Region | |9 Bangladesh |10 |Central Asia States | |11 |Hong Kong | 11 |Afghanistan | NBP has four representative offices in the following countries: |S. No. |Country |S. No. |Country | |1 |USA |2 |Peoples Republic Of China | |3 |Uzbekistan |4 |Azerbaijan | NBP has a subsidiary situated in Kazakhstan. 9. NBP Cantt. Branch: PESHAWAR

This branch shifted to its new building in the year 2000. It is located in the commercial heart of Peshawar. Its main customer is Government Of Pakistan. It is also called “Main branch Peshawar”. It’s a large branch and has been serving both civil and military personnel. All the cheques drawn on or by the bank are pooled here and then taken to SBP for clearance. It’s one of the most profitable branch of NBP in Peshawar. 3. 9. 1 Set up • Keeping in view the size of the branch the Operation manager will take direct responsibilities for some of the operation functions depending on the nature of activities in the branch and will act as Compliance officer also. The Operations area would comprise of Cash Counter Services and Customer Services. • The branch manager with the relationship officer(s), (if required) will concentrate and fully devote to credit marketing and business/deposit development. • Operations manager will report directly to the regional chief operations with dotted line reporting to the branch manager. 3. 9. 2. Branch Manger Responsibilities • Overall affairs of the branch. • Checking and ensure effectiveness of control system and working procedures. • Meeting existing and New Customers. • Marketing business/deposit development and public relations. • Assignments of accounts to relationship manger/officer. • Income and business budget. Performance evaluation of reporting staff. • Develop objectives for reporting staff. • Review of reports. • Conduct periodical meeting of the staff. • Liaison with controlling offices. • Approval of credit proposal with-in delegated authority • Approval of expenses with in delegated authority. • Follow-up for recovery of Non performing finances • Restructuring and rescheduling of classified accounts. • Special project/Assignments by controlling officers. 3. 9. 3Operations Manager Responsibilities • Supervision of all assigned operation department. • Ensure check and control systems are in place. • Create cordial and customer friendly atmosphere in branch. Ensure continuous satisfactory service to the customers. • Review of daily activity reports. • Ensure compliance of bank/SBP and local regulations. • Approval of opening of new accounts. • Approval of expenses with in delegated authority • Preparation of expenses budget. • Develop duty list for all branch operation staff • Develop objectives for operation staff • Performance evaluation of reporting staff. • Cross-training to the staff • Management of staff attendance and vacation • Provide leadership and guidance to operations departments • Reporting of all exceptions to controlling office. • Conduct periodical meetings of operation staff • Represent branch on operation matters. Rectification of audit irregularities • Maintenance and upkeep of the branch. • Act as compliances officer. • Special projects / Assignments by manager / controlling offices. 10. HUMAN RESOURCE MANAGEMENT Human Resources Management is that part of organization, which is concerned with the “people”. Every organization is comprised of people. It acquires their services, develops their skills, motivates them to high level of performance and ensures that they continue to maintain their commitment to the organization. Getting and retaining good and competent people (employees) is critical to the success of every organization regardless of its type.

NBP also places great importance on the qualification, caliber and competence of the staff. There are three main steps at NBP for staffing and administration. • Recruitment of the staff • Development of the staff • Motivating staff 3. 10. 1 Recruitment of the Staff Recruiting is the discovery of potential skills of the employees to fulfill organizational needs or we can say that it is the linking activity for bringing together employees with skills to fill the vacancies. The recruitment procedure has following steps: i) Short- listing of the Application In this step, thousands of candidates apply for limited posts available. The candidates are scrutinized and the test calls are sent to them.

The calls are sent by the Head Office to only those candidates who fulfill the requirement of the job advertised. ii) Tests NBP under the supervision of the Institute Of Bankers In Pakistan conducts test. After the tests the applicants are further short-listed. iii) Interviews For the interviews only those candidates are called who qualify the written tests. Different types of questions are asked from the candidates by the interviewing board. Interview questions include, a. Questions about the personal background, extra curricular activities during education and about personal contacts. b. About the role of banking in current situation of economy. c. Role of foreign enterprise in public economy etc

Apart from these questions, the candidate’s personal interests are also discussed and an effort is made to have an understanding of the individual’s personality. After these questions, an evaluation is made about whether the candidates will prove himself as a valuable asset to the organization or not. iv) Merit List After the final result, the successful candidates are sent the appointment letter and they are asked to sign the agreement with the bank. 3. 10. 2 Developing the Skills of Employees Once the employees are recruited, it is very important to develop their skills. There are two ways to develop their skills. • Initial Training/Pre Service Training • On the job Training i) Initial Training/Pre Service Training All the newly recruited personnel are provided with training facilities.

During this training, an employee is rotated through different sections of the branch so that he may learn by practically doing the work. The minimum probation period is six months. ii) On the Job Training On the job training programs can be arranged at any time when the need arises for training. These training courses are of short duration, mostly for two to four weeks. These training courses are arranged at the home station or at any other station. In case of outstation, the transportation and boarding charges are paid by NBP. NBP has its own training institution. This training institute arranges seminars/courses for the NBP employees. 3. 10. 3 Motivating Staff

People who are motivated exert greater efforts to perform the assigned tasks effectively and efficiently than those who are not motivated. Various measures are used in NBP for motivating the employees and for appraising their performance. The techniques used are as follows. i) Audit Report These reports are prepared by auditors and are sent to the Head Office for performance appraisal. ii)Salaries Wages The Government of Pakistan finance division sets salary. Presently, President put suggestions to the board of directors and gets approval from the board for increasing salaries. iii)Provident Fund 7. 5% of every employee’s salary is deducted as provident fund and the bank contributes the same. iv) Medical Allowance

The bank also compensates the cost of medical advice and medicines, claimed by the employees for themselves and their dependents. BOARD OF DIRECTORS OF NBP ORGANIZATIONAL STRUCTURE OF NBP HEAD OFFICE ORGANIZATIONAL STRUCTURE OF REGIONS OF NBP Source: Circular No. 11/2000 Dated May 13, 2000 CHAPTER-4 DEPARTMENTATION Departmentation is arranging the activities into meaningful groups. It distributes the workload and increases efficiency and effectiveness. Departmentation can be done on various bases for example, departmentation for customers, by function or by location. National bank of Pakistan Main Branch Batkhella Malakand Agency consists of various departments based on its different functions.

So it can be said that the basis for departmentation at NBP is purely functional. 4. 1DEPARTMENTS OF NBP BANNU CANTT BRANCH 1. Deposits Department. 2. Remittances Department. 3. Advance Department 4. Cash Department. 5. Foreign Exchange Department. 1. Deposits Department This department is responsible for the accounts opening, accounts closing and answering customers’ queries regarding their accounts, check book issuance etc. Lockers are also under the supervision of this department. 4. 1. 2 Remittances Department This department is responsible for inward and outward remittances through demand draft (DD), telegraphic transfer (TT) or cheque collection.

It also provides account statements to the customers and answering their queries regarding their accounts. 3. Advances Department Its main function is to make correspondence with Head office Regional office and other officials, and to advance consumer loans. It checks the credibility of the consumer and maintains loans till maturity. 4. Cash Department The head of this department is an accountant. All the cash is given with fixed amount in the morning from which they can make payments. At the cash counter, local currency receipts and payments are handled. Cheques are received and presented for transfer or collection. All the money is kept in the strong room.

Cash handling is very risky job, therefore, only authorized person is allowed to enter cash department. 5. Foreign Exchange Department This department is responsible for opening and maintaining the foreign currency accounts. At present it deals in EURO, US DOLARS & GBR POUND accounts. It also provides the facilities of sending and receiving the foreign currency through foreign TT, MT etc. It also facilitates the exporters and importers by opening and clearing LCs for them. 2. INSTRUMENTS USED BY THE BANK The bank (NBP) is making the use of certain instruments, which are explained below: 4. 2. 1Signature Card This instrument is used to keep a record of customers. The customer fills this card at the time of account opening.

It consists of the customer’s name, account number, amount and specimen signature. All the signature cards are kept in the stationary in the order of account numbers, so whenever the card is needed for any purpose, it can easily be found. 2. Vouchers Vouchers are used in every bank. Every bank has its own printed vouchers. Vouchers show the details about the amount received and paid by the bank. As banks use a double entry system i. e. debt and credit system, therefore vouchers are of two types. i) Debit Voucher To differentiate these types, for the convenience of the officers, debit vouchers are printed in white color. Whenever bank incurs some expense; entries are made in debit vouchers. ii) Credit Voucher

These vouchers are printed in green color. They are used to enter the credit transactions. Any income or amounts received by the bank are entered in a credit voucher. All the sections of the bank use vouchers because they are documentary proofs that the transaction has taken place. Each section of bank collects its vouchers and tallies with deposit department at the end of the day, for removing any discrepancy. 3. MACHINES USED BY THE BANK In today’s modern world, an organization must adopt the modern technology to be efficient and consequently profitable. The use of modern technology can save a good deal of wastage of time and resources. i) Fax Machine

In the bank fax machine is used to communicate the massage from one bank to another and for sending important letters or any other documents for urgent consideration. ii) Computers and Printers There are several computers in the bank, which are used to save accounts information and to keep the record of other departments. Daily balance sheet and Other important documents are printed-out through the printer. iii) Telephone and Intercom Sets There are 3 telephone connections; one is used by the Manager and the other two for the other bank purposes. 4. 4DEPOSITS DEPARTMENT The principle source of funds of any commercial bank is the deposit account i. e. emand, saving and time deposits. From banking point of view, the term deposit means “the currency, Cheques, or draft given to a financial institution for crediting to a customer’s account”. Like all commercial banks, the primary function of National Bank of Pakistan is to accept and receive surplus money from the people. In order to attract money it offers different types of facilities to its customers. The deposit department of National Bank of Pakistan,bannu Cantt. Branch mainly performs the function of, ? Opening of Accounts ? Closing of Accounts ? Issuance of Cheque book ? Issuance of Statement of account NBP Bannu Cantt. Branch offers local currency accounts.

Local currency accounts are discussed as follows. 4. 5TYPES OF LOCAL CURRENCY ACCOUNTS 4. 5. 1Current Account A current account is a running account, which is continuously in operation. NBP current account allows customers to deposit and withdraw cash at their own convenience. The customer can withdraw the current deposits anytime, without any previous notice to the bank. The bank has to honor the cheques to the extent of credit balance in the account. No profit/interest is paid to the customer on these deposits, but the customer is required to maintain a minimum balance in the account. The initial amount required for opening of such an account is, Rs. 100.

The current account is opened and operated by traders, business companies, public service bodies, industrialists etc. 2. PLS Saving Account Saving deposits or profit and loss sharing (PLS) are those accounts on which bank offers a relatively lower rates of interest. PLS saving account can be opened with an initial deposit of not less than Rs. 500. PLS Saving Account may be opened in the name of an individual or jointly in the name of two or more persons. Charitable institutions, companies, Associations, Societies, Educational institutions, firms etc, may also open these accounts. Minors and illiterates are also eligible for opening saving accounts.

However illiterate customer must present themselves in person for withdrawals. The bank determines the rate of profit or loss on PLS saving account. 4. 5. 3Term Deposit Account These are the deposits than can be withdrawn after a certain specified period of time. The period of time varies from three months to five years. On these deposits return/interest varies with the duration for which the amount is kept with the bank. The rate of interest/return on term deposit is higher than that of a saving deposit. Its interest/return is unaffected for the duration of the deposit irrespective of market fluctuations. Term deposit is best suited for short-term investment.

Individuals as well as joint account an be opened by sole proprietorships, partnerships, joint stock companies, limited companies, clubs/associations/trusts, administration, executors etc. Profit is paid at the maturity of deposit. On these deposits premature withdrawal is permitted but against a reduced rate of interest as agreed at the time of deposit. 4. 5. 4Finance Facility Bank also extends finance facility to clients against saving and fixed term deposits on comparatively low markup rate. The deposit is kept under lien, however the customer may withdraw the profit amount credited to his account 4. 6OPENING OF AN ACCOUNT WITH THE BANK Account opening has the following requirements: 4. 6. 1Formal Request The person desirous of opening an account is required to fill an “Account opening form”.

It is a formal request by the customer to the bank to allow him to open and operate the account. The form contains information about the customer i. e. his name, address, business/profession, contact number etc. 4. 6. 2Obtaining Introduction Before opening an account the bank obtain introduction of the customer from an old customer. 4. 6. 3Specimen Signature The bank takes specimen signature of the customer on the “signature book” or on a card. Signature card is used for the verification of drawer’s signature on the cheques. 4. 6. 4Minimum Initial Deposit The current account can be opened with minimum of Rs. 100 and PLS Saving Account with minimum of Rs. 500. 4. 6. 5Operating the Account

Bank provides pay-in-slip book, cheques book and passbook to the customer for operating the account. 4. 7ACCOUNTS TERMS AND CONDITIONS Against the submission of the bank’s prescribed application form, duly introduced in the manner provided and on supply of documents required, the account is made fully functional under certain conditions. In case of account on PLS basis, bank invest the amount in any manner it considers under PLS system. 4. 7. 1Deposits All money to be deposited to the credit of an account is accompanied by pay-in-slip showing the name and number of account to be credited. Putting Bank’s stamp under the signatures of two bank officers on the pay-in-slip then authenticates the entry. 4. 7. 2Withdrawals

Withdrawals from the account can be made only by means of cheques supplied by the bank. Cheques should be signed according to the specimen signature. The drawer under his full signature must authenticate any alteration in the instrument. 4. 8STATEMENT OF ACCOUNT Account statement is provided to the customer by the bank. In these statements the bank assures that all debit entries are correct. In case of error, the bank passes an adjusting entry to rectify the error. 4. 9CLOSURE OF ACCOUNT While closing the account, the account holder returns the unused cheques and passbook to the bank. The customer also withdraws the credit balance of the account (if any). 4. 10ISSUANCE OF CHEQUE BOOK

Before issuing a new cheques book, the bank is required to give a requisition slip to the customer. The customer put his signature on the requisition slip. After verifying the signature, the cost of cheques book is charged. The account number of the customer is written on the cheques book as well as in a cheques book register. 4. 11REMITTANCES DEPARTMENT 4. 12Remittances The word “Remittance” means to send money by mail or any other method. It may also be defined as “Payments send by mail to a center for processing”. National Bank of Pakistan also provides the facility of transfer of funds from one bank to other and from one place to another place.

The transfer of funds is mainly the responsibility of the remittances department. Remittances are divided mainly into two categories. 4. 12. 1OUTWARD REMITTANCES When the bank sends a telegram etc. to another bank (concerned branch) for payment to the customers, it is called outward remittance. The sender is required to apply through a firm in which he will give all the necessary details about the sender and the beneficiary. The signature of the customers is verified. The details regarding documents attached and exchange control regulations are scrutinized. Telexes option and transactions number is recorded on the source document. This source document is then forwarded for verification.

No instrument is given to the customers. Customers can receive the TT receipt at the end of the day and document is credited to the beneficiary account. 4. 12. 2INWARD REMITTANCES When TT through telexes etc is drawn on NBP Branch, it is called inward remittance. Message is received from the Telex Department. The concerned office duly checks authentication and purpose of remittance it is received from abroad. In NBP remittance takes place in the following ways. 1. Telegraphic Transfer (TT) 2. Mail Transfer (M. T) 3. Demand Draft (D. D)/Payment Order. 4. Cheque collection 5. Clearing of Cheques. 4. 12. 3TELEGRAPHIC TRANSFER It is the fastest mode of transfer of money.

Sometimes when the remitter urgently desires the remittance, he may request to issue to telegraphic transfer. TT may be issued to general public on their written request and against the value received. The customers fill the forms and deposits cash. The official of the National Bank of Pakistan send instruction regarding payment to the drawee branch telephonically in the coded language and under confidential number known as TEST NUMBERS. Or telephone call is making to the said branch the make payment to customers. Vouchers are sent by ordinary mail to keep the record. Telephone charges a re also taken from the customers. No excise duty is taken on TT. . 13MAIL TRANSFER It is a mode of transfer of transferring money from one branch to another branch either within the same city or in cities through out country. MT advices dispatched by mail. MTs may be issued for transferring funds in one account to another account branch or to any person not requiring urgent remittance or draft. Customers fill same application and deposit the cash in the same way. National Bank of Pakistan official record the transaction voucher and advices are made and sent to responding branch. National Bank of Pakistan takes Rs. 10 as mail charges from application. No excise duty is charged on MT. 4. 14DEMAND DRAFT (DD) A bank draft is an order drawn by one branch of the bank to another of the same bank to pay a certain sum of money on demand or to the person named there on”. DD is another mode of transfer. It is just like a cheque. The application form is filled in the beneficiary name, account number and sender’s name is written. The customer deposits the amount of DD in the branch concerned. Then DD is made and given to the customers. National Bank of Pakistan official note the transaction in issuance registers on the page of that branch of National Bank of Pakistan in which the DD will draw. They also send advice to the branch to which the DD is sent. An OPEN DD is one in which direct payment is made.

A CROSS DD is one on which payment is made through account. PAYMENT ORDER Pay Order is made for the local transfer of money. National Bank of Pakistan takes fix connection of RS. 15 on pay order. Pay order also comes for clearing from SBP. NBP official checks with register and writes the entry in register. 4. 15CHEQUE COLLECTION “A Cheque may be defined as a written order of a depositor upon a bank to pay to or to the order of a designated party or to a bearer, a specified sum of money on demand. ” Cheque is received form the customer by the bank and branch-crossing stamp on the face of the cheque is checked. Cheque is received along with deposit slip. 4. 16CLEARING OF CHEQUES

Clearing of cheques is made through SC (short credit), LSC (Local short credit) in clearing house. 4. 16. 1SC (Short Credit) SC is the short credit, which consists of the cheque outside the district. These cheques are sent in SC outside the district for clearance. Once they are cleared our bank charge a certain amount of money spent on the process form the customer. 4. 16. 2LSC (Local Short Credit) LSC is the short credit, which consists of the cheques inside the district. Separate register is maintained for it. Local branches for clearance send these cheques for clearance. Bank has no charges on the process form the customer. 4. 17DUPLICATE ACCOUNT STATEMENTS

If the customer has not received his account statement due to any reason, he can get a duplicate account statement. Request is received form the customer for the issuance of duplicate statement and signatures are verified. Statement is then printed and delivered to the customer. 4. 18ADVANCES DEPARTMENT Bank is a profit seeking institution. It attracts surplus balances from the customers at a low rate of profit and makes advances/finances to individual and business firms at higher rate of mark-up. Advances and financing in banking business refers to provision (supply) of money on credit and it is the most important function of a bank. The bank tries to channelize the funds into profitable ventures to make profit.

Advancing loans is the most risky process as well and bank exercises utmost care while advancing loans to its customer. Another function of this department is to make correspondence with Head Office, Regional Office and other Officials. 4. 19RUNNING FINANCE Running finance is usually provided on working capital. The running finance facility given by NBP to its customers is only for short period. Interest/markup is charged yearly. At the end of the year, the customer is required to renew the limit. These are secured loans and are provided against personal security and against hypothecation or collateral mortgage. These securities reduces the risk of loss, therefore it is a safe investment. 4. 0DEMAND FINANCE It is a facility in which it is obligatory on customer to withdraw the entire amount. In demand finance, full amount of loan is advanced to the customer on the day the loan is sanctioned. When this type of advance is given to the borrower, the bank gives grace period after charging installments and markup. However, the customer pays installments monthly. 4. 21PERSONAL LOANS Customers whose salary account is maintained by bank are eligible for this type of loan. It is up to three basic salaries of employees of government organization. The objective of this type of loan is to improve the life style of customers. 4. 22STAFF LOANS

These types of loans include house loans, car loan etc. They are long-term loans. Amount is deducted from the salary of employee every month. 4. 23ELIGIBILITY FOR FINANCE FACILITY At NBP Advance is given after hundred percent backup guarantees. The types of securities, which are accepted by the bank, are: 1. Government Bonds and Saving Certificate. 2. Cash deposits at the same bank. 3. Pledge of stock. 4. 24ADVANCE SALARY ACCOUNT Before advance salary account was introduced by NBP, one important mode of financing was the project financing in which there was a great deal of risk involved for the non-performing of loans. (The risk of un-collection was not diversified).

While at the same time the salaried class was ignored too. As a result the advance salary introduced by NBP in mid 2000 with a wide range purpose and all branches were granted with adequate discretionary powers. Advance salary is a modified form of running finance. It initially offered three months advance salary to salaried class customers of any govt. , non-govt. or a registered firm with 11% markup rate per month. Advance salary account is receiving a handsome response from existing and potential customers because of its simple procedure and feasible nature. Keeping in view the demand of advance salary the number of months has now been increased to 10 months.

A potential customer of advance salary account has to bring and attach in following documents with specified application form. 1. Three undated crossed cheques. 2. Last salary slip. 3. Photocopy of service card. 4. Copy of NIC. 5. Undertaking from the salary distribution authority. 4. 25GOLD FINANCE Nation

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