Prepared by

Hashim Sanghi
 In The Name Of Allah, The Most Beneficial,

The Most Merciful.

All praise Is For Allah, The Lord Of The Universe.

The Most Beneficial, The Most Merciful.

The Master Of The Day Of Judgment.

( al-Fatiha; verse:1-4 )
 D EDICATED TO M Y
P ARENTS
W HO A LWAYS C ARE M E
 ACKNOWLEDGEMENT

I am very grateful to Almighty Allah who enabled me to complete this report

in a very limited time.

My thanks are also due to the young, dynamic, congenial, and qualified staff

of NBP who never let me alone in different situations related to my internship.

Without their humble help, it was not easy.

I cannot forget to pay my special thanks to Mr. Riaz Hussain, Muhammad

Asghar and Hashmat Khan for their cordial cooperation regarding my internship

report and for providing all sorts of information related to banking functions..
 OBJECTIVES OF STUDING THE ORGANIZATION

Objectives for studying the banking organization are,

 To get practical knowledge about banking.

 To improve my skills

 To know how banking support economy.

HISTORY OF BANKING IN PAKISTAN

The partition plan was announced on June 3, 1947 and August 14, 1947 was
fixed as the date on which independence was to take effect. It was decided that the
Reserve bank of India should continue to function in the dominion of Pakistan until
September 30, 1948 due to administrative and technical difficulties involved in
immediately establishing and operating a Central Bank.

At the time of partition, total number of banks in Pakistan were 38 out of these
the commercial banks in Pakistan were 2, which were Habib Bank Limited and
Austrasia Bank of India. The total deposits in Pakistani banks stood at Rs.880 million
whereas the advances were Rs.198 million. The Governor General of Pakistan,
Muhammad Ali Jinnah issued the order for the establishment of State Bank of
Pakistan on 1st of July 1948.

In 1949, National Bank of Pakistan was established. It started with six offices
in former East Pakistan. There were 14 Pakistani scheduled commercial banks
operating in the country on December 1973, the name of these were:
1. National Bank of Pakistan
2. Habib Bank Limited
3. Habib Bank (Overseas) Limited
4. United Bank Limited
5. Muslim Commercial Bank Limited
6. Commerce Bank Limited
7. Australia Bank Limited
8. Standard Bank Limited
9. Bank of Bahawalpur Limited
10. Premier Bank Limited
11. Pak Bank Limited
12. Lahore Commercial Bank Limited
13. Sarhad Bank Limited
14. Punjab Provincial Co-operative Bank Limited

The Pakistan Banking Council prepared banks amalgamation schemes in 1974

for amalgamation of smaller banks with the five bigger banks of the country. These
five banks are as under:

1. National Bank of Pakistan

2. Habib Bank Limited
 3. United Bank Limited
4. Muslim Commercial Bank Limited
5. Allied Bank Limited

So, through the Nationalization of Bank Act 1974, the State Bank of Pakistan,
all the commercial banks incorporated in Pakistan and carrying on business in or
outside the country were brought under the government ownership with effect from
Jan. 1, 1974. The ownership, management, and control of all banks in Pakistan stood
transferred to and vested in the Federal Government. The Finance Minister announced
plans to start Islamic Banking system in Pakistan in the budget speech on June 26,
1980, but it could not be possible till August, 2003.

EFFORTS TOWARDS ISLAMIC BANKING IN

PAKISTAN

Pakistan was created in the name of Islam on august 14, 1947. But since then, the
interest is paying the cardinal role in resource allocation of the economy. The banking
system in Pakistan based on interest divergences with Islamic ideology and is
forbidden by Almighty Allah and His Prophet Muhammad (PBUH).

Any government till now in the country except President Zia-ul-Haq did not dare
to change the well-digged system based on interest in banking in Pakistan.

The only step taken under this direction is starting of PLS Deposits from
January 1, 1982. Only PLS saving account and PLS term deposits shall be accepted
on profit and loss sharing basis. The banks were allowed to meet the working capital
requirements of their clients on the basis of Musharika, and Leasing, and Hire
Purchase. Beside it, different efforts are made time by time in this respect but could
not be acted upon at all.

Recently in June 2002, the Shariah Applet Bench of Pakistan issued an order to all
the banks in Pakistan to change the interest-based banking system to Islamic Modes
but the lawyer from the government of Pakistan challenged it by saying that if any
affair is in the favor of the public of the country and is also admired by the public then
it cannot be abandoned by the government. So this issue is still not resolved.
 NATIONAL BANK OF PAKISTAN

National Bank of Pakistan (NBP) was established under the National Bank of
Pakistan Ordinance 1949. The primary objective of NBP was to purchase jute from
the growers in the former East Pakistan and also to perform the commercial banking
functions in the country.

National Bank of Pakistan is now the biggest financial institution with assets
totaling over Rs.310 billion with 1428 local and 23 foreign branches. The bank is the
higher financer in agriculture and commodity operation sector.

NATURE OF THE ORGANIZATION

National Bank of Pakistan (the bank) was established under the National Bank of

Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. Its

registered and Head Office is situated at I.I. Chundrigar Road, Karachi. The bank is

engaged in providing commercial banking and related services in Pakistan and

overseas. The bank also handles treasury transactions for the Government of Pakistan

(GoP) as an agent to the State Bank of Pakistan (SBP). The bank operates

1,261branches in Pakistan and 16 overseas branches (including the Export Processing

Zone branch, Karachi). Under a Trust Deed, the bank also provides services as trustee

to National Investment Trust (NIT) including safe custody of securities on behalf of

NIT .

National Bank of Pakistan acts as a commercial bank and performs the following

functions:
  It acts as the agent of State Bank of Pakistan in handling treasury

functions, receipt of taxes and other revenues.

 The places where the State Bank of Pakistan has no branch, it receives

money and makes payments on behalf of State Bank of Pakistan.

 It provides credit for State Trading. It deals internal and external bills of

exchange and discounts them.

 It keeps deposits of the people and provides lockers and agency services.

 It invests in Government securities and bonds.

 It provides loans to industry, import and export trade, Agriculture and

Commercial sector.

 It handles salaries and pensions of Govt. employees.

 Collects utility bills.

 Makes Hajj arrangements.

 Sale and encashment of Prize Bonds, Defense Saving Certificates.

BUSINESS VOLUME

Year 2007 has been an outstanding year with the bank recording the highest profit in

its history. Our wide range of product offering, large branch network and committed
workforce are some of our fundamental strengths that enabled us to achieve

exceptional results in a very competitive market.

FIVE YEARS OF NATIONAL BANK OF PAKISTAN

Rs. In Million

YEARS 2003 2004 2005 2006 2007

TOTAL 468,697 553231 577719 635133 762194
ASSETS
DEPOSITS 395492 465572 463427 501872 591907
ADVANCES 161266 220794
PRESIDENT
PRESIDENT 268839 316110 340677
EQUITY & 27584 42936 75818 81954 116338
REVAUATION
SURPLUS MEMBER
MEMBERBOARD
BOARD
PRE TAX 9009 11978 19056 26311 28061
PROFIT SENIOR
SENIOREXECTIVE
EXECTIVEVICE-PRESIDENT
VICE-PRESIDENT
AFTER TAX 4198 6195 12709 17022 19034
PROFIT
EARNING EXECUTIVE
EXECUTIVE
8.53 VICE
VICEPRESIDENT
10.48 PRESIDENT
17.92 24.01 23.34
PER SHARE
(Rs.) SENIOR
SENIORVICE
VICEPRESIDENT
PRESIDENT
RETYRN ON 2% 2.4% 3.4% 4.3% 4.1%
HIERARCHY

ASSETS(PRE
BRANCHHIERARCHY

TAX PROFIT)
NUMBER OF 1199 1226 1242 1250 1261
BRANCHES VICE
VICEPRESIDENT
PRESIDENT
BRANCH

ASSISTANT
ASSISTANTVICE
VICEPRESIDENT
PRESIDENT

OFFICER
OFFICERGRADE
GRADE II

OFFICER
OFFICERGRADE
GRADE 22

PROFILE OF EMPLOYEE
OFFICER
OFFICERGRADE
GRADE 33

MESSENGER
MESSENGER

PEON
PEON

SWEEPER
SWEEPER
 Official set up
Head Office

Special
Special
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Treasury
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Management Credit
Credit Assets Inspection
Inspection
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Support
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Processing Managemen Audit
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Division Division
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Headquarter Division
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Special
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Credit Assets Inspection
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ZonalAssets
Office Management
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Processing Managemen Audit
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Division
Division
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Branches
Special
Special
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Management Credit
Credit Assets Inspection
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Processing Managemen Audit
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General information about

Special
Special
Treasury
Treasury
Management
Management Credit
Credit Assets Inspection
Inspection
Assets
Management
Management
Support
Support Processing
Processing Managemen Audit
Audit
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 INTRODUCTION
A well-developed monetary sector is pre-requisite for the development of any
country. The banking system can contribute greatly to the realization of a nation’s
potentialities for development by helping to keep aggregate demand in proper balance
with the supply of those resources, which are responsive to monetary demand.

FORMAL DEFINITION of bank

“Bank is an institution transacting the business of accepting for the purpose of money
from public, repayable on demand or otherwise and withdrawal by cheque, draft,
order and includes any post office saving bank.”

Types of bank
These are the following types of banks
 Central Bank
 Commercial Bank
 Exchange Bank
 Saving Bank
 Industrial Bank
 Agriculture Bank

COMMERCIAL BANKS

The most widely spread banks in any country with an objective to mobilize the saving
of the people and providing finance to the investors. These banks are in the ground for
profit earning motive and in competition with each other. These banks are providing
the basic services to the customers in the form of deposits, advances, remittances and
other.
 COMMERCIAL BANKING SCENARIO IN
PAKISTAN
At the time of independence in 1947, there were 38 scheduled banks with 195 offices
in “Pakistan”. But by December 31, 1973 there were 14 scheduled Pakistani
Commercial Banks with 3,233 offices all over Pakistan and 74 offices in the foreign
countries.
Nationalization of Banks was not done 1st January 1974 under the Nationalization Act
1974 due to certain objectives. But it had negative effects on the efficiency of the
banking sector. Afterwards, a Privatization Commission was set up on January 22,
1991. The commission transferred many banks to the private sector, i.e., MCB and
ABL. The government approved and permitted the establishment of 10 new private
banks in August 1991.

Functions of commercial banks

 Borrowing of money from customer in shape of term deposits / PLS savings /
Current Deposits and Notice Deposits.
 Lending of money to borrowers in shape of finances short-term finances, long-
term finances under various name, Demand Finance, Small Finance, Cash
Finance, and Running Finance.
 Agency services.
 Remitting of money.
 Foreign exchange business foreign currency deposits, LCs, imports and exports
etc.

Role of commercial Banks in the economic

development of a country.
Banks play an important role in the economic development of a country. If the
banking system is unorganized and inefficient, it creates mal-adjustments and
impediments in the process of development. In Pakistan, the banking system is
organized in a well manner. The State Bank of Pakistan since July 1, 1948 stands at
the apex and is responsible of the operation of the banking system. The other banks,
which form the banking structure in Pakistan, are playing role in the economic
development of the country.
The role of the commercial bank in the growth and development of the economy on
sound and steady footings is discussed briefly as follows:

Mobilization Of Resources
The commercial banks are the most efficient organizations of the economy in the
mobilization the resources and making a profitable pool of these resources. Taking
then money from the savers and lending it to the investors is the most prominent job
of the bank.

Financing Development Projects

The banks and other financial institutions advance loans for the development projects
that enhance the pace of overall development of the country. These advances are
made in both public and private sectors for the purpose of achieving a good and
strong economic field to carry on the other activities of trade and business.

Creating Climate For Capital Formation

Capital formation is done by the act of accepting people’s money and putting into
profitable ventures. This money so accumulated, make possible the availability of the
needed capital by the investors. The investors on the other hand are able to get the
needed funds that shortfall their requirements.

Assisting In Planned Development

With the help of well-organized banking sector the government is able to make good
implementation of its economic planning and can execute the developmental activities
for the welfare of the society.

Promotion Of Saving Habit

There are persons who have money but cannot put them in profitable use. The banks
attract these persons by offering a variety of accounts. They provide them not only the
safety of the funds but also higher returns on them. The banks, in this way, promote
the habit of thrift among the people.

Effective Implementation Of Monetary Policy

With the help of a good banking system in the country the government and the
Central Bank regulate the monetary supply and demand of the money. A good system
helps in the implementation of the policies that are formulated by the government.
Through these banks using different techniques of credit control makes credit
expansion and contraction.

Narrowing Regional Disparity

The banks help in bridging the regional disparities in the country. The surplus fund of
one region is sent to the centers of deficit. The less developed areas acquire funds, put
them into productive channels and increase production. The banks this help in a
balanced growth the economy.
 Executive summary of NBP
National bank of Pakistan since its establishment in 1949 is working as a commercial
bank and also providing specialized services to the government and State Bank of
Pakistan. The bank was nationalized with other major banks in early seventies and
since then being a government owned organization it has not been able to gibe a
remarkable performance. Further, the privatization of other banks has also created a
stiff environment in the banking industry.
National Bank of Pakistan, besides providing the general banking services is also
acting as an agent to State Bank of Pakistan, in areas where State Bank of Pakistan
does not has its own branches. National bank of Pakistan is working with the State
Bank of Pakistan in effective implementation of the credit policies that have been
formulated from time to time by the government and State Bank of Pakistan to control
and monitor the fiscal and monetary situation in the country.
National Bank of Pakistan currently has a wide network of branches inside the
country and in all commercial centers of the world as well. Through this huge
network of branches the Bank is providing all sort of services that have become part
of the modern banking. Nation Bank of Pakistan successfully adopts new innovations
and new products, which are rapidly adding up in the product mix of banking
industry.
The Bank is providing deposits facilities to more than five hundred thousand
customers in the country and which is increasing by the time. The bank has been
providing a service to the government of making salary payments to all government
employees on behalf of the government. These payments are sent to the bank for
distribution from the provincial divisions of all concerning departments.
In the deposits area the bank is providing special accounts such as PLS Term Deposits
(Monthly Income account), which provides a monthly with draw able return on the
account. And there is a National Income Daily Account, carrying hybrid
characteristics of saving and current accounts, distributes all profits on daily product
basis to the account holders. The bank is trying to revolutionize the services that are
provided over the counter and is working for an early change in all the branches of the
bank.
In the advances side the bank has been successful in deploying its resources in the
best way in all commercial, industrial and agricultural sectors of the country. These
advances have been increasing with the increasing trade and commerce, and bank has
been able to meet the requirements up to the maximum extent.
The introduction of a new set of services in shape of foreign currency accounts has
further given a sharp rise in the banking field. This has made easy for the foreigners
residing in Pakistan to be encouraged and make the inflow of foreign exchange in the
country more stable. This new service, though shaken its importance after undue
freezing of all accounts in 1998 have spread a situation of non-confidence among the
masses, still these accounts are increasing in number.
The financing process of all international trade, which modern banking made less
complicated and more secure, have increased with the global-village concept in the
world. For banks it is an opportunity to grasp the maximum share as possible through
being more efficient to reach the customer. National Bank of Pakistan has been
providing these financing services with great esteem and devotion to public and
private enterprises. Nation Bank of Pakistan up till 1995 has shown good performance
in the banking field with earning good profits and financing bigger projects. But after
that year with the privatization of three nationalized commercial banks, the bank has
not been able to sustain its good ranking in the industry. Further due to being under
the political influence the bank has been forced to make unprofitable commitments
too.
The management is considering the fact and doing planning for the sake of getting it
through these unjustified pressures but still not been able to implement them in good
manner. This is a further disturbed by the demotivated and unqualified staff that is
working with the bank.
To be able to regain the level of performance and profitability the bank has to take
serious measures to escape from the political influence, build a competent and
qualified pool of employees, make all possible efforts to introduce the modern
technology that is serving the banks in the world and to enhance the confidence of the
customer, are necessary steps be taken by the bank.
 Account opening department
Borrowing funds from different sources has become an essential feature of today’s
business enterprises. But in the case of a bank borrowing funds from outside parties is
all more vital because the entire banking system is based on it. The borrowed capital
of a bank is much greater their own capital. Banks borrowing is mostly in the form of
deposits. These deposits are lent out to different parties. Such deposit creation is done
through opening an account in the bank.

Types of accounts
In NBP, there are the following types of accounts:
 Current Account.
 Saving Account.
 Term Deposit.
 Notice Deposit.

Current account
In current account there is no interest on it. It is for only transaction purposes. They
are paid on demand. When a banker accepts a demand deposit, he incurs the
obligation of the paying all cheques drawn against him to the extent of the balance in
the account. As there is no profit paid on this account it is also called checking
account because cheques can be drawn on it. Current account is mostly opened for
business. The minimum amount for opening the account is Rs.100/-.

Saving account

The purpose of this account is to induce the habit of saving individuals in the
neighborhood. The profit on PLS saving Accounts in NBP is checking accounts paid
on the basis of profit and loss calculated after six month. The minimum deposit for
opening the account is Rs.100/-.
 Notice Deposits
Notice Deposits are kind of fixed deposits. The minimum balance requirement for
opening the account is Rs.5000/- and payment is drawn on maturity of the specific
period. Notice Deposit is of the two kinds:
 One for which a prior notice of 7 days is required from the customer before with
drawing deposited amount and for which rate of return (ROR) is the 7 days rate.
 Second for which a prior notice of 30 days is required from the customer before
with drawing the deposited amount and for which rate of return (ROR) is the 30
days rate.
These rates are more than the saving rate but less than the rate calculated after six
month. These are one-year deposits and the rate of return (ROR) is supposed 7%. If
person withdraw the amount before maturity, suppose 7th month then we charge him
the saving rate, which is, suppose 4% and the remaining 3% is our recovery.
Term deposits
A term deposit is a deposit that is made for a certain periods of time (not more than 5
years). At the end of the specific period, the customer is allowed to with draw the
principle amount.
The term deposit account rate varies after six month and rate is depend upon the
period of term deposits, as period is increased the rate is also increased and the
minimum balance requirement is Rs.1000/- but no maximum limit. Prior A/C is not
required for term deposits.

The amount of profit is given to deposits in three ways:

 By cash.
 By sending a bank draft to depositor’s home address or office or whichever is
specified as mailing address.
 The amount is credited in any one of the checking accounts of the depositor.
 Distribution of profit on pls deposits for
the half year ended June, 30, 2001

Nature of Account Time Period Rates of Profits

7 to 29 days Notice 4.00%
PLS Special Notice Account
30 days & over Notice 5.00%
PLS savings On monthly min balance 4.10%
Three months 6.50%
Six months 7.50%
One year 8.00%
PLS Term Deposits Account Two years 8.50%
Three years 9.00%
Four years 9.20%
Five years & above 9.50%

Account opening procedure

For the checking accounts (C/A, S/A), there are different types of account holders are
required. The operation / procedure requirement that is needed for “Individual
Account” differ from “Joint”, “Proprietorship”, “Partnership”, and “Limited Company
A/C” as explained below.

Individual’s account

When a single man or woman opens an account in his/her own name and has the right
to operate it is called individual account.

Documentation
All the peoples are required to bring a copy of their NIC and come with the person
who already has an account in the same branch along with the copy of his NIC.
Illiterate persons are required to bring three passport size photos as well.
 OPERATION
 The person place a “Check Mark” in the type of account and type of operation
required.
 He/she fills in part-1 of the form, affix his/her either two or four similar signature
(or thumb expression in the signature space and get it introduced and signed by a
person who already has an account with the bank and write his account no in the
specific rows in a specific space.
 The person fills Annexure-A (next to kin) form where he/she’s father, mother,
husband/wife or any other relative’s name, his/her address, phone no and affix
his/her signature to certify this requirement. This requirement is needed because in
his/her absence bank can have correspondence with the specific person.
 The person put her/his signature (or thumb expression) on the Signature Specimen
Card (SS CARD) similar in the area on the form.
 The person deposits the initial amount for opening account to the cash counter.
The person put his signature on lower part of the form-559 (check book
requisition) on two places in “authorized signature” and fills in the “Title of
Account” space by writing his name.
 If the person put his signature in Urdu or any language other than English, he
signed a “Vernacular Form” where he undertakes that affixed signature are
original and his own.
 The next day is the opening of account.

Joint account
When two or more persons, neither partners, nor trustees, open an account in their
name is called joint account. Husband and wife or two persons of same sex can open
joint account.

Documentation
For joint account copy of N-I-C Card of all the persons is obtained other things
remaining same as in individuals account.
 OPERATION
 The person checks the type of account and type of operation required in the
respective box on the form.
 The persons fill in the Part-I and Part-II in the form.
 Signatures of both persons are obtained on the form in the area specified for
signature and SS Cards.
 In the title of account space names of all persons are maintained.
 Accounts holder specified in the form that they would operate the account singly
or jointly.

Proprietorship account
When the owner of the firm operating singly, opens an account in his firm name, this
account is called a proprietorship account proprietor himself liable for all his acts.

Documentation
For this kind of account, an application for opening the account on the firm letter –
pad (having the firm name) is required along with the N-I-C Card of proprietor.

OPERTION
All operation remains the same except that the firm name is written in the “Title of the
Account” area and signature of the proprietor are affixed in the SS Card and the area
specified for signatures on the form.

Partner ship account

The account is opened in the firm name and all partners designate one or two persons
to act on behalf of the partnership firm all acts on behalf of firm. The partners in the
partnership firm are liable for the acts of the firm jointly and severely.

Documentation
 Application to open the account on the firm letter pad.
 Copy of N.I.C. Card of all partners.
 Partner ship deed in case registered partnership firm.
 Letter showing the implied authority of one or more partners to act on behalf of
the firm.


 In case of non-registered partnership firm, undertaking on behalf of the firm to

remain liable for all acts of the firm.
 Names, addresses of all partners are written on the pad.

OPERATION
All other requirement remain same except that the form is dully signed by all partners
cards are signed by all those partners who will act on behalf of the firm and along
filling Part-I, Part-IV is also filled.

Limited company account

These are normally operating only the current account not saving account.

Documentation
 Memorandum of Associations.
 Articles of Association.
 Resolution of the Board of Directors.
 Certificate of Incorporation.
 Certificate of Commencement of business.
 N.I.C.

OPERATION
The person authorized in the resolution of the Board of Directors put their signature
on SS Cards. Annexure-A (Next to kin) requirement is not need in case of a limited
company. After completing all these formalities, introducer’s signature is verified.
Customer signatures are admitted by stamping “Admitted” near signatures and again
signatures on SS card are admitted in the same way. The same process of verification
and admission of signature is repeated on the F-559 and signature on next to kin area.
After completing each and every formality, signatures are taking by all those partners
who will act on behalf of the firm and along filling part-I, part-IV of the form.

Letter of thanks
At the end, after opening the account, NBP issues letter of thanks to “Account
opener” and “Account introducer” for the trust they have on NBP at the same day.
The purpose of this letter is to check the address of both the parties for future contact.
 Stamping “Posted”
After completing all this process, the forms are signed from managers of the branch
after which these forms are stamped across as “POSTED” on one corner of the front
side of the form. And these form are sent for posting in the computer, then they are
posted in the respective. “Account Opening File”.

Procedure for opening other account

Notice Deposit
The procedure for issuing Notice Deposit in NBP is as follows:
 The customer comes to the bank and specifies the number of days for which he
wants to deposit his money in Notice Deposit.
 The credit voucher is made for the amount of cash to be deposited the presence of
account is not necessary.
 The officer then fills the notice/deposit form. The date of opening, the period, the
name of the customer, the signatures etc. are all written on the form.
 The Notice Deposit receipt is filled accordingly. All the requirements are carried
out the signature of the customer and the authorized officer, the stamp of the bank
etc.
 The number of the Notice Deposit form and Notice Deposit is noted receipt is then
given to the customer.
 The Notice Deposit receipt is then given to the customer.
 The number of the Notice Deposit form and Notice Deposit receipt is noted in the
Notice Deposit register.
 After completion of the form, it is posted in the Notice Deposit file.
 A 0.2% tax on the principal amount is taken while issuing the receipt.
 A credit voucher made and the amount is credited to the tax on ND.

Term deposit
Any person can open a term deposit. He needs not have an account in the bank. The
procedure is the same as that of the Notice Deposit.
 Other responsibilities of account opening
department

Account closing
Account is closed on the written request of the customer NBP debits Rs.100/- as
incidental charges for closing the customer account from the bank. The account
holder with draws the amount by writing a cheque and just leaves Rs.100/- in his
account.

Procedure
 The customer for individuals account writes an application to the manager of the
bank on a simple paper about the closing of his account with the bank (In case of
proprietor ship partnership and limited company account the application should be
written on firm or company letter-pad).
 The individual or in case of other type-proprietor firm and company surrender the
cheque-book to the bank.
 The cheque-book is then torn from one side and is attached with the application.
 In case of Ltd. Company Account resolution of the board of directors is also
obtained to attach it with the application.
 The account opening form of the account holder is taken from the account-
opening file, and the application, cheque-book, and resolution of board of
directors in case of limited company account are attached with the form.
 Lastly, it is written in “Red Ink on the form that account closed” and “Date of
account closing”.
 Then the form is put in the account-closing file.

Receiving inward checks

Another responsibility and function of account opening department is to receive
inward cheques for collection from other banks as well as of NBP. Then these
cheques are sent to clearing official who clears these checks at SBP from other banks.
 Cheque-book issuing
Check books are issued only for checking account such as current account, saving
account. They are not issued for other fixed and term deposits because of their long-
term account’s nature.
When an account is opened, cheque-book is usually issued the next day, however they
too are issued on the same day of opening the account keeping in view the energy
requirements the account holder.
Cheque-books leaves vary with the nature of the account. For example, 50 leaves and
100 leaves cheque-book are issued for current accounts depending upon the energy of
the account holder. Where as 10 or 25 leaves cheque-book are for saving accounts. 10
leaves cheque-books are handed over to “easily individual’s account, holder”.
There is Rs.2/- excise duty carried on cheque-book leave.

Issuing Procedure
 Signatures on cheque-book requisition are verified by matching with signatures on
SS Cards.
 Cheque-book leaves number, account number, account holders’ name are
mentioned in the cheque-book issue register and take the signature of the account
holder.
 The name of A/C holder and date of cheque-book issuance is written on cheque-
book requisition and the account opening officer puts his initials on requisition
leave.
 A/C number is stamped over the leaves of cheque-book and finally authorized
person affix his signature over the debit voucher of the excise duty and he voucher
is attached from the cheque-book and is handed over to the customer.

Everyday posting
At the end of each day, posting of cheque-books is performed, the account department
makes credit vouchers of excise duty on cheque-book leaves, and posts it in the
company.
 Lockers
Locker services are provided by the banks in order to provide the customer a safe
place where they can kept their precious documents, things, like jewelry which can be
dangerous for robbery and theft to keep in the house. Against these locker service the
bank take certain charges. NBP also has a great number of lockers in most of its
branches.
NBP has three main types of lockers.
 Small Size Lockers.
 Medium Size Lockers.
 Large Size Lockers.
Locker charges vary with the size of the lockers. Locker charges are half for the
employees of the National Bank to the normal charges charged to the customers.
Recently locker charges have been reduced by 25% as previous.

Govt. collections
NBP is also entitled for the govt. collections including the Sales Taxes, Income Taxes,
Property Taxes, Professional Taxes, and WAPDA Bills, PTCL Bills, Sui Gas Bills as
well. All the taxes and bills are collected on the cash counter, cashier count the money
and received the voucher and put the stamp “Cash Received” and break the voucher in
to two parts and give one portion to the customer and one keep in the counter. Each
types of taxes or bills have a certain lot size when the lot size is completed the cashier
send the lot of bills or taxes to the account opening dept. and now the responsibility of
the account opening officer to prepares the separate “Scroll” for each categories of
bills or taxes and make correctly the subtotal or grand total. Then after the 1.30PM the
cashier matches the total amount of all the bills and taxes and then account-opening
officer makes the credit vouchers to transfer the amount in to the concerned accounts.
At the end of each week the account opening officer calculate the weekly commission
or exchange on the collection of the bills or taxes and pass the debit voucher to the
concerned accounts.
Other then bills or taxes the NBP is also entitled to pay the “Pension” to the retired
govt. employees after each month. When a pentionist come to the bank they present
their pension book to the officer, he will check the monthly amount to be paid and
Then he sees whether the payment is of one month or more. He will writes the amount
to be paid along with the date on the pension form. And also enter in the pension
register, from the register he verify the signature and also the person because the bank
has a photograph of pensioner on the register and put the stamp “Signature Verified”
branch stamp and the stamp that “pay cash”. Then the amount is checked an other
officer and counter signs it and then pensioner present the form to the cash counter
and received the cash.
 CREDIT DEPARTMENT
The earning of a commercial bank are chiefly derived from interest charges on loans
and discounts it. Now loans are recognized as advances or finances. The advances are
made through the deposits that are kept in the bank by the customers. The bank pays
profit on the deposited amount and receives mark up on the advances made of
different amounts. NBP introduced the mark up based advancing in Jan1, 1985 when
the Islamization of the economy was influence under this system of advancing the
bank is entitled to receive a constant sum of money on the amount that is outstanding
on the account of the party.

LENDING POLICY
This policy statement sets out the principles for Board of Directors who will
determine credit activity of NBP. The Board of Directors delegates authority to Credit
Committee to approve, to direct, and to review commercial lending of NBP to ensure
its efficiency and effectiveness. The policies are defined under the following
headings.

CREDIT PRINCIPLE
The following principles are to be adopted for lending authority, approval, monitoring
and control on a basis consistent with NBP’s operational objectives and business
stages.

Objectives
∃ Providing suitable credit services and products.
∃ Not compromising NBP’s standards in extending credit.
∃ Transactions, which don’t apparently exhibit adequate commercial consideration,
will not be undertaken accept when authorized by the credit committee/president

Structure
The authority structure should enable effective adoption to changes in the economical,
technological regulatory and competitive environment.

Performance
The education and admission of the loan portfolio should conclude with in defined
and acceptable risk limitation toward attaining satisfactory return on the bank’s
capital. Credit advancement shall focus on the development and enhancement of
customer relationship and are measured on the basis of the net yield for each customer
relationship where individual transaction should also be profitable

Administration
The administration of the loan process should insure compliance with all laws and
regulations of regulatory authorities and the credit policy of the NBP. Lending where
repayment and performance on mark up or profit servicing deteriorates are identified
at early stage and closely monitored by the branches to avoid loan losses.

CREDIT PORTFOLIO LIMITS

The nature of the credit portfolio are governed by guidelines set down by the credit
committee from time to time, which are in keeping with local regulatory requirement.
These guidelines are consistent with overall NBP’s limits.

Total Facilities
The aggregates of all the facilities shall confirm to regulatory requirement as specified
from time to time.

Term Facilities
Aggregate term facilities for more than one year should not exceed 30% of credit
portfolio. Any facility for more than one year shall require prior approval of the credit
committee.

Unsecured Facilities
The aggregate of all advances to a single person should not exceed than the guidelines
stipulated by the regulatory authorities.

Security
Security accepted as collateral for credit facilities are properly valued by approved
surveyors. Appropriate margins of security are taken in accordance with not only
local regulations and practice but such margins should also reflect disposal costs and
potential price movement of the underlying assets.
Financing Against Share
Where as credit facility will not be extended towards floatation of share capital of
Public Listed Companies, facilities will not be consider against unlisted shares. Where
facilities are considered against quoted share. Which are freely marketable, such
financing are subject to the margin requirement of the regulatory authorities or as
determined by the credit committee whichever being the higher.

Borrower Liquidity/ Leverage Ratios

The branches must also ensure that the current ratio of the borrowers is equal to or
more than one. The debt- equity ratio should not exceed 60:40 except in cases where a
debt- equity ratio has been specified by the regulatory authorities. This condition may
be subject to change by the regulatory authorities.

Credit Reviews
All limits are subject to at least an annual review and where necessary branch
managers will forward half- yearly reviews. This review function is the responsibility
of the branches that will submit periodic reports to the credit division immediately
notifying any change in environmental factors. The changes are assessed on expiry of
limits or reassessed before the scheduled periodic review whenever necessary.

CREDIT APPROVAL
The primary individual factor determining the quality of the banks credit portfolio is
the ability of each individual, counter party to honor, on a timely basis, all credit
commitments made to the bank. This must be accurately determined by the
authorizing credit personal prior to credit approval.
The credit approval process must be as follows:

Authority
Credit are extended in accordance with the authority levels approved/ delegated by the
Board of Directors from time to time; provided credit approval is required at short
notice rather than that at normal span, the proposal may be referred directly to the
credit division. The credit division has authority with the agreement of a quorum of
the members of with the appropriate credit committee, to extend the loan.
Documentation
It is the essential that the proposal defines clearly the purpose of the facility, the
source of repayment, the agreed repayment schedule, the value of security and the
customer relationship consideration implicit in the credit division.
The security to be accepted as collateral for the facility and all documentation relating
to the security of the facilities must be in the approved form. All approval procedures
and required documentation must be completed and security is perfected, prior to the
disbursement of the facility.

Credit Risk Assessment

It is necessary to have a detail and complete credit risk assessment for each facility.
Customer relationship must not be over emphasized. It is the absolute responsibility
of the proposing officers and the branch managers to ensure that all necessary
proposal documentation is collected before the facility request is sent to the credit
division or committee.

Prevention Of Criminal Use of Banking Channels

The branch manager shall ensure that all credit facilities being proposed, every efforts
has been made to determine the true identity of a customer and in case of each
transaction the source of funds is established. The relevant Prudential Regulations
applicable must be compiled with before forwarding credit applications to the
approved authority.

CREDIT ADMINISTRATION
The principle elements of credit administration are as follows:
∃ Credit File Maintenance
∃ Facility Evidence Maintenance
∃ Credit monitoring and review

Credit File Maintenance

The credit file on each facility must contain all information necessary to facilitate
immediate monitoring of that facility. The primary items will include:
∃ Credit Application is received from the customer and Credit Report is received
from the credit information Bureau of the SBP whenever necessary.
∃ Credit approval documentation, summarizing the details of the borrower; credit
request, purpose of credit repayment sources, collateral description, valuation and
guarantors.
∃ Evidence of the credit approval and date upon which approval was granted
together with any comment and maintained by the credit division.
∃ Details if all related facilities to the same customer group are to the credit by the
branches and maintained by the credit division.
∃ An assessment of the competence and quality of the borrowers management, the
general economic and competitive environment of the borrowers industry and any
other pertinent factor which may affect the borrower’s ability to repay the facility.
∃ All supporting data such as financial statements and analysis therefore references,
credit investigation, results and notes of all discussions with the borrower and
other relevant parties.
∃ Written instructions for the disbursement schedule of funds.
∃ Summary sheet containing information regarding, amount dates for mark up
/profit charges and commitment fees, identification of industry risk and
classification/ rating of the borrower, guarantor and security details of overdue
payments.
∃ Each credit file must be maintained in saved in fireproof location at branches and
access restricted to authorized personal.

Facility Evidence Maintenance

All legal documents and register of security must be maintained at branch such
documents may include:
∃ Signed credit agreement
∃ Signed guarantees or other evidence of credit security or collateral agreements.
∃ All concerned documents are held in the secure location.

Credit Monitoring

Responsibility
Responsibility lies in branch manager to monitor the overall profile and risk aspect of
the credit portfolio in accordance with criteria setout in Bank’s Credit Policy. This
review is held to judge performance responsibility of the manager to ensure at each
credit extension the portfolio complies with all limits set. The branch manager must
provide a classification summary to the Credit Division which include following
information:
∃ Total Facilities
∃ Term Facilities
∃ Exposure to customer group
∃ Unsecured facilities
∃ Industry exposures.
He will provide a commentary on any local development, which may impact upon
limit setting and the risk of the credit portfolio.

Assessment
A formal assessment of each customer is carried out on a regular basis. If facilities to
any customer groups are booked in number of locations, a designate officer shall be
responsible for management of the Bank’s exposure to that customer group. Any
development in the customer’s circumstances, which may adversely affect the
management of the facility, and in particular the credit rating assigned to the customer
must be documented and advised by the manager.

PRINCIPLES OF LENDING
Once a customer decides to get a loan his interview with bank’s lending officer is
necessary, because this gives the customer the opportunity to explain his credit needs.
The bank officer can make a guess to assess the customer’s character.
When a request for finance is received it has to be ascertained:
∃ Borrower has the legal capacity to borrow.
∃ Banker must inquire the purpose of the advance.
∃ Duration of the advances.
∃ Source of repayment of the advances.
∃ Preparation of the credit report.
The banker considers the following points important.

Safety & Character

Character, capacity, capital and collateral are the three basic credit factors of the
borrower to discharge his obligation in accordance with the term of the loan
agreement. Integrity is considered of vital importance. Careful observation of business
will assist in evaluating the integrity factor. Assessment of the character is very
important. A banker must have an ability to judge the character and credit worthiness
of the borrower.

Purpose of advance
It self evident that one needs to know the purpose for which bank’s money is used i.e.
for increasing fixed assets, current assets or for decreasing liabilities. The banker
needs to examine each of them. It is for branch manager to compile a complete credit
proposal the purpose must be one, which is satisfactory for the banker. The amount is
likely to be sufficient for the given purpose. A banker must ascertain the nature of
borrower’s business so as to assess if he is competent person to repay the loan in this
case of companies it is necessary to check that the purpose is not out side the
objective mentioned in the Memorandum of association.

Productivity
As a matter of fact advances must be granted to such trade and industries, which are
capable of meeting the economic objectives of the country. Increasing gross
domestic/national product, encouraging growth of agriculture, cottage industry, small
business, local technology and talent to create more employment opportunities. The
credit repot should also depict that the proposal will be remunerative from banker’s
profit point of view.

Security of advances
Bankers lend against repayment ability of the borrowers and not merely against
security. A proposal in which repayment is not reasonably demonstrated in not
satisfactory proposal. The security must be easy to evaluate and readily realizable.
The banker accepts securities and keeps sufficient margin to secure the advances.
Securities can be the goods, stocks and shares.

Repayment of advances
Source of repayment of the borrower is required to be inquired. A banker must see at
the time of lending that the loan will be liquidated with in time and also without
restoring to a legal action against the borrower’s assets. A banker is to see that his
funds are not stuck and this is why he carefully investigates the borrower’s assets.
After the completion of investigation a decision can be made for approving or
declining a loan application.

Remuneration
The banker must see that the advances would prove highly remunerative. He must
know that the mark up on advances is the main source of bank’s earning and he must
ensure that the rate of markup is carefully maintained, recoveries are made from the
borrowers along with incidental charges as well as credited to bank’s account.

Credit report
The report is prepared by bank of the intending borrower with a view to considering
his Credit Worthiness and Eligibility for the Bank Finance. Besides other things it
contains the net worth of the borrower.

TYPES OF FINANCES
Finances can be classified into two categories:
∃ Unsecured / Clean Finances.
∃ Secured Finances.

UNSECURED FINANCES
Unsecured finances are those finances against which no security has been taken.
Unsecured advance include only the Clean Finances.

Clean Finances
Clean Finances are those finances, which are allowed to govt. employees, against
their salaries. The limits of the Clean Finances are up to three basic pay, and are
required to repay within one year.

Legal Documentation
∃ Formal request for grant facility.
∃ Authentic proof from the concerned department about his salary.
∃ N.I.C.
∃ Undertaking from the employee that the salary for the applicant shall be remitted
to the branch and in case of clients inability to repay the finance the same would
be adjusted from his dues.
∃ Sanctioning of the loan.
 SECURED FINANCES
Secured finances are those finances against which security has been pledged. Security
can be the property, stocks, deposits, prize bonds, hypothecation charges, shares,
mortgages on tangible readily reliable unencumbered assets, and govt. securities.
Secured finances are of the following categories:
1. Running Finance.
2. Agri. Finance.
3. Demand Finance (Gold Finance).
4. Cash Finance.
5. Small Finance.
These are also known as the short-term finances.

Running Finance
Running Finance is a short-term finance, one year of payment, to assist a large-scale
business operator to carry on his day-to-day requirements of liquid funds. This
account is opened to made operations in his favor or course all disbursements are
made under proper consideration of the securities and 4 C’s of the borrower. Bank
retain 25% margin on the Running Finance, means that if security having a value of
Rs.100000 then against it Rs.75000 has been financed by the bank. The mark up rate
on the Running Finance is Rs.0.4384 paisa/1000/day.

Security
Running Finance can be against the following securities:
∃ Bank’s Deposits.
∃ National Defense Saving Certificate.
∃ National Investment Trust Units.
∃ Life Insurance Policy.
∃ Shares of Joint Stock Companies on Bank’s approved list.
∃ Prize Bond.

Operation
∃ Formal request for the finance.
∃ N.I.C.
∃ Application form for Running Finance has been properly filled.
∃ Pledge original certificates of the security.
∃ Sanction for the loan convey to the customer.

Documentation
∃ IB – 28 / 31.
∃ Pledge letter.
∃ IB – 6 (Revised)
∃ F – 200 (Dated)
∃ Security description.
∃ Agreement for the finance.
∃ F – 200 (Transfer Deed Dated)
∃ Security delivery letter (F – 198).
∃ IB – 12 (Demand Promissory Note).
∃ Surrender value certificate from insurance Co.
∃ Then the opening of the Running Finance (F – 53).
∃ Life Insurance Policy duly signed in favor of Bank.
∃ Certificate from the Joint Stock Co. confirming Bank’s lien.
∃ Confirmation of the genuineness of the security instruments.
∃ In of saving deposit, mark up lien of the bank at saving center book.
∃ Authority letter from the Client to debit account for the premium.
∃ A certificate from the Insurance Co. that the age of the insured is admitted.
∃ NIT Units Certificates with its relative surrender and Transfer Letter / Forms.
∃ Letter addressed to the Joint Stock Company to mark lien against Bank Finance.
∃ Under taking that pledge letter is original and that the client has sign it with out
any pressure.
∃ Letter from the client to National Saving Center / Post Office to pay proceeds of
the NDSC to the Bank.
∃ Letter from NSC/PO confirming the instructions of beneficiary with regarding the
payment of proceeds of the National Defense Saving Certificates to the Bank.

Agri. Finance
Now a day Agri. Finance has been included under the category of the Running
Finance. Basically there are two types of Agri. Finances:
1. Agri. Finances for Crop.
2. Agri. Finances for Development.
For the development and expansion of the most participative sector of our economic
prosperity, the National Bank of Pakistan has been providing loans and finances to the
agricultural sector since its establishment. Agri. Finances for crop is called as short
term finance that is provided to carry on the operational requirements of the Agri-
business such as purchase of seeds, fertilizers, pesticides, and other seasonal
requirements of the farmers till the final activities to make the product reach to the
market. This finance is provided to cover a period of less then one year.
The other type is long term, which is provided, or the purchase of Agri-machinery and
other heavy equipment (tractor, harvester) that are used for the reclamation of the
Agri-land. But these equipments have registration joint with the bank. This finance is
provided more than one year.

Security
∃ Personal guarantee (personal identity).
∃ Third party guarantee.
∃ Against third party guarantee.
∃ Mortgage of immovable property.
∃ Against Agri. Pass Book.

Documentation
∃ Formal request
∃ IB – 6C / 12 / 21 / 22 / 26 / 29.
∃ F – 198 (Security Delivery letter)
∃ Term deposit Receipt duly discharged by the client.
∃ Letter of undertaking.
∃ Mark Lien by the Patwari and verified.
∃ Property Valuation Certificate issued by the Bank Engineer.
∃ Copy of extracts of form City Survey or maturation record.
∃ Certificate of Title Clearance issued by the Bank’s law Officer.
∃ Non-Encumbrance Certificate.
∃ Search Certificate issued by the Registrar Joint Stock Companies.
∃ Insurance Policy Premium paid with Bank Mortgage Clause.
∃ Original sale deed.
∃ On Objection Certificate issued by form co-operative Society to the effect that the
borrower is not indebted to the society.
Short term Agri. Loans has different financing limit and depend of the nature of the
crop and area covered by the crop. In case if some crop is destroyed by rain or some
other reason then the payment of the loan may post pone and the repayment may be
extended by the concerned authority. Or in some special case the loan may be
forgiven to the farmer.

Demand Finance (Gold Finance)

One time disbursement of the whole amount sanctioned, as the limit for the credit
allows. Any person, individual, group, company, firm and all others, can achieve this
mode of financing. The mark-up or interest is calculated on the total amount disbursed
and requires to be paid before the date of final adjustment. Demand Finance has 9 –
15 month duration. The Demand Finance is a one transaction finance, means that once
he withdraw the amount and after when submit the amount then he can never be
withdraw again.

Security
Demand Finance are given against Gold ornaments. Bank make their self secure by
taking 50% margin, because of mark-up (18%), default risk, impurities, and in case of
auction sale of the gold sales tax (18%).

Operation
∃ Request for the loan.
∃ Assessment.
∃ Sanction of the loan.

Documentation
∃ IB – 6A / 12 / 26.
∃ Letter of introduction (F – 344)
∃ Gold loan insurance letter.
∃ Delivery letter for Gold ornaments cum evaluation certificate (F – 205).
∃ Gold smith’s weight (net weight) quantity and quality valuation certificate.
 Cash Finance
In this mode of financing the borrower is allowed to make withdrawals of funds as he
requires, but the total amount outstanding cannot exceed the limit sanctioned. The
mark-up / interest is calculated on the amount outstanding on his account. The
calculation of mark-up / interest is based on the number of days a specific amount is
withdrawn. This finance is normally borrowed by small traders or individuals for their
petty matters involving cash transactions up to rupees three hundred thousand
maximum. These are normally for the seasonal business like cotton, which have 6-8
month business.

Security
∃ Pledge of stock.
∃ Third party guarantee and Hypothecation of stock.
∃ Pledge of stock & collaterally secured by third party’s guarantee.

Documentation
∃ Formal request for the facility.
∃ Insurance policy.
∃ IB – 6 / 12 / 23 / 25 / 26 / 29.
∃ F – 53 along with Partnership letter partner deed.
∃ F – 219 Letter handling over physical possession of the godown by the borrower.
∃ F – 218 Letter acknowledging Bank’s Lien in the stock stored (taken from
godown owners).
∃ Letter from client authorizing the Bank to Debit salaries of Godown staff to his
account.
∃ F – 138 Resolution to be obtained from the limited co. covering operations on an
account.
∃ F – 184 Resolution to be obtained from the limited co. covering authority to
Directors to execute documents.
∃ Certified copy of Memorandum and Articles of Association.
∃ Certificate of Incorporation.
∃ Certificate of Commencement of business (in case of public limited).
∃ Resolution passed by the board of Directors for the grant of Cash Finance facility.
∃ Balance sheet (audited).
Operation
∃ Formal request for the finance.
∃ Assessments.
∃ Sanctioning of the finance.

Small Finance
Small Finance is normally for the expansion of the business. In Small Finance
Hypothecation is in the custody of the owner. Where as if the security is pledge then it
will in the custody of bank.

Security
∃ Hypothecation.
∃ Pledge.
∃ Stock.
∃ Mortgage.
∃ Vehicles.

Documentation
∃ IB – 6B / 12 / 25 / 26.
∃ Formal request for the facility.
∃ F – 53 along with partnership letter.
∃ Partnership deed.
∃ Letterform client authorizing the bank to debit salaries of Godown staff to his
account.
∃ Letter signed by the client authorizing the bank to debit his for the payment made
in respect of insurance premium.
∃ Insurance policy in favor of bank.
∃ Registration in the Joint names of the bank and the borrower.

Long term finances

There are some other categories of the long-term finances:
∃ Local Manufacturing Machinery (LMM).
∃ International Borrowing for Regional Development (IBRD).
IBRD finances are usually granted for the development of the industries. Where as
LMM finances are granted to the person who want to import the machinery from any
other country and going to use that machinery for local production. In this case the
bank has pledged building or machinery, up till the person to the bank has remitted
the whole amount. After collecting the whole amount the bank will transfer the title of
ownership to the person.

LEVEL OF LENDING
The structure for lending in NBP has three levels:
∃ Credit Committee at Zonal Office.
∃ Credit Committee at Head Office.
∃ Board of Directors.

CREDIT COMMITTEE at Zonal Office

There is no authority to the Branch credit committee, the branch credit committee is
only the responsible to make the case for the loan and forward it to the Zonal Office
for approval. The Credit Committee at Zonal Office gives first approval. It has
discretionary powers with in which it implements Credit Facility decisions. The credit
department in branch prepares credit line proposal (CLP) for each advance along with
other supporting documents. The supporting documents and CLP are presented to the
Credit Committee at Zonal Office for considerations. The credit committee at Zonal
Office exercises judgment individually and judiciously on accordance with Bank’s
lending criteria.
If the proposal is within the discretional powers of the Credit Committee of Zonal
Office, the proposal may be approved after thorough evaluation of the credit risk. The
approval limit is returned to Credit Department of Branch for post approval
administration.
After that disbursement authorization certificate are obtained from the committee,
which are signed by the Branch Committee and counter signed by the Resident
Auditor to ensure that support is perfected before release of funds.
The Branch Credit Committee shall prepare minutes of its meetings, and send copy of
the minutes, copy of CLP (approved), and security details sheet to Credit Division of
Head Office within 7 days of the sanctioning for post factor review.
In case the CLP is beyond the powers of Branch Committee, the proposal is forward
for approval of the Head Office Credit Division with the recommendation by the
Branch Committee.
e.g. the lending authority in case of Agri. Loan up to 2500000 or less, Zonal Office
has authority to grant the loan.

HEAD OFFICE CREDIT COMMITTEE

The 2nd approval level in lending organization is Head Office Credit Committee.
When the CLP is beyond the discretionary power of the Branch Credit Committee, the
CLP is sent to Credit Division at Head Office along with all supporting documents
and recommendation of Branch Credit Committee.
The Head Office Credit Division processes the proposal is handed over to Head
Office Credit Committee for their decision. The CLP is reviewed by Head Office
Credit Committee and decided upon as per the policies of the Bank if the proposal is
within its powers. The Head Office Credit Committee conveyed the proposal to the
Branch Credit Department, which maintain all relevant records for approval either by
Credit Committee/Executive Committee or the Board.
e.g. the lending authority in case of Agri. Loan up to 2500000 or more, Regional
Head Quarter has authority to grant the loan.

BOARD
The highest authority of Credit Approval is the Board of Directors. All CLPs beyond
the power of the Executive Committee of Head Office referred to the Board by the
Secretariat Division along with the form.

Borrower’s credit worthiness

In order to get a complete picture of the borrower’s credit worthiness, inquiries will
have to be made about:
∃ His business.
∃ Trade experience.
∃ Assets and liabilities.
∃ His account with bank or other banks.
∃ His financial statements and income tax returns.
∃ An interview with him will be necessary to elucidate or supplement the
information that may have been collected.
There is hardly any credit agencies in Pakistan, which assist banks by giving reports
on parties. Even a report on borrower obtained through banks in Pakistan is usually
brief and does not give sufficient information that could be of practical use. It would
appear that banks could be in better position to serve the business community and
themselves, if they evolve a system by which detailed credit reports on customers are
communicated to each other.

Sources of information on borrowers

Banks get information on borrowers through various sources as ahead as follows:
∃ Loan application / credit proposal / personal investigation.
∃ Bazaar reports through friends or rivals mostly from the borrower’s trade or
business line.
∃ Borrower’s account with the bank or statement of accounts with other banks.
∃ Statement of assets and liabilities. In the case of companies, their balance sheets
and profits and loss accounts for say three years, records of the Registrar of Joint
Stock Companies.
∃ Income tax statements.
∃ Wealth tax statements.
∃ Sales tax statements.
∃ Trade and other reports in the press.
∃ Reports about actions and decrees in Govt. Gazettes.
∃ Registration, revenue, and/ or municipal records.
∃ Other bankers and branches of the bank.
∃ Operations by a customer on his safe custody account or locker
∃ SBP credit information Bureau.
∃ Personal Contacts including personal interviews.
∃ Chamber of commerce / Trade Bodies.

Legal Proceeding in defaultness

NBP all limits should be sanctioned / renewed in such a way that expiry date of all
accounts fall either on June 30 or December 31 each year. The banker is required to
calculate the mark up on June 30 or December 31 each year for the purpose of
distribution among the depositors. This is under stood that client is advised to pay
resale value, which is marked up amount on or before the date of final adjustment and
no withdrawals are allowed after this date. NBP has decided that the date for final
adjustment of the limit in respect of working capital for trade and industry should 30
days after the expiry date. If during this period the person don’t adjust the bank issued
one-month notice for adjustment. If there is no response, then another notice has been
send. If still there is no response then the bank will contact to the legal advisor,
(advocate) he will send a legal notice for adjustment within 15 days other wise bank
will register post (A.D). Then after that Bank will suit file proposal to Zonal Office,
which will further forwarded to Regional Head Quarter. After that they will file the
case in the banking court. The banking court makes Decree (degree) in favor of bank,
and stated that if there is no response your property has been auctioned.
Then banking court nominates an auction judge and takes the auction money as
charges. The judge then give the advertisement in the news regarding the auction of
the property along with the terms and conditions of the auction and a written notice to
the borrower and bank as well.
The auction judge will sale the property on maximum prices, and bank has to decide
whether it is enough to collect its amount then auction will be end other wise
objection order is implemented by the court.
If the auction sale price is greater than the dues of the customer towards the bank then
the bank returned the difference to the client but if the auction sale price is less than

the dues of the customer towards the bank then his warrant for arresting him has been
issued and they try to find out his other property to satisfy the bank dues. In case if he
prove himself as insolvent in the court then the loan has been forgive to him.
 Foreign exchange department
To promote flow of foreign exchange in the country, the Government of Pakistan
started a new scheme of opening of bank accounts in foreign currency. These
accounts were entitled to receive profit percentage in shape of the currency in which
the account was kept (Dollar account shall be paid profit in dollars). This has
increased the flow of foreign currency especially from the Pakistani foreign residents,
who used to send money to their families at home. The State Bank of Pakistan was
given special rights to control and monitor the performance of the “Authorized
Dealers” in foreign exchange accounts.

Authorized Dealer is a person or an institution, which can deal with the foreign
exchange. The authority is given by SBP to all those scheduled Banks who have
adequate trained staff and facilities. These scheduled banks are given license to deal
in foreign currency transactions. The license is of two types.

Limited License
Authority to deal in certain foreign currencies/transactions

General License
Authority to deal in all currencies and transactions
The freezing of foreign currency accounts on May 28, 1998 have shaken the
confidence of the people and it has also put a bad effect on the flow of the foreign
exchange as well.

Functions of Foreign Exchange

Department
Foreign exchange department is controlled by OG-III. Different functions are
performed by this department such as:
( Foreign Currency Deposits.
( Imports.
( Exports.
( Foreign Remittance.
Previously another function was also performed by foreign exchanged department as
Export Finance Part-I and Part-II but due to some restrictions by SBP that function
is not performed now.

Foreign Currency Deposits

To earn foreign exchange NBP offers different types of account such as:

Types of Foreign Currency Account

The National Bank of Pakistan is currently providing foreign currency accounts

services in four currencies:
( US Dollars
( Pound Sterling
( Dutch Mark
( Japanese Yen
Foreign currency accounts can be operated by Pakistani residents abroad and residents
at home, plus foreign nationals who are residents in Pakistan.
The opening of foreign currency goes through the same kind of process that is used
for opening of an ordinary deposit account. A prescribed form has to be filled as an
application for opening of account. Personal identification card and introducer is
required who can be an old account holder with the Bank or an officer of the Bank.
Foreign Currency accounts can be opened in following three types.
( Foreign Currency Current Account
( Foreign Currency PLS Account
( Foreign Currency Fixed Deposit Account

Foreign Currency Current Account

Foreign currency current account can be opened with a minimum balance of $500.
This account is not entitled to any profit.
Foreign Currency PLS Account
Foreign currency PLS account require $100 for opening and this account is eligible to
share the profits and losses at the rate that is prescribed by the Head office from time
to time.

Foreign Currency Fixed Deposit Account

In this type of account the deposits are accepted for a period of minimum 3 months
and maximum up to 3 years. The profits are credited to the accounts after every six
months on a rate that is ascertained by the Treasury Division of the National Bank of
Pakistan Head Office Karachi. The profit is provided on daily product basis, which
means that profit is credited based on the balance in the account and the number of
days it has remained in the account.

Profit On Foreign Currency Accounts

The profit on foreign currency accounts is paid only on the US Dollar account and
Pound Sterling account. The other two currencies are not entitled to receive profit on
the balances. The profit for the half-year ended June 30, 2001 has been declared at the
following rates:

Currency name New Account Old Account

US Dollar @ 1.250% @ 2.2350%

Pound Sterling @ 1.175% @ 1.878%

The Bank maintains separate ledgers for every type of currency account. The most
significant accounts with the Bank, in number and frequency of transactions, are US
Dollar and Pound Sterling. That is the reason these accounts are made eligible to
share the profits.
 FOREIGN REMITTANCES
Remittance is transfer of funds from one place to the other by way of using an
intermediate dealer. These dealers are authorized agents who provide these services
on commission. Foreign remittances are the most significant type of transaction that is
carried on in case of a foreign currency accounts. The remittance can primarily of two
types.
( Inward Remittances
( Outward Remittances

Inward Remittances
Funds coming into the country on account. The inward remittances are coming
through either Telegraphic Transfer (T.T) or in form of Demand Draft (D.D). Further
these remittances are coming in either in foreign currency or are in Pak Rupees. The
remittances coming into NBP City Branch, Multan cam be classified into the
following types.
Case 1: Remittances where the beneficiary or the payee is an account holder in
the City Branch.

Case 2: Remittances where the beneficiary or the payee is an account holder of

any NBP branch other than City Br. Multan.

Case 3: Remittances where the beneficiary or the payee is an account holder in a

Bank other than NBP.

All the above-mentioned types of remittances are handled differently and the
reimbursement of the amount is done through separate recordings in the books. The
instruments of inward remittances carry instructions for the proper reimbursement of
the amount to be credited to the account holder on realization. The reimbursement on
TTs is available as follows:
For Pak Rupee: Reimbursement is made from “Nadir House Br.” Karachi
For Foreign Currency: Reimbursement is made from “NBP Head Off. Karachi”
All TTs received from foreign bank are initially put on a test to verify the genuineness
of the massage received. This test confirms the amount, the beneficiary, the case and
the sending branch of a bank. There are special codes that are used for testing the
instrument. Once the message is confirmed then its payee’s status is checked.
Case 1
If the payee is an account holder of the City Br. then it is recorded as following:
Dr. Account at Nadir House Br.” Karachi (if remittance is in Pak Rupees)
OR
Dr. Account at NBP Head Office, Karachi (if remittance is in foreign currency)
Cr. Payee’s account
The responding branch is sent a debit advice along with copy of the message received.

Case 2
The case where T.T is addressed to another branch of NBP and has to be credited to
the account of the payee this requires the City Br. personnel, after the conformity of
the message, make a Mail Transfer (M.T) to that very branch. NBP City Br. provides
the service of T.T for its other branches, which do not have the facility of Telex or
Fax.

Case 3
T.T that is addressing a branch other than of NBP, then the payment mode selected is
T.T Payment Order, which is sort of an instrument that is sent to the responding
branch ordering it to pay the beneficiary the sum mentioned on it. The same is
presented for reimbursement through the clearing process from the clearing-house.

Outward Remittances
Funds going out of the country on account. Sending amount outside the country is an
outward remittance. Again this remittance can be made by T.T or demand draft. The
condition for these remittances requires the sender to be the account holder of the
Branch. That account holder has to submit a written cheque along with the payee’s
particulars and responding bank. This procedure has charges that are higher in case of
T.T and comparatively lesser for demand draft. These charges can be deposited in
cash or can be debited from the account of the sender as the case may be.

S.W.I.F.T
The increasing pace of technology has made the communication processes more easy,
faster, and reliable. In case of transfer of funds the introduction of S.W.I.F.T., an
acronym for Society for Worldwide Inter-bank Financial Transactions, has made
remittances faster and secure. The system works like Internet communication
processes. All the banks in the world are registered for the service, which have the
facility of online computers. The head quarter of S.W.I.F.T. is in Belgium. The
messages sent through this way do not require any code tests to confirm its
authenticity. NBP City Br. Multan has this service that has special access rights with
only one officer who is responsible to check the lists of the sent transfer messages.
The sending process is more secure where two officers make the transmission of the
message, one types the content with his code word and the other executes it with his
password.
There are different types of codes that are used for the messages interchanged on the
basis of the type of the transaction. For example:
19909 for the message that is simply send for T.T
18808 for message that relates with the L.C. functionality

FOREIGN BILLS FOR COLLECTION

Demand draft is an instrument for claim of money from any party, in this case is the
issuing bank. These drafts are for collection of foreign currency. When a customer
comes in and presents a Demand Draft (D.D) for collection from a foreign bank, the
entry in the books of accounts is made as following:
Debit. DDP Account (Demand Draft Purchased)

Credit. Payees Account

For collection of the international DDs, NBP has maintained agency relations with
following Banks:
( American Express for Americas, Europe and Asia
( Bank Al-Jazeera or Saudi Arabia
( National Exchange corp. for Emirates
These collections can be in form either Pak Rupees or in foreign currency. For
collection from abroad the cheque/draft is sent to American Express Karachi. On
realization of the amounts the Bank receives a credit advice from the agent bank and
the Bank makes a new entry.
Debit. Account at Nadir House Br.” Karachi (if remittance is in Pak rupees)
OR
Debit. Account at NBP Head Office, Karachi (if remittance is in foreign currency)
Credit. DP Account
This collection process requires some charges that have to be born by the
customer who deposits the cheque/draft for collection.

Local Bill for Collection

Local drafts are also handled in this department. When these drafts comes from
different banks for payments the bank made them advance payment and charges
certain commission and postage charges, then NBP sends these drafts to main branch
Karachi for collection. In main branch these drafts are credited to NBP account and
debit that bank’s account from where these drafts are issued.

Import Section
Import is the basic function of the foreign exchange department and NBP earn money
from imports. In order to import the goods abroad the party has to open a letter of
credit in favor of beneficiary (seller of goods).

LETTER OF CREDIT
As a credit instrument and as a mean of making security of the payment, the
documentary credit is essential these days for conducting safe and sound foreign
trade. A documentary credit represents a commitment of a Banks to value honor
cheques and other means of obligation against his customer to the amount of value of
goods traded, on the presentation of the documents evidencing the bonafide conduct.

One mode of payment is Letter of Credit (LC). It is a conditional undertaking by the

Bank to make payment to the exporter if he fulfills the terms of credit by presenting
the required documents to the bank in his country. In fact LC is a legal document on
behalf on which the payment made by the importer’s bank to the exporter’s bank.

National Bank of Pakistan is providing this service to its customers who have an
account with the branch and other businessmen too. This facility has been recognized
as a modern banking activity of all commercial banks that are included in the list of
6000 Banks internationally.
 Information in LC Document
( The name of the local company, which is importing the goods.
( The name of foreign company, which is exporting the goods.
( The details of the goods to be transacted including the amount, quality, mode of
packing etc.
( The total amount of the LC.
( The number of days for which the LC is valid.
( The name of the banks, which are regulating all these dealings.
( The name of the carrier, which will be used for the shipment of the goods to the
importer.
( The bill of shipment number.

PARTIES INVOLVED IN A LETTER OF

CREDIT

There are normally six parties involved in a letter of credit:

1. Buyer (known as the importer, account party or consignee)

2. Buyer’s Bank (known as opening, or paying bank)
3. Seller (known as the exporter, shipper, or beneficiary)
4. Seller’s bank (known as advising, confirming, negotiating bank)
5. Carrier (known as the shipping company)
6. Insurance Company

TYPES OF LCS

Irrevocable LC
An irrevocable LC is one that is a definite undertaking by the issuing Bank that it
cannot be cancelled or amended without the consent of all the parties to the credit.
This means that all the provisions for the payment, acceptance or negotiation
contained in the credit shall be fulfilled if the documents and drafts/cheques are
presented that comply with the terms and conditions of the credit. This type of LC is
the most commonly used LC for the international trade purposes. The exporter feels
himself safe and assured that his payment will be met in time without delay.

Revocable LC
This type of credit is one that can be cancelled at any time by the issuing bank giving
any reason to the negotiating bank, meaning that the importer’s bank shall not honor
any cheques/drafts presented for payment. The importers do not so commonly use this
type of LC, as most of the time there are instructions by the exporters to open an
irrevocable LCs in their favor.

Red Clause LC
A special type of LC in which the issuing bank authorizes the exporter’s bank to make
an advance payment to the exporter up to the limit said there in. This type is used in
case of import of some goods for which exporter demands an advance payment before
the shipment is made.

Revolving LC
This type of LC is opened in case the importer is indulging in import of many goods
frequently and to avoid himself of opening a new LC for every transaction, he opens a
revolving LC. The main function of a revolving LC is that it is not binding to one
transaction, rather it is made useful for different amount that are to paid to the
exporters. The maximum amount is said on the LC and the bank accepts the
responsibility to honor all cheques/drafts with in this limit.

Requirement Before Opening LC

According to the international trade policy of the GOP it is prescribed that no person
or a company can import or export until it gets itself registered with the Export
Promotion Bureau (EPB) and gets a valid certificate of registration. On being granted
the certificate he is eligible to import or export from the country.

For an importer to open a LC for the first time has to make an application to the State
Bank of Pakistan, through a scheduled commercial bank for grant of the permission to
open a LC. This importer on getting of the permission is also not bound to open the
LC from the same bank. He is free to go to any bank that suits him for the purpose.

All imports must be done under observance of all rules and regulations that are
prescribed by SBP and Government, which are subject to change from time to time.

EXPORT REGULATIONS
National Bank of Pakistan is an authorized dealer with respect to dealing in the
foreign currency affairs that are related with the export, import and foreign currency
accounts. The LC can be opened and negotiated through only from the list of 6000
banks internationally. For export L.C. negotiations the bank has to follow prescribed
rules and regulations levied by SBP. For negotiation the Bank has to give in writing
that it shall bear the responsibility to honor all bill and cheques on behalf of the
importer that shall be presented for the payment by the foreign exporter.

Documentation For Export LC

For this purpose the Banks has to make sure that it has acquired the duly required
documents from the exporter that include the following:

( “E” Form (which describes the detail of the goods to be exported, the importer’s
particulars, the amount of foreign currency payment and the details of the
importer as well.
( Original Invoices of the transaction for sale.
( Bills of Exchange drawn on the importer by the exporter.
( Bills of Lading from the shipping company along with the details.
( Insurance documents.
Along with these documents the Bank certifies that:

( Exporter is known to the Bank and is a bonafide businessman and customer in

Pakistan. He has made arrangements with realization of the export proceeds,
which must be made within 120 days from the date of the shipment of the goods.
( The Bank shall receive export proceeds against shipment on firm contract within
the prescribed period by the State Bank. Failure to make the receipts, the Bank
shall inform the State Bank the circumstances and reasons shall comply with it.
( In case of non-realization of export proceed within the prescribed period Bank
obtain from the exporter the circumstances and the reasons.
Banks certifies those firms for which:

( Arrangements have been made for realizations of export proceeds.

( Bonafide of importer/consignee abroad and credentials have been checked and
verified.
( Arrangements have been made for the receipt of export proceeds.
( Genuineness of the charter party where shipment is to be made against charter
party bill of lading has verified.
After submission of all the related documents to the negotiating Bank, seller is bound
to receive payment. The Bank on its part is also bound to make payment however it is
only reasonable to allow the banks sufficient time to scrutinize the documents that
exporter has submitted.

After these documents have been verified and found correct the bank makes the
payment to the exporter, in addition confirming it from the issuing bank. All the
documents of the export transaction are received by the exporter and then submitted
to the Bank for negotiation. These documents are sent to the foreign bank for
authentication. When the confirmation is received then a security sheet is prepared to
check the amount of the LC as well as the amount of Bill of Exchange.

The advising bank certifies form-E after checking the invoice, LC and the contract
attached with the Form-E. After certification from the banks the exporter then goes to
the custom authorities and makes the shipment to the importer.

Functional Utility of E-form:

Exports from Pakistan, subject Exchange Control Requirements, are required to be
declared on “E Form” that is in set of four copies each. Exporter shall submit all
copies after been completed and signed by the exporter or representative of the
exporter to the Bank. Completed form to be submitted to custom authorities at the
time of shipment along with shipping bill. Custom authorities will detach the original
copy and after filling their part will submit to the State Bank. Three copies are
returned to the exporter of which the exporter keeps one copy and two are sent to the
Bank with in 14 days from the shipment. Bank sends one copy to the State Bank
along with the monthly return in which realization of the export proceeds are reported.

Bank shall check for the compliance of all documents related with the exports and
shall compare the bills or documents with relative to export form and satisfy that they
conform in all respect to declarations on the relative export form and related to the
amount of bill and invoices.

IMPORT REGULATIONS
For the control of foreign exchange SBP and GOP discourage import of the goods to
the most important ones. Imported products are fulfilling still most of our daily needs.
The import procedure is also complicated that involves many dimensions to be looked
for. The Bank’s role in this regard is again indispensable for the importer and the
exporter.

DOCUMENTS FOR IMPORT LC

The party, which is going to import, has to submit the following documents to the
bank:
 Annexure – A (request for opening LC)
 Invoice Performa ( by beneficiary)
 Limit sanction certificate.
 Valid import license (not necessary)
 N-I-D Card of the importer.
 Insurance Certificate
 Bill of Exchange
 Bill of Lading

LC Opening Charges
When an LC is opened, the bank collects certain charges from importer these are:
 Commission
 Postage charges
 Telex charges
 MINISTRY Involved IN IMPORT
Ministry of commerce is for commodity movement whereas ministry of finance is
responsible for monetary transactions. These ministries have to be informed about all
the international transaction carried on by any businessman.

PAYMENT TO BANK
The requirement by the Banks is that the consignor must submit 30% of the total LC
value on opening of the LC and 70% is made after receiving the original documents.
The importer also pays any commission or mark-up changes. The charges are all
possible to change without any prior notice at the discretion of the bank.

NATURE OF PAYMENT
The nature of payment can be of three types:

Sight: where the payment is made on the presentation of the documents

Usance: where payment is made after 30, 60, or 120 days of presentation of the
documents

At Collection: Here high commission is charge and payment is made after 150 & 180
days.

The issue authority (in this case the bank) has to be confirmed about the bonafide of
the customer the same way as in case of export LC negotiations.

PROCEDURE OF OPENING LC
When the importer fulfill all the documentary requirement the bank verifies the
validity of these documents open LC. Two registers are maintained for LC opening
records.
 LC opening register.
 Liability account register.
From LC open register the bank allow LC no. now for getting approval from manager
the officer fills three forms on behalf of importer.
 Sanction slip.
 Offering sheet for LC opening.
 LC opens form.
Now importer’s account is checked for the balance that has to be retained as margin.
Previously import license was also required but now it is not necessary required to
open LC. The allowable rate for shipment is “TWO WEEKS”. But amendments can
be made up till three weeks. For that the exporter has to inform the bank and the
importer. If importer accepts it then bank allow these amendments other wise the bank
sends the document back to the beneficiary.

PAYMENT OF THE LC

The negotiating bank after receiving the documents from the exporter verifies for the
genuineness and confirms the conditions set in the LC makes payment to the exporter
(if it is a sight transaction). If the transaction is Usance then the bank makes the
payment after number of days mentioned in the LC document from the date of
presentation of the documents. These documents when checked are sent to the issuing
bank for reimbursement of the amount paid to the exporter. The issuing bank once
again checks and confirms the genuineness and sends the amount to the negotiating
bank through remittance instrument.

FOREIGN CURRENCY TRAVELERS CHEQUES

Travelers Cheque is a credit instrument that is used for safe and easy mode of
carrying money. It is innovation of modern banking that has replaced carrying cash
and being at the risk of theft or robbery. Traveler’s cheque is piece of paper that gives
the holder the right to claim from the issuing bank to make payment up to the amount
written on it. These cheques have become widely used in all business trade
transactions. NBP don’t sell Dollars by hand but they issue traveler cheques.

TRAVEL QUOTAS
Travel quotas are issued to the foreign travelers who are going abroad for visit, or for
“Umrah” and “Haj”. These expatriates require some amount of foreign currency that
they must carry along with them for the expenses. These quotas are not issued in form
of foreign currency but in shape of “Travelers Cheque” on which payment can be
received from any bank interested in purchase.
The State Bank of Pakistan has placed some restrictions on the amount of which TCs
can be issued. And these restrictions are subject to changes from time to time through
circulars sent by the SBP. The first circular was sent in 1982 and with the passage of
time many changes have been made through other circulars. The last circular in effect
is number 23 dated June 24, 1996.

The quotas for personal travel purposes are prescribed by the SBP are as follows:

( The quotas shall be issued in form of Travelers Cheque only.

( There is restriction (subject to change) on the amount, which is US $ 2,100 or US
$ 50 per day whichever is less that can be issued in form of TCs in one calendar
year to one expatriate. The need for over this amount can be negotiated and
permission can be achieved from SBP.
( Only US$ 100 can be issued in shape of hard cash that is to facilitate the most
urgent need of the traveler.

ISSUANCE OF TRAVELERS CHEQUE

The documents required for issue of T.Cs includes:

( A travel ticket issued by a registered travel agent.

( A copy of passport that has a visa stamped and is still valid.
( A copy of the national identity card of the applicant.
The Bank must also assure that the traveler has a confirmed flight at minimum 14
days from the application for the T.Cs. A copy of all the documents must be sent to
SBP along with “T-I Form” (form on which the application for T.C is recorded)

There are different quotas for which T.Cs are issued:

Business Quotas
Quotas that are issued to the people going out for business purposes have to follow
different type of procedure and require submitting different types of documents. The
main features in this regard are as follows:

( The traveler is allowed US $200 per day or US $6,000; whichever is less that can
be issued in form of TCs in one calendar year to one expatriate.
( The need for over this amount can be negotiated and permission can be achieved
from SBP.
 Medical Quota
Quota that is issued for expatriates going abroad require special treatment and have to
go through special set of regulations that are set by SBP in this regard. This requires a
special permission from the SBP for going abroad. On the permission acquired the

expatriated has to submit an application to the bank for the concerned travel. The
amount of the total expenses on the medical treatment is paid based on the invoices
being presented by the medical center abroad to the issuing bank.

Education Quotas
For students going abroad there is a special set of rules that have to be followed for
issuance of the quota. The maximum amount is based on the fee requirements of the
foreign institution and the methodology they use for the payment. These payments
may be for one semester or for two semesters, can be in advance or after completion
as the case may be.

FOREIGN CURRENCY BEARER CERTIFICATE

(FCBC)

FCBCs are the tool for the SBP to increase foreign exchange reserve in order to make
balance of payment favorable for the country’s economy. FCBCs are floated at the
order of the President of Pakistan. When these are issued they are recorded in the
cheque-book register and in the register of cheque-book for collection. Important
characteristics of FCBCs

( The profit on FCBCs is 14.5% annually.

( No tax or Zakat is deducted on these certificates.
( These are considered as white money.
( Maturity period is 6 years.
 PROCEDURE FOR ISSUANCE OF FCBC

Following are the requirements for the issuance of FCBC, which are imposed by SBP
to be followed by the banks, and are subject to change from time to time.

( Covering letter of sale of FCBC to the H.O. National Bank of Pakistan and C.C to
Chief manager SBP Public Debt Office Karachi.
( Secretary SBP, Karachi.
( The SVP investment Division H.O. Karachi.
( Proceed realization/encashment certificate to senior deputy director SBP.
( Statement showing the sale of FCBC as on date of sale to the above mentioned
three persons.
( Copy of the I.D card of the Buyer of FCBC.
Credit is send to SBP after three days of the issuance of FCBCs.
 REMITTANCE DEPARTMENT

Remittance department provides services to the customer of the bank. The main
function of this department is transfer of funds.

INSTRUMENTS OF BILLS AND REMITTANCE

DEPARTMENT
The instruments that are handled in the Remittance department are as follow:

 Demand Draft.
 Mail transfer.
 Telegraphic transfer.
 Pay order.
 Pay slip.
 OBC (outward bill for collections).
 IBC (inward bill for collections).

Demand Draft

A demand draft is an instrument, which is drawn by one bank upon another bank for a
specific sum of money payable on demand. It is made by the bank and given to the
purchaser against cash or cheque. If two banks are involved, then one banks sends a
DD to anther bank. But in customer – Bank case the customer sends his DD to the
receiver.

Issuance Procedure
 A demand draft application is given to the customer; he fills the relevant
information and signs it.
 The officer in charge then checks the information form.
 The charges such as excise duty, postage is charged as per effective schedule of
Charges. Tax is exempted if he is taxpayer and knows his No.
 In case of cash deposit the cashiers counts his amounts and signs the DD
application and enters it in the register.
 The cash received equals the amount of remittance and the cheques there on.
 Then the officer of the bills and remittance department signs it and operation
manager counter signs it.
 The entry is the made in the DD issuing register.
 It is given to the customer.
 Vouchers are passed.
 The vouchers and the DD form given for posting at the computer.
 The DD advises be printed at the computer and mailed to the respective branch.

Payment:
On the contrary, when a DD is received i.e. a customer comes to bank with the DD,
the procedure is as follow.
 The DD credit advice is received through mail. The No’s are checked and
signatures are verified.
 An entry is made on the DD payable register, and the voucher is made.
 The DD credit is attached with the vouchers and given for the posting at the
computer.
 When DD is received, The test No’s are checked, and the payment is made.
 The vouchers are given for posting.
 The vouchers are given for posting. And the entry that was made in register is
closed.

Mail Transfer

Concept
A Mail Transfer is mode of remittance that is used for transfer of money in case the
responding branch is of the same bank, which is issuing the MT. Simply to say, all
inter-branch transfer are done through MTs. A MT does not need an advice to be sent
because the amount of MT is directly credited to the account of the payee. So it is an
easy mean to transfer the amount from one account to the other account with in the
same bank but different branches.
 Issuance procedure

 A voucher is filled with the information about the receiver his account number,
responding branch of the bank, date, and amount.
 The amount to be sent is deposited in cash or a cheque is attached with the
voucher.
 Based on the information provide the MT leaf is filled.
 It is recorded in the concerned register.
 Send to the officer for signature and authentication.
 A signature is taken on the counter folio of MT from the customer.
 The MT drawn is sent to the concerned branch with a fanfold by the bank itself.

Payments
 When a MT arrives, the test numbers are checked and the signatures are verified.
 The entry is done in the MT payable register.
 If there is no account then the MT receipt needs revenue stamps and then the
payment is made.
 The MT receipt is strictly non-negotiable.

Telegraphic transfer

Concept
It is said to be the fastest mean of transfer of funds from one place to the other. In this
method a Telex message is used to make an order of payment of the responding
branch. For issue of TT a request has to be made to the manager who gives the
permission. It is a costly mean and the charges are comparatively higher than other
means.

Issuance procedure
 After a request has been granted permission the applicant is asked to deposit the
amount and the charges of the transmission.
 The manager on the basis of the amount desired for sending makes a TT message
that is gives information about the payee.
 The amount is written and is made conditioned with help of codes that are allotted
to the manager.

Payment
 On receipt of the message the officer of the responding branch will put his codes
to confirm the message.
 The amount is credited to the account of the payee.

Pay Order

Concept
It is a cheque drawn by a bank on itself. Pay order is an instrument in which three
parties are involved, the purchaser, the bank and the receiver. Any customer can
purchase it. It is usually made by govt. Bodies. A single bank is involved in this case.

Issuance
 The standard form is given to the customer; he fills in the detail and signs it.
 The concerned staff checks the form. Charges as per effective schedule are
applied.
 The cash of the pay order is received.
 A cost memo is signed, stamped and handed over to the applicant as a receipt.
 Then the pay order receipt is filled accordingly.
 Counter foil is also filled.
 An entry is made in the pay order issued register.
 Then the authorized office after checking the pay order signs it.
 The pay order is then handed over to the applicant after obtaining his signature on
the back of the counter foil P.O form.
 A voucher is also made and posted at the computer Cr. bills payable account P.O
issued.

Payment:
 On presentation of the pay order receipt the receipt is signed by two authorized
officers of the branch.
 The P.O entry is made in the P.O issued register.
 Then the amount is credited to the account of the customer or paid in cash.
 The P.O is posted at the computer.

Pay slip

Concept
It is an instrument used by the banks for its payment. The slips are issued to the
employee of the banks for their bills and invoices. The bills are transferred to pay
slips. In this case only one bank is involved and that is the issuer as well as the payer.

Procedure
Procedure prescribed for P.O for issuance and payment is followed for pay slips with
the following exceptions.
 Pay Slips are the issued by the bank for the settlements of this own payment
 No excise duty is applicable on P.S.

Issuance
 A credit voucher is sent from the account department to the remittance
department.
 The Pay Slips books is taken out and filled according to the credit voucher.
 It is entered in the P.S. / P.O register.
 An authorized officer, AVP, signs it.
 The Pay slip is handed to the customer.
 A voucher is made and posted payment.
 The P.S. is received on the counter, clearing or transfer.

Payment
 On receiving the P.S. if it is transferred in the P.S. register. The payment is made
and the P.O. is posted at the computer.
 If branch is in that city, the OBC forwarding schedule in sent to that Branch.
Otherwise it is addressed to the particular Branch to whom the cheque belongs.
 Outward Bills for Collection

Concept
The bills, which are sent to, other city banks for the local clearing in that city are
called outward bills for collection.

Procedure
 The cheques that are banks in other cities are separated and called SC (short
credit) where as with in the city bank cheques are called LSC (local short credit).
 First customer is required to fill the red slip and take the receipt for submission the
cheque.
 The OBC forwarding schedules / (Annexure) are prepared for the different
branches.
 That are entered in the OBC (SC/LSC register) register, the number is written in
the stamps.
 The respective cheques are attached with the schedule.
 Two authorized officers sign the schedule.
 The office copy is filed and the original schedule is mailed.
 On clearance the respective banks send back the OBCS along with IBCA. Inter
branch credit advice.
 The OBC numbers are checked from the OBC register and then an entry is made.
 Charges i.e. commission charges and postage charges are deducted from the A/C.
 Vouchers are made.
 At the end of the day. The contra vouchers are made.

Inward Bills for Collection

Concept
The bills, received from other banks out of city for the local clearing, are called
inward bill for collection.
 Procedure
 The OBC of the other branches will be IBC’s of this branch. So an OBC
forwarding schedule is received by mail.
 The cheques are entered in the IBC register. The IBC numbers are allotted to
them.
 The cheques are lodged for clearing.
 After realization, an IBCA is prepared and mailed to the branch.
 At the end of the day two contra vouchers are made and posted.

Other Functions
Balancing the Register
At the end of the day, all the registers are balanced with the computer balances. The
heads are as follows.
 DD payable.
 TT payable.
 MT payable.
 OBC lodged.
 OBC Collection
 IBC lodged.
 IBC collection
 Bills payable P.S. Issued.
 Bills payable P.O. issued.
If the payables are not cleared for a lot of days, a reminder is sent to the respective
branches.
 CASH DEPARTMENT

Cash department is very sensitive and risky part of the bank. Very cautious and
competent personnel are needed for the job. NBP has really such a diligent staff with
appreciable competencies and will to do work.
Main function of Cash department is to deal with cash payment and cash receipts.

CASH DEPOSIT
There are two types of deposit slips; Red slip is for cheque deposit, where Green slip
is for cash deposit. If a customer comes to deposit cash in his account the procedure is
as followed in this case:

Procedure
 The customer fills the pay slip. The cashier receives the pay slip and cash.
 He counts the cash and makes the detail of the notes at the bank of the pay slip.
 Then he compares the detail with amount written on the pay slip and signs the pay
slip.
 Writes the entries in the Receiving cashier's book, i.e. serial No, account type,
Account Number, and amount.
 Puts the stamp of the “Cash Received” on the pay slips and writes the serial
number from the receiving cashbook.
 The first portion i.e. the Receipt is taken and given to the customer. While the
latter portion is handed over to the person for the entry in order to update the data.

CASH PAYMENT
When a customer comes to withdraw a certain amount from his account, he brings a
Cheque along with him. In this case the following steps are taken.

Procedure
 The cashier receives the Cheque and checks it whether it is posted or predated.
Cheque can be cashed within six months. A repeated Cheque cannot be cashed.
 He takes two signatures at the back of the Cheque from the bearer.
 He gives the Cheque for 'posting " at the computer. The computer checks out
whether there is balance in the account or not. Other instructions are also received
e.g. blocked, frozen, etc. The posting is done in the computer and the Cheque is
stamped “posted" with the serial number and date and the token is issued to
bearer.
 The cashier counts the cash and makes the detail at the back of the Cheque.
 The cash is paid to the person and the Cheque is stamped “Cash Paid"
immediately.
 The entry is made in the Paying Cash book and the Serial number is written on the
Cheque.


CALCULATION OF ENDING CASH BALANCE

The official time for receiving deposits and payments is till 1:30. However some
important customer are accommodated afterwards.
 The cash in hand is counted. It contains the cash at the counter and the cash in the
strong room.
 Then opening balance is taken, i.e., the ending balance of the previous day.
 The receipts are added.
 The payments are deducted.
 Because this branch is online hence they are not written and maintain the daily
book manually but printed daily cash position books by the computer.

CASH MANAGEMENT
Cash management is a technique of managing cash according to the requirements
of the bank on daily basis. The operation manager manages this aspect of cash.
Every Branch has an accountant at the State Bank of Pakistan. A 5% of the total
deposits have to be maintains so there are two main sources of the cash.

 State Bank of Pakistan.

 Head Office.
If Branches borrows cash from Head Office it has to pay an interest of 13% . On the
other hand. If the cash is remitted to head Office, The branch gets a profit at 12.75%.
CHEQUEs
According to the Negotiable Instrument Act 1881, “Cheque is bill of exchange drawn
on specified banker and not expressed to be payable other wise than on demand”.

The Request of a Cheque

 It should be in writing.
 The drawer must not put any condition for the payment of the Cheque.
 Drawn on a specified banker only.
 Payable on demand.
 A certain sum of money.
 Payable to a specified person.
 Signed by the drawer.

Types of Cheques
In Pakistan, banks deal with two types of cheques:
 Open Cheque—they are payable in cash at counters.
 Crossed Cheque—they are not payable in cash at counter.

Open cheque
When cheque is presented at cash counter for payment, the token clerk examines the
cheque before issuing token. The following is looked into:
 The cheque is drawn on the same branch of the bank.
 The cheque is not crossed that it is open cheque.
 It is not stale or post dated.
 The drawer has signed the cheque.
 The amount written in words and figure is same.
 The drawer of the cheque duly signs all alteration or cancellation.
 The presenter has signed at the back of the cheque.
The Branch has online computer system, hence firstly he check the balance in his
account by giving the account number and check the title of account as well, and debit
the account by the mentioned amount. When cheque is found in order, the token clerk
affixes “Token Stamp” on the cheque, writes the token number on it and puts his
initial there and after this token is given to the presenter and cheque is handed over to
the authorized officer for further processing.

Processing Of Cheque
The authorized officer examines the cheque for the above mention things. When
cheque is found acceptable in all the aspect, the signature of the drawer is compared
with his Specimen Signature Card. When it is found similar to Specimen Signature,
he affixes stamp “Signature Verified” near the drawer signature on the cheque and
signs it. Then the entry about it is made in the Token Issue Register. Following
information is entered:
 Date.
 Token number.
 Account number.
 Cheque number.
 Amount.
 Initial of the clerk.
After, this cheque is handed over to the cashier. The cashier calls the presenter and
takes his token and compares the token number written on the cheque. He takes out
the cash to be handed over to the presenter writes its denomination at the back of the
cheque. Thereafter, he gets signature of the presenter at the back of the cheque and
hands over cash to him and affixes the stamp “Cash Paid” on cheque.

Crossed cheque
The customer of the branch deposits the cheque drawn on same branch, for payment
to be credited into his account, attached with pay slip. The officer accepts it after
looking into the following:
 The person depositing the instrument for collection is the customer of the branch.
 The correct pay slip (Current / Saving) is attached with the cheque.
 The depositor signature is present on the pay slip.
 The word and figure of the amount tally with each other.
 The cheque is neither post dated not stale.
 The drawer signature is present on the cheque.
 The alteration on the cheque are signed by the drawer.
 The cheque in the name of company, firm etc is not going in to the account of any
other person.
 The cheque with “Payee Account Only” crossing is not being deposited into the
account of any other person other then the person mention on the cheque.
When every thing is found in order, “Transfer” stamp is affixed on cheque and both
parts of the pay slip. Bank’s special crossing stamp is affixed on the cheque. “Payee
Account Credited” stamp is affixed at the back of the cheque.
If the cheque is an open cheque then “Payee Account Credited” stamp is not affixed.
The authorized officer puts has signature on both the portions of the slip and back of
the cheque. One portion of the pay slip is returned to the depositor. Cheque is handed
over to the authorized person for further processing.
The signature of the drawer is compared with the signature on the Specimen Signature
Card. When signature is found similar to specimen signature, the officer affixes the
stamp “Signature Verified” near the drawer signature, and signs it. Then he checks the
balance in the account if the account has sufficient balance, he passes the cheque and
the account is debited by the mention amount and account of the depositor of cheque
is credited by the same amount. The cheque is treated as debit voucher and pay slip,
credit voucher. The information about the both is mention is Transfer Voucher Sheet.

Returning of the cheque

Cheque can be returned back to presenter due to various reasons. When a cheque is
returned “Cheque Returned Memo” is attached to it. In the memo following
information is mentioned:
 The name of the branch.
 Date.
 Cheque number.
 Reason for returning the cheque.
The authorized officer signs the memo and Branch Stamp is place near his signature.
When the cheque (along with memo) is returned to the presenter, the token is taken
back from him and token number written at the back of the cheque and Token Issued
Register is crossed. Some of the reasons for returning the cheque are:
 Stop payment from the drawer.
 Insufficient funds in the account.
 Signature differ form specimen signature.
 Necessary stamps found missing.
 Account has a joint operation where as the cheque has single signature.
 Effects not cleared, may be presented again.

 Amount in words and figure differ.

 Cheque crossed.
 Any other.

Stop payment of cheque

The stop payment of cheque is done on the request of the drawer and no other party
can call for stop payment of cheque. A written request from the account-holder is
taken for stop payment. Stop payment is usually done when the account holder losses
his cheque-book or one of the cheque.
The instruction for stop payment us usually not accepted on telephone. If the account
holder can not sent written instruction quickly, he is asked to send the fax message
and later on submit the original request.
When the request is received, his signature is verified with the specimen signature and
signed by the authorized officer. Then the application is sent to the concerned people
who flag marks the account. And enters the information about stop payment. Later the
request of the account holder is filed in Stop Payment File.
 Clearing department

There is no legal obligation on a banker to collect cheques drawn upon other banks
for a customer. However it is function of almost every modern bank of the collection
of cheques and bills on behalf of the customer.
Clearing department services are provided in order to make arrangements for the
economic collection of the cheques, DD and other negotiable instruments. A large
part of this work is carried on through the clearinghouse.

Clearinghouse
Clearinghouse is a place where all the representation of different banks and exchange
all means of transaction other than cash and then settlement procedure carried out for
the balancing of the SBP accounts.
All the clearing members of each bank go to the clearinghouse for the first clearing at
9:30 and for the second clearing at 1:30.

First clearing
The clearing members take the outward cheques and go to the clearinghouse. The
outward cheques are given to the respective branch members and inward cheques
received. A summary is prepared and given to the supervisor of the clearinghouse. He
balances the accounts of all the banks.

Second clearing
After the outward cheques, they are checked and the ones to return are to be attached
with a memo. Then at 1:30, clearing members goes for the second clearing. At this
returned cheques are received. Once again, the summery is prepared and given to the
supervisor for balancing. The supervisor balances the accounts of the banks. The SBP
gives ending position to each member.
 Role of the clearing department

Suppose X is an account holder of NBP, and he has to pay Rs.2, 000/- to Y who is an
account holder of MCB. X draws a cheque in favor of Y and gives it to Y. Now Y
instead of coming to NBP for payment, deposit the cheque at MCB. The MCB
clearing members will bring those cheques to the clearinghouse and gives it to NBP
clearing members. The NBP clearing members brings it back to the bank and checks
the validity of the cheques and in the second clearing the MCB members told that his
cheque has been cleared.

Book keeping
There are three registers in this department:
 Clearing summary register.
 Inward clearing register.
 Outward clearing register.

Clearing Summary Register

In this register the clearing summary balance is made. The received cheques and the
delivered cheques are written in the respective columns.

Inward Clearing Register

The inward clearing register used to write the details of the inward cheques cleared.
Inward cheques are those cheques, which have been recovered from the different
banks. The amount of these will be credited SBP Account, so these cheques are
against us and have a negative effect.

Outward Clearing Register

The outward clearing register is used to write down the detail of the outward cheques.
Outward cheques are those cheques, which have been delivered to different banks.
The amount of these cheques will be debited to SBP account so these cheques are in
favor of us and have a positive effect.
Different instruction is dealt in he clearing department. All negotiable instruments e.g.
 Cheques
 Pay slips
 Pay orders
 Term deposits
In order to make arrangements for the speedy and economic collection of cheques,
bills and other documents payable or deliverable at offices of clearing house. State
Bank of Pakistan provides clearing services in all the big cities. Where State Bank of
Pakistan has no office then NBP act the role of clearing house.

Procedure
The branch for clearing items adopts the following procedure.
 All cheques, drafts, pay orders etc. accepted for clearing shall be stamped with
clearing stamp on the face of the instruments, customers, counterfoil and the pay
in slip with date of the next working day.
 All cheques received for outwards clearing to be deposited by the customers are
be accepted on the bank’s relevant pay-in slip duly filled in by the depositor as per
printed columns of the pay-in slip.
 The depositor should write the instrument number, the name, and the branch of
the bank drawn on and should sign at the prescribed column (deposited by) for his
signature.
 Immediately on the receipt of the instrument the cleaning official of the bank
affixes the bank’s crossing and clearing stamps on the face of the instrument
endorsement stamp of the bank. The pay-in-slip shall be stamped on both parts
with the clearing signature beneath the stamp.
 The pay in slip along with the instrument is passed on to the operation manager
for his signature on the pay-in-slip.

 All instrument received over the counter and from branches for outward clearing
are entered in the outward clearing register (NBP SC/LSC register). All columns
of the registers are filled in for each instrument received from any other branch of
the bank, the name of the branch is mentioned in the column for the name of
depositor.
 All instruments are received for outward clearing shall be sorted bank wise.
 They are posted at the computer in the next date are received print out.
 The grand totals of all schedules amount and number of instruments must agree
with the totals as per outwards clearing register.
 After completing the above formalities vouchers for the outward clearing are
prepared and signed.
 Similarly bank’s clearing representative receives instruments drawn on the bank
presented by the other banks through clearing house under the clearing schedule.
 After the receipt of the instrument from one bank’s representative enter them in
the summary sheet under columns pertaining in clearing.

 All instruments received in inward clearing shall be entered individually in the

inward clearing register and totaled for counter checking.
All instruments received in inward clearing shall be checked on the following:
1. The cross and clearing stamps of the collecting bank have been affixed and the
clearing stamps are correctly dated as of the data of representation in clearing.
2. The crossing and clearing stamps are of the same bank.
3. Crossing of the bank other then collecting is canceled.
 There after the instrument to be returned unpaid in clearing shall be returned the
same day through second session of clearing i.e. 2nd clearing.
 The returned instrument is returned along with check returned memo and the
reason for is signed by the operational Manager.
 Clearing position statement

After the 1st and 2nd clearing the clearing positions are prepared.
A Inwards cheques, Demand Draft, Pay orders, palsy’s etc.
B out wards Cheques, pending cheques
If amount B is greater than amount A, it means that our cash balance at SBP has
increased and so it is a favorable for bank. On the contrary, if A is greater than B it
means that our cash balance at SBP account has decreased and here it is unfavorable
for the bank.
 Strengths Weaknesses
∗ Public confidence ∗ Poor quality counter services in
∗ Sound financial strength branches which are not online

∗ Highest profitability ∗ Outdated system & procedure

∗ Vast operational network ∗ Lack of good delegation

∗ Role in economic development ∗ Inadequate, poorly placed network

technology
∗ Utility bills collections
∗ Corporate branches
∗ Poor MIS

∗ Evening banking
∗ Deep rooted bureaucratic approval

∗ Efficient home remittance

∗ Poor maintenance & implementation

∗ Recognition of hard work of staff

∗ Lack of long term & short term plans

∗ SWIFT
∗ Less share in import & export
business
∗ Internet access (www.NBP.com.pk)
∗ Poor resource utilization
∗ Pension & salaries payments
∗ Need better service policy
∗ Online city branch
∗ Frequent change in senior
management
 Opportunities
 New style management
 Introduction of new products and
services
 Introduction of new technology &
electric banking
 Capital management & equity
financing
 Secondary market operations
 New deposit scheme
 Leasing
Threats
 Establishment of new private
financial institutions & expansion
 Govt. sponsored schemes
 Political pressure
 Reducing branch network
 New products form private Pakistan
Establishment of new private
financial institutions & expansion
 Govt. sponsored schemes
 Political pressure
 Reducing branch network
 New products form private Pakistani
& foreign banks
 Non-banking institutions
 Inability to change
 i & foreign banks
 Non-banking institutions
 Inability to change
 Stakeholders interests
 PEST ANALYSIS

Political:
∗ Privatization policy and deregulation.
∗ Impact of subsidized credit affecting and NCB’s.
∗ Employment practices, Unions, Associations.
∗ Political Interference and harassment.
∗ Incidents of high taxation on banking industry.

Economical:
∗ Constraints in mobilization of public savings because of inflation.
∗ Staff cost.
∗ Operating cost.
∗ Bad debts.

Social & cultural

∗ Inadequate human resources.
∗ Cultural strain to savings.
∗ Defaulter’s lobby.
∗ Declining education and work ethics.
∗ Inadequate accountability.
∗ Adequate empowerment.

Technical
∗ Inadequate communication infrastructure.
∗ Inadequate computer facilities.
∗ Inadequate IT training.

Suggestions & recommendations

Based on the SWOT and PEST analysis of the National Bank of Pakistan, it is
observed that the Bank like the other public sector industries has not been showing up
to mark performance. There is a long list of weaknesses that is given on the previous
page. Most of them are going along since long time and that all efforts made to
remove them have not succeeded. On the basis of SWOT analysis of the Bank the
following suggestions and recommendations are given.
∗ Bank should try to get rid of the political influence to be able to compete in the
industry with prudent and strong policies.
∗ The undue reliance on the public sector be minimized and ventures of private
sectors should be taken as well.
∗ Redefining of rules, regulations and policies should be made implemented at all
costs.
∗ Efforts of great importance to be made for the over the counter services of general
banking making it more simple and faster to get a better response of the
customers.
∗ The behavior of the employees, especially on the counter have to be strictly
monitored and checked.
∗ The still existed bureaucratic approval system has to be demolished.
∗ All advances should be made by getting the maximum security and should focus
on productive work.
∗ Better and comprehensive long-term and short-term planning should be made to
forecast the future needs.
∗ There is a possibility of establishing a task force to ascertain the effectiveness of
the policies being implemented.
∗ The Bank should develop a comprehensive recruitment policy to make only the
competent ones to be on the job.
∗ There is a still a vast pool of incompetent employees that has to right sized.
∗ There is a lack of promotional element in the planning and budgetary decisions of
the Bank that has to thought seriously.

∗ All branches of the Bank should be computerized for increasing the effectiveness
and efficiency of its employees.
∗ Efforts should be continued to keep the powers of employees union to the
minimum, like the current situation.
∗ Promotions must not be delayed and should be made on time to further increase
the commitment and efficiency of the employees.
These and many others that can make a good set of recommendations, which have to
be made possible to escape from the threats and weaknesses and the risks in
environment that surrounds the Bank. The management do considers the policy matter
that are not helping the Bank, but are still in practice due the absence of prudentially
regulated system to protect them and the Bank.
Efforts have been made with serious concern to give NBP a status that it has to
maintain by having practices of:
∗ Right sizing of the employees.
∗ By closing unprofitable branches.
∗ By introducing a merit based selection criteria.
∗ Promotions made conditional with qualifications.