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Internship Report on NBP

An Internship Report On

NATIONAL BANK OF PAKISTAN

Submitted To:

Incharge Internship and Placement,

Sir. Nazik Hussain.

Submitted By:

Nazia Yasmeen

MBA (IT)-A

Roll No. 14

DEPARTMENT OF MANAGEMENT SCIENCES

ISLAMIA UNIVERSITY BAHAWALPUR

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Internship Report on NBP

DEDICATION

To my parents, especially to my kind father. I

cannot forget their cooperation and sacrifices.

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ACKNOWLEDGEMENT

With the name of Allah who is the most beneficial & merciful. I

am very thankful to Allah for his unlimited blessings for me. I have

completed this task with the help of my Allah, my parents & my teachers

especially Mr. Nazik Hussain (Incharge Internship). I am very thankful

to the staff members of NBP FG branch for their cooperation & kindness,

especially I am thankful to Mr. Sharafat Hussain, Mr.Shoaib Mailk, Mr.

Abd-ul-Rehman, Mr. Saeed Khan, Mr. Ahmad Karim Soomro, Mr.

Ghazali.

I cannot forget the kindness &cooperation of Miss Uzma & Mrs.

Naghma. I am very thankful to them for their guidance &support.

I am also very thankful to the staff members of NBP main branch for

their cooperation especially Mr. Syed Ibrar Shah Bukhari & Mr.Amir

Abbasi both of them are very honest to their work & org. They provide

me a lot of information & knowledge of foreign exchange with in very

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short period of time. I cannot forger their cooperation & kindness, many

regards to them.

I have gain practical knowledge of banking functions & their

processes during my internship. I have tries to get more & more

information &knowledge about banking from senior & experienced

employers of NBP during my internship period.

NAZIA YASMEEN

MBA(IT)-A

ROLL NO,14(4th Semester)

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Internship Report on NBP

PREFACE

Internship, a practical training, is an integral part of MBA study.

For internship I was sent to National Bank of Pakistan Farid Gate Branch

Bahawalpur. It is a six weeks training period in which I tried my best to

get complete knowledge and training in different sections of the branch.

This report contains the necessary information about the sections and

functions of NBP. This report is prepared in simple and understandable

format so that ordinary person can also take benefit from this report.

Nazia Yasmeen

MBA (IT)-A

Roll No. 14.

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Internship Report on NBP

CONTENTS

♦ Executive Summary 7
♦ History of NBP 10
♦ Mission/ Vision and Objectives 15
♦ Organizational Structure 20
♦ Structure of various divisions 22
♦ Functions of various divisions 23
♦ Deposit Section 27
♦ Remittance & Collection Section 41
♦ Advances Section 54
♦ Govt. Receipts & Payment Section 63
♦ Establishment Section 67
♦ Foreign Exchange Section 73
♦ Dispatch Section 86
♦ Cash Deptt. 90
♦ Accounting Section 94
♦ Financial Analysis 98
♦ SWOT Analysis 108
♦ Suggestions & Recommendatios 117
♦ Conclusion 120
♦ Annexure 124.

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Executive Summary
I have completed my 6 weeks internship at National Bank Of

Pakistan. I tried my best to gain something practically from this

opportunity. This report starts from the introduction of word ‘Banking’,

and then History of National Bank of Pakistan. History of NBP shows

that how it helps its Nation and Country in both war & peace.

Bank Mission statement & Vision shows its focus on overall performance

of the bank and quality of services and products.

After restructuring of the bank the objectives of the bank are changed.

Now it has objectives to overcome past mistakes, realize the real

importance of customer so now it has main objective to achieve

customization.

A commercial bank has basic functions that are must be performed by

them as a bank i.e.

• Accept money as deposits.

• Investing deposits to earn profit.

• Miscellaneous functions.

Each branch of the bank is divided on the basis of these functions into

different sections.

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Deposit section opens different accounts of clients and maintains record

of deposited money from the customer & credited it into his account. It

also maintains record of payment to the customer when he presents

cheque.

Advances section deals the customers who demand loans against required

security.

Remittance & collection section deals customers who want to transfer or

collect their money from/to other city.

Foreign Exchange section deals customers who have foreign account in

the bank & deals exchange of foreign currencies.

Bank also provides facility of L.C to support export and import in the

region.

SWOT analysis of National Bank Of Pakistan shows that it has small

number of strengths and lot of weaknesses. The bank should give

attention to this drawback. But bank has lot of opportunities to improve

its quality of services, and do efficient banking. Bank should give proper

attention to overcome its threats.

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WHAT IS BANK?

No satisfactory definition of bank is available although various

attempts have been made by different authorities;

Americans defined Banking as “By banking we mean the business of

dealing credits; and by bank we mean include every person firm or

company having a place of business where credits are opened by deposits

or collection of money or currency, subject to be paid or remitted on

cheque or order or money is advanced or loaned or stocks, bonds,

bullion, bills of exchange, promissory notes are received for discount or

sale”.

Our Negotiable Instrument Act 1881 define a banker under its section

3 (b) as “Banker means a person transacting the business if accepting, for

the purpose of lending or investment of deposit of money from the

public, repayable on demand or otherwise and withdraw able by cheque,

draft or otherwise and includes any Post Office Savings Bank.”

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HISTORICAL BACKGROUND OF NATIONAL BANK

When we won political independence, Non- Pakistanis, mostly

Hindus, controlled our economy. After partition over 7 million people

came to West Pakistan & about 5 million went out. East Pakistan was

spared from massive migration but its economy was also, being

dependent on Calcutta, badly hurt. Most bankers & business experts left

Pakistan and the economic life was brought to a standstill: mostly

branches of Imperial bank of India were only in partial operation with

little staff. The number of bank offices fell from 631 to 195 after

partition.

After this commercial phase, in 1950 started the industrial phase – Jute

and cotton industries were started during 1950-55.

It was decided that Reserve of India would act as the common

monetary authority of both countries up to September 1948. But this

arrangement did not prove well. In August 1947, we were given a first

installment of Rs. 200 million (20 crore) as our share, leaving a balance

of Rs. 550 million (55 crore) but it was not paid when ask for.

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In October 1947 there was fighting in Kashmir, when India refused

to give us the amount of Rs.55 crore if we did not give up all interest in

Kashmir, which we refused. In response, Reserve Bank of India refused

to make even an advance for ways and means. Despite that India had to

pay our 50 crore, (the remaining 5 crore still remains unpaid). There was

a controversy on establishment of our central band because we had no

experience or expertise but it was resolved and SBP was created, 3

months ahead of schedule, on July 1,1948, which was the last public

appearance of the Quaid-a-Azam. SBP claimed its share of Assets of

Reserve Bank of India against the Indian currency retired from Pakistan,

but this 50crore India disputed and virtually refused to settle this dispute

until now.

In 1949 (September) U.K. devalued its currency, India

followed suit but we did not, India said we had contravened the

agreement of keeping both currencies at par. We said we had not done

that, India had done it arbitrarily without consulting us. On October

1949, the two central banks were to announce the new par value of both

currencies but India denied a day earlier. India also froze our trade

balance surplus, which is still an unsettled dispute. India also withdraws

the Marwari merchants who were employed annually for movement of

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jute crop by financing it. There was being no jute industry, prices fell

sharply, foreign banks and foreign merchants stood aside and an agrarian

unrest was threatening. Two ordinances were, therefore, issued.

1-Jute Board Establishment Ordinance &

2- NBP Ordinance dated 08-11-1949.

NBP was established on 20-11-1949 to provide finance to suitable

parties. NBP stood behind jute trade, SBP stood behind NBP and the

Govt. stood behind SBP. Speedy it was such that 6 branches came into

being at once and the doubts on our ability to handle this situation were

dispelled forever. Now, as the jute Board and NBP were in the field, the

foreign merchants and bankers also rushed in to get their share in the

business and consequently NBP had to lay out much less finance than it

could. Mr. Ghulam Farooq was chairman jute Board & Mr. Mumtaz

Hassan was chairman NBP. Until June, 1950, NBP remained exclusively

in jute operations, there after other commodities were also taken-up.

After that Mr. Zahid Hussain, Governor SBP assumed additional charge

also as chairman NBP’s Board of Directors, & Mr. M.A. Muhajir

became its first M.D.

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In 1952 NBP replaced Imperial Bank of India. Mr. Mumtaz Hassan

negotiated this arrangement as acting Governor of SBP. In 1962 when

Mr. Mumtaz Hassan became M.D, the number of branches increased

from 6 to 239 & deposits from Rs. 5 crore to 106 crore, profit from Rs. 3

lac to 21 million & the staff increased from 380 to 7091. In Des.1966 its

600th branch was opened raising the deposits to 2.31 bn, and staff to

14,963.

In 1964 people’s credit scheme was started to finance small business.

During the 1965 war, NBP worked 7 days a week, actively and

wholeheartedly, even at branches on the hostile borders. Mr. Mumtaz

Hassan wrote in his book, “ The Story Of NBP”, “ I shall always

remember the performance of my officers and staff during these difficult

days, with pride and gratitude. He wrote, “ we had, instead built up sound

business traditions. NBP had been the instrument of National policy in

the past, its doors have ever been open to high & low, rich & poor, from

every where in Pakistan. We helped small parties to grow bigger, we

dedicated ourselves to building up a strong middle class in the country &

we sought to broaden the base of the economy”. “ NBP will continue to

perform these tasks with the same enthusiasm and vigor &, whenever in

the years ahead, the Bank is mentioned, I trust & believe it will be always

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be said that the National Bank Of Pakistan truly exists in the service of

the nation”.

Now (2003) it has 1204 branches and 12,195 employees. Its Head

Office is situated in Karachi. Sayed Ali Raza is the present president and

chairman of Board of directors of the Bank. Board of directors consists of

seven members including chairman.

On the basis of profit rate, NBP stands first in ASIA and at 8th

position in all over the world (as on June 2003).

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MISSION STATEMENT

To be recognized in the market place by

institutionalizing a merit & performance culture,

creating a powerful & distinctive brand identity,

achieving top-tier financial performance, and adopting

& living out our core values.

VISION

To be pre-eminent financial institution in Pakistan and

achieve market recognition both in the quality and

delivery of services as well as the range of product

offering.

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OBJECTIVES
TO BE AN ORGANIZATIN THAT IS FOUNDED ON…

 Growth through creation of sustainable relationship with

customers.

 A national presence with a history of contribution to

communities.

 Prudence to guide business conduct.

NBP SHALL WORK TO…

 Meet expectations through Market-based solutions and

products.

 Reward entrepreneurial efforts.

 Create values for all stakeholders.

TO BE PEOPLE WHO…

 Care about relationship.

 Lead through the strength of commitment and willingness to

excel.

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 Practice integrity, honesty and hard work.

HAVE CONFIDENCE THAT TOMORROW NBP WILL BE…

 Leaders in our industry.

 An organization maintaining the trust of stakeholders.

 An innovative, creative and dynamic institution responding

to the changing needs of the internal and external

environment.

TO HANDLE THE CRISES

The major objective of NBP is to handle the crises because when it

came into being there were jute crises in East Pakistan and it was

assigned to handle those crises.

TO SUPPORT THE ECONOMY

At present the main objective of NBP is to support the economy

with the help of its financial policies rather to maximize profit.

TO CAPTURE THE MAXIMUM DEPOSIT

It is objective of NBP to capture the deposits of the Govt. as well

public.

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TO SUPPORT THE INDUSTRIAL SECTOR

The National bank provides different types of loans to the

industrial sector to increase their business activity.

TO PROVIDE ASSISTANCE TO THE AGRICULTURE

National bank provides the different types of loans to assist the

formers on short-term basis.

TO INCREASE THE FOREIGN RESERVES

By issuing the foreign currency bonds and advancing loans against

the gold National bank support the Govt. to increase the foreign reserves.

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ORGANIZATIONAL STRUCTURE

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President

Commercial Regional
& Retail Corporate &
Business
banking Regional Investment
Group chief Chief Marketing Managers Banking

Branch
Operations Regional
Operations Regional Manager
Group Operations
Group Operations
Chief Chief
Chief Chief
Corporate Head
North &
Regional Operations Branch Corporate Head
Compliance Departments Operations South
Chief of the Manager
Region

Risk Regional
Risk
Management Risk Management Corporate
Management
Group Chief Branches
Group Chief

Credit Credit
Department of Department of
the Region the Region

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Layout Of the Branch Of NBP

D.C-Branch

Commercial banking Govt. banking

Deposit Advances Foreign Cash deptt. Remittance Collection


Section Sec. Exchange Sec. Sec.

Govt. Receipts Govt. Payments Utility Bills

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FUNCTIONS & DEPARTMENTS

FUNCTIONS OF NATIONAL BANK

BASIC FUNCTIONS

 Receiving of Money as Deposits

 Lending and inverting the deposited money

 Miscellaneous Functions

MISCELLANEOUS FUNCTIONS:

 Collecting Negotiable Instruments on behalf of customers.

 Issuing Letters of Credits for Customers.

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 Buying and Selling Bullion and Foreign Exchange.

 Discounting Bills of Exchange and other Negotiable Instruments.

 Receiving valuables for Safe Custody.

 Dealing in Stocks, Shares and Debentures and other Securities on

behalf of Customers.

 Acting as Agents to His Customers and the Government.

 Undertaking and Executing Trust.

 Issuing Guarantees and LC’s.

 Dealing of any Property that may come to it as Security in

Satisfaction of its outstanding claims.

 Acting as Executor, Administrator and Attorney for their

Customers.

 Transfer of Money from one Place to Another Place.

 To arrange for payment of subscriptions, premier, rents etc, and

collection of notes, Dividends, Interest, Salaries, Premium etc. on

behalf of their Customers.

 To act as correspondent of other banks and financial corporation.

 Act as Income Tax Advisors.

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 Collection of Fees and money for people proceeding on Hajj

Pilgrimage.

 Utility Services.

 Agent to SBP for Collecting Government dues both Provincial and

Central Government.

 Payment of Pension on behalf of Provincial and Central

Governments.

 Treasury Business.

DEPARTMENTS

1. Deposit

2. Advances

3. Bills and Remittance

4. Establishment

5. Foreign Exchange

6. Govt. receipt & payment

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Now we see the functions of each department working at each

branch of National Bank of Pakistan.

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DEPOSIT SECTION

DEPOSIT SECTION

All types of accounts of customers are managed and maintained in

this section. All the money deposited and withdrawn is properly recorded

in each specific account number.

TYPES OF THE ACCOUNTS

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Depositors can open the following types of accounts with the

National Bank of Pakistan: -

i- Current account

ii- P.L.S. saving account.

iii- P.L.S. Term Deposit Account.

iv- M.I.S. (Monthly Income Scheme)

v- N.I.D.A. (National Income Daily Account)

vi- Call Deposit

vii- Cumulative Deposit Account

A brief introduction of these accounts is given below.

CURRENT ACCOUNT

It is a running account between the customer and the banker. As

the name signifies the depositor can draw or demand amount at any time

by presenting the cheque in the bank. Unlike term deposits there is no

restriction of withdrawals. The bank neither pays any kind of interest nor

deducts the Zakat from the deposits of this account. The bank also does

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not take any service charges up to the minimum balance of account from

the depositors. The minimum balance required to an account to be

opened is Rs. 5000/-. If balances in account reduce from the minimum

balance then the bank charges Rs. 25/- as incident charges. Overdraft

facility can be provided through the agreement with the bank. In

developed and developing countries a very significant amount of money

is kept under current account. Businessman normally opens this kind of

account.

PROFIT & LOSS SHARING SAVING ACCOUNT

In Pakistan the profit & Loss Sharing Account is introduced

in January 1982.

In these P.L.S. accounts the bank gives no fixed rate of

profit. These types of deposits are designed to encourage the

saving habits of the people. The minimum deposit to open this

account is Rs. 300/-. After every six months a rate of profit is

announced by the Head Office and after calculating the amount,

it is credit to the depositor account. Now a day, if an account

holder maintains Rs.2000/- minimum balance throughout the

month then his account is eligible for profit.

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On 1st day of RAMADAN, Zakat is deducted at the rate of

2.5 %. If any customer does not want to pay Zakat from his

account then he must give an undertaking that he will pay Zakat

himself or he belongs to Fiqah-e-Jafriya.

Restriction on withdrawal of heavy balances is now

abolished. Customer can withdraw heavy amount within the

banking hours without giving any notice.

Profit Calculation

Profit is calculated on the basis of Product & Days. Product &

Days include number of months for which the bank retains balance

multiply with the amount of balance, and then apply the rate of profit on

net balance.

P.L.S. TERM DEPOSIT

In this type of account the amount is deposited for a specified

period of time. This period varies from 7 days minimum to maximum 5

years. The profit rate is also changes with respect to period. There is

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higher rate of profit on long term P.L.S. T.D.R. The minimum balance

required to open this type of account is Rs. 10000/-. Profit is announced

after six months and then credited to the respective accounts.

Monthly Income Scheme

For this scheme the required minimum balance is Rs.10000/- Profit

is announced after every six months but it is credited to the customer’s

account in every month. Mostly retired persons are like to open this type

of account.

National Income Daily Account (NIDA)

Mostly big organizations open this type of account.

Minimum balance for this account is Rs. 2,50,000 & profitable balance is

Rs. 2 million. Profit is given on daily basis & profit rate is same as P.L.S

account.

Call Deposits

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This deposit is used for Govt. services e.g. Tender Notice fees,

advance payment for participating in Nilami of govt. property. No profit

is given on this account.

Cumulative Deposit Account

In this account certificates are issued of certain amount for the

period of 20 years. Profit on this account is calculated as compound

interest.

ACCOUNT OPENING PROCEDURE

Requirements for opening an account;

(i) A copy of ID card of both introducer & customer.

(ii) Original ID cards for verification.

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(iii) If customer use thumb impression then he must gives his

recent 3 snaps & female customer also gives a written

statement on P.L.S form that “ I do not observe Parda ”.

(iv) Next to kin. The customer must clear that who is responsible

for the account in his absence.

(v) Customer must be appearing at the time of account opening.

IN CASE OF CURRENT ACCOUNT;

(i) For partnership firm account, a copy of partnership Deed &

Article of association is required.

(ii) For Corporation account, a copy of Memorandum of

association is required.

(iii) All the Executives of the firm must be present at the time of

account opening.

(iv) A copy of registration of the firm.

(v) Number of partners & who will operate the account must be

cleared.

Terms and conditions for Account Opening;

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(i) Customer must be a citizen of the city in which he wants to

open his account.

(ii) Introducer must have the balance of Rs. 4000 in his account.

(iii) A blind person can open a joint account with a partner who

must not blind.

(iv) Insane person cannot open an account.

(v) A person who sometimes normal & sometimes abnormal

then he must operate his account only in normal condition.

(vi) Endorement Account. If account holder does not operate his

account more than one year then his account will be ceased

& he cannot draw the cheque without giving an application.

Procedure of opening an account;

(i) Customer to fill application to open an account on bank’s

prescribed form.

(ii) Account opening form is properly filled in.

(iii) Banker takes customer’s signature on specimen card &

keeps it in record.

(iv) A letter of thanks on prescribed form should be sent to new

account holder under certificate of posting.

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(v) When customer comes with that letter of thanks then

chequebook & Passbook is issued to him.

Issuance of chequebook

Size of chequebook is varies. It contains 10 leaves to 100 leaves.

The assistant writes the following information on the title page of the

chequebook and chequebook issuance register.

• Issuance date

• Name of account holder

• Account number

• Type of account

After authentication by the authorized officer on the chequebook

register, the chequebook is handed over to the account holder.

• First time chequebook is issued when customer

presenting letter of thanks of the bank.

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• Empty chequebook has a requisition slip. Customer can

get a new chequebook by giving that requisition slip to

the banker.

• If chequebook or requisition slip has stolen then

customer must reported a FIR & submit a copy of that

FIR to bank for stopping payment & issuance of new

chequebook.

Mode of operation

The customer can operate an account with the National Bank

of Pakistan in the following ways: -

• Individually

• Jointly

Individual Account

When a single person operates an account is called

individual account. After his death, the person who is

authorized by court will operate the account.

Joint Account

There are two ways to operate a joint saving account:

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1. Either or survivor

For payment a cheque is required with signed by anyone

partner. In case of death of any partner of joint account, the

survivor will operate the account.

2. Jointly operate

For payment cheque is required with signed by all partners

of joint account. If cheque is missing a sign of any partner

then it will not discounted.

DEPOSITING OF THE AMOUNT

Account holder can deposit the amount in cash or

transfer in his account through credit voucher. In N.B.P. two

types of vouchers are used for this purpose.

1. Blue voucher which is used for Cash Receipts

2. Pink voucher, which is used for all Non Cash Receipts

like drafts, cheques, payment orders etc.

ENCASHMENT OF CHEQUES

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• Issuance of Token

After scrutinizing the apparent tenure of cheque, a token is

issued to the account holder. An assistant writes the number of

issued token on the back of cheque and transfer it to his officer.

• Verification of Signature

After affixing the two stamps i.e. Pay Cash and Signature

Verified, a cheque is sent to the accountant for the verification

of signature from signature specimen card. After authentication

of signature and posting in his account the cheque is sent to the

cash department for the payment.

• Payment of Cash

Cashier pays the amount to the token holder after getting

back the token from customer and matching the number with

cheque.

DEDUCTION OF ZAKAT

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From the PLS Saving account Zakat is deducted at the rate of

2.5% annually on the outstanding balance of account on the first day of

every valuation date i.e. first day of Ramadan. Minimum balance for

deduction of Zakat is fixed by the Central Zakat authority (CZA) before

the valuation date.

DISHONOR OF CHEQUE

When a bank refuses to make payment of his customer’s

cheque that is duly presented at the counter of the bank, the cheque is

said to be dishonor.

Following are main reasons for dishonoring of a cheque:

1. Effects not yet cleared.

2. Refer to drawer.

3. Amount in words & figures differ.

4. Payment stopped by the drawer.

5. Requires revalidation.

6. Drawer’s signature differs.

7. Cheque is post dated.

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CLOSING OF ACCOUNT

There are many reasons for closing or ceasing of an account. It

is not a good indication for the business of the bank. Some of the more

common reasons are as follows:

• Account holder’s own request

• Death of the account holder

• Bankruptcy of the account holder

• Closing of account due to bad conduct of account

holder etc.

• By the order of Govt.

• Insanity of the account holder.

• Account is not operated for the period of 3 years.

Before closing an account the bank sends a letter to the account

holder that his account will be closed. So after fulfilling the legal

requirements, it is marked of the accounts holders number that the

account has been closed.

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REMITTANCE &

COLLECTION

DEPARTMENT

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REMITTANCE DEPARTMENT

Remittance is a major function of the bank. It is the transfer of money

from one place to another place without directly involving cash.

By proving this service to the customers the National Bank earns a lot of

income in the form of “Exchange”. There are two types of bills

remittance:

I) Remittance inward.

II) Remittance outward.

Remittance inward.

“Cheques & Drafts received for payment and clearance or

drawn on us from customer or other banks on behalf of their customers ,

is called remittance inward”.

Remittance outward.

“All instruments issued by us, which are drawn on other

branch of the same bank or instruments deposited for collection from

other bank locally or out of the city are called outward remittances”.

Bills remittances & collection are mainly lie under two heads i.e.:

• Local Short Credit (LSC).

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• Short Credit (SC).

Local Short Credit (LSC)

All bills for remittance & collection from customer or bank

within the city are recorded under this head in LSC book. These bills are

passed along with a covering schedule & Advice/ Ex-advice to main

branch of the bank, from where an agent of SBP received that bills for

clearance.

Short Credit

All bills for remittance & collection from customer or bank

outside the city/ country are recorded under this head in SC book.

If bill is drawn on the bank itself then it passed along with a covering

schedule & an Advice/ Ex-advice directly by courier service to the

concerned branch on which it is drawn for realization.

If bill is drawn on another bank then it is passed to the main branch of

our bank of mentioned city for realization.

National Bank of Pakistan deals with the following type of remittances: -

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 Demand Draft (DD)

 Mail Transfer (MT)

 Telegraphic Transfer (TT)

 Pay Order

 Demand Draft Purchase (DDP)

 Home Remittance Purchase (HRP)

 Traveler Cheques (TC)

Now we discuss all these in detail: -

DEMAND DRAFT (DD):

“Demand draft is a written order given by the one branch of a bank

on behalf of customer to another branch outside the city of the same bank

for a certain amount to the certain person”.

It is an unconditional order. The payee is not bound to have an account in

the bank. It is issued on the request of customer and bank receives the

charges & exchange. Exchange rate is based on the amount of the

instrument.

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Procedure for Prepare Demand Draft

1. A draft request slip is filled which contains the following

information

Name of the parties involved

Date

Amount to be sent

Account number (if DD is crossed)

2. A credit voucher is filled in order to get the exchange

commission & preparation charges.

3. The sender deposits the total amount of the two vouchers i.e.

the debit and credit vouchers.

4. Then the cashier sends the cash receipt voucher to the accounts

department and the account records the amount paid in his cash

scroll.

5. Accountant gives the DD leaf along with the DD voucher to his

assistant who records the sender’s name, amount and receiver’s

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name. After writing all the information in the DD register he

gives it to the officer along with the DD for authentication.

6. Head Cashier and Operations Manager make a secret code with

the help of code book, this code is written on the advice

&Frankfort.

7. After authentication the DD is handed over to the sender and

bank sends the advice with a Frankfort (debit f-15) to the

concerned branch. DD documents must have a TR code which

is 22. So when the party presents the DD in the concerned

branch, its payment could be made.

Parties involved in the Demand Draft

The following parties are involved in demand draft;

1. Purchaser or Sender

The purchaser is the person who sends the money to a particular person

who is paid by certain branch.

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2. Issuing or Drawing Branch

The branch from where the demand draft is issued to another branch of

the same bank.

3. Drawee Branch

Branch in which the draft has drawn and called upon to pay the

amount

4. Payee

The person who is entitled to receive the amount after presenting the

demand draft in the Drawee branch.

MAIL TRANSFER (MT)

It is the transfer of money from one branch to another branch of

the same bank through mail service. In mail transfer there is no need of

advice as the amount is directly credited to the receiver’s account. It is

necessary for both parties to have accounts in the same bank. Its TR code

is also 22.

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Procedure:

1. First a request slip is filled in which the sender writes the amount

to be sent, name, account number of the receiving person with the

branch name and date.

2. A credit voucher is filled in order to deduct exchange, postage

charges according to the amount of the mail transfer.

3. The sender deposits the total amount of the two vouchers in the

cash department.

4. The cashier gives the voucher to the accountant after affixing

received stamp and writing the amount by red ink.

5. Then the accountant writes the amount paid in the cash scroll and

gives the MT to his assistant.

6. MT leaf is filled according to the information provided in credit

voucher. He also writes the same information in the MT register.

Then he gives the MT leaf and MT register to the officer for

authentication.

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7. He takes two signature of the sender on the counter foil of the MT

and counter foil is handed over to the sender. He must applied his

signature code with his signatures on MT & its other documents, at

the end the MT along with the Frankfort is sent to the concerned

branch through mail.

TELEGRAPHIC TRANSFER (TT)

This is the most urgent method of remitting the money from one

place to another place. This method is used when the sender desires to

send money urgently, in this case the sender request the manager of the

branch to issue TT.

Procedure

For sending the TT the manager applies a test. In the test the

manager uses a coding technique. He writes his own signature code,

which is allotted to him as the bank branch code. After making all the

confirmation, the concerned branch makes the payment to the receiver. If

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the sender wants to convey the same message through telephone then he

has to pay the charges of telephone along with the TT charges. First the

person deposit the TT amount along with the charges through the credit

voucher then his TT sent to the relevant branch. Its TR code is 21.

Pay Order (PO):

A pay order is a written order issued by the bank on its own

branch, drawn upon and payable by itself to pay a specified sum of

money to the person. The purpose of a pay order is to transfer the fund

from one place to another. It is usually not issued in favor of the parties

of other cities. Usually the pay order is issued for the local transfer of

money between two parties. Every purchase of bank is paid through

Payment Order e.g Establishment charges.

Procedure

If the purchase of the branch is of huge amount then first the

manager writes a letter to the Zonal Chief in order to get sanction of the

purchase. Then the advertisement of the purchase is given in the

newspaper in order to invite the contractors. But if the work is small then

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the branch manager has discretionary power to select the party whose

rate is lowest. After finishing the work the contractor submits the bill of

purchase on his stamp pad. Then the bank issues a pay order, against the

pay order the contactor gets the amount from the issuing branch.

Demand Draft Purchase:

It is an internal banking. It has great facility to operate an account

at a time in all over the country. It is for companies & govt. Institutions.

e.g. Hero scratch Cards, company has its main account in Islamabad

branch of NBP but its Inami Scheme Cards are accepted by each branch

of NBP in all over Pakistan & then money is recovered from main

account of company.

Home Remittance Purchase (HRP)

Foreign drafts & MT are first cleared by National Exchange

Company (NEC) then transferred to concerned branch of the bank in Pak

Rs. That branch passes it to its Headquarters after holding a carbon copy

of HRP. After authentication of HQ, concerned branch will purchase that

draft & transfer its amount to the customer’s account.

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COLLECTIONS

There are two main types of collections.

a) Collection inward

b) Collection outward

Collection inward:

All cheques and drafts deposited by the customer for collection

from other bank locally or out of the city is called collection inward.

Collection outward:

All cheques and drafts of NBP when deposited in any other bank

for collection then those banks send that cheques to NBP for clearance &

collection through the agent of SBP, on behalf of their customers.

Procedure:

i) Endorsement checking

Every cheque received for collection must be checked by

Deposit section to ensure that the cheque is genuine, its Apprentiner

(date, amount, drawer’s signature, crossing stamp, name of title, & A/c

No.) is accurate etc.

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ii) Test Code Checking

After check he apprentiner of the cheque, then it passes over to

Operations Manager for checking the accuracy of test code applied on it.

iii) Signature Code Checking

After test code checking, Signature Code must be check by the

Incharge of remittance & collection section.

iv) Record the Cheque

All the particulars of the cheque are written in an advices

received folder.

v) Clearance

After checking all requirements, a Frankfort affixing with a stamp

Of “ your LSC/SC is paid” & TR code i.e. 27 is send to SBP.

vi) TRV (Transfer Voucher Register)

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Before sending back the cheque with an advice, the date of

sending, advice number, & sender bank name must be recorded

in TRV register.

ADVANCES SECTION

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Advances section:

Advances are investments of bank to earn profit. After

restructuring of National Bank Of Pakistan, Head Office gives loan

targets to each branch that must be achieved for its survival. The

Manager is responsible to achieve these targets in the given period.

TYPES OF LOANS /FINANCES:

There are three major types of loans that are offered by NBP

mostly at the rate of 11%, they are as follows:

1. Short Term Finances

2. Medium Term Finances

3. Long Term Finances

SHORT TERM FINANCES:

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Short-term finances are sanctioned for increasing Working

Capital & Production. These are given for the period of one year to 3

years maximum. Short Term finance includes the following types:

1. Cash Finance

The bank gives this loan to the customer &

businessman against certain specified immovable

property. It is issued for establishment & extension of

industry.

2. Demand Finance

This loan is given against movable property (called

Secure Finance) or may be given against personal

guarantee (called Clean Finance). Demand finance is

further divided into three types:

(i) Staff Finance

This finance is given to the employees of

National Bank for improving their living

standard e.g. for purchasing a motorcycle, car,

house building, computer etc. There is no

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markup on this loan except on car & computer

buying @ 4%.

(ii) Gold Finance

It is sanctioned for the period of 11 months

by pledging gold ornaments.

(iii) Agricultural (Seasonal Finance)

It is given for supporting seasonal crops like

‘Rabi’ & ‘Kharif’. It is sanctioned for six month only

at high markup rate.

3. Running Finance

This finance is only a secured finance which is

sanctioned against movable security that is easily convertible

into cash e.g. security bonds, Govt. certificates & bonds etc.

Example for this loan is Three Advance Salary. It is newly

commenced credit scheme by NBP.

Three Advance Salaries is given to Govt. or semi

govt. registered company’s employees. The only condition for

this type of credit is that the salary must be directly credited

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into the bank. The borrower must give a blank cheque for

security.

Medium & Long Term Finance:

These finances are issued for production & development of

industry & agriculture e.g. for buying input or building for industry.

These are issued for the period of 5 years or more. The main types of this

finance are:

1. Project Finance

2. Agriculture (Development)

3. House building Finance.

All the loans may be fund base or non-fund base.

FUND BASE loans are those which given in cash form to the borrower.

NON-FUND BASE loans are those which given other than cash e.g.

Guarantee, L.C, Promissory Note etc.

Banks run their business with the money of depositor, which

is repayable to them on demand. Banker is very conscious while using

these funds. They think thousands times before lending to the borrower.

They must keep in mind the following factors before advancing the loan:-

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1. Character:

The first and most important factor considered in the credit

analysis is character. The credit character is base on the borrowers

willingness to pay his obligation. The willingness can be judged by the

banker to see his family background, stability of employment, personal

habits, nature of business, previous record moral reputation, importance

of values to him etc.

2.Capacity To Pay:

The bank should judge the financial condition of the

borrower. Whether he is able to repay that amount of loan which he

wants to get. Before advancing the loan bank must be satisfied with the

repayment of fund by checking following resources of borrower;

(a) Sale of Assets

(b) Income

(c) Location of Plant etc.

3.Capital:

The asset of the consumer may be in form of horse

motorcar, furniture etc. The businessman may own assets in the form of

new material, plant, machinery, building etc. The bank should extend the

loan in the proportion to the asset head by them. If the assets of borrower

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are liquid, he may be giver large amount of credit. If assets are not

liquid, then less amount of credit may be given against the value of

assets. Before landing the loan the banker should examine the value of

his business and its prospectus in future. The banker should keep in his

maid the owners participation in his business. The banker should not

provide loan more than capital.

4.Collateral:

Collateral means an additional security given against the

loan. Before advancing the loan the banker should preferred get the

security of liquid assets because they can be converted into cash easily.

The collateral security may be consisting of stock, bill of exchange, bill

of lading warehouse receipt, bonds etc. Bank must be carefully

examining this collateral security before advancing the loan for security

purpose. Banker should not extend loan on up to the full value of

collateral security. The securities, which are issued by the govt., may be

given 100% loan against them. The other collateral may set 40%, 50%

etc. loan against the value.

Main Requirements For Sanctioning Loan

• ID card copy.

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• Legal contract between bank & borrower on a security bond.

• A written application.

• Promissory Note.

• Valuable security.

• Lien mark in favor of bank.

• References (at least two)

• Latest Financial statements.

• Financing Agreement on a prescribed form.

• Authority letter.

• Trust Receipt.

• Insurance of securities.

Securities:
Before giving a loan to borrower a bank required a valuable

security in three ways:

• Hypothecation

• Pledge

• Mortgage

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Hypothecation:

In This type of security, immovable property is pledged

by the bank & bank is required a real value of that property for

sanctioning a loan. Margin for this security is 50%. In hypothecation

bank does not interfere in the business of borrower.

Pledge:

In Pledge the bank has 90% shares in business of the

borrower. The bank has a right to sold the production & interfere in

business transactions. In this type of security bank pledge the stock &

raw material. The stock must be insured. Stock is controlled & managed

by the bank, borrower cannot use raw material & cannot sold its

production without the presence & permission of the agent of bank.

Mortgage:

All documents of ownership & registration of movable

property is submitted to the bank with an authority letter which has an

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agreement to give authority of selling property in case when borrower

will not repay the loan after a fixed period.

GOVT. RECEIPT &

PAYMENT

DEPARTMENT

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GOVT. RECEIPT & PAYMENT DEPARTMENT

Govt. Receipts:

1. Utility bills:

Electricity Bills

BLT Bills

Telephone Bills

Sui Gas Bills

Procedure:

The cashier in cash section receives utility bills. The cashier posts

the amount of bill in respective scroll and at the end all the amount of

collected bills is transferred to the respective account. Then

representative of the concerned department collects the amount in the

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shape of M.T. (Mail Transfer). The bank takes the collection commission

of Rs. 2 per bill from each type of bill.

2. Federal And Provincial Taxes:

Federal Taxes are:

• Income Tax

• Central excise Tax

• Sales Tax

• Domicile fees

Provincial Taxes are:

• Provincial Excise Duty

• Provincial Motor Vehicle Duty:

1. Duplicate fee

2. Transfer fee

3. Token Tax

• Provincial Misc. Tax

• Provincial property Tax

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• Agricultural Tax

Procedure:

The customer deposits two or three copies of tax Performa with

cash or through transfer. The cashier enters this Performa in govt. scroll

and one copy returned to the customer. At the end of the day a summary

is prepared and the total amount is credited to the relevant head.

3. Admission Fee of AIOU

GOVT. PAYMENTS:

1. DISBURSEMENT OF PENSION

National bank is fully authorized to disburse the pension to the

Govt. and Army retired personnel.

Procedure:

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For the distribution of pension the branch maintains the

pension register. In order to get the pension, first the pensioner

submits his pension voucher with his pension book, that voucher

sent to the cash department for the payment to the pensioner after

posting into his account.

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ESTABLISHMENT

DEPARTMENT

ESTABLISHMENT DEPARTMENT

In National Bank, establishment department works for

the maintenance of different types of expenses and for the

provision of funds for different activities in the branch. The

Incharge of this department has two types of register.

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1. Charges account register.

2. Suspense account register.

CHARGES ACCOUNT REGISTER:

All routine expenses of the branch are recorded in the

charges account register under the specific heads as follows:

Expenses for Existing Employees:

• Basic salary

This account deals with the salaries of the employees

within that branch when bank have to pay the salary of any

employee the amount of salary is debited to the charges

account.

• Allowances

Under this head different allowances are paid to

employees. But these are attached with salary and paid with

the salary.

• Provident fund

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It is deduction from the employee’s salaries, which is

paid out at his retirement.

• Medical attendance

When some employee suffer from any disease the

bank allocate fund for him and this amount is debited to

charges account of the patient.

• Staff welfare

To improve the efficiency, the bank provides some

special facilities and the fund is provided from the welfare

account.

• Bonus

When the efficiency of employees increases and bank

earn profit more than expectation then bank gives bonus to

the employees. The provision of bonus is done through

bonus account by debiting to the charges account.

• Liveries

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If the bank needs some uniform for some employees

like messengers, peons, guards etc. the funds are provided

from liveries account.

• Traveling Expenses

It is for officers who visit different branches for the

purpose of auditing. The bank through this account pays

their traveling expenses.

Under this account the transportation expenses of

employees are also maintained for example, when a manager

goes to attend the meeting in any other city or country his

expenses on transportation are paid from this account.

Similarly when some one goes for any official work to other

branch or head office the traveling expenses are paid from

this account.

Expenses for office use:

• Cash carry expenses

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• Taxes

• General Insurance

• Lighting & Power:

(a) Electricity bill of the branch

(b) Sui Gas bill // // // //

(c) Generator Oil etc.

• Telephone bill

• Repairs & Renovation

• Postage &Stamp

• Books & News papers

• Maintenance exp.

• Computer exp.

• Freight exp.

• Petty exp.

• Sundries

• Protested bills etc.

Suspense Account:

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All accidentally losses happen in branch are recorded in

suspense account e.g. medical expenses of ex-employees,

loss of fire etc. These are not routine expenses.

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FOREIGN

EXCHANGE

FOREIGN EXCHANGE

This section deals in foreign currency. NBP authorizes only two

branches in Bahawalpur to deal in foreign currency i.e. District Court

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branch & Farid Gate branch. These branches are authorized to deal in

Euro, Dollar, Japanese Yen, & Pounds sterling.

The rates of foreign currencies in Pak Rupees are

announced daily by Head Office Karachi. These rates are

different from market rates.

Each Foreign Exchange section send report to Head

Office & SBP, for its foreign exchange transactions (FET)

daily, weekly, & monthly with required details.

PROCEDURE TO OPEN AN ACCOUNT IN FOREIGN

CURRENCY

There are two types of foreign currency accounts,

 FOR RESIDENTS

In order to open the account of a Pakistani resident in

foreign currency, all the requirements are same as P.L.S account.

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 FOR NON RESIDENTS

For non-residents following documents are required.

i- Photo copy of Passport

ii- Photo copy of Visa

The remaining process is same to open an account in local

currency. This account can be opened with any Dollar

amount.

CLOSING OF A FOREIGN CURRENCY ACCOUNT

To close the foreign currency account the same procedure is

used as in local currency.

FOREIGN REMITTANCES

To transfer funds abroad and to bring the funds from the other

countries foreign remittances are used. NBP has contract with different

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foreign companies that deal in foreign remittances e.g. NEC (National

Exchange Company Dubai) has link with NBP by opening an account at

Head Office Karachi. Other mentionable company is Western Union.

Bank has contract with Western Union only for remittance inward.

Western Union can pay its clients through NBP within 10 minutes via

computer networking.

NBP pays to Western Union’s clients in Pak Rupees only

but receives foreign exchange from Western Union in adjustment. NBP

does not receive service charges from these contracted companies.

NBP receives foreign advices or messages for foreign

remittances through Swift / Telex. SWIFT messages are received via

Satellite. It combines the world banking organizations & has information

of linked banks.

 Access to Telex / Swift area is restricted to authorized staff only.

 Request for outgoing Telex / Swift message is authorized by

competent Officers.

 Telex / Swift messages are promptly coded / decoded & delivered

to the relevant Department against acknowledgment.

Working Procedure With Western Union:

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Before making payment to a customer, the concerned

Officer must check;

 The goodwill of the customer.

 ID card information

 Properly filled form prescribed by Western Union.

Then all this information is feed in computer & directly sent

to Western Union Through computer networking. After authentication of

customer by computer payment is made to him immediately by NBP.

Western Union has Customer Service Counter (CSC) at

NBP Head Office Karachi. It has its main account in Chapal Plaza Branch

Karachi. This branch maintains whole day transactions of Western Union

with NBP.

TYPES OF FOREIGN REMITTANCES:

The customer who has a foreign currency account in bank

can easily remit his amount outward through foreign currency

instruments. If a customer who has not a foreign currency account but a

Pak Rupee account in the bank then he must give an acceptable reason

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for remitting outside the country in foreign currency. When GOVT. &

SBP approve that reason then he can remit.

1. FOREIGN CURRENCY DEMAND DRAFT

The debtor can make the foreign payment by purchasing a

bank draft from the branch. The debtor to creditor dispatches the draft.

He can claim the amount of the draft from the responding branch.

2. FOREIGN MAIL TRANSFER

The debtor can makes the payment to the creditor in foreign

currency by Foreign Mail Transfer. The NBP’s branch issue the order for

the payment to the responding branch by mail. After receiving the letter

responding branch will make the payment to the creditor.

3. FOREIGN TELEGRAPHIC TRANSFER

The same procedure is followed here as in local account

Telegraphic Transfer.

4. FOREIGN TRAVELER CHEQUES

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If a customer has a local currency account but wants to remit

a certain amount in foreign currency for an approved purpose e.g. for

Haj, Umra or education purpose etc. then bank gives him foreign

currency Traveler Cheques to transfer money from one country to

another.

MAIN REQUIREMENTS FOR REMIT OUTWARD:

• The debtor must be foreign account holder of NBP.

• He must mention the name of the foreign bank.

• The purpose of the remittance should be permitted by the

GOVT.

• The account number of the ultimate client should be told to

the bank.

MAIN REQUIREMENTS FOR RMIT INWARD:

Before making payment against any instrument or bill, the

relevant Officer must check;

• Genuineness of instrument.

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• Goodwill of customer.

• The amount in figures & words.

• Type of currency.

• The way from which instrument is received.

• Purchase agreement for T.C’s.

Assignment Account

It is foreign loan account for local authorities or

organizations. At a fixed date bank receives an assignment of advance in

foreign currency from foreign bank & pays it only in Pak Rupees to

concerned party. The concerned party must has an advice for that

assignment.

Reports & Statements

The foreign exchange section sent daily & monthly Foreign

Exchange Transactions Report to Head Office Karachi & SBP for FC

account only.

• FET (C):

This is a foreign exchange conversion transaction daily

report.

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• FET (A):

This is a foreign exchange assignment transaction daily

report.

• S-1:

Monthly statement for foreign remittances.

• S-4:

Monthly statement for Pak Rupee remittances.

• S-6:

Monthly statement for foreign currency notes.

IMPORT& EXPORT FINANCE

For promoting business import & export activities in the

area, NBP offers Import/ export finance in the way of ;

 Letter of credit (LC).

 Guarantee.

LETTER OF CREDIT:

It is a means of payment for importing goods. Bank issued

LC on the request of exporter in favor of importer.

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Opening bank issued LC on IB-500 financing agreement in which all

necessary information is written by importer such as: Type of goods

imported, quantity, quality, mode of shipment, By which way goods are

imported & by whom, & when etc.

Types of LC:

There are two types of LC i.e.

 Inland LC

 Foreign LC.

Parties Involved In LC.

The parties involved in a Letter of Credit are :

 Exporter

 Importer

 Opening Bank

 Advising Bank

 Negotiating Bank

DOCUMENTS REQUIRED FOR OPENING LC:

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 Application for opening LC

 Performa invoice

 Contract between parties

 Insurance of shipment

 Bill of lading

 Weighting note

 Genuine securities with acceptable margin.

 Mode of payment

 Signed terms & conditions of importing goods

 Agreed rate per unit/ ton.

 Bill of exchange.

 Trust Receipt.

Opening bank send a message by Telex / swift to the

concerned city’s branch of the bank, this bank is called advising bank, it

send advice to seller / importer. Seller then produces goods according to

LC conditions received. Seller presents all documents to his bank called

negotiating bank that negotiates the documents. It checks all terms &

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conditions then attach a letter of conduct with that document & send to

the opening bank. Negotiating bank confirms that the credit is secure &

safe & also confirms the negotiating bank & its issuing LC.

When the shipment of goods reached at destination then the

opening bank is responsible for payment & receiving goods.

FIM: (Finance Against Imported Merchandise)

It is a type of import finance. If exporter cannot pay the

amount of LC at the time of goods received in lump sum amount then he

can pay in installments by pledging his imported goods with the bank &

gives a Trust Receipt which is a legal document issued by buyer in which

he promises to pay the debt at due date.

GUARANTEE:

It is non-fund finance. In LC the payment of debt is at the

destination point of goods immediately for receiving goods as goods

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arrived. But if a certain period is involved to complete a commitment

then other party requires a bank guarantee to avoid fraud e.g.

consignment of readymade clothes etc.

Bank gives guarantee of an exporter by pledging valuable securities to

the importer’s bank & becomes responsible for the payment of goods.

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DISPATCHES

SECTION

DISPATCHES SECTION

Dispatch section maintains the record of mail of branch.

Mail is received & sending by this section through different ways. Before

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the handing over the mail to the courier service clerk, the dispatch section

assistant notes the document in a register and issues a number, which is

used to maintain the proper records. After handing over to the courier

service, now it is the responsibility of the courier service company. In

case of misplacement they have to pay for the damages. Assistant of this

department sort out the receiving mail and then sent to the different

sections.

WAYS OF SENDING MAIL:

There are four ways by which NBP sends its mails that are;

1. Ordinary Dak

It is internal messaging from one section / employee to

another section / employee of the same branch. This mail can be send by

peon or memorandum. It is recorded in a separate register with its

charges of that message.

2. Ordinary Postal Dak:

In this way of sending mail, mail is send through General

Post Office (GPO). It is used mostly when bank want to give any

message to customer.

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3. By Courier Service:

Bank hires different courier services for sending mail

outside the city.

4. Register A/D Dak:

It is register acknowledgment dak send through a registry. It

involves mailing of important documents that are not money related

Dispatch section maintains two main books;

 Postage Book

All postal charges & expenses are recorded with date. It also

has the record that: where the mail is send, by which way & date & what

type of mail is send.

 Peon Book

Ordinary dak from one branch to another of the same bank is

send through a peon. Record of information about mail is maintained in

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peon book. Peon carry the mail along with peon book to take signatures

of mail receiving Officer.

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CASH

DEPARTMENT

CASH DEPARTMENT

The cash department is that through which all the receipts

and payments of bank are made. Also the bank’s cash record remains

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with this department. There are two types of books used in this

department.

1. Cash Receipts Book.

2. Cash Payment Book.

CASH RECEIPT BOOK

In which the cashier records the entry when some one comes

to deposit some amount. The clients come with pay-in or deposit slips

and the cashier receives the amount according to the pay-in slip, sort outs

the notes, puts a signature on slip, stamps it and record in cash receipt

book. After stamping the slip the cashier returns the pay-in slip to the

customer. Then customer goes to another bank officer, he again record

this voucher into his cash scroll and returns one part of the pay-in slip to

the customer and keeps the other part for the record.

CASH PAYMENT BOOK

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When some client comes to the branch to withdraw some

amount from his account, after getting the token from deposit section he

goes to the cashier, cashier checks his token and cheque which is referred

to him from deposit section. The cashier makes to him required payment

and receives the token from the customer. After recording all the cheques

in his book he returned the cheques to the deposit section.

PETTY CASH

Petty cash (Rs. 100 only) for the stationary expenses of the

branch is handled by this section. But cheques of Rs.10 each can only

withdraw it.

HAND CASH

Head Cashier is allowed to retain a limited amount as hand

cash that is Rs.1000 now a day. Remaining balance of cash collection at

the end of the day is locked in safe. This safe opens with two keys, one is

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hold by cashier & other is hold by operational Manager. Only one key

cannot open the safe.

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ACCOUNTING
SECTION

Accounting Section

This is the last section of the branch; whole day’s work is

officially ended in this section. Incharge of this section send information

of whole day’s business in branch to Main branch Multan via computer

networking.

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Computer operator retained a copy of that information in floppy

for branch record daily. He also reconciled all transactions with Head

Office transactions received daily.

This section maintains its record in three books that are;

1. CASH SCROLL

Daily transactions of cash are recorded in cash scroll at the

end of each day. Total cash received in the date is added up in opening

balance (closing balance of previous day) then cash payments are

subtracted from it. End balance is recorded in computer & mails it

directly through networking to Multan IT section of NBP.

2. TRANSFER SCROLL

Al transfers inward & outward of the branch is recorded

with all details of accounts in transfer scroll. It is also mailed to Multan

(IT) section of NBP daily at the end of day.

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3. NBP GENERAL ACCOUNT

General account is an account of each branch of the bank in

its Head Office for transactions among branches. All transactions among

branches are through Head Office by sending F-16 Frankfort, that are

reconciled at Head Office.

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PERFORMANCE OF

NATIONAL BANK OF

PAKISTAN

FINANCIAL ANALYSIS

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RATIO ANALYSIS

Ratio Formula Applied For

Calculation 1998 1999 2000 2001 2002


Regulatory Ratios
Advances to Deposits Advances / Deposits

Ratio 40% 42% 44% 49% 39%


Cash to Deposits Ratio Cash / Deposits
19% 22% 22% 23% 15%
Capital Adequacy
Equity to Asset Total Equity / Total

Assets 3.1% 2.9% 3.1% 2.9% 3.3%


Equity to Deposits Total Equity / Deposits
3.7% 3.5% 3.6% 3.4% 3.9
Profitability Ratio
Return on Equity Net Profit / Equity
5.31% 0.30% 4.1% 9.6% 15.7%
Return on Total Assets Net Profit / Total Assets
0.16% 0.01% 0.12% 0.28% 0.52%
Net profit margin Profit after tax /Income
1.54% -0- 1.4% 3.2% 7%
Operating profit margin Operating profit

/Income 13.7% 8.2% 10.9% 16.4% 19.7%


Investments / Total Investments / Total

Assets Assets 32% 26% 20% 17% 33%


Deposit / Tot. Liabilities
88% 88% 89% 88% 89%

ADVANCES TO DEPOSIT RATIO

RATIO
1998 1999 2000 2001 2002
Advances to Deposits
39%
Ratio
COMMENTS 40% 42% 44% 49%

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This ratio shows the relationship between total deposits and the advances

by the bank. There is no considerable change in this ratio. It was 41% in

the year 1997 and 40% in the year 1998. After that this ratio has the

increasing trend, It means the bank is giving more and more advances.

And the increase in advance rate is greater than the increase in deposits.

This is a positive sign. In 2002 this rate is falling which is a negative

sign. The management should also consider the risk of bad debts and take

the steps regarding this.

CASH TO DEPOSIT RATIO

RATIO 1998 1999 2000 2001 2002


Cash to Deposits Ratio 19% 22% 22% 23% 15.3%

COMMENTS

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This ratio shows the relationship between the cash and the total deposits

of the NBP. This ratio also has the increasing trend every year. The

highest ratio is in the year 2000, And the lowest in 2002.

EQUITY TO ASSETS

RATIO 1998 1999 2000 2001 2002


Equity to Asset 3.1% 2.9% 3.1% 2.9% 3.3%

COMMENTS

This ratio calculated to show the relationship between the equity and the

total assets. This ratio was highest in the year 2002 i.e. 3.3%.

Management also should try their best to increase this ratio because the

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main concern of the management should be to increase the shareholder

equity.

EQUITY TO DEPOSITS

RATIO 1998 1999 2000 2001 2002


Equity to Deposits 3.7% 3.5% 3.6% 3.4% 4%

COMMENTS

This ratio shows the relationship between the total equity and the total

deposits of the customers. The highest ratio was in the year 2002, while

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in 1999 it was lowest i.e. 3.4%. As the deposits increase the management

also try to increase the share holder equity.

NET PROFIT MARGIN

RATIO 1998 1999 2000 2001 2002


Net Profit Margin
1.54% -0- 1.4% 3.2% 7%

COMMENTS

This ratio shows the relationship between the net profit and the total

income. From the year 98 to 2001 it is very low which is discouragable.

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In 2002 bank improve this ratio by giving special attention. It is a

positive sign.

DEPOSITS / TOTAL LIABILITIES

RATIO 1998 1999 2000 2001 2002


Deposits/Total Liabilities 88% 88% 89% 88% 89%

COMMENTS

This ratio shows the relation ship between the Deposits and total

liabilities. It is almost stable from 98 to 2002. This shows that deposits

are the main portion of the total liabilities.

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INVESTMENT/TOTAL ASSETS

RATIO 1998 1999 2000 2001 2002


Investments / Total Assets 32% 26% 20% 17% 33%

COMMENTS

When we compare the investment against the total assets we find that

investment is decreasing as a percentage of total assets but now bank has

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handled this situation in 2002. This is because bank’s advances are

increasing and bank is now lending and financing to businesses.

RETURN ON EQUITY

RATIO 1998 1999 2000 2001 2002


Return on Equity 5.31% 0.3% 4.1% 9.6% 16%

COMMENTS

When the total profits of the bank are compared with the total equity of

the shareholders. we find up and down fluctuations in the return on

equity ratio. This ratio was maximum in 2002, which is very

incouragable due to the record profit earned by the bank this year. And

this ratio was very low in the year 1999.

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RETURN ON TOTAL ASSETS

RATIO 1998 1999 2000 2001 2002


Return on Total Assets 0.16% 0.01% 0.12% 0.28% 0.52%

COMMENTS

This ratio shows the relationship between the total assets and the net

profit. During last 5 years this ratio for the NBP fluctuates very much. It

was highest in the year 2002. In the year 1999 it was in negative due to

loss in this year.

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SWOT ANALYSIS

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SWOT ANALYSIS:

It is very important for any organization to know about its

strengths, weaknesses, opportunities and threats to compete in the

industry. So, by the help of environmental analysis and

organizational structure we can find out the opportunities and

threats and then match with the capabilities of the organization.

STRENGTHS:

 National bank of Pakistan is a government owned bank. This is the

reason that the Pakistani nation has complete trust over the bank

that its deposits are fully secured.

 National bank of Pakistan is enjoying the deposit of different

government organization like P.I.A., Pakistan Railway, WAPDA

and Sui gas.

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 There are more than six million clients of National bank. Its

customers are served all over the Pakistan and abroad. Its branch

network is one of the largest in Pakistan.

 It has strong financial position.

 The most important point of National bank is that it is agent of

State bank of Pakistan, where the State bank branches are not

working; National bank controls its function.

 Only the NBP is authorized to advance loan against Gold. This

function makes the NBP able to earn profit on the Gold. This

function becomes the major source of income of NBP.

 When Govt. starts any new scheme of loan to assist the public,

then normally NBP is authorized to implement it. It is provided

with the funds from the Govt. to advance this loan to public, it

earns profit on it which increases its over all income.

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 National Bank Of Pakistan has the safe advances because it is a

Govt. bank. Which increase the profitability of the bank.

 NBP has now restructures itself to provide better services

efficiently to the customers of the bank. Upper management aims

to achieve high customization.

 NBP has contracts with foreign exchange companies for foreign

remittances, due to this NBP earns more foreign exchange than

before and more than any other bank in Pakistan.

Weaknesses

 Being a Govt. bank, Govt. imposes many policies, which proves

harm full for the bank..

 The private bank’s employees are provided more facilities so they

become more efficient. For example Askari bank has a power full

computer network while in NBP most of the branches including all

branches of Bahawalpur are not still computerized. The employees

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have to complete their work manually, which is very time

consuming. Even employee’s daily works till nights.

 As National bank of Pakistan is a Govt. owned organization so

there is strong political influence on its operations.

 Lack of implementation of rules and regulation

 Unskilled staff. The staff is not skilled and professionals are very

few in number.

 Generally, the attitudes of the employees are not serious with each

other and have professional jealousy, which is not healthy for the

bank.

 NBP Has adopted very strict policies in case of sanctioning the

loan, which are difficult to fulfill and time consuming.

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 HRM department of NBP is not working properly. It results lack of

motivation, creates confusion among employees because many

employees are placed at seats which are totally irrelevant to them.

 There is no attention toward internal decoration of the branches of

bank.

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Opportunities

 NBP must develop its IT section in each branch. It must be

computerized and commence online banking.

 NBP should concentrate more industrial sector and agriculture

sector. They should provide finances to the farmers both on short

term and long term basis.

 Since the Govt. has offered Golden Hand Shake scheme only in

NBP. So the NBP can reduce its huge establishment expenses.

 The bank by establishing new branches in the foreign countries can

expand its business and earn more foreign exchange.

 NBP can diversify its funding base and earn foreign exchange by

investing into capital markets of other countries.

 New schemes for deposits and finances should be introduced

regularly.

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 Proper advertising of the products of the bank.

Threats:

 With the passage of time the other banks are introducing efficient

information technology sections & computer networks. But use of

the modern technology is very less in NBP as compared to the

other banks. So there may be a time come when those banks

would snatch the market share of NBP.

 Being the Govt. employees it is often seen that the employees are

not so much efficient and hard working. When employees of some

organization are not so much hard working ultimately that

organization will remain behind the competitors.

 Employees are involving so much in internal politics & lobbies

among them, which disturb working conditions & goodwill of the

bank.

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 Lack of customization.

 The number of banks in Pakistan is increasing day by day and they

are providing good customer services as compared with the NBP,

so it may lose its market share in the future.

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SUGGESTIONS

&

RECOMMENDATIONS

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SUGGESTIONS & RECOMMENDATIONS

 It is strongly recommended that N.B.P. should computerize its

braches & develop a powerful computer network for on-line

banking.

 Govt. should take keen interest to recover its bad debts, which can

improve its financial position.

 HRM department must have a proper plan for placement of

employees.

 NBP must give the proper attention toward increasing the

customization. It should establish a customer-oriented section in

each branch for receiving him respectfully & provide proper

guidance that he requires.

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 Along with the officers, the training must also be given to the

clerical staff. Because of N.B.P. are running on manual system and

the training of its staff directly improving their efficiency of work.

 Working conditions must be improved for the employees.

 Upper management should take decisions for promotion of

employees on the basis of professional justice.

 Internal politics & lobbies should be minimized.

 There is also a need of proper recruitment and selection program.

New young talent should be introduced to inject the new ideas.

 Political influences on the banking operations should be

eliminated.

 The recruitment policy should be fair and transparent.

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CONCLUSION

CONCLUSION

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Being a Govt. bank it is ignored from the beginning. It has to

followed strict rules & regulations imposed by SBP & Govt. It has

great burden of Govt. services, which is not much beneficial for the

bank. Due to the pressure of Govt. activities like payment of pension

and receipt of Govt. a rush of work is there, which disturb the normal

banking business. Also such type of activities is performed by the

National Bank without any services charges.

Another burden for the National Bank is salaried accounts. Those

are in large numbers. National Bank is not gaining any advantages

from these types of accounts besides of wasting the time. These

salaried accounts are dead assets for the bank.

National Bank is still working on manual basis. It is very time

consuming activity that’s why customers feel uncomforted as they

have to wait for long time even for a single cheque and also the

chances of mistakes and frauds are greater in manual work system.

Motivation plays an important role in the success of any organization.

So, there is late schedule for upgrading the employee’s status.

Promotion should be in time and according to the individual’s

performance.

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Due to the manual work system employees have to spent most of

their time in the bank to complete even their daily routine work. They

have to sit till 9:00 or 10:00 PM. For this reason their normal life is

disturbing which create the irritation in the behavior of employees.

As compare to the other banks the working environment of

National Bank is very poor. Most of its branches are still in old decors

and poorly conditioned buildings. These working conditions effect in

two ways. First from employees side if the working conditions are not

reasonable then their work efficiency will be very low and Second

from the customer’s side that the customers don’t like to go in such

type of environment.

Being a Govt. Bank, political and beurucratic pressure is much

more as compared to the other banks. As a result the bad debts are

high.

Due to all above-mentioned factors the customers of NBP are

shifting towards other banks and also the deposits of National Bank is

decreasing.

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ANNEXURE

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