National bank of pakistan

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An internship report on NBP (National Bank of Pakistan) a governmental financial institution. A detailed report on its organizational structure, its departments, and financial analysis with recommendations and conclusions.

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National bank of pakistan

  1. 1. Internship Report on NATIONAL BANK OF PAKISTAN The The Nation's Bank Nation's Bank National Bank of Pakistan government The Treasury Nation's Bank Te h Ntio'sBn a n ak HAILEY COLLEGE OF COMMERCE Salma Bashir Te h Ntio'sBn a n ak Roll number: 126 B.com (Hons.) Session : 2005 - 2009 Supervisor : Sir. Hassan Mubeen Alam National Bank of Pakistan Samnanabad Branch Date of joining : 25-7-09 to 24-09-09
  2. 2. DEDICATION Dedicated to my Parents who always care me and most formative teachers, Sir Zafar & Sir. Yasin for their unwavering support and guidance. HAILEY COLLEGE OF COMMERCE Salma Bashir Roll number: 126 B.com (Hons.) Session : 2005 - 2009 Supervisor : Sir. Hassan Mubeen Alam National Bank of Pakistan Samnanabad Branch Date of joining : 25-7-09 t0 24-09-09
  3. 3. ACKNOWLEDGEMENT C K N O W L E D G E M E N T All praise to Allah, the most merciful, kind and beneficent, and the source of all knowledge, wisdom within and beyond my comprehension. He is the only God, who can help us in every field of life. All respect and possible tributes goes to my Holy Prophet Mohammad (SAW), who is forever guidance and knowledge for all human beings on this earth. I am proud to say that I am very grateful to my family whose kind prayers and cooperation helped me at every step of my work. Special thanks go to my parents for their cooperation for the sake of my knowledge. I am greatly indebted to my learned teachers, Sir.Kumail Abbas Rizvi, Sir. Yasin, Miss. Shamaila, Miss Hafza, Sir. Zafar who have great influence on me during my formative years. This report reflects the knowledge which I have gained from my valuable teachers. I acknowledge with deep gratitude the invaluable help extended to me by Mr. Rana Ahsaan-ul-Haq, one of the officer of the National Bank of Pakistan, without his co-operation it was not possible for me to complete my Internship Report. He guided and helped me and specially the sympathetic attitude, which always inspired me for hard work. I am really very thankful to Muhammad Rafi Operational Manager of National Bank Samanabad Branch, Lahore and all the bank staff for their cooperative attitude during my internship. In the end thanks are due to one of my friend Miss. Sana Khalid for her cooperative attitude during the completion of my project work. She helped and supported me during gathering and analyzing information. SALMA BASHIR B.com(Hons .)
  4. 4. EXECUTIVE S UMMARY X E C U T I V E U M M A R Y To interpret my skills and educational knowledge of Finance I done my internship in National Bank of Pakistan Samanabad Branch, Lahore and to know how I will work in financial institutions and among various types of people have different attitude. The objective of this Internship was to explore the issues relating to Finance and to find out problems regarding the theoretical concepts with practical experience working in an organization during the internship and study the system of National Bank of Pakistan. There are many possible improvements, which we can make positive changes in the system. The report is based on my two months internship program in National Bank of Pakistan. The methodology reported for collection of data is primary as well as secondary data. The biggest source of information is my personal observation while working with staff and having discussion with them. The report summarizes the National bank of Pakistan with its working divided into three parts first part deals with the description of the NBP the second part covers the theory and practices adopted by NBP and third part discuss the financial position of NBP, its analysis and at the end concluding remarks and suggestions are given for improvements. It was too much difficult for me to describe the functioning of such a vast organization within the limits. In spite of this I tried my best to describe. Finally, for any all too fallible errors, omissions and shortcomings in the writing of the report only I am responsible for which I hope that all concerning regards of this report will forgive us. SALMA BASHIR B.com(Hons. )
  5. 5. PREFACE R E F A C E During this eight weeks long practical glimpse the theories and ideas which we received from the books have been women in the texture of our actual life. No doubt, it has helped us in cultivating the qualities of courage, hope, initiatives and capacity to turn our knowledge to practical purpose. Banking sector owes a pivotal importance in the economy of any country through its vibrant functions. This is the deep seated motivator that geared up me to join any bank for internship. National Bank of Pakistan (NBP) was established in ١٩٤٩ under the National Bank of Pakistan Ordinance ١٩٤٩ and was ١٠٠% government owned. NBP acted as an agent of the Central Bank wherever the State Bank did not have its own Branch. It also undertook Government Treasury operations. Inside the bank, in branch banking it has Clearing and Collection Department, Government Receipts Processing Department, Account Opening Department, Remittance Department, Customer Services Department Cash Department, Deposit Department, Advances and Credit Department. These are the most common departments exist in almost each branch. It is offering different deposit choices, advances, credits and securities etc for its customers through its corporate branches. Yet there are many possible improvements, which we can be made and that can bring positive changes in the system. There is shortage of employees in the organization. With development of online banking system the load of work can be decreased. All the staffs do not know about computer. There is almost one or two employees are trained to operate the system in every branch. Especially, the cash department is not familiar with computer and information system. It is not easy for it to implement a new system immediately it takes a lot of time to replace systems. Once implemented its testing takes more time. So it is important for the Bank to develop a research department for redesigning the operations of the Bank SALMA BASHIR
  6. 6. b r i e f c o n t e n t s BRIEF CONTENTS Introduction and National Bank of Pakistan ٤ -١  Bank's Profile ٢  Introduction ٣  Overview of Organization ٤ Historical Background ٨ -٥  Background ٦  Establishment ٧ Organizational Structure ١٥-٩ Organizational Network ٢٠-١٦  Registered and Head office ١٧  Share Registration Office ١٧  Share Capital ١٧  Branch Network ١٧ Management of NBP ٢٦-٢١  Management System ٢٢  Management Structure ٢٢  Corporate Information ٢٤  Senior Management ٢٥  Oversea Management ٢٦ Departments ٧٢-٢٧  Departmentalization in NBP ٢٨  General Banking Department ٢٩ Deposit Section ٢٩ Account opening Section ٣٣ Locker Service Section ٤٢ Cash Dealing Department ٤٣ Clearing Section ٤٧ Remittance Section ٥٣
  7. 7.  Advances Department ٥٨  Accounts department ٦  Billing and Government Receipt/ Payment Department ٧٠ Commercial and Retail Banking ٨٤-٧٣  Premium Aamadni Scheme ٧٤  Premium Saver Scheme ٧٥  Karobar Scheme ٧٥  Saiban scheme ٧٦  Advance Salary Scheme ٧٧  Cash card Scheme ٧٩  Cash n Gold Scheme ٨٠  Kisan Dost ٨١  Kisan Taqat ٨١  Pak Remit ٨٢  NBP Protection Shield ٨٢  NBP Student Loan Scheme ٨٤ Financial Analysis ٨٥  Horizontal Analysis ٨٦  Vertical Analysis ٩٠  Ratio Analysis ٩٣  SWOT Analysis ١٠١ Work Performed ١١٤-١٠٤  Learning and Personal Experience ١٠٥  Branch Profile ١٠٦  Branch Hierarchy ١٠٧  Departments of training ١٠٧  Issues Faced by Branch ١١٣ Findings and Conclusion ١٢١-١١٥  Dilemmas faced by organization ١١٦  Recommendation ١١٩  Conclusion ١٢١
  8. 8. Annexure and Documents ١٢٢
  9. 9. INTRODUCTION N T R O D U C T I O N & NATIONAL BANK OF PAKISTAN A T I O N A L A N K O F A K I S T A N In this section three topics are discussed: • Bank's Profile • NBP Introduction • Overview of Organization • Vision • Mission • Core values • Goals
  10. 10. Bank's Profile THE NATIONS'S BANK Type Government KSE: LSE Established ١٩٤٩ Headquarter Principal Office, Karachi Pakistan Key People S. Ali Raza (President & Chairman) Industry Banking, capital Market Products Loans, Credit Card, Savings, Consumer Banking etc Deposit ٦٢٤٩٣٨ Million Net income ١٥٤٥٩ Million Total Assets ٨١٧٧٥٨ Million Number of Employees ١٥٢٠٤ Number of Branches ١٢٧٦ Home page www.nbp.com.pk
  11. 11. Internship Report National Bank of Pakistan INTRODUCTION (Incorporated under the National Bank of Pakistan Ordinance, ١٩٤٩) National Bank of Pakistan is the largest commercial bank operating in Pakistan National Bank of Pakistan was incorporated in Pakistan under the National Bank of Pakistan Ordinance, ١٩٤٩ and is listed on all the stock exchanges in Pakistan. It's registered and head office is situated in Karachi. The bank is engaged in providing commercial banking and related services in Pakistan and overseas. The Bank's services are available to individuals, corporate entities and government. While it continues to act as trustee of public funds and as the agent to the State Bank of Pakistan (in places where SBP does not have a presence) it has diversified its business portfolio and is today a major lead player in the debt equity market, corporate investment banking, retail and consumer banking, agricultural financing, treasury services and is showing growing interest in promoting and developing the country's small and medium enterprises and at the same time fulfilling its social responsibilities. NBP headquarters in Karachi, Pakistan with over ١,٢٠٠ branches country wide. In today's competitive business environment, NBP needed to redefine its role and shed the public sector bank image, for a modern commercial bank. It has offloaded ٢٣.٢ percent share in the stock market, and while it has not been completely privatized like the other three public sector banks, partial privatization has taken place. It is now listed on the Karachi Stock Exchange. • Handling of treasury transactions for the Government of Pakistan as agent to the State Bank of Pakistan. • Accepting of deposits of money on current, fixed, saving, term deposit and profit and loss sharing accounts. • Borrowing money and arranging finance from other banks and advancing and lending money to its clients. • Buying, selling, dealing, including entering into forward contracts of foreign exchange. • Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc. • Carrying on agency business of any description other than managing agent, on behalf of clients including Government and local authorities. • Generating, undertaking, promoting, etc. of issue of shares and, bonds, etc. • Transacting guarantee and indemnity business. • Undertaking and executing trusts. • Joint venturing with foreign dealers, agents and companies for its representation abroad. • Participating in "World Bank" and "Asian Development Bank's" lines of credit. 3
  12. 12. Internship Report National Bank of Pakistan OVERVIEW OF THE ORGANIZATION VISION "To be recognized as a leader and a brand synonymous with trust, highest standards of service quality, international best practices and social responsibility." MISSION NBP will aspire to the values that make NBP truly the Nation’s Bank, by :  Institutionalizing a merit and performance culture  Creating a distinctive brand identity by providing the highest standards of services  Adopting the best international management practices.  Maximizing stakeholder’s value.  Discharging our responsibility as a good corporate citizen of Pakistan and in countries where we operate. CORE VALUES  Highest standards of Integrity.  Institutionalizing teamwork and performance culture.  Excellence in service.  Advancement of skills for tomorrow’s challenges.  Awareness of social and community responsibility.  Value creation for all stakeholders. GOALS To enhance profitability and maximization of NBP share through increasing leverage of existing customer base and diversified range of products. Excellence in Direction Excellence in Growth Excellence in Performance Excellence in Management Excellence in Achievement 4
  13. 13. HISTORICAL BACKGROUND I S T O R I C A L A C K G R O U N D In this section two topics are discussed: • Background of Foundation • Establishment
  14. 14. Internship Report National Bank of Pakistan HISTORY OF NATIONAL BANK OF PAKISTAN BACKGROUND At the time of partition the total number of Commercial Banks in Pakistan was ٣٨ .Out of these Pakistan had ٢ banks, India had ٢٩ and there were ٧ exchange banks. Before the partition of Sub Continent the entire banking business was almost controlled and managed by non-Muslims. The Muslims were deliberately kept cut of banking profession by the wealthy Hindu community. When Hindu capitalists became sure of the division of Sub Continent, they secretly began transferring their funds and the other valuables at an accelerated pace to India and there was a mass scale migration of non Muslims from West Pakistan to India which also caused the drain on the bank deposits. The Hindus closed down most of the head offices and the branches of scheduled and non-scheduled banks in Pakistan. The number of scheduled bank’s branches was reduced from ٦١٩ to ٢١٣ in both the wings of the country after independence. The non-scheduled banks also suffered a severe jolt and their number was reduced from ٤١١ to ١٠٦ over the same period. West Pakistan from where there was greater exodus of non- Muslims to India suffered a great deal, as a number of branches fell down (from ٤٨٧ to ٦٩). The mass scale closure of branches and withdrawal of the deposits caused a dead lock in the banking business in Pakistan. The government of Pakistan was quite aware of the serious banking situation caused by the withdrawal of deposits and wholesale migration of banking staffs to India. It took up the challenge and started reorganizing the crippled banking immediately after partition. In ١٩٤٩ September U.K. devalued its currency, India followed the suit but we did not. India said we had contravened the agreement. On October ١٩٤٩ ,٣ the two central banks have to announce the new par value of both currencies but India denied the day earlier. India also froze our trade balance surplus that is still an unsettled dispute. India also draws the Marwari merchants who were employed annually for movement of jute crop by financing it. There being no jute industry, prices fell sharply, and an agrarian unrest was threatening. Two Ordinances were therefore issued. 1Jute board Ordinance & 2NBP ordinance dated ٠٨.١١.١٩٤٩ In order to regulate both of the banking on sound footings, the following measures were taken to develop the banking system in Pakistan. • The State Bank of Pakistan, which is the central bank of the country, was established in July ١٩٤٨. • The National Bank of Pakistan was established on ١٩٤٩,to serve as an agent to the SBP. 6
  15. 15. Internship Report National Bank of Pakistan • The Industrial Development Bank of Pakistan was set up on August ١٩٦١ ,١ with a Paid up Capital of Rs; five crore. The Agricultural Development Bank of Pakistan (ADBP) was set up in ١٩٦١. it provides short , medium and long term loans to the farmers. In Jan, ١٩٧٤ the entire commercial banks were Nationalized. The weaker commercial banks were merged with the stronger once and in all Five major banking companies were formed. MCB and ABL have again been privatized. ESTABLIHMENT The normal procedure of establishing a banking company under the Companies Law was set aside and the Bank was established through the promulgation of an Ordinance due to the crisis situation that had developed with regard to financing of jute Trade. The Bank commenced its operations from November ١٩٤٩ ,٢٠ at six important jute centers in the then East Pakistan and directed its resources in financing of jute crop. The Bank’s Karachi and Lahore offices were subsequently opened in December ١٩٤٩. State bank of Pakistan after its formation demanded from the Indian Reserve Bank the assets against the Indian currency retired from Pakistan territory. Government of India refused to hand over the assets worth about five hundred million rupees. The dispute is still unsettled and these assets are still not delivered to Pakistan. Until June ١٩٥٠, the Bank was engaged exclusively on jute operation. Thereafter, it was felt that it could expand its business to include other commodities as well. Bank took a big stride in ١٩٥٢, when it replaced the Imperial Bank of India, as an agent of State Bank of Pakistan. There were ١٤ Pakistani scheduled commercial banks operating in the country on December ١ ٩٧٣, 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 7
  16. 16. Internship Report National Bank of Pakistan The Pakistan Banking Council prepared banks amalgamation schemes in ١٩٧٤ 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 ١٩٧٤, 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. ١٩٧٤ ,١. The ownership, management, and control of all banks in Pakistan stood transferred to and vested in the Federal Government. With the passage of time its functioning diversified as they take over the function of different institution with the passage of time like in past they took over the function of Imperial bank of India and now of NDFC (national development finance corporation). It is working as the agent of the state bank of Pakistan and performs its functions wherever state bank of Pakistan is not present. 8
  17. 17. ORGANIZATIONL STRUCTURE R G A N I Z A T I O N L T R U C T U R E In this section topic is: • Overall Organizational Structure of NBP and it's hierarchical View
  18. 18. Internship Report National Bank of Pakistan ORGANIZATIONAL STRUCTURE In National Bank of Pakistan, the head is called “Chairman” or “President” of the Bank. And after President there is Five Broad of Directors. National Bank of Pakistan has eleven Groups which control the working of the Divisions, Wing, Department, Section and Regional of the national bank of Pakistan. In NBP, “Department” is called “Wings”. Chairman & President Board of Directors President’s Secretariat Secretary Board of Directors Corporate & Credit Audit & Inspection Investment Management Compliance Group Group Banking Group Group HRM & Commercial & Treasury Administration Operation Retail Banking Management Group Group Group Group Special Assets Overseas Management Group Management I.T. Group Group 10
  19. 19. Internship Report National Bank of Pakistan National bank of Pakistan divided their task in to separate jobs. Basically national Bank of Pakistan having different groups, and each group perform different task specialization in their department. National Bank of Pakistan Categories their departments through their work specialization. And NBP hire their employees also through work specialization. The following Chart shows the Work Specialization in the bank. HRM & Administration, Operation, Commercial & Retail Banking, and I.T Group are performing different working in the Organization. HRM & Commercial & Administration Operation Group Retail Banking I.T. Group Group Group National Bank of Pakistan is structurally divided into Groups and groups are also subdivided into Departments, Wings, and Divisions. National Bank of Pakistan has different Department in the Group and each department performing work, as their task assign. Department also subdivided into working bases. Credit Management Group (Functional Deptt) Administration Credit Industrial Credit Policy & Wing Monitoring Research SME Wing 11
  20. 20. Internship Report National Bank of Pakistan GEOGRAPHIC DEPARTMENT Special Assets Management Group (Geographic Deptt) SAMG - North SAMG – South SAMG – Head (Lahore) (Karachi) Office PROCESS DEPARTMENT Compliance Group (Process Deptt) Administration Market & Credit Risk SBP Inspection Wing Liquidity Risk CUSTOMER DEPARTMENT Operation Group (Customer Deptt) Customer Customer Services Financial Institutional Facilitation & & Govt. Business & Admn. Cash Manag. 12
  21. 21. Internship Report National Bank of Pakistan National Bank of Pakistan (NBP) provides Services through more than ١٢٠٠ branches in Pakistan and ٢٢ branches in overseas. And there are ٢٩ Regions. All Branches of National Bank of Pakistan report to five Head of RMT Members. And these five members reported to regional Offices. Regional Offices report to the Group Chief of the Groups. All the process is working very quickly and it not consume more time. And the Group Chief of each Group Report to the President of the National Bank of Pakistan. All the data were proceed to the President of the bank. Chairman & President Operation Group HRM Group Audit & Inspection Compliance Group Chief Chief Group Chief Chief South Region North Region West Region East Region Overseas Reg Head 1 Head 2 Head 3 Head 4 Head 5 Branch 1 Branch 2 Branch 3 Branch 4 Branch 5 National Bank of Pakistan is relatively Wide span of control and Flat Structure. National Bank of Pakistan are less layers of management to pass a message through, so the message reaches more employees faster. More skillful Group Chief Managers can control a greater number of employees. National Bank of Pakistan assess that the internal Control environment is showing signs of improvement as compared to previous year in all areas of the Bank. 13
  22. 22. Internship Report National Bank of Pakistan Chairman & President HRM Group Operation Group CMG TMG OD Wing IRD Wing T & S Wing Tech Wing C. M Wing Admn. Wing C. M Wing Admn. Wing National Bank of Pakistan is having Decentralization in the Bank. And give the authority of Decision Making to their Group Chief of every Group, to take decision, which is benefit for the Organization. National Bank of Pakistan provides facility of making decision to their Senior Vice President as well as Vice President of the every Group. President (NBP) Group Chief (Group) SVP or VP (Group) AVP (Group) Grade Officers (Group) National Bank of Pakistan has low Formalization in the bank. And Employees are free to take action or decision in their work specialization. Employees are follow the rules and regulation in the bank is very little formalized. Employees’ behavior is little bit guided by rules and regulation. National Bank of Pakistan follow the Organic Model Organization. In NBP, there are Cross- Functional teams, as well as Cross-hierarchical teams. There are free flow of 14
  23. 23. Internship Report National Bank of Pakistan Information and Wide span of Control. NBP is Decentralization in nature and very low formalization in the bank. Basically National Bank of Pakistan is high Diagonal Differentiation and every employee of any department can easily communicate to other department of the Bank. 15
  24. 24. ORGANIZATIONAL NETWORK R G A N I Z A T I O N A L E T W O R K In this section topics are: • Registered & Headoffice • Share Registration Office • Share Capital • Branch Network • Global Network • Domestic Network • Present Status of Bank
  25. 25. Internship Report National Bank of Pakistan ORGANIZATIONAL NETWORK REGISTERED & HEAD OFFICE Head office of NBP in NBP Building, I.I. Chundrigar Road, Karachi, Pakistan which is “the city of lighting” in Urdu “Uroos-ul-Bilad” which was also the first capital and ancient place of Pakistan. It carried out its successful journey to make it an “Asian Tiger”. SHARE REGISTERATION OFFICE THK Associates (Pvt.) Ltd. Shares Department, Ground Floor, State Life Building #3, Dr. Ziauddin Ahmed Road, Karachi, Pakistan. SHARE CAPITAL Issued Capital The bank was setup with an issued capital of Rs.1.5 million. Authorized Capital Authorized capital of National Bank of Pakistan in 2000 was Rs.25 Billion. Issued, Subscribed, and Paid-up Capital Issued, subscribed and paid-up capital in year 2008 was 10763702260 BRANCH NETWORK Presently the Bank is divided into 10 Groups headed by SEVPs/EVPs. 9 Regions reporting to as many Regional Chiefs and 15 Single Branch Zones headed by Zonal Chiefs; 12 corporate branches and 1,254 domestic branches headed by Branch Managers control its field operations. With the geographical development of its branches, the Bank has been able to extend its services to a much larger number of Pakistanis all over the country. Today it has more than 8.5 million accounts. Bank maintains its presence in all the major financial centers of the world through its 21overseas branches and 4 representative offices. Of these, three representative offices 17
  26. 26. Internship Report National Bank of Pakistan have recently been set up at Tashkent (Uzbekistan), Baku (Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging opportunities in CIS countries. Apart from having a vast branch network, Bank is at the forefront in the acquisition and application of new technologies in every aspect of its banking facilities. It has acquired leased telephone lines for on-line banking. The Bank has 12 Regional Computer Centers to cover various on-line and batch system requirements of branches and controlling offices. Bank has also a presence on the Internet. It has modernized its services by installing Automated Teller Machines (ATMs) called "CASH LINK" at selected branches and presently 17 ATMs are operational in major cities. GLOBAL NETWORK  18 Overseas Branches  5 Representative Offices  1 overseas Subsidiaries  Joint Venture.  Overseas Branch Network:  Paris  Baku  Seoul  Kabul  Tokyo  Osaka  Dhaka  Bahrain  Bishkek  Kowloon  Ashgabat  Jalalabad  Frankfurt  Chittagong  New York  Hong Kong  Washington D.C.  KEPZ Offshore Banking Unit, Cairo 18
  27. 27. Internship Report National Bank of Pakistan  Oversea Representative Offices  Baku  Beijing  Toronto  Chicago  Tashkent  Oversea Subsidary  CJSC Almaty, Kazakhstan DOMESTIC NETWORK  1254 Domestic Branches  6 domestic Subsidiaries  29 domestic regional offices  Domestic Subsidiaries  NBP Capital Ltd.  Taurus Securities Ltd.  NBP Exchange Company Ltd  National Bank Modaraba Management Co.  National Agricultural and Storage company Ltd.  Cast – N- Link Products Ltd  Joint Venture  United National Bank Ltd., UK (Economic Indicators Pakistan, Published by Economic research Wing NBP, Head Office Karachi) PRESENT STATUS OF BANK The new management team having extensive experience of management of large financial institutions both within and outside the country is expected to further enhance the profitability and operational efficiency of the Bank. Prospects The Bank's principal strategic going forward objective is to make the transition from a public service institution to a modern commercial bank. Being the country's largest financial institution, the Bank is uniquely positioned to leverage its large branch network and its 8.5 million-customer base to consolidate its core businesses as well as develop new revenue generating opportunities. 19
  28. 28. Internship Report National Bank of Pakistan The new management team is in place combining the Bank's existing personnel with professionals recruited from outside. Operating procedures are being re-defined and internal controls strengthened utilizing a revamped IT architecture. A brief on the progress on some critical areas is as follows: Corporate & Investment Banking A new approach to corporate banking is underway. The Bank has initiated a structured approach to corporate banking by introducing a single point of contact through Relationship Managers (RMs). For this purpose, new RMs as well as team leaders have been inducted to expedite this process. Area Managers will be appointed to manage relationships and to better service the needs of multinationals and large local corporates. In investment banking team has also been formed to offer specialized services to major relationships including advisory and debt syndications (TFCs). Furthermore, to stem the growth in non-performing loans, the existing risk / credit management practices at the Bank are being revamped. Treasury / International Banking The deregulation of foreign exchange treasury business has ensured that a growing Volume of business now flows through the inter-bank market where rates are determined by the market forces. This can prove to be an immense profitable proposition for the Bank. Towards this objective, the Bank is shifting focusing on expanding its market share in trade finance, home remittance and foreign investment related forex-denominated flows. 20
  29. 29. Internship Report National Bank of Pakistan MANAGEMENT OF NBP A N A G E M E N T O F In this section topics are: • Management System • Management Structure • Central Board • Local Board • New Management Structure • Corporate Information • Board of Directors • Audit committee • Auditors • Legal Advisor • Senior Management • Oversea Management
  30. 30. Internship Report National Bank of Pakistan MANAGEMENT OF ORGANIZATION Management is a distinct process consisting of activities of planning, organizing, actuating and controlling performed to determine and accomplish stated objectives with the use of human being and other resources. MANGEMENT SYSTEM The management has two types. • Centralized • Decentralized Centralized Management tends to concentrate decision making at the top of the organization Decentralized disperses decision making and authority throughout and further down the organizational hierarchy. NBP have a centralized type of management because all the decisions are taken by the top management. MANAGEMENT STRUCTURE Central board The general superintendent and direction of the affairs and business of the bank shall be entrusted to the central board which may exercise all powers and things as may be exercised or done or done by the bank and or not by this ordinance expressly directed or required to be done by the bank in general meeting. The Central bank consist of the following directors namely: • Managing director • President Managing Director The Managing director appointed by the central government under section ١٦, nine directors is directed in local or special meeting by the share holder in the following manners. The share holder registered in a branch, register maintained for an area mentioned in sub section (٥) of section ٨, shall elect from amongst themselves, such number of directors for that area as may be decided before election by the central government having regard to the proportion which that share capital subscribed by the share holders of that area bears to the whole. Provided that shareholders registered in branch register maintain at Dacca shall elect from among themselves at least two directors. Three directors appointed by the central government, provided that total number of elected directors representing the area for which the decca register is maintained shall not be less than three. 22
  31. 31. Internship Report National Bank of Pakistan President The president of a Central board shall be appointed by the central government from among the directors. Local Board The local board shall be established for the area mentioned in sub section (٥) of section B , one each at Karachi ,Dacca and the Lahore ,and shall without prejudice to the powers conferred by the sections ١٢, have power ,within the prescribed limits generally to transact all usual business of the bank. A local board should consist of following members namely;  The Managing director  One member appointed by the central board from amongst the directors elected by the share holder register in the branch register of the area.  Two members appointed by the central government from the area in which the local board is situated.  Three members elected in local or special board meeting from among themselves by the shareholder register in the branch register of the area. The Managing director shall be appointed by the central government for a period not exceeding five years and on such salary and terms and condition of the service as the central government may determined. New Management Structure The previous management was removed by the bank nationalization ordinance ١٩٧٤. the general direction and superintendent of the affairs and business of the banks vests in the Executive board consisting of President (Chief executive) and five senior executives of the bank . The federal government in ١٩٨٠ constituted a board of directors comprising the president and the members of executive board of the bank and two additional members one representing the ministry of finance and the other Pakistani banking council. Thus therefore, all nationalized commercial banks are controlled by the Pakistani banking council being subject to State bank of Pakistan regulation as well. The federal ministry is responsible for bank operations in the ministry of finance. Recently by the order of president of Pakistan, banking council of Pakistan is removed. Board of Directors. An executive board composed of six senior executives of the bank and the president who is also the chief executive supervises the affairs and business of the bank, called the Board of Directors. Management Committee: Also there is a Management Committee consisting of nine senior executives of the bank, called the members and the president who is also the chairman of the committee. TRAINIG and MANAGEMENT DEVELOPMENT WING National bank of Pakistan has its national and development centers and ٤ staff collages at: - 23
  32. 32. Internship Report National Bank of Pakistan • Karachi • Lahore • Peshawar • Islamabad In these centers and staff colleges, the banking training is provided to the officers, managers, and to potential managers. It arranges courses and seminars for middle and higher management in all. Each year almost ١٥٠٠ persons receive training over there. CORPORATE INFORMATION Board of Directors Syed Ali Raza Chairman & President, Chief executive M. Ayuub Khan Tarin officer Director Ibrar A. Mumtaz Director and SEVP and Group Chief, Human Resources Management & Administration Group Tariq Kimrani Director M. Arshad Chaudhry Director Sikandar Hayat Jamali Director Mian Kausar Hameed Director Audit Committee M. Ayuub Khan Tarin Chairman Ibrar A. Mumtaz Chairman Tariq Kimrani Chairman M. Arshad Chaudhry Chairman Mian Kausar Hameed Chairman Auditors Ford Rhodes Siddat Hyder &Co. Charterd Accountant 24
  33. 33. Internship Report National Bank of Pakistan M. Yousuf Adil Saleem & Co. Charterd Accountant Legal Advisors Mandviwala & Zafar Charterd Accountant SENIOR MANAGEMENT Qamar Hussain Chief Operating Officer & Head of Credit & Risk Management Masood Karim Shaikh SEVP & Group Chief, Corporate & Investment Banking Group Shahid Anwar Khan SEVP & Group Chief, Overseas Banking Group Dr. Asif A. Brohi SEVP & Group Chief, Operations Group Amer Siddiqui SEVP & Group Chief, Commercial & Retail Banking Group Muhammed Nusrat Vohra SEVP & Group Chief, Treasury Management Group Dr. Mirza Abrar Baig SEVP & Group Chief, Human Resources Management & Administration Group Imam Bakhsh Baloch SEVP & Group Chief, Audit & Inspection Group Ziaullah Khan Senior Executive Vice President Nabi Bakhsh Soomro SEVP & Group Chief, Islamic Banking Group Ekhlaq Ahmed EVP & Secretary Board of Directors Tajammal Hussain Bokharee EVP & Group Chief, Special Assets Management Group Nadeem Anwar Ilyas EVP, PSO to the President & Group Chief, Compliance Group (A) Naeem Syed EVP & Divisional Head-Project Management Office & Core Banking Applications Aamir Sattar SVP & Financial Controller/ Divisional Head, Financial Control Division Atif Hassan Khan SVP & Group Chief (A) Information Technology Groups 25
  34. 34. Internship Report National Bank of Pakistan OVERSEA MANAGEMENT R.A. Kaleemi SEVP & Chief Representative, Canada Office M. Rafiq Bengali SEVP & Regional Chief Executive, Americas Region Shahid Anwar Khan SEVP & Group Chief, Overseas Banking Group Dr. Asif A. Brohi SEVP & Group Chief, Operations Group Amer Siddiqui SEVP & Group Chief, Commercial & Retail Banking Group Muhammed Nusrat Vohra SEVP & Group Chief, Treasury Management Group Dr. Mirza Abrar Baig SEVP & Group Chief, Human Resources Management & Administration Group Imam Bakhsh Baloch SEVP & Group Chief, Audit & Inspection Group Ziaullah Khan Senior Executive Vice President Nabi Bakhsh Soomro SEVP & Group Chief, Islamic Banking Group Ekhlaq Ahmed EVP & Secretary Board of Directors Tajammal Hussain Bokharee EVP & Group Chief, Special Assets Management Group Nadeem Anwar Ilyas EVP, PSO to the President & Group Chief, Compliance Group (A) Naeem Syed EVP & Divisional Head-Project Management Office & Core Banking Applications Aamir Sattar SVP & Financial Controller/ Divisional Head, Financial Control Division 26
  35. 35. DEPARTMENTLIZATION E P A R T M E N T L I Z A T I O N In this section topics are: • General Banking Department • Deposit Section • Accounts Opening Section • Lockers Services • Cash Dealing Section • Clearing Section • Remittance Section • Advances Department • Accounts Department • Government Receipt & Payment Department
  36. 36. Internship Report National Bank of Pakistan DEPERTMENTALIZATION Dividing an organization into different parts according to the functions is called departmentalization. NBP Main branch ,Lahore offer a wide range of banking services to public and private sector corporation ,partnership ,individual and others . The National Bank of Pakistan has various departments. Brief description of all these departments are given here one by one under separate heads for better understanding. • General Banking Department  Account opening Section  Deposit Section  Cash Dealing  Clearing Section  Remittance • Credit and Advances Department • Accounts Department • Government Department • Consumer & Retailing Department • Foreign Exchange Department • Import and Export Department • 28
  37. 37. Internship Report National Bank of Pakistan GENERAL BANKING DEPARTMENT General banking involves the following sections 1. Deposit Section 2. Accounts Opening Section 3. Cash dealing Section 4. Clearance Section 5. Remittance Section 6. Lockers Handling Section Deposit Section Deposits are the lifeblood of commercial banks. The main function of a commercial bank is to mobilize deposits of money from the savers and lend into for most profitable purposes. The process of collection deposits is Deposits Mobilization. Commercial banks donor receive these deposits for safe keeping purpose only .but they accept deposits as debts. When a bank receives a deposit from a customer becomes a creditor and the bank a debtor. When the bank receives the amount of deposits as a debtor, it becomes the owner of it but there is an implicit agreement that the amount owned would be paid back by the bank to depositor on demand or often at specified time. The classification is based on duration and purpose for which the deposits are to be kept at the bank before the depositor can withdraw them. Deposits can be divided into two categories. Deposits Checking Non-Checking Accounts Accounts PLS Saving PLS TDR’s Account Current Deposit Special Notice Accounts Deposit Accounts Foreign Currency NIDA Accounts 29
  38. 38. Internship Report National Bank of Pakistan Categories of Deposits There are two broad categories of deposits. These are • Time deposits • Demand deposits Time Deposits Demand Deposits • These are payable on maturity • These are not payable of maturity • Receive profit with respect to time but on demand period • No profit is given on demand • All TDRs, saving accounts and deposits other profit bearing accounts are • They include current accounts and included. call deposits etc. TYPES OF ACCOUNT/ DEPOSIT Following types of accounts are open in NBP 1. Current or demand account 2. Saving account 3. Fixed account 4. Call Deposit Accounts 5. Foreign Currency Accounts 1. Current This account is also known as running balance account. Simply we can say “A bank account which may be used to lodge payments or to withdraw money on demand.”Its main purpose is to serve the businessman. Form number F-53 is provided to the person to open the account. It is a statutory requirement to maintain current account. Its main features are: -  Minimum amount for opening this account is Rs.500  Any person can open the account with the bank  According to inter banks agreement interest is not paid on current account.  Bank act as custodian of money  Over draft facility is provided to the customers  Customer can withdraw money through cheque supplied by bank  No limitation to the number of withdrawal 30
  39. 39. Internship Report National Bank of Pakistan  No zakat is deducted on current account. Basic Bank Account (BBA) BBA’s are opened on proper introduction and submission of required documents.  BBA’s are opened for individuals single or joint only.  Free ATM issuance  Minimum balance is 1000/-.  In BBA’s maximum two deposits transactions and two chequing withdrawals are allowed free of charge through cash/clearing in a month.  Nill accounts are closed after 3 months 2. Saving account This type of account is designed to encourage the saving habit of the customer and lead to a long-term banking or investment relationship. Bank saving accounts are in the nature of deposits accounts and are not normally available for drawings. Rates of interest are typically ahead, by a small margin. NBP offered the three types of saving accounts a. Profit and Loss Sharing/Saving Account (PLS Acc) b. National Income Daily Account (NIDA account) a. Profit and Loss Sharing/Saving Account (PLS Acc) In general it is also called saving account .To provide interest free banking facilities in Pakistan, this type of account was introduced in January 1982 after the islamization of banking. The main features of this account are: -  Instead of having fixed return in the form of interest the deposited money will be shared in profit and loss of the bank.  One can open the account by depositing minimum Rs.100  The bank is authorized to deduct service charges on half yearly basis.  Profit on PLS Saving Account is calculated on minimum monthly basis and is paid half yearly basis announced by the Head Office after June 30 and December 31.  Zakat at the rate 2.50% is deducted from the PLS Saving Accounts.  No limit of withdrawals b. National Income Daily Account (NIDA account) 31
  40. 40. Internship Report National Bank of Pakistan The scheme of NIDA was launched in December 1995 at attract at corporate customers. NIDA are opened for individuals single or joint, Charitable institutions, Provident funds, autonomous bodies, companies, associations, educational institutions, firms etc. the features of this account are same to the features of the saving or PLS account except the following ones:  In this account the minimum balance required to acquire the benefits of this account is Rs 2 million, and the maximum limit is 5.0 million.  When the above condition is fulfilled, then the bank will pay interest on daily basis, which is that if the deposit is minimum of 2 million than the mark up rate is 5.2%p.a.and if it is at maximum that is 5.0 million than the rate is 7.00 %p.a.  In this account the daily balance of account is taken, products are calculated and the interest is calculated on that balance.  If the balance on any day comes below the lower limit, which is Rs 2 million then interest will not be given.  This scheme did not gain popularity so NBP close this scheme. 3. Call Deposits Call deposits are the sorts of deposits, which are deposited in the bank against any tender. This is without interest deposit and may be with interest provided. The depositor has agreed to keep this amount with the bank for some fixed period. 4. Fixed Deposit Account This account is the major source of funds for the banks. This account is best for people who have surplus money and don’t need such funds in nearer future. The rates on this type of deposits are higher than the saving bank accounts. The money is deposited for a fixed period of time. Main features of this account are: -  Fixed amount is deposited for fixed period.  Amount of profit can be obtained after each six months.  Higher will be the time period, higher will be the rate of profit, and vice versa.  A receipt is used for the amount deposited called fixed deposit receipt.  Period of deposit can vary from 3 months to 5 years depending upon the nature of scheme offered by bank. The amount can be withdrawn before maturity after surrendering interest. PLS Term The bank accepts these deposits with minimum sums as prescribed by the bank for a fixed period of time. Profit may be paid in cash, pay order, demand draft or any other form.  Terms deposits are accepted for a period of one month to five years.  Minimum deposit is accepted is Rs.25, 000/= with no upper limit.  Available to all types of investors i.e. individuals, partnership firms, public and private limited companies, corporation, trusts, and government bodies. 32
  41. 41. Internship Report National Bank of Pakistan  Profit is paid on maturity. Fixation Schemes of NBP NBP offered following types of fixation and saving schemes • PLS Special Notice Term Deposit Reciept- PLS SNTDR • PLS Monthly income Scheme – PLS MIS • Premium Saver Scheme- PLS Saving Account • Premium Amdani Scheme 5. Foreign Currency Accounts These are the accounts in US $, Pound, Euro, yen etc. of different account holders and either saving or current accounts. Profit is fluctuating as determined by the State Bank of Pakistan on six monthly bases whereas return on Term deposits/SNTD will paid on maturity. The transactions in these accounts are translated into Pak. Rupees at the exchange rate prevailing on the date of transaction. Account Opening Section Account opening section of the bank can be considered the most important department because banking starts with the account opening. Every customer of the bank either he is of credit section or foreign section or any other department must have his account in order to get benefit and transaction with the bank. Therefore it is considered the most important section of the bank. Account opening officer take special consideration for the proper recognition of the customers. This section performs the following functions: • Opening of Accounts • Issuance of cheque books • Closing of accounts OPENING OF ACCOUNTS The opening of an account is the establishment of banker customer relationship. Before a banker opens a new account, the banker should determine the prospective customer’s integrity, respectability, occupation and the nature of business by the introductory references given at the time of account opening. Preliminary investigation is necessary because of the following reasons.  Avoiding frauds  Safe guard against unintended over draft. 33
  42. 42. Internship Report National Bank of Pakistan  Negligence.  Inquiries about clients. i. Terms and conditions There are certain formalities, which are to be observed for opening an account with a bank.  Formal Application  Verification of customer's CNIC through the NADRA  Copy of NIC of the customer  Specimen Signature  Minimum Initial Deposit To open an account the customer has to meet the general banking manager with an introducer with the ID card. Manager verifies the customer's ID card through the connection of NADRA. NADRA send the verification report to the bank with the concluding remarks called VERISIS. If the customer's id card is fake then bank has right not to accept the contract and if the contract is acceptable to both, now it is ready to open the account formally. After the identification of the customer along with the form a card for specimen signature is also supplied to customer. Manager has every right not to accept this contract if he is not satisfied by the details provided by the customer. ii. Qualification of Customer The relation of the banker and the customer is purely a contractual one, however, he must have the following basic qualifications.  He must be of the age of majority.  He must be of sound mind.  Law must not disqualify him.  The agreement should be made for lawful object, which create legal relationship  Not expressly declared void. iii. Steps for Opening of Account After entering into bank premises the person goes through the following steps for opening an account in the bank and for becoming a bank customer. 1. A Verfication: The first important step to take place in bank is to get satisfactory verification of the person, who wants to become bank’s customer. This verification is made through the NADRA. 2. Account Opening Form and Specimen Signature Card: Now the person is provided with an application form known as Account Opening Form (AOF). This form contains: - 34
  43. 43. Internship Report National Bank of Pakistan i. Type of account  Current Account  PLS SNTDR  PLS Term  BBA  PLS Saving  Premium Saver  Premium Amdani  Call Deposit  NIDA ii. Nature of Account NBP has the offered services to following types of individuals. Accounts of general customers (Individual accounts)  Minor account  Illiterate person account  Joint account Accounts of special customers  Proprietorship account  Partnership account (Registered/ Unregistered)  Limited company’s account (Public/ Private)  Accounts of clubs, societies and associations  Corporate Body (Incorporated/ Unincorporated )  Trust account  Govt Institutions (Federal/ Provincial) iii. Initial Deposit Amount Deposit can be accepted in the form of:  Pak Rs.  US $  UK  EURO  JY iv. Particulars of customers e.g;  Title of Account  Adress  CNIC Number 35
  44. 44. Internship Report National Bank of Pakistan  NTN Number (if available)  Profession  Telephone number may be of office, mobile or residential v. Next of Kin (all above mentioned particulars of introducing him) In this customer mention the name and address of person to be contacted for ascertaining his whereabouts after the expiry of three years from the date of last operation in his account or last communication from him to the branch to inform him the existence of account when the customer is not available at the given address. This is simply the refrence of the 2nd person if the bank fails to communicate with the customer then bank can contact with the next of kin / the mentioned person to know about its customer.Customer provide in this all the personal details of the next of kin.e.g;  Name of person  CNIC Number  Address  Telephone number etc. vi. Operating Instructions The account can be operated by  Singly  Jointly  Either/ survivor vii. Zakat Deduction Zakat is deducted on each type of account accept current account in the 1st day of the Ramzan at the rate of 2.5%. If customer wants no zakat deduction then he have to submit affidavit/declaration as per zakat rules. viii. Signatures of the applicant ix. Service charges deduction In this category customer authorize the bank to deduct service charges as per bank's rariff. Service charges are exempted for;  Government employee  Pensioner  Student  Widows State Bank of Pakistan now authorize all the banks to deduct service charges on all types of accounts when the balance of the customer become less from 5000/-. Rs. 55/- per month is deducted from the customer's account. 5000/- is the minimum amount which should be kept by the customer in his account. 36
  45. 45. Internship Report National Bank of Pakistan Specimen Signature Card (SS card) Specimen of signatures will be obtained from depositor at the time of opening his account. A specially designed card is used for this purpose; the card must be countersigned by an official of the bank not below the rank of an officer. For illiterate person a recent picture of the newly account holder is taken and attached with SS Card. To reduce the risk of frauds and misuse of the cheques of an illiterate person the specimen signature card and account opening form both are stamped by the Personal Visit stamp. Person who use thumb impression as a mean of signature can operate their account only by Personal Visit. 3. Account Opening Register Now the name of the customer is recorded in account opening register, and from here the account no. of the customer will be written on (top most corners) account opening form and on specimen signature card. 4. Letter of thanks Letter of thanks is the latter issued by the bank to the customer for two purposes  1st purpose is to say thanks to the customer for opening the account in their bank  2nd purpose is to confirm the address provided by the customer while opening the account. 5. Issuance Of Cheque Book And Pass Book The cheque book will ordinarily be issued to all customers desiring to have chequing facility. First Cheque book is issued to the customer after sending the letter of thanks when the customer comes with the latter of thanks and requests for the issuance of the cheque book. A Cheque book consists of  PLS 25 leaves or pages per order  CD 50 leaves or pages per order  100 leaves or pages per order  CD 50 leaves or pages per bearer  100 leaves or pages per bearer ∗ Order- if a person appears himself for new cheque book or who is the holder of account ∗ Bearer- if the person other than account holder appears then he is bearer Rs. 3 per leaf as postage charges is charged to the customer. A special cheque book register is kept to enter the name of the person having cheque book. Customer can withdraw money by signing a cheque and writing the amount he wants to withdraw from his account. 37
  46. 46. Internship Report National Bank of Pakistan 6. Pass Book Pass book is another important type of book handed over to the customer as he opens the account with the bank. The withdrawal and deposit of money is recorded date wise in this book. 7. Recording into General Ledger: The concerned officer records the name and amount deposited with the bank in to general ledger. Separate ledgers are maintained for different types of accounts e.g.  Current Account Ledger  Saving Account Ledger  Fixed Deposit Account Ledger  Call Deposit Account Ledger As and when customer will deposit the money, amount will be credited in general ledger and the withdrawal will be followed by a debit entry in the ledger. iv. Documents Enclosed by Customer Documents required to be attached by the customer are different for different categories. Documentation In case of Individuals Account ∗ Copy of CNIC/NICOP/POC ∗ Copy of Driving license in case CNIC is without photograph ∗ Applicant photograph and VNIC copy ∗ Copy of service card/ evidence of employment in case of salaried person ∗ Photographs in case of illetrate person ∗ Copy of CNIC of Next of Kin. ∗ Zakat exemption Declarartion ∗ Evidence for exe,ption of account from levy of service charges ∗ Proof of age in case opening of account with minor Documentation In case of Private/ Public limited company accounts: ∗ Photocopy of National Identity Card of each director ∗ Application form ∗ Copy of company’s memorandum and articles of association ∗ List of directors ∗ Copy of board resolution 38
  47. 47. Internship Report National Bank of Pakistan ∗ Certificate of incorporation ∗ Their signature cards ∗ Certificate to commence business ∗ Power of Attorney Documentation In case of Partnership Account ∗ Application form ∗ A copy of partnership deed ∗ Signature cards of partners ∗ Registration certificate copy ∗ A copy of National Identity Card of each partner ∗ Authority letter favoring persons authorized to operate the account Documentation In case of Club, Society, Association or Trust ∗ Application form ∗ Copy of rules ∗ Certified copy of resolution ∗ Signature cards Documentation in case of agents Account ∗ Copy of power of attorney ∗ Id card of each agent Documentation in case of trust Account ∗ Certificate of registration ∗ CNIC of all trustees ∗ Copy of instrument of Trust v. Stamping and Scrutinizing After the fulfillment of all the necessary terms and conditions and checking of the form the relevant officer of Account Opening then affixed stamps on the AOF for the sake of completion of all the formal rules and regulations. He affixed three types of stamps on the form and two types of documents. Affixed stamps:  National Bank of Pakistan Stamp  Authorized Stamp 39
  48. 48. Internship Report National Bank of Pakistan  Personal Visit Stamp---in case of illiterate person or the person not having specific sign Affixed Documents:  Know Your Customer Form (KYC) Summarizing the context of AOF briefly  Signature Card For identification and verification of signatures vi. Loose Cheques If any customer forgets or leaves his cheque book at his home, which is far away from the bank or whatever the case may be, the customer applies with the bank for the issuance of loose cheque by the bank as he does not has his cheque book with him and the money is urgently required, the this cheque is called the loose cheque. NBP issues a loose cheque for Rs.150 as charges for the issuance of the loose cheque. NEW CHEQUE BOOK ISSUANCE All subsequent cheque books to be issued against the requisition cheque extracted from the previous cheque book. This slip is duly filled and signed by the customer. The signature of the customer is verified by the bank and new cheque book is issued to the customer and serial numbers of cheques are duly entered in the book of the bank. Along with the signature, the person should also write his full name and address. The authorized officer filled the cheque book requisition card for the customer and sends them to Head office which is present in Karachi through the NIFT (National Institutional of Facilitation Technology) (PVT) Ltd. The customer can obtain the cheque book after at least two days of submission of requisition slip.  Cheque books issued in the running serial order with the name of the customer printed on the book.  Rs. 3 per page of book is charged for the postage services through NIFT  Enter particulars in the cheque book issue register.  Enter detail in the system.  These records should be daily checked by the Daily Cheque Book Report, which should be signed by the authorized officer after checking cheque book series input number.  At the end of the day all the cheque books should be checked and balanced with the help of requisition slips. In case of cheque book is issued without the requisition cheque of previous cheque book care must be taken to establish the genuineness of the customers and Form should be obtained. In some cases when cheque book is issued by the person duly authorized by the account holder for obtaining cheque book, a letter of issuance of cheque book is sent to the account holder for his acknowledgement. 40
  49. 49. Internship Report National Bank of Pakistan In rare cases when customer demand printed cheque book, requisition slip with demand letter is sent to the NIFT (National Institutional of Facilitation Technology) (PVT) Ltd. CLOSING OF ACCOUNTS Account Closing by Customer The customer can close the account. Customer is required to submit an application for closing the account. Then the account is closed out and his balance is paid to him after deducting the closing charges, i.e., Rs. 200 and the application is filed in Account Closing File. Remaining leaves of cheques will also be collected from the customer. Account Closing by Bank i. Dormant Account All current accounts which have not been operated for six months or all saving accounts which have not been operated upon for one year classify as dormant account. ii. Inoperative Account All the current accounts which have not been operated upon for 2 years or all saving accounts which have not been operated since 3 years are classified under inoperative accounts. Operations in accounts classified as dormant or inoperative will remained suspended unless request in writing for activation or restoration is received from the Account Holder. If the account holder fails to reactive the account despite of bank's notice, the bank will have the right of exercising option of closing of account and in such case will refund the balance to the customer after deducting all applicable charges. iii. Treatment of Deposit declared Unclaimed Unclaimed Deposit A debt payable owing by bank due to the reason of deposit in respect of which no transaction has taken place and no statement of account has been requested by the creditor during a period of ten years are classified under unclaimed deposit. These are simply a debt owned by bank when a customer has not been operating his account during a period of 10 year. The bank serves a 3 month Final Notice in writing to the account holder at his latest known address for his reciving balnce lying in account. Upon expiry of such period NBP then surrender the deposit to the SBP. 41
  50. 50. Internship Report National Bank of Pakistan Locker Services Section National bank of Pakistan also provides lockers facility in the country. It means a box operate by a customer of holder on permanent basis. Locker operation account is allowed for a account holder, Non-account holder not able to operate it. There are four types of locker depending upon the size of lockers operate in banks. • Small size locker • Medium size locker • Large size locker • Extra large size locker An application form is necessary for customer with desire documents and approval made by the head of department. Lien is placed on the account of a locker holder on drawing of amount. Entries are made on “Locker Register” as well as on the system. Locker No and Key No is allotted to the locker holder for further operation. The dual control system is used for lockers. The officer has Master Key to apply on the locker but he cannot open the locker of any person. The locker holder provides the bank his specimen signature. Whenever the locker holders come to open the locker, his signatures are verified by the officer and then will be able to open his locker. If the key of the locker is lost company providing these lockers breaks the locker and new lock is fitted in its locker and lock is destroyed in the presence of the locker holder and bank charges RS 1200 for that. In case the locker holder dies, the court opens his locker in the presence of his as mentioned in his will or and his belongings are given to them and the locker is closed. Customers paid the rent of lockers on annual basis. The annual rent of different lockers, their security charges and insurance is shown in table. Annual Rent of Lockers SIZE OF LOCKERS RENT SECURITY INSURANCE Small 4000 25000 500,000 Medium 5000 30,000 500,000 Large 6000 200,000 700,000 Extra-Large 6000 200,000 1000,000 42
  51. 51. Internship Report National Bank of Pakistan Cash Dealing Department Cash department of NBP is given the complete responsibility of handling all receipts & disbursements of cash as a result of transaction in both local and foreign currencies & near cash items such as traveler's cheque etc. (when they are issued against cash).As a consequence it is also responsible for the book keeping of these transactions & the safe custody of cash and near cash securities of NBP. Cash department of NBP is separate close part; no one other than cash departments' employees is allowed to enter into that area. Cash department performs the following functions.  Cash receipts for receive deposits.  Cash payment for encashment of cheques. Receipt The money, which either comes or goes out from the bank, its record should be kept. Cash department performs this function. The deposits of all customers of the bank are controlled by means of ledger accounts. Every customer has its own ledger account and has separate ledger cards. Payments It is a banker’s primary contract to repay money received for this customer’s account usually by honoring his cheques. CASH RECEIPTS The depositor uses pay-in-slip for depositing the amount in their account. There are two types of pay-in-slip. Both are in different colors for clear identification. i. Cash Pay-in-Slip ii. Cheque Pay-in-Slip There are two parts of deposit slips: • Counter foil • Adjacent credit voucher i. Cash Pay-in-Slip It is used whenever the account holder deposit cash in his account. For this he have to fill the both parts i.e; counter foil and adjacent foil of the slip properly writing the amount in figures as well as in words. Cashier of cash receipt accept the deposit slip with cash and then signed the both parts of deposit slip, affixed cash received stamps on it and returned the counterfoil to the customer. The amount is credited to the customer's account by the computer terminals. ii. Cheque Pay-in-Slip It is used whenever the account holder deposit amount in his account by the cross cheques. This slip is used for transfer of funds from one customer's account to another. The processing 43
  52. 52. Internship Report National Bank of Pakistan of the cross cheques held in the clearing department. The cashier just check the cross cheques to confirm whether it is acceptable or not. CASH PAYMENT It is the primary function of bank to repay the money received from his customer’s account usually by honoring the cheques. It is the contractual obligation of a banker to honor his customer’s cheque. Bankers in Pakistan deal with three types of cheques. Types of collected Cheques Bearer Cheques Bearer cheques are cashable at the counter of the bank. These can also be collected through clearing. Order cheque These types of cheques are also cashable on the counter but its holder must satisfy the banker that he is the proper man to collect the payment of the cheque and he has to show his identification. It can also be collected through clearing. Crossed Cheque These cheques are not payable in cash at the counters of a banker. It can only be credited to the payee’s account. If there are two persons having accounts at the same bank, one of the account holder issues a cross-cheque in favor of the other account holder. Then the cheque will be credited to the account of the person to whom the cheque was issued and debited from the account of the person who has actually issued the cheque. The Requisites of Cheques There is no prescribed form of words or design of cheques but in order to fulfill the requirements the cheques must have the following:  It must be in writing  It must contain an order to pay and addressed a specified bank.  The order must be unconditional  The order must direct to pay on demand  The sum ordered to be paid must be certain  The payment should be ordered to be paid to a certain or to his order or the bearer Payment of Cash Cheques at Counter Acceptance of Cheques Whenever a cheque is presented at counter for payment, the officer examines the cheque before issuing a 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. 44
  53. 53. Internship Report National Bank of Pakistan  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.  Cheque should not be damaged  Funds must be sufficiently available  No legal bar prohibiting payment Affirmation of Signatures The accountant/authorized officer examine the cheque for the above mention things. When cheque is found acceptable in all aspect, the signature of the drawer compared with his signature on the Specimen Signature Card. When it is found similar to specimen signature, he affixes SIGNATURE VERIFIED stamp, near the drawer signature in the cheque and sign it. Computer Terminal Process The cheque is received in computer terminal , where the computer operator cheques the balance of the account holder . the operator also sees whether the stop payment instructions are received from the account holder or not. After considering these two points he checks the balance in the account through a software of Bank Back Office (BBO). If the account has the sufficient balance, the cheque is posted. The cheque is then handed over to the cashier after the allotment of the token number to the cheque. The token is given to the presenter.The cheque is cancelled after posting & is returned to cashier . Payment of Cash The cashier calls the presenter and takes his token and compares the token number with the number written at backside of the cheque. He takes out the cash to be handed over to the presenter and writes its denomination at the back of cheque. Thereafter, he gets signature of the presenter at the back of the cheque and hands over cash to him and affixes Cash Paid stamp on cheque. Stopping the Payment of Cash on Presentation of Cheques The payment of cheques is stopped dishonored on the following grounds:  Effects not yet cleared then request to present again  Irregularity endorsed  Drawer’s signature differ  Payee’s endorsement requires bank’s guarantee  Alteration requires full signatures  Cheques is not post dated  Cheques is without date  Amount in figures and words differs 45
  54. 54. Internship Report National Bank of Pakistan  Crossed cheques must be presented through the bank  Payment stopped by the drawer Payment of Cheques in Transfer The customer of the branch deposits the cheque drawn on the same branch, for the payment to the credited into his account, attached with pay in slip. The officer accepts it after looking into the following: The person depositing the instrument for collection is the customer of branch.  The correct pay in slip (current/saving) is attached with the cheque.  The depositor signature is presented on the slip.  The account number of depositor is written on both the sides of the slip.  The word and figure of the amount tally with each other.  The cheque is neither post dated nor stale.  The drawer signature is present on the cheque.  The drawer signs the alteration on the cheque.  The cheque in name of the company, firm etc is not going into the account of any person.  The cheque with Payee Account Only crossing is not being deposited into the account of any other person other than the person mention on the cheque. Processing of Transfer Cheques The cross cheques are then transferred to the Clearing Department. All the cross cheques are processed through Clearing Houses. The local cheques are cleared through local clearing and outstation cheques are cleared through intercity or short credit clearing. CASH LINK NBP ATM SERVICES FOR CONVENIENCE  Cash withdrawal according to your cycle limit.  Transfer of funds between PLS saving account and current account of the same customer through the same ATM card  Account balance inquiry.  Instant mini statements of accounts listing the last 15 transactions in account. Request for a new cheque book ,which might be collected by the customer from the branch. How much cash can be withdrawn There is a 24 hours cycle cash withdrawal limit imposed on all ATM cards. Withdrawal limit depends upon the type of customer. Personal identification number (PIN) A pin mailer issued to the ATM card holder carries the pin number in a sealed envelope. Card holder is required to keep the PIN number in a safe place as all the operation are carried out 46
  55. 55. Internship Report National Bank of Pakistan on the ATM are carried out through the same. Clearing Section Clearing "The transfer of funds from one branch of bank to the other branch of the same bank or the other bank on which the instrument is drawn , without involving cash through “State bank’s clearing house " We can say that cheques which cannot be cashed at the cash counter of the bank or cross cheques go through the clearing process. Clearing Department The major function of Clearing Department is to receive the cheques, which are drawn on some other bank. The customer can get the money in his account at NBP, from the cheques drawn on another bank. The bank accepts these cheques and collects the amount from that bank on which cheque is drawn through the Clearing House. Bank charges some commission for this function. Clearing House A clearing house is an association of commercial banks set in State Bank of Pakistan for the purpose of interchange and settlement of credit claims National Institutional Facilitation Technology (NIFT) Pvt. Limited is performing the function of clearing and charges commission against it. Before the NIFT, the State Bank of Pakistan (SBP) with efficient controlling staff performed the process of clearing. If SBP had no office at a place, then NBP, as a representative of SBP acted as a clearinghouse. NIFT is a joint venture between a six major banks and private sector. The clearing operations were commenced by the establishment of first centre at Karachi and now it has been extended to all major cities of Pakistan. At such places where the area is not covered by NIFT the clearing and settlement services are provided by National Bank of Pakistan. TYPES OF THE CROSS CHEQUES Some specific types of cheques are being entertained in the clearing department of NBP are: i. Local Cheques By local cheques we mean collection of cheques from the banks which are located within the city. It means the presenting bank and the bank on which the cheques is drawn are situated in the same city. ii. Outstation Cheques By outstation cheques we mean collection of cheques from the bank, which are situated outside the city. It means the presenting bank and the bank on which the cheques is drawn are not situated in the same city. 47
  56. 56. Internship Report National Bank of Pakistan iii. In House Cheques In house cheques are drawn on one branch of NBP and presented to another branch of NBP such cheques are marked with the transfer stamp. TYPES OF CLEARING i. Local Clearing ii. Short Credit Service iii. Local Short Credit iv. Inter City i. Local Clearing All cheques and other Negotiable Instruments payable locally is presented through the local clearing system. NIFT provides the local and intercity services. Cheques deposited at branch counters presented for clearing on the same day. Bank give credit to the customer's account on the day when clearing settlement takes place. No charges levied for local collection of cheques or instruments which are collected through local clearing. Time Frame for Collection of Local Cheques/ Instruments The customer's account credited in respect of local cheques on the next day from the date of acceptance of the cheque. ii. Short Credit Services (SC) For small cities where there are no NIFT services then branch bank clears the cheque either through mail/ TCS or bank can own provide service and charge commission for providing services. Bank give credit to the customer's account on the day when clearing settlement takes place. Time Frame for Collection of SC Cheques/ Instruments The customers account are credited in respect of outstation cheques on 4th 0r 5th day from the date of acceptance of the cheques. iii. Local Short Credit (LSC) This arrangement has been set up if the customer wants amount in his account on urgent basis. Bank then provide service to its customer for those in house cheques when presented and draw on NBP. Both can be of different branches of the bank but must be located within the city. No Bank charges are recovered from customers for these services. Time Frame for Collection of LSC Cheques/ Instruments The customer's account credited in respect of local cheques on the same day from the date of acceptance of the cheque. 48
  57. 57. Internship Report National Bank of Pakistan iv. Inter City NIFT pvt. limited is responsible for the clearance of the outstation cheques. Cheques drawn on bank's own branches at outstation centers or outstation other banks both are collected using the inter city arrangements maintain by NIFT network. Its offices are present in all the large cities of Pakistan. NIFT network is present in: ∗ Islamabad ∗ Karachi ∗ Quetta ∗ Sukhar ∗ Hyderabad ∗ Peshawar ∗ Gujranwala ∗ Sialkot ∗ Daera ismael khan ∗ Bhawalpur ∗ Muzafarabad ∗ Faisalabad ∗ Rawalpindi ∗ Multan Time Frame for Collection of Inter City Cheques/ Instruments The customer's account credited in respect of local cheques on the 2nd day from the date of acceptance of the cheque. CLEARING PROCESS The process of clearing is carried in two categories. i. Inward clearing ii. Outward clearing i. Inward Clearing Cheque received of other parties after clearing are lodged in the system by vouching date, signature, documents numbers is noted. The cheque without sufficient balance, changing in amount, signature and verifying other formalities returned to the customer by attaching return 49
  58. 58. Internship Report National Bank of Pakistan memo explaining the cause of cheque return. Return cheques also enter into the return register by writing dates, causes of return, and amount. After posting summary of cheques is prepared and cheques return to third parties through NIFT. ii. Outward Clearing These are the cross cheques deposited by the customers for credit the same amount to its account. Before posting following is being performed.  Crossing cheque stamp if not place it.  Title of account and account number from deposit slip is checked.  The deposits slip is handed over to the customers by branch stamping.  Entry is done in daily register.  Add list is being prepared.  Special crossing clearing stamp of next day is affixed.  The payee’s amount will credit stamp is affixed on back of the cheque.  In case of outside city clearing Inter-Branch Clearing Stamp is affixed.  Place all the cheque in a bag with special closing and sent to NIFT. Excess of outward clearing over inward clearing produces a net increase in clearing account balance. Excess of inward clearing over outward clearing produces a net decrease in clearing account balance. The first case is reffered to as favorable clearing & the second case is unfavorable clearing. CHARGES ON SC & INTERCITY CLEARANCE IN NBP On clearance of instruments through SC and inter City three types of charges are deducted from the depositor's account i. Commission ii. Federal excise iii. Postage i. Commission rates are NBP to NBP -------------------------- 0.15% NBP to Other Banks----------------- 0.20% ii. Postage rates are ------------------------------------------ 75 Rs. iii. Federal excise rates are ------------------------------------------- 16% of Commission On clearing of cheques the minimum amount of commission is 50 Rs. and if it is less than minimum amount then Rs. 50 and in case if it is greater then greater amount is considered. PROCEDURE FOR CLEARING THE CHEQUES 50

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