Maim National Bank Report

National Bank of Pakistan

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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

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Vision
To be the pre-eminent financial institution in Pakistan and achieve market recognition both in the quality and delivery of service as well as the range of product offering

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PREFACE
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Now is a age where a person is not only restricted to only a few fields but as time is passing and globalization is increasing, new and more useful fields are being introduced, in which the students not only gain theoretical knowledge but the students are also recommended to gain practical knowledge, in order to be fully prepared and confident when they enter the real practical world. As being a student of “Banking & Finance” I also had to pass through all these steps and gain practical knowledge. During this program I had been provided with an opportunity to learn that how the theoretical knowledge can be implemented in practical grounds. I was selected for my internship in National Bank of Pakistan, Main Branch, Shahrah a Quaid-e-Azam, Mall Road, Lahore. I worked there for eight weeks and came to know about many technical methods and workings, the knowing of which was not possible by simply relying on the theoretical knowledge. During my eight weeks internship experience, which was one of its own kind, because I worked in an environment, where there is a very heavy load of work on the employees, because of National Bank being the bank after State Bank of Pakistan. And I also worked in this hectic routine along with the NBP employees, which certainly would have proven that I can use my skills and talent to the level best in such a hectic routine as well. I had a chance to work in all the departments of the bank and the following pages represent my working and observations and the knowledge that I have gained during my experience in my eight weeks stay in National Bank.

MAIMOONA RAHIL

ACKNOWLEGEMENT
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Whenever a person actually enters the practical world he/she obviously does not have any experience and is not familiar with the way the things go. So in this situation there are many people who discourage you but side by side some people are very generous who help you out and make you feel comfortable. Same is the case with me that after completing my “Masters in Banking & Finance” I also had to step out in the practical life and along with the theoretical knowledge gained during my program I had to physically implement it in the practical field and have a better understanding of it. Now my report will remain incomplete if I do not mention the efforts of those people who helped me during this whole experience. So, firstly I would like to thanks DR.Tashfeen Azhar, Dean of University of Management & Technology, who gave me the opportunity to study in such a prestigious organization which is among the best universities of the panel of HEC. I would like to thank Mr.Qazi Muhammad Irfan, In charge of internship program, in the university to guide the students in the practical part of their life. I would like to thank all my teachers without the guidance and support of, I would have not been able to complete this program at all. During my internship in National Bank Main Branch, I came across to meet some very helpful people who have helped me throughout my internship program. Firstly, I would like to thank Mr. Usman Rauf, who guided my way to National Bank. Then I would like to thank Mr.Sarfraz Hashmi, OG 1, Accounts Department of National Bank, on whose recommendation I was allowed to join National bank as an internee. Then I would like to thank Vice President Administration Mr. Tariq Majeed, who with special attention prepared this program. The program was organized in such a way that sufficient time was given to each department according to its importance. I am thankful to the staff of NBP Main Branch Lahore and especially to Mrs. Shahnaz Awan Assistant Vice President (AVP), Bills Section, General Banking Department, NBP whose continuous support and guidance made my experience at NBP a worthwhile experience. Finally my report would not be complete without the mention of my dear friend Nashmia Nawaz, my fellow internee, whose friendly nature made me completely enjoy my experience at NBP.

EXECUTIVE SUMMARY
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This report is a quick review of my internship at National Bank of Pakistan, Main Branch Shahrah e Quaid-e-Azam, Mall Road, Lahore. This report includes the brief details about the bank. The major purpose of this report is to provide details of all the departments, my experience, observations & all the working activities, which I observed during my eight-week internship. I have also explained in detail the functions performed by me as an internee of all the departments which include enquiry, bills, deposits, accounts, imports, exports, credit and administration. Enquiry department gave me the chance to know about the account opening process and requirements. In Bills department I have explained the different kinds of services provided by NBP In deposits I have emphasized more on how the money was coming in and going out of the bank. Accounts department shows all the working of the bank during the whole period. This department prepares the balance sheet, income statement, salary slip of the employees and disburses the salary to the employees. The foreign exchange department provides the details about the trade of the country; it covers imports, exports and foreign currencies. Import gives the details about LC opening, lodgment and retirement and other ways of making an import. The foreign currency department shows the currency coming in and going out of the country. Credit department includes all the information that is regarded whenever a loan or facility is extended to its clients and customers and all the technicalities involved it the process. A detail of how all the risks involved in extending a loan are minimized and controlled. The credit department also provides loans to its clients and customers through its scheme; this includes NBP Saibaan Housing Scheme. Another scheme is the NBP advance salary through which it gives loans to all government employees at very convenient conditions. While giving the detail of every department I have also obtained some samples of the documents from different departments of NBP, involved in the whole procedures just

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to make a complete understanding of the documents as well and I hope that I have succeeded in this attempt. At the very end I have given the SWOT analysis of NBP. By analyzing the overall performance I can say that the bank has improved its working since its incorporation but there still has to be much more improvements to compete with other private banks. Finally, some suggestions have been given which I felt during my internship program the bank needs to incorporate in order to make rapid progress and increase its business and performance.

TABLE OF CONTENTS

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Page# CHAPTER: 1 INTRODUCTION TO NATIONAL BANK OF PAKISTAN National 14 Golden 15 Objectives 16 Corporate 16 Salient 17 Board 20 Branch 21 Organizational 23 Main 25 Division 25 of NBP offices chart of NBP network of directors features of NBP Philosophy and milestones History of NBP Bank of Pakistan

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Credit 25 NBP 27 Code 29 Awards 30 Business 31 CHAPTER: 2 of

rating

of

NBP

Professional

outlook

corporate

Governance

won

by

NBP

operation

analysis

MY PART OF INTERNSHIP Introduction 35 Organizational 35 Department 36 description structure

GENERAL BANKING DEPARTMENT Enquiry section Account 39 ATM 43 Bills section card facility opening

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Demand 45 Pay 47 Telegraphic 48 Mail 53 Deposits section Types 54 How 55 Verification 55 Reason 57 Clearing 58 Accounts section Jobs 59 Payment 60 Pension 61 Salary and Benevolent of Medical in account for returning of to cash of

draft

order

transfer

transfer

cheques

cheques

cheques

cheques

desk

section

expenses

funds

slips

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61 Payroll 65 Weekly/monthly 69 CREDIT DEPARTMENT Credit processing SME 74 Running 78 Advance 82 Credit administration Inland 85 Inland 90 Inland 90 Bank 90 Documentation 92 NBP 94 Saibaan housing scheme guarantees bills discounting bills negotiation LC salary finance financing schedules summary

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FOREIGN EXCHANGE DEPARTMENT Bills of exchange section LC 98 LC 101 LC 107 Exports section E-form 108 Process 110 Purchases 112 Packing 115 Remittance section Remittances 116 Money 125 SWIFT 125 ADMINISTRATION DEPARTMENT Reconciliation 127 transfer finance of exports retirement lodgment opening

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Staff 129 Compliance 131 Administrative/welfare 132 CHAPTER: 3 ANALYSIS: SWOT 134 CHAPTER: 4 CONCLUSION: Suggestions 138 Concluding 139 CHAPTER: 5 HELPING MATERIAL: References Bibliography

loan

analysis

remarks

141 142

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INTRODUCTION TO NATIONAL BANK OF PAKISTAN

INTRODUCTION OF NBP
National Bank of Pakistan maintains its position as Pakistan's premier bank determined to set higher standards of achievements. It is the major business partner for the Government of Pakistan with special emphasis on fostering Pakistan's economic growth through aggressive and balanced lending policies, technologically oriented products and services offered through its large network of branches locally, internationally and representative offices. NBP continues to be the principal bank for handling the government treasury business. Bank has total of 1531 branches in the country and 18 branches world over with four representative offices. To position the bank for capitalizing on the requirements of the relatively lower banked sectors, a dedicated Commercial and Retail banking group was created. Within a short span of time a number of retail products have been launched and the customer response to these schemes has been very encouraging. New retail products will be offered to cater the large diversified customer base of over 9 million, the largest in the country. The success of retail banking is critical to maintaining interest revenue and enhanced fee income. University of South Asia 16

Corporate banking as a dedicated business is being very well received by the corporate sector. The bank was mandated as a lead manager in significant capital market transactions. Through a combination of a large direct equity portfolio as well as a 25% holding in NIT, Pakistan’s largest mutual fund, NBP has one of the largest equity portfolios in the country. Given the strong stock market performance in 2002 attractive trading gains were realized. This area will continue to be one of bank’s key income contributors as the capital market gains depth. To meet the challenges of position of NBP as a market leader, training is seen as a critical success factor. Training has been restructured to make it more need based and aligned with the corporate vision of inculcating customer focus and developing core competencies under a program “Gearing up for Excellence”. A strategic training management plan was developed keeping in view the stakeholders’ expectation. We are glad to say that while training is a process of continuous improvement, we have achieved significant results thus far.

GOLDEN HISTORY OF NATIONAL BANK OF PAKISTAN
In 1949 (September) U.K. devalued its currency, India followed suit but Pakistan did not. India said Pakistan 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 3, 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 that is still an unsettled dispute. India also withdraws the Marwari merchants who were employed annually for movement of jute crop by financing it. There 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 National Bank of Pakistan was established on November 9, 1949 under the National Bank of Pakistan Ordinance 1949 in order to cope with the crisis conditions which were developed after trade deadlock with India and devaluation of Indian Rupee in 1949. Initially the Bank was established with the objective to extend credit to the agriculture sector. 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 20, 1949 at six important jute centers in the East Pakistan and directed its resources in financing of jute crop. The Bank’s Karachi and Lahore offices were subsequently opened in December 1949. The nature of responsibilities of the Bank is different and unique from other banks/financial institutions. The Bank acted as an agent to the State Bank of Pakistan for handling Provincial/Federal Government Receipts and Payments on their behalf. University of South Asia 17

Mr.Ghulam Farooq was chairman Jute Board and Mr. Mumtaz Hassan was chairman NBP. Until June, 1950, NBP remained exclusively in jute operations, thereafter-other commodities were also taken-up. After that Mr. Zahid Hussain, Governor SBP assumed additional charge also as chairman NBP's Board of Directors, and Mr.M.A.Muhajir became its first M.D. In 1952 NBP replaced Imperial Bank of India. This arrangement was negotiated by Mr. Mumtaz Hassan as Acting Governor of SBP. In 1962, when Mr. Mumtaz Hassan became MD (He had already served NBP for 10 years as its Chairman of government Director), the number of branches had increased from 6 to 239 and deposits from Rs.5 crore (50 million) to 106 crore (one billion & 60 million), profit from 3 million to 21 million (2.1. crore) and the staff increased from 380 to 7091, as compared to 1949-50. In Dec. 1966 its 600th branch was opened raising the deposits to 2.31 bn. and staff to 14, 963. Up to 1965, the shareholders had received 225% of their original investment. Now it has more than 21,549 employees 1,537 branches and Rs.208, 283 million deposits. The Bank has also played an important role in financing the country’s growing trade, which has expended through the years as diversification took place. Today the Bank finances import/export business to the tune of Rs.62.17billion, whereas in 1960 financing under this head was only Rs.1.54billion. The field is being de-layered to improve customer services and enable faster decision making. As a result of this de-layering zones have been eliminated and the numbers of regions have been increased. Organizational hierarchy at the regional level has been restructured and operational and business activities have been completely separated. This separation will improve communication, decision making and promote teamwork. For the third consecutive year, the Bank is recognized was the best Bank in Pakistan for the year 2004 by the prestigious periodical. “The Banker” UK (a subsidiary of Financial Times Group) “We’re expanding horizons, reaching out, being there and bringing something for everyone. After all, we are The Nation’s Bank”.

OBJECTIVES
Strong emphasis has been laid upon training of branch officers to better equip them for marketing of retail banking products. Initiatives on similar lines are being launched for the SME sector. In future NBP is going to introduce modern banking services to keep pace with the competition and more important our customer needs. These are as follows: 1. Debit cards 2. Internet banking 3. Call centers

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4.

Mobile banking

MILESTONES
 “Best Emerging Market Bank from Pakistan” for the year 2005 ‘Global Finance’ USA, May 2005  NBP is one of the “Top 100 Banks of Asia” ‘Euro money’ UK, March 2005  Bank of the year 2001, 2003&2004 for Pakistan ‘The Banker’ financial times Group UK.  Best Foreign Exchange Bank in Pakistan ‘global Finance’ USA, March 2004 Amongst Top 1000 Banks in the world and Number 1 in Pakistan ‘the Banker’ Financial Times Group UK, July 2005

CORPORATE PHILOSOPHY AT NATIONAL BANK
 We at NBP believe that our customers are our most important and 1st responsibility, we must, therefore, serve our present customers and promise to serve our potential customers to the best possible on-counter and behind-counter services. We should try to provide a total and integrate package of services to create satisfied clientele. Our braches, regional offices and head office should regard the customer as their most priority, serving them with maximum possible helpfulness and courtesy.  Our second most important responsibility is the employees who work for our great institution. They must have their security, stability and fair treatment in their jobs in recruitments and assignment, in training and development, in promotion and placement. Till separation. They should be treated with dignity and should be made to rise to their highest potential working condition should be attended. Supervisor should be tough minded but fair in the pursuit of bank objectives.  Our third most important responsibility is our executives and officers. They should have talent, education, experience and ability with a premium, place on commitment, knowledge, leadership and orientation towards action, implementation, improvement and achievement of goals.  Our fourth responsibility is to the communities that r served by our great institution. Our 1st community is the Pakistani nation whose service is the reason for our existence.  Our 5th responsibly is to our owners and stockholders. We must make a sound profit and protect our business by creating financial services.

SALIENT FEATURES OF NBP
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National Bank of Pakistan has the following distinguishing features:  It acts as the agent of the State Bank of Pakistan (SBP). At places where SBP has no Branch, it receives money and makes payments on its behalf.  It provides credit for State Trading. It deals in internal and external bills of exchange and discounts them.  It keeps the deposits of the people and provides lockers and agency services.  It invests in government securities and bonds.  It provides short terms loans to industry, import and export trade, agriculture and construction.  It provides credit lines for project financing like LMM and IDA etc.  The Bank to facilitate the people to have their own houses has recently launched a big project under the head of SAIBAN.  NDSL a subsidiary of NBP has been established for catering the needs of capital and money market. National Bank of Pakistan performs some general Functions on behalf of the Government of Pakistan:  Disbursement of salaries to the government servants, private organizations and autonomous bodies.  Payment of pensions to hundreds of thousands of pensioners across the country.  Payment of benevolent funds to the public.  Payment of Zakat funds on behalf of government to the needy and deserving person.  Catering of collection and payment of donations for the welfare and charity purposes.  Selling and purchasing of Prize bonds.  Selling of charity tickets on behalf of charity institutions.  Collection of all types of utilities bills.  Collections of Traffic challan fees and tokens.  Collections of government treasury challans both Federal and Provincial.  Loaning to the talented students of the nation (Qarz-e-Hasna).  Collection of fees for passport and National Identity Cards.  Loaning for the purchase, construction and renovation of houses for the government employees and businessmen on easy installment and interest rate basis under the name of “SAIBAN”.  National Bank of Pakistan performs the functions of State Bank of Pakistan in those areas where SBP has no Office. Functions of NBP as a representative of State Bank of Pakistan:

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                       



Collection of cheques and bill of exchange for its customers. Paying insurance premium, rent or other obligations of the customers. Collecting interests due, dividend, pensions and other sums due to customers. Transferring of money from place to place. Acting executors, trustees for the customers. Providing safe custody and jewelry, documents or securities. Issuing of travelers cheques and letter of credit to give credit facilities for travel. Purchasing shares for the customers. Accepting bills of exchange on behalf of customers. Undertaking foreign exchange business. Furnishing trade information and tendering advice to customers. Formulating operation policy guidelines for the banks. Laying down performance criteria for banks and taking steps for ensuring their observance. Evaluating the performance of the banks in the context of operational guidelines issued to the banks. Determining the areas of coordination of the banks. Formulating schemes under section of the act. Making recommendations to the federal government for the appointment of the president and members of the executive board. Analyzing and appraising financial statement including balance sheets and profit and loss accounts of banks and appointment of auditors of the bank. Conducting such surveys, inquiries and appraisals as may be necessary for the purpose of this act. Exercising and performing such powers and functions of the federal government under the act and such other functions as the federal government may assign to it. Establishing a research department or conduct banking research and in particular study overseas banking operation and problems of the agricultural financing. Establishing a central training institution for improving bank services. Coordinating the planning of the operations of nationalized commercial banks, and exercising general overall checks on the cost of their operations. Appointing lead banks and to apportion share of advance among the banks in respect of consortium loans financed by the nationalized commercial banks only, in accordance with resource availability of each bank. Watching the progress of the implementation of the rulings made in State Bank Annual Inspection Reports and the remedial and corrective measures taken by the banks with a view of removing imbalances.

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Management (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.

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BRANCH NETWORK
NBP has a wide number of domestic and foreign branches, and also SWIFT branches and online branches.

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DOMESTIC BRANCHES:
NBP has an extensive domestic branch network of about 1458 branches located all over Pakistan, in different cities.

ONLINE BRANCHES:
1. 20 in Karachi south region 2. 11 in Karachi west region 3. 15 in Islamabad region 4. 11 in Rawalpindi region 5. 4 in Sialkot region 6. 5 in Gujranwala region 7. 6 in Hyderabad region 8. 1 in Larkana region 9. 1 in Abbotabad region 10. 1 in DG khan region 11. 2 in Bahawalpur region 12. 1 in Jhang region 13. 1 in Mardan region 14. 1 in Sahiwal region 15. 1 in Sukkar region 16. 1 in Sargodha region 17. 1 in Jhelum region 18. 6 in Quetta region 19. 25 in Lahore region 20. 6 in Multan region 21. 4 in Muzzafarabad region 22. 8 in Faisalabad region 23. 5 in Peshawar region 24. 5 in Mirpur khas (A.) region

SWIFT BRANCHES:
SWIFT is the Society for Worldwide Interbank Financial Telecommunication, a member-owned cooperative through which the financial world conducts its business operations with speed, certainty and confidence. Over 8,300 banking organizations, securities institutions and corporate customers in more than 208 countries trust us every day to exchange millions of standardized financial messages. Its role is two-fold. It provides the proprietary communications platform, products and services that allow its customers to connect and exchange financial information securely and reliably. It also acts as the catalyst that brings the financial community together to work collaboratively to shape market practice, define standards and consider solutions to issues of mutual interest.

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SWIFT enables its customers to automate and standardize financial transactions, thereby lowering costs, reducing operational risk and eliminating inefficiencies from their operations. By using SWIFT customers can also create new business opportunities and revenue streams. SWIFT has its headquarters in Belgium and has offices in the world's major financial centers and developing markets. SWIFT is solely a carrier of messages. It does not hold funds nor does it manage accounts on behalf of customers, nor does it store financial information on an on-going basis. As a data carrier, SWIFT transports messages between two financial institutions. This activity involves the secure exchange of proprietary data while ensuring its confidentiality and integrity. NBP has a number of swift branches located in Pakistan as well as in 10 foreign countries

FOREIGN COUNTRIES OF NBP BRANCHES
The Bank has 28 branches in foreign countries. These countries are as follows: 1. United States of America 2. United Kingdom 3. France 4. Germany 5. Africa, Middle East Region 6. Bahrain 7. Asia Pacific Region 8. Japan 9. Republic of Korea 10. Central Asian States 11. Bangladesh 12. Peoples Republic of China

CAPITAL:
The authorized capital of the Bank is Rs.2500 million divided into 100 million ordinary shares of Rs.10 each. After nationalization, all the shares held by persons other than the Federal Government or Corporations i.e., owned and controlled by the Federal Government were considered as transferred and vested in the Government.

ORGANIZATIONAL CHART OF NBP
DESIGNATIONS FO HIGHER LEVEL OFFICERS

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PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENT (GRADE 22) EXECUTIVE VICE PRESIDENT (GRADE 21)

VICE PRESIDENT (GRADE 20)

ASSISTANT VICE PRESIDENT (GRADE 19) ` GRADE I OFFICER (GRADE 18)

GRADE II OFFICER (GRADE 17)

GRADE III OFFICER (GRADE 16)

MAIN OFFICES - NATIONAL BANK OF PAKISTAN DOMESTIC CHAIN:
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   

29 Regional Offices 1531 Branches 130 Online Branches 4 Subsidiaries

The bank has its main office at Karachi and controls its branches through 29 regional offices which are as under: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Regional Office, Karachi (South) Regional Office, Karachi (West) Regional Office, Hyderabad Regional Office, Larkana Regional Office, Quetta Regional Office, Gawadar Regional Office, Sukkur Regional Office, Lahore Central Regional Office, Lahore East Regional Office, Gujranwala Regional Office, Sialkot Regional Office, Faisalabad Regional Office, Jhang Regional Office, Sargodha Regional Office, Multan Regional Office, Bahawalpur Regional Office, DG Khan Regional Office, Sahiwal Regional Office, Federal Capital Regional Office, Rawalpindi Regional Office, Jhelum Regional Office, Gujrat Regional Office, Gilgit Regional Office, Peshawar Regional Office, Mardan Regional Office, Dera Ismail Khan Regional Office, Abbottabad Regional Office, Muzaffarabad (A.K.) Regional Office, Mirpur (A.K.)

OVERSEAS CHAIN:
 18 Overseas Branches  4 Representative Offices University of South Asia 27

 1 Subsidiary  1 Joint Venture NBP is the only Pakistani bank to have representative offices in Canada, China, Uzbekistan and Azerbijan. The other main offices and branches are located at following places:

France Paris Egypt Cairo Bahrain Manama Germany Frankfurt Turkmenistan Afghanistan Kabul & Jalalabad Bangladesh Dhaka & Chittagong Republic of Korea Seoul Japan Tokyo & Osaka Hong Kong Hong Kong & Kowloon United States of Wall Street New York, Washington America D.C., Chicago Pakistan Karachi (off-these banking branch) Uzbekistan Tashkent Canada Ontario Britain London

DIVISIONS OF NBP
In order to perform all the functions the National Bank of Pakistan has made some divisions, which perform some specific functions. Following are the divisions: 1-Credit Division The main function of this division is to make the credit policies, and also to do credit ceiling which means the maximum amount of credit that can be given to a certain client. This division also looks for the agricultural and small loans. It also considers the cases of right off i.e. bad debts. 2-Corporate Credit Division It is a division to handle the big loans and industrial financing, I.B.R.D. It also does the evaluation of credit ceiling policy devised by the credit division. 3-International Division This division has to look after the administration of National Bank of Pakistan outside Pakistan. It takes care of all the affairs about the advances given outside, the

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management of the branches of the bank outside Pakistan, the posting of employees outside Pakistan etc. 4-Recovery and Litigation Division This division comes into operation when recovery of advances given becomes difficult or impossible. It is the job of this division to decide whether to file a case in the court against the client or not. 5-Audit and Inspection Division The major function of this division is to carry out the inspection of rules and policies. It also inspects the books of accounts, whether they are kept rightly or not. 6-Administration Division This division consists of two wings the personnel wing and establishment wing. The personnel wing concerns with employee welfare and administration. It looks after things like rules relating to the administration of employees, the medical bills etc. There is also a disciplinary cell, which is for punishments if an employee does something wrong. The establishment wing has a main function of controlling the debt stock i-e furniture, transport facility, stationary, sports portfolio, security arrangements, and staff welfare. 7-Finance and Investment Division It looks after the accounts, investment in resources and decides where to allocate the surplus funds. 8-Customer Service Division The main job of this division is to manage the opening and closing of branches, Islamization policy, then there is a complaint cell where the customers make the complaints if they are not treated well. This division also accepts Hajj application. This division is very important as it directly concern the customers who are the ones to make the deposits, which the bank invests. 9-Marketing Division It concerns the marketing and selling of the policies and interest rates of National Bank of Pakistan through advertisements on television or in the papers etc.

CREDIT RATING OF NBP
JCR- VIS Credit Rating Company Limited re-affirmed the bank’s entity rating AAA/ A-1+. The medium to long term standalone rating of the bank has been upgraded University of South Asia 29

from AA- to AA with a stable outlook. Rating has been upgraded in view of the bank’s improving risk profile, with a reduced level of asset impairment and diversification of risk assets.

NBP AMONG 8 GLOBAL BANKS
KARACHI, National bank of Pakistan‘s profitability has earned it a place among the top eight banks of the world. Global finance intelligence magazine .The banker published by the financial times group, London has compiled a merit list of 1000 banks on the basis of the best profit on capital, capital to assets and profit on assets ratios. On the best profit on capital scale, National Bank of Pakistan has been rated as the highest in Asia and 8th in the world .The survey also showed that that the banks from the Islamic world are becoming more efficient in performance. This year, five banks from the Muslim countries including Pakistan, Turkey, Indonesia and Libya are placed in the best ten banks of the world in terms of return on capital

NBP’s PROFESSIONAL OUT LOOK
1-Risk Management Progress was made in improving the overall risk architecture. A comprehensive risk management manual was put in place in line with Central Bank guidelines. The bank has initiated a well defined risk rating system. The bank is well aware of the challenges posed by risk management guidelines and Basel II accord and is continuously improving the posture to cope up with the challenges. Risk Management Frame Work To comply with SBP’s directives NBP has taken a lead in many areas of risk management that include:  Establishment of separate Risk Management Group with well defined organizational structure.  Developed Risk Policy Manual for independent risk review.  Set-up an Industrial Research & Analysis Wing.  Initiated a well defined risk rating system.  Acquired Risk Management software.  Developed a comprehensive Country Risk Policy.  Introduced standard of qualifications, experience and skill sets for all levels of staff involved in the credit process. Recognizing the challenges posed by SBP Risk Management guide lines and Basel II, NBP is continuously improving its posture to cope up with forth coming challenges. Projects in pipe line to be completed during the year include:

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 Redefining business discretionary powers,  Setting control limit for risk concentration.  Assigning capital based on risk return trade off. 2-Human Resource Development The bank firmly believes that a highly motivated and well trained workforce is the key factor to success. Heavy emphasis is being placed on institutionalizing a merit culture through performance based rewards and career development. The bank remains committed to improve the quality and banking skills of its human resource, to ensure its position as the market leader. The regular hiring of 70-80 MBA’s annually since 2002 will further improve the quality of the workforce. 3-Informational Technology NBP is cognizant of the importance of information technology and is constantly investing to expand and upgrade its technological platform. The IT strategy is fully aligned to business requirements to offer IT enabled products and services for the highest level of customer satisfaction. The bank is to install 70 new top of the line ATMs, set up a national call centre, introduce on-line banking facilities and automate government business. NBP is also on track for acquisition of a new core banking application to improve operational efficiency and enhance customer service. 4-Improvement in Physical Infrastructure NBP branches are being upgraded with standardized premises and signage under the new brand. To cater to the needs for Islamic banking, the opening of the first Islamic banking branch is in the final stages. This initiative is expected to attract new customers besides increasing revenue. The presence of NBP in major financial centers of the world allows us to play a key role in promoting the country’s trade. NBP further expanded its international presence in the year by opening branches in Jalalabad and Chittagong to increase the international presence to 17 countries. In recognition of NBP’s excellent performance, the bank was awarded the prestigious "Bank of the year” in Pakistan by "The Banker" London in 2004. "Euro money" magazine, a leading journal in its latest issue of March 2005 listed NBP amongst the top 100 banks in Asia, being the only Pakistani bank.

CODE OF CORPORATE GOVERNANCE

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The board is fully aware of its responsibilities established by the Code of Corporate Governance issued by the Securities & Exchange Commission of Pakistan (SECP). The Directors are pleased to give the following declarations/statements to comply with the requirements of the Code. (a) The financial statements (Balance Sheet, Profit & Loss Account, Cash Flow Statement, Statement of Changes in Equity and notes forming part thereof), prepared by the management of the bank give the information required by the Companies Ordinance, 1984 in the manner so required and respectively give a true and fair view of the state of the bank’s affairs as at December 31, 2004 and of the result of its operations, changes in equity and its cash flows for the year then ended. (b) Proper books of accounts have been maintained. (c) Appropriate accounting policies have been consistently applied in the preparation of the financial statements and accounting estimates are based on the reasonable and prudent judgment. (d) Approved Accounting Standards have been followed in preparation of the financial statements and there is no departure from the said standards. (e) The system of internal control is sound in design and has been effectively implemented and monitored throughout the year. The Board is responsible for establishing and maintaining the system of internal control in the bank and for its ongoing monitoring. However, such a system is designed to manage rather than eliminate the risk of failure to achieve objectives, and provide reasonable but not absolute assurance against material misstatements or loss. (f) There are no significant doubts about the bank’s ability to continue as a going concern. (g) There has been no material departure from the best practices of the corporate governance as detailed in the listing regulations. (h) Key operating and financial data is available in the annual report. The process used by the Board to review the efficiency and effectiveness of the system of internal control includes, the following: a. The Board has formed an audit committee comprising of three non-executive directors. The audit committee has written terms of reference in the form of a charter, which has been approved by the Board of Directors. The committee is responsible for the oversight of the internal audit function and reviews its approach and methodology from time to time. It also receives and reviews the internal and external audit reports to the internal control, accounts and related matters. The committee on a continuous basis reviews the material control

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weaknesses and areas of concern and actions to be taken by the executive management to address these issues. b. Internal audit department of the bank conducts the audit of all branches, regions and groups at Head office level on ongoing basis to evaluate the efficiency and effectiveness of internal control system and proper follow up of irregularities and control weaknesses is carried out. c. The Board receives confirmations / representations from all group and regional heads on annual basis confirming effectiveness of the internal control system established and maintained by them within their function. The principal features of the bank’s control framework  The bank has clearly defined organizational structure, which supports clear lines of communications and reporting relationships.  There exists a properly defined financial and administrative power of various committees and key management personnel, which supports delegations of authority and accountability.

AWARDS WON BY NBP
        Asia’s Number One Bank World’s Number 8th Bank (In Terms of Return on Capital “The Banker”, London) Bank of the Year 2001 Bank Of the Year 2002 Bank Of the Year 2003 Bank Of the Year 2004 The Banker”, London’s Award. Among the Top Ten Banks in Emerging Markets. “Global Finance”, USA

BUSINESS OPERATIONS ANALYSIS
This analysis includes 1) Marketing Mix of NBP 2) Competitive Strategy of NBP 3) Business Process Analysis 1) MARKETING MIX OF NBP A) NBP Products and Services Various types of products and services are being offered by NBP. Products NBP Saiban NBP Advance Salary NBP Cash n Gold NBP Kisan Dost University of South Asia 33

   

         

Services Demand Drafts Pay Order Mail Transfers Traveler's Cheque Foreign Remittances Letter of Credit Swift System ATM Agricultural Finance SME and Corporate Finance

(The product and services mentioned above will be discussed in detail later.)

B) -Price In banking sector price is meant to be the interest rate bank is charging from the customer. The interest rates charged by National Bank are the cheapest as compared to any other bank working in Pakistan. They are using the Market Penetration Strategy in terms of pricing. C) Place It’s been a known fact country wide that National bank is the Nation’s Bank. It has the most enormous network of branches all over the country, which exceeds over 1400, and they also give an image to the customer of delivering goods at the doorstep. In this case they are using Market Push Strategy. D) –Promotion They are working right from the beginning of banking sector in Pakistan. So, they don’t need promotion strategies like the other banks working in Pakistan but without letting people know about your product will cease survival. So, they have been continuously promoting the bank through mediums of electronic, print and Internet. Moreover, it is a bank of masses (Nation’s Bank) where everyone can open his/her account as they have a motto of facilitating each and everyone. Hence NBP has opened its branches in places where no other bank exists for example a district like Pind Dadan Khan has a branch of National Bank and a single branch of any bank existing in the last village of Pak-China border is of National Bank.

2) - Competitive strategy of NBP University of South Asia 34

The Banking Industry in Pakistan is growing each day and with an increase in the number of the Commercial Banks, the bar of competition amongst the banking sector is rising every day. Last year the better half of the foreign direct investment was in the banking sector. To maintain and retain the market share in the banking sector, it must deliver the goods on deadlines to obtain customer satisfaction and loyalty. National bank has always proved itself in difficult times, by providing the cheapest interest rates on loans given to the corporate world, employees of the government institutions in terms of Advance Salaries and to the farmers; it is the Nation’s Bank. NBP is mainly using the Market Penetration Strategy to attract more customers. 3) - Business Process Analysis The only problem the Bank is having is the hierarchy at the top level; the S.E.V.P (Senior Executive Vice President Mr. Tariq Taj) in taking all the major decisions regarding marketing plan, financial advices and human resource policies of NBP which creates a bit of a bottle neck situation especially in the absence of S.E.V.P. However, NBP have appointed a lot of V.P’s (Vice President) and A.V.P’s (Assistant Vice President) to manage its daily operations. The diagram below shows a typical situation arising out of the bottleneck situation:

BOTTLE NECK DIAGRAM:

Marketing All main decision are made by top management (S.E.V.P) which slows over all efficiency

Finance

Human resource

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MY PART OF INTERNSHIP

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Internship at NBP Main Branch 47-shahrae-Quaid-e-azam, Mall Road, Lahore

I joined NBP Main Branch, Lahore on 2nd of June 2008, as an internee. Mr.Jamal, OG 1, in the Administration department, briefed me about the functioning of the Branch, its departments and its staff. And he told me that I would have to work in all the departments according to the schedule which was given to me by him. I had to work according to the given schedule and was advised to report to the respective sectional heads, after completing the required formalities of my training in the respective departments. NBP Mall Road Branch is a huge branch, with a huge amount of work on daily basis, which is on one side a very hectic routine for the NBP employees but on the other hand it is good for all the internees in such a way that they get to learn a lot and have a full understanding of all the aspects of general banking. The same is the case with me that during my eight weeks of internship I got a chance to work in all the departments and by actually physically being involved in all the activities and this has helped me seek maximum knowledge about the banking practices and also about the management skills. Before giving a description about the different departments of NBP and the details of it I would like to show a small diagrammatic representation of the organizational structure at NBP Main Branch, Lahore, which Sir.Bilal Bukhari, of Bills section, General banking department was kind enough to give it to me.

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ORGANIZATIONAL STRUCTURE AT NBP MAIN BRANCH, LAHORE
Chief Manager

Chief Operation manager (CRA) Manager Credit Processing

Manager Credit Operation

Manager FEX*

Manager GB*

Manager Admin

Manager Compliance

[Sections] FEX Export Import Remittance F/C A/C Inquiry Deposits Bills Clearing Utilities Accounts Cash/Chest Govt. Collection

[Sections] Reconciliation Dispatch Dead Stock Security Staff Welfare

[Sections] Audit /Inspection To sign all Br. Returns Money laundering .etc

*FEX Foreign Exchange *GB General Banking

DEPARTMENT DESCRIPTION
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National Bank Mall Road Branch is a huge branch and it provides numerous services to its customers under one roof. Namely there are five departments: 1) 2) 3) 4) 5) General Banking Department Credit Department Foreign Exchange Department Administration Department Compliance Department

The above mentioned departments and their field of operations are now discussed in detail

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GENERAL BANKING DEPARTMENT

GENERAL BANKING DEPARTMENT
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The general banking department is one of the busiest departments of NBP Main branch. It is that department which comes in direct contact with the customers and deals with hundreds of customers in one day. And as NBP is working as a representative of SBP and is responsible for Disbursement of salaries to the government servants, private organizations and autonomous bodies therefore there are many many customers on the first 4 to 5 days of the new month. So the employees in this department have to be very efficient, quick and fully attentive because it is peoples money with what they are dealing with. According to the “Office Order” given to me by the Administration department, I had to spend 20 days in the General Banking Department. This is a very interesting department because here I came to meet people of different types and had to deal with them accordingly. Appointments at General Banking Department Sr # 1 2 3 4 Name of Section Enquiry Bills Deposits Accounts From 02-06-2008 03-06-2008 10-06-2008 17-06-2008 To 02-06-2008 09-06-2008 16-06-2008 22-06-2008

The General Banking Department is divided into 4 major sections: 1. 2. 3. 4. Enquiry Bills Deposits Account Section

Enquiry Section
I started my internship on the 2nd of June 2008, from the enquiry section of the general banking department of NBP. My appointment in this section was for one day only and Miss Shaheen (AVP) is the in-charge of this section. The main jobs performed in the Enquiry section of the NBP are: 1. 2. 3. 4. Account opening forms & procedure Hajj Applications Traveler cheque ATM Card opening

ACCOUNT OPENING:
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At the entrance of the NBP, Main Branch, there is an Enquiry Department, where the accounts are opened of the customers, here I learnt about the account opening procedure with the Bank. The different types of accounts opened in this branch are as follows:         Current Account Basic banking account (BBA) Profit & loss Sharing Account (PLS) Term Deposit Receipts (TDR) Foreign currency account (FCA) National Income Daily Account (NIDA) Premium aamdani Call Deposit

PROCEDURE TO OPEN AN ACCOUNT
Here I learnt the procedure of opening & closing the account. Both accounts current account & profit and loss account have the same opening procedure. Here I’ll briefly explain the procedure.


First I gave the account opening form to a new customer who is willing to open an account in this bank.(form sample attached)

 After this, I briefly explain the requirements of the account opening form and inform the customer about the necessary documents to be attached with the form. Besides these necessary attachments such as identity card photocopy, photographs of the account holder, the Bank also requires the proper introduction of the new account holder by the existing account holder, for the purpose of eliminating any chance of risk involved in opening an account of new customer. And obtaining the following information: o o o o His/her full name and address. Detail of account either single or joint CNIC photocopy Introducer’s full name, address, his/her account number, signatures, CNIC photocopy.



 After this, I marked an account number in the account opening register; I took the signatures of the new account holder on specimen signature card (SC) and then entered his/her name against the account number.

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 After receiving the letter of thanks from the customers, I then issued the cheque book to them. I stamped each cheque book leaf with the NBP branch stamp (space provided on the cheque) and another stamp with the account number (space provided on the cheque) of the account holder. The cheque book is issued to the account holder after keeping the record in the cheque book register. The customer is then required to deposit a minimum of Rs.5000/- in his/her new account.

PROCEDURE OF CLOSING ACCOUNT
The customer can also close his/her account. The customer is required to submit an application for closing the account. Then the account is closed out and his/her balance is paid to him/her. The Cheque book is returned back to the Bank and the officer cancels the remaining cheques in the Cheque book.

NATURE OF ACCOUNTS:
1) 2) 3) 4) 5) 6) 7) 8) Individual Sole proprietorship Limited Company (Public/Private) Partnership (registered/ unregistered Company) Govt. institution (Federal/Provincial) Corporate body (incorporated/unincorporated) Trust Club, Society & Association

INFORMATIONS REQUIRED
Name Father’s name Address Telephone no. CNIC number National tax number(if available) Currency of account Initial deposit Nature of Business Residential status Details of other accounts maintained with NBP or any other bank. Special instruction regarding the account Signature of the applicant In case of joint account, name of joint account holder and all his/her credentials.  Name of introducer and all his/her credentials.               

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DOCUMENTS TO BE ENCLOSED:
The account opening procedure is of two weeks and after two weeks the cheque book is handed over to the customer. Documents required to be enclosed are different for different categories. 1) Individual       Copy of CNIC/NICOP Copy of driving license in case if CNIC is without a photograph Applicants photograph Copy of service card Photograph in case of illiterate person Zakat declaration declaration/certificate

2) Partnership     CNIC of all partners Partnership deed (certified copy) Attested copy of registration certificate Undertaking from all partners involved for responsibility of conduct of account individually and jointly.

3) Private/Public Limited Companies         Certified copies of Certificate of incorporation Certificate of commencement of business Memorandum of Association Articles of Association List of directors board of directors resolution CNIC of all directors Power of attorney

4) Club, Societies and associates  Certified copies of certificate of Registration  Resolution of Governing body for account opening  Undertaking signed by all authorized persons when any change takes place in the persons authorized to operate on the account, the banker would be informed 5) Trust Accounts  Attested copy of Certificate of Registration

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 CNIC of all trustees  Certified copy of instrument of trust SAMPLE OF ACCOUNT OPENING FORM

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ATM CARD FACILITY:
NBP also provides its customers with the facility of ATM card with which customers can obtain cash from any 1-link ATM or Mnet ATM.

PROCEDURE:
The procedure is a simple procedure; all the customer has to do is to fill in the NBP cash card form. In the cash card form the customer has to fill in the following details:       Name Customer type e.g. individual, sole proprietorship or any other Title of account Telephone number CNIC number Account number

Apart from all this basic information, there also is an option whether the customer would like to request for the facility of the following E-mail of account statement activation of mobile banking facility activity of utility bills payment facility These facilities are available only for customers with Current accounts or Savings accounts. Once the form is filled in by the applicant/customer and submitted to the account opening counter, then the customer is said to collect its ATM card after the next 7 to 10 days.

1. 2. 3.

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SAMPLE OF NBP CASH CARD FORM

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BILLS SECTION
On the 3rd of June 2008, my appointment was in the Bills Section under the leadership of Miss Shanaz (AVP). In this section, I worked here in this section for 6 days. This started from the 3rd of June 2008 to the 9th of June 2008.

Services provided in the bills section:
1. 2. 3. 4. 5. 6. Demand Draft Issued (D.D) Demand Draft Purchase(D.D.P) Pay Order(P.O) Telegraphic Transfer(T.T) Mail Transfer(M.T) Local short credit (LSC)

In this department internees learn the working of transfer of money from one place to another place of the country by the above modes of transferring money. During my stay in this department I learnt that how these modes of transferring money are issued. 1. DEMAND DRAFT: The first day in bills section I was said to work with Sir.Agha Sabih ul hassan, AVP, who was responsible for issuing Demand Drafts and all issues regarding the demand draft. Sir told us that a demand draft can be issued for any amount and there are no limits of demand draft. As soon a demand draft is issued an invoice is prepared at the same time. Sir told me to check the following main things that must always be checked as soon a draft is prepared: a) b) c) d) e) Signature of the 2 bank officers of the issuing branch. All amounts should be same in figure& words Clearing & Crossing stamp on front Drawn on the same branch Endorsement on the back with signatures.

ISSUANCE OF DEMAND DRAFT (DD) First of all a copy of the CNIC has to be deposited then a form is filled.  The amount both in words and figures is written and  The applicant has to sign on two places, which are helpful in case DD is to be cancelled.

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The applicant then has to deposit the cash at the counter. The officer in charge at the counter will affix the stamp of cash received at the DD issued form. After the cash has been received the DD will be issued to him. Each DD has its own register along with the name of the party in whose favor the DD was issued. After issuance the DD is handed over to the applicant and its Advice containing the particulars of the draft is sent to the drawer branch of the NBP with its necessary information and the payment of the DD is made on its presentation. CANCELLATION OF DEMAND DRAFT For cancellation of DD the customer has to submit an application to the Bank that the DD is no longer required and the signatures of the applicant are required to cancel the DD. An entry will be passed by debiting the NBP Main Branch and crediting the party account. The bank will then issue a debit device to the NBP Main Branch. Entries of DD Particulars NBP General A/c Nominated Branch A/c (Draft able) Draft able Party A/c Entry Debit Entry Credit Debit Credit

CLEARING OF DRAFT The DD is cleared through three different ways: Clearing Transfer Cash City to city through SBP Branch Acc Through Officer Endorsement

In the following page is a picture of the demand draft, as a sample cannot be obtained from the bank because it is merely the property of the bank and by lending such negotiable instrument to someone out of the bank is purely against the rules of the bank.

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DEMAND DRAFT:

2. PAY ORDER It is a local document. It is made for inter city. The procedure of pay order is similar as to others. The person who wants to transfer his money inter city, is required to make a pay order. If he is the account holder of bank then he is required to make a pay order. If he is the account holder of bank then he is required to pay Rs.50/- as the pay order charges. If the person is not the account holder of that bank then he has to pay Rs.100/- as the charges of pay order. ISSUING PROCESS OF PAY ORDER A credit voucher is filled by the customer on which he/she mention the amount, customer name and in favor of (the name of the concerned party to whom the voucher will be send) then a commission voucher and a FED is also charged to the customer which he pays on the cash counter then he comes to the pay order counter and all the details are punched on the debit voucher which is crossed in favors of the payee account.

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For the non-account holder, an ID card copy is required and the Bank charges FED of Rs.5/- and commission of Rs.100/- is charged on the pay order.

CLEARING OF PAY ORDER The following things are checked      Branch Name Clearing Stamp Payee Account Revenue Stamp Tickets

DIFFERENCE BETWEEN DD AND PAY ORDER DD is issued out of city while pay order is issued within the city limits.

3. Telegraphic Transfer (TT) The next instrument which is also used as a mode of transfer of money is telephonic or telegraphic transfer. On the 6th of June 2008, I was told to work with Mr. And learn the procedure of how telegraphic transfer was done. PROCEDURE: When a customer request the bank to transfer his money from this bank to any other bank of the branch of same bank in the city, outside the city or outside the country the first thing he has to do is to fill an application form. In this form, he mentions the name and Account Number of the beneficiary. If the customer is the account holder of this bank, the bank will debit his account. A set of forms is asked to be filled by the customer, which are as follows: a. b. c. d. e. f. F-118 F-86 for P&T charges (postal & telegraphic charges) F-86 for FED (federal excise duty) A credit voucher F-87 A debit voucher

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SAMPLE OF FORMS

F-118:
 Put the stamp of the originating bank in the space provided  Date is written  After where the words “wanted a telegraph” is written, the name of the bank to where the money is to be transferred is written  In the space provided “in favor of” we enter the name of the receiving person along with the account number is written  Amount is filled

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 Exchange is added which is different for different amounts  Amount and exchange are added and written in the total the signatures and the telephone number of the customer is also obtained.  Then the customer is said to submit a copy of his CNIC

F-86:
 Another form which is filled is the F-86 form and an amount of Rs.75/- is charged for postal charges  And another F-86 is filled for an amount of Rs.3/- which is the federal excise duty.

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CREDIT VOUCHER:
A credit voucher of Rs.100/- is filled which is the charges of the telephone bills

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Now the customer is asked to take these forms along with the money to the cash counter and give the money and the forms to the officer at the cash counter. The money that has to be transferred would be deposited in the NBP general account. When the money is deposited a telegraphic transfer confirmation form is filled i.e. F-125 in which an advice is made and then sent to the AVP of Telegraphic Transfer department, who then marks codes which only he knows or the manager of the other branch knows and then a T.T number is designated. Once the T.T code has been assigned then another credit voucher is filled F-15 and this shows the amount that has been credited from the General Account of NBP and sent to the respective bank to where the money had to be transferred. Then through courier or fax or by a telephone call the other receiving bank and instructed him that all formalities have been completed in this bank and to check the related documents and verify the code.

F-87 and debit voucher:
Once the code has been verified then another form F-87 is filled along with a debit voucher in which is filled the amount transferred and is kept as a record within the bank.

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4. MAIL TRANSFER (MT) The procedure is same as that of TT, but the advice is sent through mail rather than wired. MT is from NBP to NBP inter city or out of city. The name of the person/party, account number, and branch .these three things must be mentioned clearly and there should be no discrepancy in this otherwise the MT would be rejected.

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One thing must be remembered that a D.D or Pay order is given to the customer but a mail order is never given to the customer. It is transferred to the respective branch by the bank itself.

Charges:
Commission is charged on pay order and exchange is charged on demand draft. The charges are usually Rs.50/- up to the amount of Rs.50,000/-, if the customer is an account holder. If the customer is a non account holder then the charges are of Rs.100/- and if the customer is a student then the charges are Rs.25/-.

DEPOSITS SECTION
I worked in this Section for a week i.e., from the 10th of June 2008 to the 16th of June 2008. When a customer comes into the branch to present a cheque, the first step ios to take a token from the token counter and then stand in the line in front of the window where the cheques are collected. This is the window where I also spent 2 days and collected cheques by the customers and did the following procedures. Here I learnt the following things on:  Types of cheques.  How to cash the cheques  How to deposit the cheques/cash

TYPES OF CHEQUES
The basic thing that we must know is that how many types of cheques are usually presented in the bank, so Mr.Pervaiz who was at the counter briefed me about the kinds of cheques. There are the following types of checks 1. 2. 3. 4. PTCL account cheques PLS account cheques Current account cheques Foreign currency account cheques

HOW TO RECOGNIZE THE CHEQUES
When a customer gives a cheque we first of all see what kind of cheque it is.

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If it is a PTCL account cheque or a foreign currency account cheque then it is mentioned on the cheque. The main difference is between the Current account cheques and the PLS account cheques. The simplest way to distinguish between these two is to look at the account number. If the account number starts with 80-85 or by 11, 13 then it is a PLS account cheque. And if the account number starts from the number 70, 22, 23 then it is Current account cheque.

HOW TO CASH THE CHEQUES
When a cheque is received from the customer wanting to withdraw amount from his/her account. He/she also gives a token issued by the token machine near the entrance of NBP. The token number is written on the back of the cheque. After doing this the following things must be noted.  The double signature of the customer behind the cheques.  Check the date. If date on the cheque is 6 month late, then cheque can be accepted. But a post-dated cheque cannot be accepted for payment.  Amount in figures and word is accurate. Overwriting on the cheque is not acceptable. After checking these particulars, the cheque is stamped with the date stamp and the officer signs it with its initials and the token number is also entered on the stamp. DATE STAMP:

The second stamp is the Pay cash stamp and is signed by the Manager. PAY CASH STAMP:

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The third stamp is the signature verified stamp, which is signed only after the verification of the signs and check holder and then passed to the manager to pay the cash. SIGNATURE VERIFIED STAMP:

Entry of all the cheques of the day is made in a register, B-7. If the cheque is of amount more than Rs.25,000/- then a withholding tax is deducted. The tax is Rs.1/thousand on the amount exceeding Rs.25,000/-. If the cheque is more than the amount of Rs.100,000/- then two officers will verify and pass this cheque.

VERIFICATION OF THE CHEQUES
The process of the verification of the cheques is carefully making notice of the following points: 1. The account number should be of the main branch 2. Date should be correct 3. Amount in words and figures should be the same 4. Verify the signatures on the cheque if they are same as on the signature sample card obtained at the time of account opening. After checking all these features the banker then signs on the signature verified stamp

Reasons for Returning the Cheques
Cheque will be returned in the following situations  There is less balance in customer’s account  Difference in amount in words and figures,  Signatures differ

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 Cheque is post dated  Cheque is out of date  Payment stopped by the drawer These are the basic reasons why a cheque can be returned but there can be many other reasons as well.

Method for returning the Clearing Cheques
 First of all a debit voucher will be filled in which the amount of clearing cheques will be written.  A memo will be attached to Cheque in which the reason of returning the Cheque is mentioned. The stamp of transfer and branch is stamped on it.  The bank will keep the debit voucher while memo with the Cheque will be returned to clearing agent.  The data is also written in a ledge in which all amount and reason of return is written. MEMO OF RETURN OF CHEQUE:

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CLEARING DESK
Here I worked for two days. Here I worked with Mr.Shabbir Ahmed. The basic function of the clearing desk is to provide services to customers in collection of their cheques of other banks, in the city or outside the city. The customer can get the money in his/her account at NBP from the cheques drawn on another bank. The bank receives and delivers cheques to the clearing house i.e. NIFT (National Institutional Facilitation Technology). Clearing can be of 1. 2. 3. 4. Normal clearing Inter-branch clearing Inter-city clearing Same day clearing

DIAGRAMMATIC REPRESENTATION OF CLEARING:

1. Normal clearing:

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Account holders of NBP give cheques and these are then sent to NIFT for balancing. All branches of NBP are involved in this process. 2. Inter-branch clearing: Total amount of payment is done by NBP Main Branch and then all other branches send their payments to Main Branch Lahore which then issues a debit voucher to the branches. 3. Same day clearing: The cheques which come between 9 AM to 10 AM and is of at least Rs.500,000, tyhen some extra charges of about Rs.200/- is charged and clearing is on the same day. This is usually of valuable or corporate clients. 4. Inter-city clearing: Usually a list from the NIFT comes. It is a two pages list. The first contains all the details of the branches where the cheques have to be delivered and on the second page a detail of all the banks from where the cheques have been issued from is given.

ACCOUNTS SECTION
As per the Office Order, I was appointed to the Account’s Section of the General Banking Department. Mr.Sarfraz Hashmi (OG 1), Head of this section, who was very generous and helpful to me throughout my stay in the accounts department, gave a brief introduction and I learned about the operations at the different counters of the Account’s Section. The main function of the accounts department of NBP is to maintain general ledger accounts and after the business hours the function of the accounts officer is to close the books. A detail of all the functions performed in the accounts section, which were briefed to me by Mr.Sarfraz Hashmi are as follows:

Jobs to be performed in the Accounts Section of the NBP Main Branch, Lahore:
1) Payment of salaries and allowances to all both permanent and temporary/contractual/foundation employees. 2) Payment of all expenditures of the branch by debiting to the branch Charges Account. 3) Payment of pension to ex-employees of the branch. 4) Payments of expenses incurred by the staff e.g. medical bills etc

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5) Preparation of clean cash book of the branch (record of all the transactions of the branch and then balancing it at the end of the day). 6) Preparation of Profit and Loss Account, Assets and Liabilities Statement, monthly Compliance Budget. 7) Consolidation of figures from all chest/sub-chest branches, and after consolidation of the figures whether withdrawals/deposits of government transactions, is to be reported to SBP, as well as, the Head Office in Karachi. 8) Preparation of NBP General account statement.

Accounting Procedure at NBP
 Various departments use debit and credit voucher for recording the transactions.  Accounting department receives the departmental journal from the departments to gather with all the vouchers.  Verify correction of total of all into departmental entries in departmental journals.  Sort vouchers into general ledger a/c order debit separately from debit for each account.  From departmental journals add all debits and all credits for each general ledger account and write total for each account in relative account and extend new balances.  Prove debit and credit totals to department journal total. Write total obtained from machines list for each contingent accident in general ledger and up data balances.  Date and sign general ledger and obtain signature of an officer.  Place general ledger includes leaf binder in chronological order. I was told to fill out the debit vouchers and credit vouchers at different counters of the Account’s Section. These debit vouchers indicated the expenses incurred by the Bank, such as medical and connivance facility given to the staff of NBP Main Branch. The credit vouchers indicate any income received in the bank.

PAYMENT OF MEDICAL EXPENSES TO THE STAFF:
In order to get the payment of medical expense the employee has to show doctor receipt and medicine receipt along with the proposal for payment/reimbursement of medical bills and medical bill letter from the bank then an invoice comes to the department that shows the expenses done by the staff during the month it includes the details of amount, date, name of the officer and approval of AVP(Assistant Vice President) or Grade 1 officer’s(Senior Vice President) then a debit voucher is made and attached with the invoice. The debit voucher also has the transfer stamp and signature of the account department head with the debit voucher we also attach the transfer voucher.

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At the end we cross each invoice with payment paid stamp in this way payment is made to every officer and staff gets the medical allowance. Medical expense which is given along with salary is 15% of the basic pay.

PENSION:
Accounts department also deals with the pension settlement of EX-Employees of NBP main branch. For pension the age of the employees should be more than 60 years then all the documents of the employee are sent to the head office then after approval from head office the employee starts to get his/her pension. Pension is 18% of the basic pay Half of the pension is commuted which means 15 years amount of pension is given to the employee at the time of retirement of the employee.

BENEVOLENT FUND:
The maximum amount of benevolent fund is 1620/month for all employees.

SALARY SLIP:
The salary slip also called the payroll slip, contains the following heads:      Name of employee, Designation, Date of joining, Basic pay, Allowances 1. House rent allowance it is 50% of basic pay, 2. Conveyance allowance is up to 300 liters X the current rate of the petrol for V.P, 240 liters for AVP, 140 liters for OG 1, 130 liters for OG 2 and 120 liters for OG 3. 3. Utility allowance 11% of basic pay for executives, 12 % for officers and 14% for clerical and non-clerical staff. 4. Medical allowance 15% of basic pay, 5. Education of children allowance Rs2500/- for all executive and officer level employees. For clerical and non clerical staff it is Rs.900/- for maximum 4 children and if above then Rs.2700/- is paid



Bank contribution i.e. provident fund which is 14.5% of basic pay, and benevolent fund of Rs.1620. Employees contribution e.g. group insurance of Rs.325/University of South Asia 64



 

Deduction e.g. Loans (house Building loan, car loan, computer loan) etc Miscellaneous (Income tax, canteen fund, welfare fund) etc. All this information is maintained of each and every employee of the bank and then accordingly the pay slip is prepared. SAMPLE OF MAINTAINING SALARY INFORMATION OF EMPLOYEES:

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SAMPLES OF DOCUMENTS PREPARED IN THE ACCOUNT’S SECTION 1. Monthly statement of expenses for the month (F-312)

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2. credit voucher

3. Debit voucher

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I was also briefed of the statements prepared at the Account’s Section, which are: 1. 2. 3. 4. Pay roll summary for each month Profit and Loss A/c Assets and Liabilities A/c Weekly/monthly Schedule Statement

PAY ROLL SUMMARY FOR EACH MONTH END
A pay roll summary is prepared at the end of every month. At first it is maintained manually. Mr.Imran OG 2 in accounts section was responsible for preparing and maintaining the summary every month. Given below is a sample of a roughly prepared summary which is then printed out and is thoroughly checked for any mistakes. After the mistakes have been corrected then another summary is printed out which is again checked. So there is now no chance of any mistakes.

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After this then all this summary is posted into the computer system for the maintenance of the record of the bank. Below is given the format of the computerized payroll summary.

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SAMPLE OF PROFIT AND LOSS ACCOUNT STATEMENT

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SAMPLE OF NBP FORMAT OF ASSET & LIABILITIES STATEMENT

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WEEKLY/MONTHLY SCHEDULE STATEMENT:
A monthly statement is also prepared of all the expenses that have been incurred in the month. The procedure to prepare this statement is first of all a monthly abstract is prepared in the accounts department. This abstract has the heads of all the accounts that are being rum in NBP. The abstract is then sent to the desk that prepares the monthly schedule statement. A record of all the advance payments and payable amounts is also maintained in the accounts department. Now the amounts from the abstract are seen and then written down in the standard format of NBP monthly charges statement. Also have to see if the heads are also present in the advance payments list or not. If yes then that amount is subtracted from the abstract amount. If any head is in the payables amounts then that amount is added in the abstract head. Once the format is filled in the total is done which would give the total amount of Monthly charges for that month.

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SAMPLE OF MONTHLY ABSTRACT

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SAMPLE OF ADVANCE PAYMENTS AND PAYABLE AMOUNTS LIST

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NBP FORMAT OF MONTHLY CHARGES STATEMENT

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CREDIT DEPARTMENT

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CREDIT DEPARTMENT
I start my internship in Credit Administration of the NBP from the 23rd of June 2008 and had to work in the credit department up to the 6th of July 2008. Mr.Mansoor Ahmad (AVP) is the in-charge of the Credit Department. My appointments in different sections of the credit department were as follows: Appointments at Credit Department
Sr# Name of Section
1 2 3 Credit Processing Credit Administration Saiban Housing Scheme

From
23-06-2008 29-06-2008 06-07-2008

To
28-06-2008 05-07-2008 06-07-2008

CREDIT PROCESSING
The credit processing section of the credit department is related with the following services: 1. SME Financing 2. Running Finance 3. Advance salary

SME FINANCING:
The SME (small and medium enterprises) financing can be for an individual consumer as well as a commercial party. The procedure for both is the same

PROCEDURE OF SME FINANCING
The customer submits the loan application form (LAF) of SME finance to the bank.

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SAMPLE OF LAF (LOAN APPLICATION FORM)

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Once the LAF is submitted to the bank the bank then gives a sheet with the list of all the required documents to be attached with its application. SAMPLE OF BBFS (BASIC BORROWER FACT SHEET)

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SAMPLE OF NBP LIST OF DOCUMENTS REQUIRED

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After the completion of the documents and by accepting the application of the customer then the customer/client is told that the bank after assessing all the risks involved, would inform the client. A thorough assessment of the documents of the client is made and a value report of the property of the client is prepared. The documents are also checked by a lawyer to see if all legal aspects have been covered or not. A CIB report is also obtained. After the whole process 60% financing is provided by the bank and left 40% is the customer stack and the amount is transferred in the account of the company.

RUNNING FINANCE
Mr.sabahat Ejaz OG 1 was the employee of credit department who was dealing with the running finance facility. Running Finance is the most secure finance. It is for a period of 1 year and is issued against liquid securities, against their market value. A facility can be obtained of a minimum limit of about Rs.200,000/-

LIQUID SECURITIES
1. 2. 3. 4. 5. 6. Defense Saving Certificates Special Saving Certificates Regular Income Certificates Prize Bonds Foreign Currency Deposits Local Currency Deposits

Mark up:
The mark-up rate is 10% for all liquid securities except for prize bonds. For prize bonds the mark-up is 15%

PROCEDURE OF RUNNING FINANCE:
A running finance account is opened by the customer. An application is submitted by the customer with BBFS and 2 references and the following documents 1. I.D Card Copy 2. Original Instrument 3. Authority letter After accepting the documents an office note is issued which contains the details of client Name, address, occupation, income, limit of credit, security, mark up, date of issue, date of expiry and signature of the chief manager of the branch.

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The customer can use the limit for 1 year then after 1 year the customer can either adjust it or renew it.

DOCUMENTS REQUIRED:
1. 2. 3. 4. 5. IB-12 Promissory note IB-6R/6C Agreement of finance IB-26 Letter of pledge IB-28 Letter of lien IB-31 Agreement for sale and buy back of marketable security 6. IB-29 Only if a guarantee is required. This is required when someone gets a loan for some other person’s liquid security. 7. F-198 Security Delivery letter 8. Letter of undertaking A sample of all these documents is given.

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ADVANCE SALARY
In January-2003, National Bank of Pakistan has launched a unique product, ‘NBP-Advance Salary’. Currently this product is for fixed-income permanent employees of Federal & Provincial Government, Semi-Government, Autonomous, Semiautonomous, local bodies and other Government organizations. The product is purely cash flow based and offers its holder to avail 20 (twenty) net salaries in one go to be repaid in up to 60 (sixty) months. With no collateral, insurance or requirements This facility is provided to all government employees, semi government and autonomist bodies can also avail the facility but NBP usually avoids these employees.

Mark up
The mark up rate is 15%

Mode of Repayment
Partial payment is not allowed only through monthly installment or balance in lumpsum and no charges on before adjustment.

FED
5% of the processing fees.

Documents
1. 2. 3. 4. 5. 6. 7. Application form I.D card copy Copy of Office card 2 References of colleagues and there I.D card copy Last 3 months salary slip Annexure C Agreement for Financing on mark-up basis Annexure D Letter of Hypothecation for stocks

(Both Annexure C and Annexure D should have stamps of Rs.100/-)

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8. Three blank/ undated crossed cheques signed by the borrower in favor of NBP Advance Salary 9. Drawing power register.

SAMPLE OF ANNEXURE C AND D AND DPO

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CREDIT ADMINISTRATION
The main jobs performed in credit operations of the NBP are 1. 2. 3. 4. 5. In land LC (Letter of Credit) Inland Bills negotiation Inland Bills discounting Guarantees Documentation

In land LC (Letter of Credit):
NBP is committed to offering its business customers the widest range of options in the area of money transfer. All commercial enterprise’s can avail the facility of NBP’s Letter of Credit Service. NBP’s Letters of Credit has competitive rates, security, and ease of transaction, and is a safe mode of transferring your goods from one place to another within the country. “An inland letter of credit may be defined as an authority issued by the opening bank on behalf of the importer in favor of the exporter with the stipulation that the drafts drawn there under will be duly honored provided that the terms and conditions as mentioned there in are duly compiled with”

Types of L/C’s:
According to the UCP-600 (Uniform customs and principles), which deals with the documentary credits, the following types of documentary letter of credit are of following types: 1. 2. 3. 4. Revocable LC Irrevocable LC Sight LC Usance LC

Revocable LC and Irrevocable LC
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A revocable LC is that LC in which any sorts of amendments can be made in the LC, whereas an Irrevocable LC is that LC in which amendments cannot be made.

Sight LC and Usance LC
A sight LC is that LC which is opened for 7 days whereas a USance LC is that LC which opened for 60,90 or 120 days

In land LC opening:
An L/C is used for import or export with in a country. It is different from foreign L/C opening as in inland L/C there is no Bill of lading involved only truck receipt is involved. The customer comes to bank if he has good relations with the bank and gives an application for opening of an inland LC .After approval of application the importer submits the Performa invoice accepted by the importer or purchase order and invoice which include date, terms of payment and also submit the conditions of In land LC approved with his signatures. After submission of application an offering sheet is established which shows the range of amounts offered to the customer and if the customer’s amount lies with in that limit the case is accepted by the bank. This offering sheet also has the details of 1. 2. 3. 4. Margin Initiating Date Expiry Date Commission

Documents Required:
The Following documents are required at the time of LC opening 1. 2. 3. 4. 5. Covering letter for request of LC by the applicant. Performa Invoice (Sale agreement) Insurance of LC Annexure A with stamps of Rs.100/IB-27 with stamps of Rs.100/-

Discrepancies:
In case of any discrepancy in the documents the bank will charge Rs.50/- for the removal of discrepancy from the documents and Rs.1100/- if the documents are accepted

Entries when LC is opened
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Debit Credit

Constituent Liability for acceptance Acceptance for constituent Liability

(When payment is recorded then the reverse entry is passed)

Charges in LC
1. 2. 3. 4. 5. 6. PNT charges Discrepancy charges Service charges FED Commission Mark up Rs.75/Rs.50/0.1% of LC 10% of commission 0.25% on Bill amount 3 month KIBOR + 3% bank mark-up

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SAMPLE OF IB-27

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SAMPLE OF ANNEXURE “A”

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INLAND BILLS NEGOTIATION
In some cases the exporter is not willing to wait for the proceeds of collection to be remitted. In such cases exporter requests the Bank to negotiate the bills i.e. he sends the documents to Bank. In this case Bank examines the documents and arranges them with the requirements mentioned in the Letter of Credit. When bank satisfied it pays to the exporter. Now Bank has the right to collect the proceeds on his own behalf from the importer’s Bank. It is only on sight LC. No acceptance letter is required bank make payment to day and receives with in 7 days bank. In Inland bills Negotiation the bank gives 95% of the amount to the client and keeps 0.5% of the amount as its charges and also charges 0.5% negotiation commission.

INLAND BILLS DISCOUNTING
It is only on usance LC with the acceptance letter of the other bank the customer comes to bank and ask to discount the document after checking the originality of the documents the bank discount the documents and offer lesser rate for the documents. In case of acceptance of rate from the customer bank make the payment to the customer and receive the documents from the customer. In this case the bank gives the client 90% of the amount and keeps 10% to itself as bank’s discounting charges.

BANK GUARANTEES:
NBP also act as guarantor in some cases

Parties of Bank Guarantee;
1. Guarantor (Bank) 2. Primary Debtor 3. Primary Creditor

Types of Guarantee;
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1. Tender Guarantee 2. Performance Guarantee

1-TENDER GUARANTEE;
This guarantee is given by bank on behalf of primary debtor in case of government or private tender this is on the stamp paper of Rs100 in case the debtor not fulfill the tender the bank has to pay the guaranteed amount in with in 3 days other wise the SBP de list the branch in case no amount in party account then forced demand finance is created by the bank.

Entries; Debit Credit Forced Demand Finance Primary Creditor

2-PERFORMANCE GUARANTEE;
This indicate that the customer will perform the work on time .a stamp paper of Rs100 is used for guarantee advanced payment is also allowed by primary creditor to primary debtor if primary creditor feels that the work is almost complete then he can also make the balance payment in case of no performance of work a Forced Demand Finance is created Entries Debit Credit Forced Demand Finance Primary Creditor

Documents of Guarantee
1. 2. 3. 4. Request Letter Stamp Paper Drafting depending upon demand Counter guard from IB-30(Islamic Banking) signed by primary debtor to authorize the bank in case of failed the bank may debit the customer account and receive money.

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Commission
1.6% per annum per guarantee commission is charged .FDF is adjusted with in 60 days as the days delay the bank charge mark up.

DOCUMENTATION:
It is the process in which bank check all the documents used as security in all the credit sanctioning process. This process is divided into three main areas in which documents of security are involved

1-PLEDGE:
Mr.Naveed OG 3 deals with all the activities related with pledge. Following is the process of disbursement or documentation, after the finance agreement is finalized guarantees are obtained and then a letter of pledge is sent. After the documentation a sanction advice is issued by the bank which contains all the details of the pledge 1. 2. 3. 4. 5. 6. 7. Security of the pledge (pledge of stock, debt and receivables) Purpose of the pledge Margin (60% by bank and 40% by customer) Mark up (3 month KIBOR + 3%) Expiry date Date of disbursement All the conditions of the loan

2-HYPOTHECATION:
Following is the process of disbursement or documentation, after the finance agreement is finalized guarantees are obtained and a promissory note is also obtained. After that a letter of pledge is sent .After the documentation a sanction advice is issued by the bank which contains all the details of the Hypothecation 1. 2. 3. 4. 5. 6. 7. Security of the hypothecation (pledge of stock, debt and receivables) Purpose of the hypothecation Margin (60% by bank and 40% by customer) Mark up (3 month KIBOR + 3%) Expiry date Date of disbursement All the conditions of the loan

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SAMPLE OF LETTER OF PLEDGE

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3-MORTGAGE:
Whenever a request of loan is approved, a letter regarding sanction of the facility is sent to the client, in which all the details of the securities required for mortgage is described and the party/client has to deposit some documents. In mortgage the following documents are required • • • • • • • • • • • IB-25 IB-6 IB-12 Personal guarantee Sale deed NEC Mutation (shows the ownership) Mortgage deed 10% registered & equated Memorandum of deposit of title deed (equitable mortgage) Affidavit (consent of borrower) Lien marked on deed in favor of NBP

NBP SAIBAN HOUSING SCHEME
National Bank of Pakistan (NBP) has announced the launch of a housing scheme to cover all sections of the society with monthly income starting from as low as Rs.5000/per month. Branched as ‘NBP Saibaan’ (Housing for all), the scheme offers a maximum loan of Rs.10 million in accordance with the debt burden criterion. Loans are available for Home Construction, home Purchase and Home Improvement. For Home Improvement Loans the maximum amount is Rs.2.00 Million. NBP Saibaan is set to make your dreams come true! Home Construction and home Purchase loans can be repaid over a period of 20 years, whereas the repayment period for home Improvement loan is 15 years. The scheme was launched at a function in Karachi presided over by Mr. Shaukat Aziz, Pakistan’s Finance Minister. University of South Asia 97

NBP Saibaan is the most affordable House Financing Scheme. You can avail now and repay over a 3 or 20 years period.  Home Purchase loans up to 10 Million  Home Construction loans up to 10 Million  Home Improvement loans up to 2.0 Million (3 to 15 years)

Procedure for Applying;
You can apply for NBP Saibaan if 1. You are a Resident Pakistani national 2. You are aged between 21 and 62 years at the time of application/ disbursement of loan 3. You are a Salaried person, self- employed professional or business person you have a Net Take Home income not less than Rs.5,000 per month (Govt. and related organization employees) and Rs.10,000 per month (for other salaried class) Rs.15,000 per month (for business persons and self employed) 4. Your property is located in NBP approved localities 5. Your duration of service is: Two years for salaried and Three years for Self-employed/ business persons.

Documents Required;
1. 2. 3. 4. Applications Form along with Two attested passport size Photographs. Two attested copies of your National Identity Card. Cheque for the processing charges.

Mark up
The mark up is of 2 types 1. Fixed Rate 2. Variable Rate

Fixed Rate Option
Priced at 10 years PIB rates plus 3.5% with re-pricing after 10 years (subject to a minimum floor)

Variable Rate Option;

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SBP Discount Rate with 12 months re-pricing (subject to a minimum floor)

Processing Fees
For government employees including NBP employees irrespective of the finance amount Rs.500/ For Others  Financing below Rs.1 million: Rs.1000/ Financing between Rs.1 to 4 million: Rs.3000/ Financing above Rs.4 million: Rs.6000/-

Other Charges
Income Estimation, Legal and valuation Fee will be charged as per actual.

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FOREIGN EXCHANGE DEPARTMENT

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FOREIGN EXCHANGE DEPARTMENT
After completing my program at the Credit Department, the next stage of my internship was in the Foreign Exchange Department. According to the “Office Order” I had to spend 19 days in the Foreign Exchange Department.

Appointments at Foreign Exchange Department
Sr#
1 2 3

Name of Section
Bills of Exchange /FIM Bills Import section/Export Remittance/Foreign Currency

From
07-07-2008 13-07-2008 17-07-2008

To
12-07-2008 16-07-2008 23-07-2008

Mr. Talha Hassan (OG2) in the Exports Section told me to attach the necessary documents in the LC files of various clients. I was told to review the documents to be attached when the LC comes into existence.

Bills of Exchange
I start my internship in Foreign Exchange Department of the NBP by learning about LC (Letter of Credit). This section performs the most important job imports & exports which is very important in economy of Pakistan. Mr.Usman Ali (OG1) is the in charge of the Import section Mr Usman deals the internees very well. The main jobs performed in Foreign exchange section of the NBP are 1. 2. 3. 4. 5. 6. LC (Letter of Credit) opening LC Lodgment LC Retirement Import through Contract Import through Advance Payment Finance against Imported Merchandise (FIM)

LC (Letter of Credit) opening

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The customer comes to bank if he has good relations with the bank and give an application for opening of LC .After approval of application the importer submit the Performa invoice accepted by the importer or purchase order and invoice which include date ,terms of payment and also submit the conditions of LC approved with his signatures. After submission of application an offering sheet is established which shows the range of amount offered to the customer and if the customer amount lies with in that limit the case is accepted by the bank. This offering sheet also has the details of 1. 2. 3. 4. Margin Initiating Date Expiry Date Commission

IB-8 (Application for Irrevocable LC)
It is a form for LC .it contains names of branch SWIFT. it is agreed by the importer company in SWIFT it is typed which means LC is typed .it contains the details of country of origin ,amount, date of expiry, date of initiation, name of the insurance company .

FORM-I (Import Form)
It is used for import purpose that is why it is called as import form it has 1. Description of goods 2. ITC # 3. Quantity of goods 4. Quality mentioned 5. Port of shipment 6. Date of shipment 7. Beneficiary name & address 8. Vassals name 9. CNIC of importer 10. Importer name 11. LC Issuing branch 12. Country of origin with code 13. Amount in figures & words Form-I is signed by the customer it has 4 copies, 1st for SBP, 3rd one for issuing branch, 2nd & 4th for importer.

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SAMPLE OF FORM I

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LC LODGMENT:
In main branch process of lodgment is performed by Mr.javaid akhtar(OG1)Lodgment is the process in which bank check weather the documents of LC are according to conditions or requirement or have some discrepancies or are in good form.

Discrepancies
“Any defect in the documents is called discrepancy” In case of any discrepancy in the documents the bank will charge 50$ for the removal of discrepancy from the documents and 1100Rs if the documents are accepted

Shipping Documents
Documents includes             E-Form Bill of exchange Bill of lading (3 copies) Insurance documents Commercial invoices (8 copies) Packing list Chamber of Commerce certificate Shipments company certificate Insurance cover note Beneficiary certificate GSP/A Covering letter (foreign bank to importer bank)

After checking all the documents LC voucher is formed it contains date, Lc#, form#, account#, instrument# and instrument date.

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SAMPLE OF BILL OF LADING

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SAMPLE OF PACKING LIST

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SAMPLE OF INSURANCE CERTIFICATE OF SHIPPED GOODS

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SAMPLE OF SHIPMENTS ADVICE

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SAMPLE OF BENEFICIARIES CERTIFICATE

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LC Retirement
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After lodgment the final stage comes which is retirement of LC .it include final payment of LC along with bank commission, charges etc

Charges in LC
PNT charges Discrepancy charges Service charges FED 400Rs 50$ 0.1% of LC 5% of commission

If the payment is 15 day delayed by the importer then commission is charged it is only in case of sight LC.

Finance against Imported Merchandise (FIM):
It is a special type of loan facility because it is offered to the customers who’s merchandise are on the port and he has no money to get that merchandise then bank pay on behalf of the customer. Bank charge some mark up in this loan facility.

Entries; Debit Credit bill of exchange Nastro account

EXPORTS SECTION
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Jobs Performed at exports Section 1. 2. 3. 4. E- Form/Export Form Process of Export Export Finance Scheme E.F Packing Finance

E- Form/Export Form:
The export section of NBP main branch Lahore is playing very important role in the export of the country Mr. Arshad Toor is the uncharged of this section the export section start with the E-Form. It is the most important form in the export section because every exporter required an export form to make its export legal. It has 4 copies original goes to the importer, 4th goes to the exporter and duplicate and triplicate goes to the bank. It is a security document

E-Form Contains
               ID# Place of Issue Date of issue Income tax # Commodity Quantity Amount Payment mode Name of importer Shipment mode Port of shipment Exporter name Exporter address Export registration # Certification of authorized dealer (bank)

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SAMPLE OF E-FORM

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Parties of Export;
1. Exporter 2. Importer 3. Authorized dealer

2-Process of Export:
The customer comes in the export section and submits the export form after its completion they have to submit it with in 21 days of date of certification if in case not submitted then bank send a reminder. The customer sends the original to the SBP the duplicate goes to the bank record so that goods are shipped. The shipment has to make with in 14 days of E-Form certification. Then the bank officer note it into the register and he note the particular things which includes        Date of certification E-Form# Currency involved Terms of shipment Term of payment Country of import Date of shipment

REQUIREMENTS TO BE FULFILLED:
     Customer should have a current account with NBP Specimen Signatures of all board of directors should be obtained CNIC photocopies should be obtained NTN Certificate Authority letter of the authorized person should be obtained

3-Export collection:
It is the scheme in which documents are sent to the foreign bank, bank gets payment by the importer and sends the payment to the exporters bank which then in turn pays the exporter. Collection of: 1. LC documents 2. Non-LC documents (via a contract between the Buyer and seller)

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a. CAD (cash against Documents) b. DA (documents against acceptance)

Documents involved:
          Form M Invoice of exporter DHL bill copy Schedule prepared by the bank Bill of exchange Bill of lading Packing list Certificate by Lahore chamber of commerce Beneficiaries certificate Form E

NAUSTRO ACCOUNT: It is credited in Head office in case of Inward Remittance VAUSTRO ACCOUNT: NBP credits the other account in Outward Remittance

PROCESS:
Whenever an LC or in case of Non LC, the documents are received from a foreign bank then an E-form is required. The bank informs the exporter that his/her LC has been received so the exporter is required to come and collect it from the bank. When the exporter comes he collects the original documents and requests for the E-form, which is prepared and takes it to the custom, along with the goods prepared. From the custom the goods are sent to the importer. After shipment the custom prepares a Goods description or simply just stamps the E- form. Then the exporter comes to the bank with the documents and shows that the goods have been shipped. Next step is that negotiation is done with those clients that have any sort of securities pledged with the bank. After negotiation and when the customer has shown all the documents that is bill of exchange, packing list, Bill of lading then NBP sends a message through SWIFT, documents collected and sent to the foreign bank and payment is received. Realization is done, mark-up and commission is calculated. Mark-up= KIBOR + No of days X interest rate. University of South Asia 115

PURCHASES:
Purchases is a facility provided by NBP in which a loan is given against a sanctioned limit. Limit can be from cash finance, Running Finance, Packing finance etc.

DOCUMENTS
         Request of export bill purchased Form M Form R Invoice Packing list Bill of lading Dollar draft Form E Beneficiaries certificate

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SAMPLE OF FORM M

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SAMPLE OF FORM R

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PACKING FINANCE:
It has 2 main parts [part1, part2].it is given only to the customers who are already exporters. The main purpose of packing finance is to promote exports. Only previous performance is required for this finance it is given only by the request of the customer.

1-Process of Part 1
It has less mark up as compared to the commercial loans. The customer who enjoys the part1 has to show his previous performance then after calculating the average of his previous performance the finance is given to the customer. This finance has the mark up of 7.5% which is lower one because the direct involvement of SBP. It is provided by the SBP to the bank @6.5% and bank add1% as commission and gives it to customer. If SBP is not involved then the rate is 11% if SBP is involved then bank demands EE statement and send it to the SBP after approval from SBP EE statement is send back to the NBP. Now NBP demands property to pledge and after calculating the value if the property the documents are send to the credit body which sanction the credit limit to the customer after sanction of credit limit the customer come for finance and bring the following documents      Contract letter Request Promissory note Revenue stamps Stamp & signature of company directors

Under taking by the customer (it makes the bank authorized to take any action against customer if payment is not made) Now after the presentation of documents debit, credit voucher is filled and loan is issued to the customer. This loan is for 180 days.

Penalty on part1
If     Shipment is late then 0.37 paisa /thousand / day fine Quantity less then 0.37 paisa /thousand / day fine No shipment then 0.37 paisa /thousand / day fine Wrong state then 0.60 paisa /thousand / day fine

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2-Process of Part2
It is given by analyzing the EE statement of the customer it is 50% of the EE statement .if EE is of 200M then it is of 100M it is for 1 year then after 1 year EF statement is shown by the customer to the bank if loan is of 100M then EF should be of 200M.if it not of 200M then fine is charged.

Requirements for Export;
          Income tax # ID card copies Bank account Chamber of commerce registration Request for export (E-form) Authority letter for person Authority letter confirm the person that will deal with the bank. Form D (refinance claim form) Demand promissory note Undertaking

REMITTANCE /FOREIGN CURRENCY
In Remittance /Foreign Currency department Mr Ibrahim (OG1) is acting as an in charge .He explain the some basic things of the Remittance /Foreign Currency department and then ask me to visit the different seats of the department. Jobs performed at Remittance /Foreign Currency 1. 2. 3. 4. Foreign Remittance Foreign currency Deposits Money Transfer SWIFT

1-Remittance Department:
Remittance is the monitory transfer from one place to another place or from one country to another country to fulfill the requirements of the customers by the order of the customer. NBP is facilitating its customers who are either sending remittances from abroad or their near ones send money in foreign currency by opening foreign currency accounts in US$, Pound Sterling etc.

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To facilitate its customers in the area of Remittances, National Bank of Pakistan has taken a number of measures to:  Increase home remittances through the banking system  Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries

New Features
The existing system of home remittances has been revised/significantly improved and well-trained field functionaries are posted to provide efficient and reliable home remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides Pakistan International Bank (UK) Ltd., and Bank Al-Jazira, Saudi Arabia. 1. NBP is providing home remittance services without any charges. 2. Strict monitoring of the system is done to ensure the highest possible security. 3. Special courier services are hired for expeditious delivery of home remittances to the beneficiaries. Remittance Department at NBP Main Branch Lahore can be divided into two sections due to its activities. 1) - Local Remittance 2) - Foreign Remittance

1)-Local Remittance
Local remittance section deals with remittance (incoming and outgoing but only locally i.e., with Pakistani rupee and within Pakistan.) Local remittance includes the following eight functions in NBP: 1. 2. 3. 4. 5. 6. 7. Transfer through pay order Transfer through demand draft Telegraphic transfer Issuing of SBP cheques Mail transfer Local / internal transfer Preparation of balance certificates.

2-Foreign currency Deposits:

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At present NBP Main Branch accepts US$, GBR, YEN, and DM in shape of foreign currency deposits. For these foreign currency deposits bank has offered the following accounts. 1. Foreign Currency Current Account 2. Foreign Currency Saving Account 3. Preparation of Monthly statement for SBP

1. Foreign Currency Current Account
In these accounts depositors can deposit a sum of money in any of the abovementioned currencies. The depositor can also withdraw any amount subject to the availability of the amount. No profit is given on these accounts and no restriction as per the minimum balance required.

2. Foreign Currency Saving Account
NBP pays the interest that is earned on the sums available in the accounts by making investments.

3.

Preparation of Monthly statement for SBP

A statement for each month is prepared in the foreign exchange department and sent to the SBP.

Documents involved
      Statement S-6 Schedule J/O-3 Schedule C Schedule E-3/P-3 Schedule G Inward Remittance Vouchers

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SAMPLE OF DOCUMENTS PREPARED IN MONTHLY STATEMENTS BY THE FOREIGN EXCHANGE DEPARTMENT

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3-MONEY TRANSFER:
National Bank of Pakistan and Western Union - A Partnership for Pakistan's Economic Growth NBP teams up with Western Union Financial Services Inc. a world wide money transfer service, to facilitate the remittance of money through legal channels. This mode of transfer will ensure that the remittances reach the mainstream of national economy and are able to contribute to its growth. This will also assist in reaching the Government's goal in revitalizing the economic sector, attaining self reliance and achieving transparency.

4-SWIFT System:
The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances. The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-APKKA. All NBP overseas branches and overseas correspondents (over 450) are drawing remittances through SWIFT. Using the NBP network of branches, you can safely and speedily transfer money for our business and personal needs.

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ADMINISTRATION DEPARTMENT

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ADMINISTRATION DEPARTMENT
Appointments at Administration Department
Sr#
1 2 3 4

Name of Section
Reconciliation Staff Loan Compliance Administration/ Welfare

From
24-07-2008 25-07-2008 26-07-2008 28-07-2008

To
24-07-2008 25-07-2008 27-07-2008 28-07-2008

RECONCILIATION
In the reconciliation department a reconciliation statement is prepared.

Documents Used
 F-19 (responding branch Debit Voucher )  F-20 (responding branch credit Voucher)

PROCESS
Whenever a letter from the head office Karachi is received, then the Regional Office sends a Letter to NBP Main branch to prepare a Reconciliation Statement, within the mentioned time period. If every thing is perfectly reconciled with NBP general account then fine but if it is not matched then the purpose is found.

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SAMPLE OF DEBIT VOUCHER

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SAMPLE OF CREDIT VOUCHER

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STAFF LOAN:
NBP provides many kinds of loans to it employees. The employees then return the loan from their monthly income. It means that the installments are deducted from their monthly salaries. These loans that are provided by NBP to its employees are very convenient at very low mark-up rate almost equal to zero. The different kinds of loans that are provided are as follows: 1. 2. 3. 4. 5. House building loan Car loan Motor cycle loan Computer loan Student loan

HOUSE BUILDING LOAN:
Employees can be anywhere apart from Lahore but the house must be in Lahore, if the employee wants the loan from NBP Main branch.  For Clerical/Non clerical staff a loan of up to 7 lacs is provided without any interest.  For Officer that is OG 3 a loan of 12 lacs is provided. Out of which the 7 lacs is free of interest and the 5 lacs has an interest of 3 %  For OG 2 to executives a loan is provided 110 times the basic salary out of which 7 lacs is exempt of interest.

DOCUMENTS REQUIRED:

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1. Application form F-423/App 2. CNIC photocopy 3. Photocopy of Appointment letter 4. Photocopy of confirmation letter 5. Photocopy of Evaluation certificate 6. Sale agreement 7. Sale deed 8. Non encumberent certificate from Patwari 9. Fard 10. Mutation 11. Shajra Aks 12. Tax clearance certificate 13. PT 1 of excise taxation 14. Salary slip 15. Liability status 16. Two guarantees 17. Title clearance Certificate of BLA 18. Non-involvement Certificate 19. Undertaking 20. Approval of sit plan 21. Agreement to mortgage 22. Undertaking of lien 23. Affidavit 24. IB-12 25. IB-6C 26. IB-21

CAR LOAN:
This loan is only for Main Branch employees. Usually the loan is provided for purchasing a Cultus for clerical/Non clerical staff and officers. A loan of maximum 4 lacs is provided. For executives a loan for purchasing a Liana is provided with a mark-up rate of 4%.

MOTOR CYCLE LOAN
This loan is mainly for the clerical/Non-clerical staff and a maximum facility of 80 thousand can be obtained with a mark-up rate of 4 %. Officers can also avail this facility only if they have not availed the car loan facility. Because it is a rule of NBP that only one transport facility can be availed.

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COMPUTER LOAN
For officer a loan of Rs.50,000 is given whereas for executives a loan of 1 Lac with a mark-up rate of 4% .

STUDENT LOAN
This loan is not returned by the employees. NBP provides this loan as a QARZ-EHASNA. The loan covers the Boarding fee, Schedule fee, Books, Fee involved. It provides the loan for 5 years continuously. After 5 years NBP then recovers the loan by monthly installments which are deducted from the salary of the employee.

COMPLIANCE
Mr.Farooque Daar was in charge of the compliance department. The compliance department is responsible to check whether all the activities performed in the Main branch are performed according to the rules and regulations of SBP, to check whether all the procedures are done within the power limits or not. All officers and executives have certain power limits according to which they have to work within these limits. Whatever event is done in the branch whether all concerned steps have been followed, all documents have been collected or not. If there is any discrepancy in any of the steps or procedures then it should be reported to the controlling officer and the head office.

REASON OF COMPLIANCE DEPARTMENT
1. Accuracy of work and within precision 2. If any beyond limit or beyond parameters are not fulfilled then there are certain penalties which the employee would have to pay as per SBP.

ADMINISTRATION/WELFARE
National Bank of Pakistan is not only a commercial institution but also a welfare institution, who always strives for the welfare of the employees and in this regard offers following benefits to its employees. 1. Pension, insurance, gratuity and provident fund facility 2. Free medical facility for the employee, family and parents. 3. Scholarships for children. 4. Housing facility in the shape of housing colony in the big cities.

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5. 6. 7. 8. 9.

School fees for the children. Car loan, Computer loan and House loan facility at easy Installments. Five bonuses and awards to all employees every year. Market based salary structure and increase in the salary every year. Establishment of NBP Staff Welfare Trust.

ANALYSIS

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SWOT ANALYSIS STRENGTHS
1. The main strength of NBP is that it is a Government Financial Institute and is working as a representative of SBP 2. Jobs are secure for the employees 3. People prefer to work in NBP because it is a Government institute and in the long run would give pension to its employees thus providing a flow of income to its employees, and also because it provides a whole range of fringe benefits to its employees as discussed in the administration department. 4. It has a world wide network of branches within the country and in foreign countries a well, thus representing Pakistan abroad as well. 5. It is the lender to public based projects as well as Government agencies hence a lot of other Government institutes depend on this bank as well. NBP is working as right arm government of Pakistan as it is responsible for all claims of government for recovery as well as payment. All depositor of NBP are in relief that their money security is guaranteed by government of Pakistan 6. It acts as an agent of the Central Bank wherever the State Bank does not have its own Branch

WEAKNESSES
Besides being a public bank it has the following weaknesses. 1. The service provided to the customers is not so efficient and fast and the behavior of the employees is somewhat rude with its customers. NBP employees give an expression as if they are annoyed with everyone and avoid dealing with customers and try to put their work responsibility on others. University of South Asia 138

2. National bank of Pakistan does not have any online facility available even in this time of age, where most people prefer avail online facilities. 3. The working is still manual and not computerized. 4. The branches are in such a bad condition and NBP showing no interest in maintaining its branches to a better condition. The general out look and interior layout of branches are not as required according to modern banking 5. NBP staff especially at lower considers their work as burden. They usually waste time in other task a part in performing their duty. 6. In NBP, most of the time merit not has importance in hiring of employees. 7. Customers have to fallow long lengthy procedure for opening of account as well applying for debt. Which discourage most of the people to invest in NBP.

OPPORTUNITIES
Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow. NBP current management has a more clear vision of which way to step towards. They have taken steps to improve customer services, streamline internal procedure and creating a delectating climate for technology initiative. To achieve above mention objective they have created operation group 1. Starting of the retail banking initial working. 2. Setting of target for of making at least 300 branches country wide on line. 3. Closing of all those branches, which are burden on NBP. 4. Management to offer specialized services to major corporate including advisory and debt syndication introduces the concept of relationship manager. 5. Comprehensive training programs has been develop to up grade the core banking skills of the existing staff as well as integrate high quality hiring. 6. To improve the motivation of staff a merit-based culture is being promoted. Through overhauling the manpower recruitment preservation and performance appraisal system. These actions taken by current management can provide a great opportunity for NBP for making it future prosper and can make NBP not less than any modern commercialize bank in Pakistan.

THREATS
Following are the major threats which national bank of Pakistan is facing:
1.

Recently banks and other financial institutions have introduced innovative schemes to attract deposits and customers whereas NBP still is following the old measures which can lead to great loss of its customers. This awareness of the

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2.

3. 4. 5. 6. 7.

public with the newly established banks can divert the attention of the customers towards the other newly developed and Modern banks. Now banks are using technology which covers the distance no matter how far away any one, through a satellite based, on-line real-time banking system and by offering telephone banking, electronic funds transfer, E-Banking and other modern facilities. Less qualified staff in NBP can also be a threat to the NBP as now a days banks are hiring individuals with strong professional studies background and employees with related experience in order to achieve high standards. Competition with foreign and private banks, because a lot of Foreign and private banks are being developed with a whole wide range of products and services which are innovative as well, and this factor is a great threat for NBP. Mushroom growth of banks. NBP is still using the traditional system of banking like ledgers and book keeping etc which in this age of time is a very slow process, and consumes a lot of time. Political influence causes great disturbance in the banks environment and in NBP there is a lot of political influence.

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CONCLUSION

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SUGGESTIONS
NBP no doubt a government bank and has been working for its customers since a long time but I think there are certain points which should be adopted so that NBP can serve more effectively and efficiently to its clients and customers.. These points are as under: 1. This is a computer era. N.B.P. should computerize all its branches. By the proper use of computer these branches can work more efficiently. 2. N.B.P. as public service oriented institution has to create business opportunities for themselves. Now a day there is a competition between the banks. 3. Model Banks like City Bank M.C.B. are using media very effectively to increase the business of banks. So N.B.P. should use electronic media for its business developments. 4. The interference of union in banking business should be minimized as it decreases the working efficiency of the employee as well as the bank. 5. The working of the Lahore main Branch Lahore is satisfactory but still these working efficiencies are for from the standard of modern banking system. 6. The bank should bring forward the new talent as fresh knowledge and education is considered very important to increase the efficiency and production. 7. There is a need to make the outlook of branches in those manners that can complete the other modern banks in the banking market. 8. Keeping in view the hard work by the staff members at all levels of management, staff should be given bonus and increment every year in order to encourage its employees which would definitely lead to even batter standard of performance by them. 9. The environment of the offices should be comfortable so that the client and staff must feel comfort during business in bank.

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10. I observed that many branches of NBP are over crowded. Less people can work which is performed by extra people. No. of employees should decrease or new branches should opens for the adjustment of these extra employees. 11. There are some employees untrained which decreases the efficiency of the bank branch. All the employee should well trained. For this reason it is necessary that such employees should have refresher courses at regular basis or should be given hand shake and hire new and fresh and experienced workers to improve the standards of the bank. 12. Most of the bank employees are sticking to one seat only, with the result that they become master of one particular job and loose their grip on other banking operation. In my opinion each employee should have regular job change. 13. People have to wait for re-cashing their cheques and for paying their utility bill, which is not good for the reputation of bank, it should be improved.

CONCLUSION
Besides the fact that National Bank of Pakistan is a government based institution but in these days of competition it is not easy to survive without adopting modern techniques and latest tools of technology and innovative products. And in my opinion NBP is still far behind the modern standards and has to work very hard to reach the standards of other foreign and private banks. The global economic environment has changed, creating challenges and opportunities for the world’s policy makers. The privatization drive has emerged as a strong tool of transformation which is being recognized as an essential ingredient for the economic well being of the countries themselves and for the rest of the world. Banks are playing very important role in the economic growth of the countries. And NBP being the representative of The State Bank of Pakistan should also attain such a prestigious position and should be distinguished among all other banks. Hence it is concluded that although NBP is trying but still a lot of effort has to be put in and bring NBP to the level where it attains a certain position in the banking industry of Pakistan.

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HELPING MATERIAL

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REFERENCES

Mr.Usman Rauf Mr.Sarfraz Hashmi Mrs.Shahnaz Awan

OG 1 Accounts department NBP Main branch Lahore. AVP Bills section, General Banking Department NBP main branch Lahore.

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BIBLIOGRAPHY

www.nbp.com.pk http://jit.in/jaikDD.jpg https://www.fnb.co.za/images/certificate%20origin.gif http://www.encon-lc.com/images/insurance.jpg https://www.fnb.co.za/images/bill_lading.gif http://www.insightu.org/hobby/guide_mfr/ch8.ht2.gif

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